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In one of the first decision to come from the Intellectual Property Enterprise Court (IPEC), Mr Daniel Alexander QC highlights the importance of litigating when the only real issue is legal costs.


On 14 October 2013 judgement was delivered in favour of the Claimant in respect of a passing off claim. The parties subsequently filed written submissions dealing with the costs. The Claimant sought costs of £23,460 on the indemnity basis from 14 days after the preliminary indication by His Honour Judge Birss at the CMC that the defence was not meritorious.

In submissions advanced by Paragon Costs for the Defendants, it was submitted that consideration should be given to the fact that in December 2012 the Defendants effectively conceded the underlying claim, save as to costs. In considering this issue in principle, Mr Alexander QC said:

"It is important for this court to be careful not to encourage disputes to continue which are, in essence, only about costs, where one side or the other has essentially given in. SMEs should be encouraged to concede points early, if they do not have a good case and to do so early.

One of the ways in which this court can achieve this aim is to take account of reasonable admissible offers made to settle a case at an early stage of proceedings in determining what costs should be paid, if an action is pressed to trial in the face of such offers."

It was accepted that what the Defendants offered in December 2012 was not materially worse than what the Claimant eventually received by the judgement on 14 October 2013. This was significant as most of the costs had been incurred after that date. The Defendants sought their costs from that point, some £500 plus VAT or in the alternative submitted that there should be no order as to costs.

In considering what order to make in the absence of an offer which included costs, the position of the parties was summarised as follows:

"On the one hand a successful claimant can say with justification that it has been forced to go to trial to vindicate their rights and recover its costs. On the other hand, a defendant can say that there was no justification in going to trial in the face of an offer to provide substantive relief and the case was only really (from that point on) only about a modest amount of costs."

Having regard to all the facts, it was decided that the Claimant should have 100% of its costs relatively generously assessed (by IPEC standards) to the date of the Defendants' offer in December 2012 and 50% of their costs thereafter. Such costs would be assessed on the standard basis.

In reaching this decision it was noted that the Defendant did not make any offer as to costs and that depriving the Claimant of all of its costs would not do justice to the fact that the Claimant did have a meritorious claim which it needed to prepare.

The Claimant contended that the conduct of the Defendants should be taking into consideration when determining the amount of costs payable. It was accepted that such additional costs caused by the Defendants’ conduct should indeed be taken into consideration.

The costs were then assessed having regard to submissions by the Defendants as to the individual items claimed and the sum of £10,750 was allowed as reasonable and proportionate.

In summarising the overall award of costs, Mr Alexander QC said:

"For the Claimant, it provides, in effect, generous percentage recovery in respect of costs (ignoring photocopying) from the beginning of the case until the Defendants offered to change the name of their business in the manner discussed above and thereby remove the real cause for complaint. In IPEC, there should be reasonably generous recovery of the modest costs of formulating a sound claim and putting it forward if it is, in substance, accepted. However, it also accords with IPEC's overall approach and ensures that there is a reduced incentive for a claimant to press on to trial after an offer has been made for substantially all of the relief sought at an early stage, even if no offer to pay the costs has been made.

Overall, the sum I am awarding provides a reasonable sum by way of costs to the Claimant (it is about 50% of its total costs ignoring photocopying) but it does not unjustly penalize the Defendant by awarding full costs against it, having regard to their offer. The Defendants for their part will end up paying probably about twice as much as they would have had to pay if they had offered to meet a substantial portion of the Claimant's costs at the end of December 2012 and the claim had been compromised on those terms. This is an illustration of the general principles that there should be a large incentive for a defendant to make a reasonable offer of costs at an early stage if they are giving in and not to put their heads in the sand as regards this aspect."

To read the full judgement, click here.