77 Ltd v Ordnance Survey Ltd & Ors

This is an application to transfer of a claim from IPEC to the general Chancery Division. Jaani Riordan appears for the applicant (“77M”), and James Mellor for the respondent (OS). So far as is relevant to the present application, the following provisions in the CPR apply. First, CPR 63.18(2):

"When considering whether to transfer proceedings to or from the Intellectual Property Enterprise Court, the court will have regard to the provisions of Practice Direction 30.

Next, practice direction 30, paragraph 9:

“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.

9.2

Where the court orders proceedings to be transferred to or from the Intellectual Property Enterprise Court it may –

(1)

specify terms for such a transfer; and

(2)

award reduced or no costs where it allows the claimant to withdraw the claim."

His Honour Judge Birss considered the relevant factors for transfer in ALK-Abello Limited v Meridian Medical Technologies [2010] EWPCC 14, there in the context of the predecessor of the IPEC, that is to say the Patents County Court. He said this:

"30.

Pulling the various factors together, the points to consider are:-

i)

the financial position of the parties (s289(2) 1988 Act). This includes but is not limited to considering whether a party can only afford to bring or defend the claim in a patents county court (para 9.1(1) Practice Direction 30). This factor is closely related to access to justice. The Patents County Court was set up to assist small and medium sized enterprises in enforcing and litigating intellectual property disputes. Guidance on the nature of these enterprises can be found from the Commission Recommendation 2003/361/EC.

ii)

whether the claim is appropriate to be determined by a patents county court. This involves considering:

a)

the value of the claim, including the value of an injunction and the amount in dispute. (Para 9.1(2)(a) Practice Direction 30 and CPR 30.3(a))

b)

the complexity of the issues (para 9.1(2)(b) Practice Direction 30 and CPR 30.3(d))

c)

the estimated length of the trial. (Para 9.1(2)(c) Practice Direction 30). Related to this is CPR 30.3(b) - whether it would be more convenient or fair for hearings (including the trial) to be held in some other court.

iii)

the importance of the outcome of the claim to the public in general (CPR 30.3(e)) albeit that a case raising an important question of fact or law need not necessarily be transferred to the Patents Court (s289(2) 1988 Act).

31.

A factor which does not play a role is the one in CPR Pt 30.3(c) (availability of a judge specialising in the type of claim in question) since specialist judges are available in both courts.

32.

Once those factors are considered I must bear in mind what sort of cases the Patents County Court was established to handle and that its role is to provide cheaper, speedier and more informal procedures to ensure that small and medium sized enterprises, and private individuals, were not deterred from innovation by the potential cost of litigation to safeguard their rights. The decision turns on what the interests of justice require, taking into account both parties interests and interests of other litigants."

Judge Birss expanded on what he had said in paragraph 30 of ALK-Abello with regard to the financial position of the parties in Comic Enterprises Limited v Twentieth Century Fox Film Corporation [2012] EWPCC 13. He said this:

"21.

This case is one in which access to justice for SMEs is raised squarely. It is the key element of Miss McFarland's submissions that her client should stay in the PCC. Mr Malynicz submitted it was in effect just another factor to be weighed up like all the others. (I should note he does not accept the evidence on the point but I will deal with that below.) On the issue of principle, in my judgment Mr Malynicz is wrong. The Patents County Court has a specific role to improve access to justice for smaller and medium sized enterprises in the area of intellectual property. I described access to justice for small and medium sized enterprises as a "decisive factor" in Alk-Abello (paragraph 55) and I stand by that observation.

22.

However cases in which an SME seeks to sue a large defendant were always obviously going to present particular problems for a specialist court for small and medium sized enterprises in intellectual property matters. The fact that an IP right is held by a small claimant does not mean that the defendant will conveniently be a small enterprise as well. In the past small claimants were concerned that they could not afford to fight in the High Court and, more importantly, could not afford to lose. The costs order would bankrupt the company. The PCC's cost capping system deals with this problem and caps the claimant's downside costs risk at £50,000. That is one of the ways in which the PCC facilitates access to justice.

23.

Many smaller business people perceive that their intellectual property has been stolen by large corporations. Hitherto there was little they felt they could do about it. The PCC is by no means intended to be a panacea but it is intended to be a forum to facilitate access to justice for smaller IP rights holders and for that matter smaller organisations accused of infringing IP rights as well.

24.

So what is the court to do when faced with a small claimant suing a large defendant? One thing is plain. As I have said already each case depends on its facts. A small claimant does not have an unfettered right to stay in the PCC regardless of the nature of the case any more than a large defendant has an unfettered right to demand that it be sued in the High Court."

He also went on to say this:

"48.

I remind myself that the ultimate objective of an order for transfer is to do justice between the parties. The argument that the case should remain in the Patents County Court is a powerful one. Access to justice for SMEs is capable of being a decisive factor having regard to the purposes for which the Patents County Court was set up. The claimant in this case would be severely affected by an adverse costs order in the High Court. However set against that is the nature of this case itself and its value."

On the facts arising in Comic Enterprises, Judge Birss was concerned with the behaviour of the claimant which was the party opposing transfer out of the Patents County Court:

"55.

I believe the decisive factor in this case is the claimant's approach to the litigation despite its being an SME. The claimant is not approaching the case as if it is a Patents County Court claim. The claimant's approach has been to run this case as a full scale High Court style action with a claim for an injunction with catastrophic consequences for the defendant. Since that is the claim the claimant wishes to advance, the correct forum in which to do it is the High Court."

In Environmental Recycling Technologies [2012] EWHC 2097 Pat, Mr. Justice Warren referred to paragraph 48 of Comic Enterprises and said this:

"56.

Ms. Lawrence submits that the financial position of the parties is determinative. I think she gets that proposition in the sense that when an SME wants the Patents County Court and is poor, the factor is decisive and that was indeed what Judge Birss said. If you have a very poor defendant, SME or individual who wants a case in the Patents County Court, that is a decisive factor. For my part I would not say it was decisive but it is obviously an enormously important factor and may overwhelm others.

57. But even Judge Birss did not mean to be as prescriptive as that. For him, as is obviously correct, the overriding matter is the justice of the case and access to justice. It does not follow, and it is illogical, that just because a party can afford High Court litigation means that the case must be in the High Court (other factors pointing in that direction) especially if the party is an SME or individual."

Mr. Riordan reminded me of the cautionary note provided by Judge Birss in Destra Software Limited v Comada (UK) LLP [2012] EWPCC 39. This was a case concerning a dispute about computer software. The judge recognised that it could be factually complicated, but he said this at paragraph 34:

"34.

However, in fact at the moment we do not know whether this case will be anything like as complicated as it might seem. That will depend on the process of disclosure and rounds of pleadings which are inevitable in a software copyright case. Although it sounds complicated, in fact it is inevitable that copyright cases of this kind have to be looked at this way. They do require more management than other intellectual property cases."

In that case the claim was not transferred to the general Chancery Division. With that background of the law in mind, I turn to the various issues which govern whether there should be a transfer of the present case to the general Chancery Division.

I begin with the size of the parties. 77M is an SME, OS is a government-owned body with substantial licensing revenues. Mr. Riordan said that particular account should be taken of the fact that OS is a government body. He suggested that it is particularly important that a private party's access to justice should not be stifled by a state litigant in this way. I do not accept that. It seems to me that there is no relevant distinction between a private litigant and a government body in this regard and I agree with Mr. Mellor that the nature of the parties is of itself neutral.

I turn next to the parties' ability to fund proceedings. 77M, as I have said, is an SME and it is clear, from the evidence, that it is seeking the protection of the costs regime as it applies in IPEC. 77M has taken out after-the-event insurance to cover the opposing side's costs of this litigation, but up to £50,000, that is to say up to the cap which applies in the IPEC.

Mr. Highland, who is the director and cofounder of 77M, says in his evidence that it is unlikely that the company will be able to afford costs in excess of this. He says that if the claim were transferred to the general Chancery Division, 77M's position would become untenable and that he would have very serious concerns about his own financial position and the ability of 77M to continue the litigation.

Mr. Mellor said that these statements were to be treated with some caution. He emphasised that 77M has given no evidence as to whether it could obtain after-the-event assurance for a higher amount of costs of expenditure. He also submitted, as is the case, that 77M has not provided full details of how its litigation is to be funded and has not given evidence that it would be impossible to obtain funds from other sources which could meet any liability as to costs in the general Chancery Division.

It is clear, from the exhibited accounts of 77M, that it is in no position to fund litigation by itself if that litigation were to include the risk of high costs to be paid should 77M lose in the general Chancery Division. I do not take the view that it is incumbent upon an SME to prove exhaustively that it cannot access loans from elsewhere to fund litigation in order to have good reason to obtain the benefit of a costs cap in IPEC. An SME with limited financial resources is precisely the kind of litigant that is entitled to the benefit of the costs cap in IPEC, subject to other considerations.

Mr. Mellor suggested that if the case was transferred to the general Chancery Division then the court there could impose a cost cap of its own. However, he, on behalf of his client, offered no formal undertaking that it would agree to limit the costs liability of 77M to any particular amount and, therefore, so far as the position today is concerned, the risk of a high costs liability remains so far as 77M is concerned if the case were to be transferred.

It is also the case that the rules in IPEC are particularly suited to keeping disputes to the minimum in complexity, which inevitably leads to a lower incursion of costs. Lower costs should suit both sides. It seems to me that this is equally appropriate in the case of a publicly funded litigant.

Related to this matter of ability to fund proceedings is the question of the behaviour of 77M. It is argued, by OS, that 77M has not approached this litigation as though it is an IPEC claim. This was argued by reference to the observations of Judge Birss in Comic Enterprises. The following were particularly identified as proof of this. First of all, the original Particulars of Claim were settled by both junior and leading counsel. There was opposition by 77M to an extension of the confidentiality club, which resulted in an application before the court. Thirdly, it is said that 77M's approach to pleading the issues in its pleadings has been unnecessarily complex. Finally, it is pointed out that there has been service by 77M of a request for further information comprising 50 requests.

I can see that the pleading by 77M is somewhat over-developed, but, as against that, I do not see this is a case in which 77M has, for instance, pleaded either worthless causes of action or worthless defences. Although there has already been one interim application before this, I am not convinced that it was entirely inappropriate.

Mr. Riordan also submitted that 77M has made some significant concessions in the reply and defence to counterclaim, and this does appear to be the case. I am not convinced that this is an instance where the behaviour of 77M has been so inappropriate to the conduct of litigation in IPEC that it counts as a major factor in favour of transfer to the general Chancery Division.

I turn next to the value of the claim. Two issues must be separated out here. First of all, there is the potential value of damages. OS says that its claim to damages, in its counterclaim, may exceed the IPEC cap of £500,000. However, 77M have offered to waive that limit so this becomes a neutral point. Separately from that there is the general value of the claim, which would include the value of an injunction. OS claims that the value of the injunction would be extremely high. 77M denies this by reference to licence fees commanded by OS to its licensees. I am not convinced that in the end the value of the injunction would be extraordinarily high. In addition, it is not unheard of for IPEC to hear cases which involve injunctions which have a significantly high value. It seems to me this is not a point of any great weight.

I turn next to the complexity of the issues. OS has listed the issues which arise on the pleadings in the present case and they come to a grand total of 33. However, on closer analysis, some of these are, in fact, no longer in issue and many are duplicate ways of putting what amounts to a single issue. Mr. Mellor estimated that the trial would take seven to 10 days and he pressed on me that it would be completely unrealistic to fit all the issues currently pleaded into a trial of three days, which is the maximum that is contemplated in IPEC.

I am not at all satisfied that the time for trial cannot be heard within three days. On several occasions, quite complex cases have been heard in IPEC, which can lead to the parties being less expansive in their development of the case at trial as they might prefer, but none the less the issues have been quite comfortably heard in good time, precisely because the parties are aware that time is limited.

I would add a qualification to this. As I have said, I am not satisfied today that the case can be case managed at a case management conference in such a way as to make it possible for the real dispute between the parties to be heard fairly in three days. But I do not absolutely rule out the possibility that at the end of a CMC the judge hearing the CMC will reach the conclusion that, despite his or her best endeavours, this is not a case that can be heard in three days. It is unlikely but not impossible. I would note in passing that it is particularly incumbent upon 77M, when they approach the CMC, to take all possible steps to streamline the case. Implied in what I have just said is an indication that I am not here ruling out the right of OS to revisit the question of a transfer at the CMC.

As matters stand now, the most important factor in the present case is that 77M is an SME which seeks the protection of the costs regime in IPEC. I am satisfied, on the evidence I have seen, that a transfer to the general Chancery Division would raise a serious likelihood of having the practical effect of blocking 77M's access to justice. In Comic Enterprises, Judge Birss described this factor as capable of being a decisive factor. In Environmental Cycling, Mr. Justice Warren said that it was enormously important factor which may overwhelm other matters. I agree.

I think this is a case in which 77M's practical ability to retain access to the courts requires protection. I therefore dismiss OS's application to transfer the case to the general Chancery Division.