The IPEC is renowned as a specialist court in England in which cases are actively managed, and costs recovery is capped, to provide an efficient and cost effective forum for SMEs to resolve their intellectual property disputes.

Broadly speaking, costs recovery is capped at £50,000 'per case', with costs awarded, in general, to the winning party. However, what happens if there are multiple claimants and/or multiple defendants - does a claimant suing multiple defendants in one action open themselves up to a potential liability of £50k per defendant? What happens if one defendant wins and another loses – does the cap apply before or after taking into account costs that may be recovered from the losing defendant?

These questions arose in the case at hand. The parties were well-known, having appeared in the TV series "My Big Fat Gypsy Wedding". The first defendant had previously worked for the claimant, and went on to set up her own dress business. The second defendant was the mother of the first defendant. Both defendants were alleged to have copied the design of a dress, the rights in which belonged to the claimant.

The judge held that the first defendant had infringed the design right, while the second was found not liable, although she had lost on more issues than she had won. The claimants applied for interim payments, on account, of costs.

One question before the court was whether, in spite of winning, the second defendant was liable for a portion of the claimant's costs (as the claimant's barrister argued) and, if so, was the cap: shared between the two defendants; or applied independently in respect of the each of the two defendants?

The judge, Miss Recorder Amanda Michaels, summarised the case law as follows:

• a "claim" for the purposes of the CPR relates to a single set of proceedings as a whole, regardless of the number of issues or parties
• therefore, regardless of the number of winning parties, a losing party can only be liable for costs which in total do not exceed the cap
• the corollary is that despite the number of losing parties, a winning party cannot recover its costs beyond the cap
• in theory, a claimant could abuse this by joining multiple defendants to the claim; however (as was the case in Madine, in which there were a total of eight defendants) it may be appropriate to initially stay the case against one or more of the defendants; this should be considered early in the proceedings (eg, at a case management conference)

This approach clearly provides some certainty to parties, as they know that their maximum liability (and possible recovery) is limited by the cap, regardless of the number of counter-parties.

On the other hand, some uncertainty arises, since the costs recoverable by a winning defendant could depend on whether another defendant wins or loses: if both win, they have to share the costs cap as applied to the losing claimant. If one wins and the other loses, then the winning defendant could claim their costs up to the costs cap (since the claimant will not be liable for the costs of any of the other defendants).

Applying this to the case at hand, the claimant was ordered to pay the second defendant £3,500 plus VAT on account and the first defendant was ordered to pay the claimant £25,000 on account.

In short, this shows that the cap on the recovery of costs in IPEC will be robustly applied, giving litigants certainty as to their potential liability. This is to be welcomed.

However, the cap on the recovery of costs does present defendants in the Intellectual Property Enterprise Court with an increasingly difficult question at the start of proceedings.

In the eight years in which the cap has been applied, it has not increased with inflation. Therefore, legal costs are increasingly likely to exceed that recoverable. This means that a defendant will always be out of pocket when litigating in the IPEC. Therefore, in some circumstances, even if the claim against them is bogus, it is increasingly more sensible to settle rather than litigate. This cannot be in the interests of justice.

Case details at a glance

Jurisdiction: England & Wales
Decision level: Intellectual Property Enterprise Court
Parties: Madine (t/a Nico) v Phillips (t/a Leanne Alexandra)
Citation: [2017] EWHC 3418 (IPEC)
Date: 13 December 2017