IPEC costs cap increases - still an attractive venue but increase is far behind inflation

The Civil Procedure Rules were updated in October 2022 (1), and with those amendments came an increase in the amount a successful party can be awarded in the Intellectual Property Enterprise Court (IPEC). The overall IPEC cost cap has remained static since being introduced in 2010, until now.

Under the previous regime, successful litigants could not recover more than £50,000 at the liability stage of proceedings. The increase means that successful litigants can now be awarded an extra 20% for both the liability and quantum stages of proceedings, namely:

• £60,000 (an increase of £10,000) on the final determination of a claim in relation to liability
• £30,000 (an increase of £5,000) on an inquiry as to damages or account of profits

Costs recovery is also capped for each stage of the proceedings. These have also been lifted in line with the general overall increase. The cost cap increase will apply to all claims from 01 October 2022.One of the main attractions to IPEC is that a party's exposure to the other side's costs if they lose is capped, making it very attractive to SMEs and those with a limited budget. However, typical costs awards in the early years of IPEC were in the region of £30 - 35k, which made some litigants feel that the cap unduly favoured the losing party. This has been somewhat mitigated following several cases where the costs capping regime has been lifted because of a party's conduct, so it will not always act like an iron-clad shield for an unruly loser.

Good news?

While the increase is welcomed news to many, it has failed to keep up with inflation. Applying the Bank of England's inflation calculator, if the costs cap had been raised in line with inflation, they would have been nearer £70,000 and £35,000, respectively. This shortfall means it is now roughly 15% cheaper (in real terms) to lose a claim in IPEC than in 2010. For a winning party, bearing in mind that costs are typically assessed downwards before applying the cap, their recovery rate will be significantly lower. This situation may worsen if inflation continues to rise at its current rate and another 12 years pass before the next increase.All things considered, IPEC remains an arena of certainty and a smart choice for many litigants in terms of costs. Coupled with developments such as being able to issue outside of London, it will continue to be an attractive venue.

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If this is an area that you are interested in, please get in touch with Martin Noble or Jack Edwards to discuss further.

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(1) The Civil Procedure (Amendment No. 2) Rules 2022