Massimo Osti v Global Design: IPEC or the High Court?
Should a claim be issued in the English Intellectual Property Enterprise Court or the High Court? The boundary between the two courts is often blurred. With there being clear strategic issues associated with the choice, this can often be an important decision for the client and a point of contention with the other side.
Strategically, the Intellectual Property Enterprise Court (IPEC) costs recovery rules may offer the claimant a number of advantages. Costs recovery is capped at £50,000 (the norm awarded being approximately £35,000 to £40,000). This means that the claimant can quantify with some certainty its potential costs liability for the litigation at the start, namely its legal fees minus (up to) £50,000 (if it is successful) or plus (up to) £50,000 (if it is unsuccessful). The court also offers (in principle if not always in practice) greater case management and a streamlined procedure, which can reduce the overall costs of the litigation. The quid-pro-quo of this cost certainty, however, is that the claimant must accept a cap on recoverable damages of £500,000.
Conversely, the High Court may offer the claimant a number of advantages. If a costs management order is in place, the claimant has transparency as to the other side’s costs and can expect to pay its legal costs minus (up to) 100% of its costs budget (if successful) or plus 100% of the other side’s costs (if unsuccessful). The looser case management and opportunity for more detailed evidence also allows the claimant to press its case more heavily, albeit at an increased cost. In choosing the High Court, the claimant also has the advantage of not having to accept a cap on its recoverable damages.
In practice the decision often comes down to an assessment of the merits of the claim (with the security of a capped costs liability sometimes inviting more speculative claims to be commenced in the Intellectual Property Enterprise Court) and the claimant’s appetite for risk.
Of course, the choice is not always within the control of the claimant, with the court setting some restrictions on where a claim can be issued. In Massimo Osti v Global Design and Innovation, Master Clark has revisited some of these controls.
Here Massimo Osti commenced a claim for trade mark infringement and a breach of contract against Global Design and Innovation in the High Court seeking €79,835.80 unpaid royalties, damages and a pan-European injunction.
At the triage stage of receiving the claim, Master Clark ordered of her own initiative that the claim be transferred to the IPEC. This had implications for Massimo Osti (at least in relation to its recoverable costs, if successful). It, therefore, applied to set aside the order for transfer. This was resisted by Global Design & Innovation and the issue fell to be determined at a hearing.
The Civil Procedure Rules state that:
“9.1 When deciding whether to order a transfer of proceedings to or from the Intellectual Property Enterprise Court the court will consider whether –
(1) a party can only afford to bring or defend the claim in the Intellectual Property Enterprise Court; and
(2) the claim is appropriate to be determined by the Intellectual Property Enterprise Court having regard in particular to –
(a) the value of the claim (including the value of an injunction);
(b) the complexity of the issues; and
(c) the estimated length of the trial."
The IPEC provides the following guidelines:
"- Size of the parties. If both sides are small or medium sized enterprises, then the case may well be suitable for the IPEC. If one party is a small or medium sized enterprise but the other is a larger undertaking, then again, the case may be suitable for the IPEC, but other factors ought to be considered such as the value of the claim and its likely complexity.
- The complexity of the claim. The procedure in the IPEC is streamlined and trials will seldom last more than 2 days. A trial which would appear to require more time than that even with the streamlined procedure of the IPEC is likely to be unsuitable.
- Conflicting factual evidence. Cross-examination of witnesses will be strictly controlled in the IPEC. The court is well able to handle cases involving disputed factual matters such as allegations of prior use in patents and independent design as a defence to copying; but if a large number of witnesses are required the case may be unsuitable for the IPEC.
- Value of the claim. Subject to the agreement of the parties, there is a limit on the damages available in the IPEC of £500,000. However, assessing the value of a claim is not only concerned with damages. Putting a value on a claim is a notoriously difficult exercise, taking into account factors such as possible damages, the value of an injunction and the possible effect on competition in a market if a patent was revoked. The value of the claim will generally be a secondary indicator of its suitability for hearing in the IPEC. It may sometimes be inferred that a claim of very high value will require evidence and argument of an amount which will render the claim unsuitable for the IPEC. On the other hand, if a claim is otherwise appropriate for hearing in the IPEC it will be unusual for this to be ruled out solely because of an estimate of the claim's value."
There has also been useful guidance provided in the following cases: ALK Abello v Meridian  EWPCC 014, Caljan Rite-Hite v Solvex  EWHC 669 (Ch), A.S. Watson v The Boots Company  EWPCC 26, Comic Enterprises v Twentieth Century Fox  EWPCC 13, Environmental Recycling v Stillwell  EWHC 2097 (Pat), Destra v Comada  EWPCC 39.
Applying this to the facts at hand, Master Clark concluded that the claim should be transferred to the IPEC. In doing so she explained as follows:
- Global Design & Innovation was a micro company which, while part of a larger group, on its own resources could not afford to litigate in the High Court.
- On Massimo Osti’s best case the total royalties payable would be £454,706, from which would be deducted payments already made of £141,125, giving a net monetary value of the claim of £313,581. This was well within the maximum value of damages awardable by the IPEC.
- There was no evidence as to the value of the marks themselves (the validity of which had been challenged) or an injunction of the marks.
As to complexity, Massimo Osti argued that the claim gave rise to four main issues:
- Whether an implied licence came into existence;
- Whether Massimo Osti’s consent to the manufacture of the co-branded items during the term of the licence exhausted its rights in respect of those items;
- Whether Global Design & Innovation use of the marks was descriptive use within the meaning of Article 14 of the EU Trade Mark Regulations; and
- Whether the marks were invalid for lack of distinctiveness or descriptiveness as at the date of filing.
Master Clark accepted that factual evidence would be required for issues ‘3’ and 4, but held that the other issues were predominantly legal questions. The factual evidence necessary was not unusual for the IPEC and could be dealt within two days of trial.
One point of which clients should be mindful is that the manner in which a claim is pleaded can affect the complexity of the case and, therefore, its suitability for the Intellectual Property Enterprise Court. Claimants who want to issue and remain within the Intellectual Property Enterprise Court should give consideration as to what causes of action are pleaded, balancing the complexity of the cause of action (and consequent cost and time of running it) against the benefit it brings to being successful and the remedies sought. Omitting certain causes of action which do not add a significant advantage can often help keep a claim in the IPEC.
 EWHC 2263 (Ch)
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