New cost-cap system for UK patent disputes to start in early 2024

The Civil Procedure Rules Committee (CPRC) has now approved a proposal for capping costs for patent cases in the Shorter Trial Scheme (STS). The proposal submitted by the Intellectual Property Lawyers’ Association (IPLA) adopts the current procedures for the STS, adding a single total cost cap of £500,000. The aim of this proposal is to provide potential litigants with greater certainty about the total financial risk of commencing proceedings.

Three year pilot

For the court system to introduce a formal cost cap, it is necessary to change the rules of procedure. The CPRC approved the proposal at a recent meeting in November, thus clearing the way for the rule change. A three-year pilot phase for the new system is expected to start at the beginning of 2024.

“The costs cap will apply automatically to all patent claims begun in the STS after the new rules are in effect,” says Michael Burdon, patent litigation partner at the London office of Simmons & Simmons. As former chairman of the IPLA, Burdon played a leading role in the proposal’s development. In October, he passed the baton to Arty Rajendra of Osborne Clarke.

Burdon explains, “The claimant has to specify the claim has been started in the STS on the Claim Form but will not need to refer specifically to the costs cap, which will just be a part of the procedural rules. However, the defendant’s lawyers should explain the features of the STS, including the costs cap, to the defendant.” He adds, “It is possible for the defendant to apply to transfer the claim out of the STS if it is not suitable, for example because it is too complex and the case cannot be heard in three to four days.”

Patent first

The STS, which covers all manner of issues brought before any of the Business and Property Courts of the High Court, can apply to cases which do not involve allegations of fraud or dishonesty. It can also apply to cases which do not involve multiple issues or multiple parties.

IP disputes already make up a substantial proportion of the cases heard as part of the STS. Introduced by the High Court in 2018, it offers a more streamlined procedure. The scheme limits the length of STS trials to four days, with the court allocating claims to the judge at the time of the first case management conference or earlier.

However, according to Michael Burdon, the proposed cost-cap system will only apply to patent cases for now.

The courts have already successfully applied the STS in patent cases, including Facebook against Voxer and Insulet against Roche Diabetes Care. The IPLA based its cost-cap calculations on some judgements and orders that provided information about costs recovery in patent claims brought under the STS. These included, for example, Insulet against Roche (2021), Permavent against Anor (2020) or Advanced Bionics against Med-El (2022).

However, while making trials shorter where possible, so far the costs in the STS are no more predictable than in regular patent cases. Depending on the range and complexity of issues, costs for proceedings at the UK patent courts can stretch into the millions. SMEs in particular are therefore often reluctant to enforce their patents in UK courts. So far, they have mainly used the Intellectual Property Enterprise Court (IPEC).

Between IPEC and big battles

IPEC proceedings are already subject to a financial limit of £60,000 in costs and around £500,000 in damages.

The new system, which caps costs at £500,000 and has no limit on damages, is particularly suitable for mid-tier cases. These are less complex than the types of cases the patent court hears, but more complex and higher stakes than an IPEC case. “This amount should enable the successful party to recover a reasonable proportion of their total costs”, says Michael Burdon.

In order to mitigate the costs for litigating parties, last year the Civil Justice Council created a Cost Working Group aiming to make civil actions more cost effective and thereby more accessible to SMEs. The group conducted a public consultation in 2022, inviting shareholders to make suggestions for capping costs. This resulted in the now approved IPLA proposal.

Anxious look at the UPC

The number of patent cases in UK courts has been declining for years. In addition, the UPC has now emerged as potential competition for pan-European patent disputes, where the UK is only one market of many. The new system might therefore not only improve access to justice for SMEs with mid-tier patent cases, but also make the UK patent courts even more appealing and competitive – especially with regard to costs.