Cost capping pilot for patent disputes welcomed by UK SMEs

The Civil Justice Council produced its final Report on Costs in May 2023, following various consultations across four areas that included extending the scope of fixed recoverable costs. Of note to SMEs that are interested in patents is the proposal for a capped costs regime of £500k to be introduced into the current Shorter Trials Scheme (STS) for patent cases.

The STS currently offers a designated judge for less complex cases where the trial will last no longer than 4 days, alongside various other limitations that apply to the steps taken to prepare a case for trial. These limitations are one method of trying to improve access to justice by reducing the ability of dominant businesses to leave no stone unturned on the way to trial. However, in practice this still leaves uncertainty over the potential exposure to an adverse costs award – patent cases can still cost over £1m per party to reach trial even using the STS.

There is therefore a significant gap between the current costs cap of £60,000 at the liability stage in the Intellectual Property Enterprise Court (IPEC) and an open-ended liability for cases in the Patents Court. This leaves the UK with nothing to offer in competition to the recently introduced Unified Patent Court (to which it is not a signatory) where there is a costs capping regime in place.

Notably, the IP Federation (which represents the view of UK industry in intellectual property rights policy and practice in the UK and international) supports a pilot scheme where the overall recoverable costs would be capped at £500k in patent cases. It should also be a relatively simple pilot to adopt, with calls for only an overall cap to be introduced (as opposed to the phased costs capping regime in IPEC)

The Civil Procedure Rule Committee has given the green light to a new pilot Practice Direction (setting out the rules that would apply to court cases within the pilot) following on from the Civil Justice Council’s report. The pilot aims to start on 1 January 2024 and will run initially for three years. As is generally the case with this type of change, much of the work and consultation has been done already and we can expect that any pilot will be turned into a permanent feature of the English legal system at some point in the future.

The proposed pilot will be very welcome news to many SMEs who want certainty over their overall costs exposure when litigating a patent case. It has been reported that the introduction of the IPEC’s costs capping regime led to a surge in new cases (damages are limited to £500k in IPEC), but this did not lead to a decrease in the number of High Court patent cases. So it did meet a pent-up demand and this is what may happen in this case.

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