Transfer to IPEC - Massimo Osti SRL v Global Design and Innovation Ltd
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Jane Lambert
Chancery Division (Master Clark) Massimo Osti SRL v Global Design and Innovation Ltd and another [2018] EWHC 2263 (Ch) (30 Aug 2018)
This was an application by the claimant to set aside an order made by the court on its own initiative under CPR 3.3 to transfer a claim for an EU wide injunction, unpaid royalties and other relief for EU trade mark infringement and breach of contract and the defendants' counterclaim for a declaration that the mark is invalid from the Chancery Division to the Intellectual Property Enterprise Court ("IPEC").
The Significance of the Application
The Chancery Division is one of three Divisions of the High Court of Justice established by s.5 (1) of the Senior Courts Act 1981. S.61 (1) and para 1 (i) of Sched. 1 of that Act assign patents, trade marks, registered designs, copyright and design right cases to the Chancery Division. The Chancery Division has a number of specialist courts one of which is IPEC. IPEC was established by art 26 (b) (1) of The Civil Procedure (Amendment No.7) Rules 2013 to take over the business of the Patents County Court which had been abolished by s.17 (5) and para 30 (3) of Sched. 9 of the Crime and Courts Act 2013. In IPEC (as in the old Patents County Court), trials have to be completed within 2 days and no more than £50,000 can be recovered from an unsuccessful party by way of costs (see Jane Lambert New Patent County Court Rules 31 Oct 2010). There are no such restrictions in the Chancery Division so it can be advantageous for the party with the longer pocket to conduct its claim in the Chancery Division.
Matters to be considered
The possibility that the party with the longer pocket could exploit such advantage is contemplated by para 9.1 (1) of the Part 30 Practice Direction. One of the matters that the court has to consider when deciding whether or not to transfer a case to IPEC is whether a party can only afford to bring or defend the claim in IPEC. Other matters include whether the claim is appropriate to be determined by IPEC having regard in particular to the value of the claim including the value of an injunction, the complexity of the issues and the estimated length of the trial.
The rule to be applied is CPR 30.5 which governs transfers between divisions of the High Court and to and from specialist lists save that CPR 63.18 (1) permits a judge of the Chancery Division to transfer a case from the general Chancery Division to the IPEC and CPR 63.18 (2) requires the court to have regard to the Part 30 Practice Direction.
Applicable Principles
The application came on before Master Clark who had made the CPR 3.3 transfer order. The defendants referred the master to Tibbles v SIG Plc (t/a Asphaltic Roofing Supplies) [2012] 4 All ER 259, [2012] CP Rep 32, [2012] 1 WLR 2591, [2012] EWCA Civ 518 in which Lord Justice Rix considered the cases under the rule that a power of the court under these Rules to make an order includes a power to vary or revoke the order said at paragraph [39] (vii):
"The cases considered above suggest that the successful invocation of the rule is rare. Exceptional is a dangerous and sometimes misleading word: however, such is the interest of justice in the finality of a court's orders that it ought normally to take something out of the ordinary to lead to variation or revocation of an order, especially in the absence of a change of circumstances in an interlocutory situation."
The Significance of the Application
The Chancery Division is one of three Divisions of the High Court of Justice established by s.5 (1) of the Senior Courts Act 1981. S.61 (1) and para 1 (i) of Sched. 1 of that Act assign patents, trade marks, registered designs, copyright and design right cases to the Chancery Division. The Chancery Division has a number of specialist courts one of which is IPEC. IPEC was established by art 26 (b) (1) of The Civil Procedure (Amendment No.7) Rules 2013 to take over the business of the Patents County Court which had been abolished by s.17 (5) and para 30 (3) of Sched. 9 of the Crime and Courts Act 2013. In IPEC (as in the old Patents County Court), trials have to be completed within 2 days and no more than £50,000 can be recovered from an unsuccessful party by way of costs (see Jane Lambert New Patent County Court Rules 31 Oct 2010). There are no such restrictions in the Chancery Division so it can be advantageous for the party with the longer pocket to conduct its claim in the Chancery Division.
Matters to be considered
The possibility that the party with the longer pocket could exploit such advantage is contemplated by para 9.1 (1) of the Part 30 Practice Direction. One of the matters that the court has to consider when deciding whether or not to transfer a case to IPEC is whether a party can only afford to bring or defend the claim in IPEC. Other matters include whether the claim is appropriate to be determined by IPEC having regard in particular to the value of the claim including the value of an injunction, the complexity of the issues and the estimated length of the trial.
The rule to be applied is CPR 30.5 which governs transfers between divisions of the High Court and to and from specialist lists save that CPR 63.18 (1) permits a judge of the Chancery Division to transfer a case from the general Chancery Division to the IPEC and CPR 63.18 (2) requires the court to have regard to the Part 30 Practice Direction.
Applicable Principles
The application came on before Master Clark who had made the CPR 3.3 transfer order. The defendants referred the master to Tibbles v SIG Plc (t/a Asphaltic Roofing Supplies) [2012] 4 All ER 259, [2012] CP Rep 32, [2012] 1 WLR 2591, [2012] EWCA Civ 518 in which Lord Justice Rix considered the cases under the rule that a power of the court under these Rules to make an order includes a power to vary or revoke the order said at paragraph [39] (vii):
"The cases considered above suggest that the successful invocation of the rule is rare. Exceptional is a dangerous and sometimes misleading word: however, such is the interest of justice in the finality of a court's orders that it ought normally to take something out of the ordinary to lead to variation or revocation of an order, especially in the absence of a change of circumstances in an interlocutory situation."
They submitted that the same principles should apply. The master rejected their submission. He said at [25]:
"The transfer order was made of the court's own initiative, pursuant to CPR 3.3. CPR 3.3(5) provides that when the court makes such an order, a party affected by the order is entitled to apply to have it set aside, varied or stayed; and this is the provision governing the application. The hearing of such an application is, in my judgment, a redetermination of the issue in question, with the benefit of the parties' submissions; and is not governed by the restrictive principles in Tibbles, which apply to an application to set aside an order made at a hearing. For this reason, it is also unnecessary that the application be heard by the judge who made the initial order."
"The transfer order was made of the court's own initiative, pursuant to CPR 3.3. CPR 3.3(5) provides that when the court makes such an order, a party affected by the order is entitled to apply to have it set aside, varied or stayed; and this is the provision governing the application. The hearing of such an application is, in my judgment, a redetermination of the issue in question, with the benefit of the parties' submissions; and is not governed by the restrictive principles in Tibbles, which apply to an application to set aside an order made at a hearing. For this reason, it is also unnecessary that the application be heard by the judge who made the initial order."
The IPEC Guide
The learned master referred to para 1.3 of the IPEC Guide:
The learned master referred to para 1.3 of the IPEC Guide:
* The complexity of the claim. The procedure in the IPEC is streamlined and trials will seldom last more than 2 days. A trial which would appear to require more time than that even with the streamlined procedure of the IPEC is likely to be unsuitable.
…
* Conflicting factual evidence. Cross-examination of witnesses will be strictly controlled in the IPEC. The court is well able to handle cases involving disputed factual matters such as allegations of prior use in patents and independent design as a defence to copying; but if a large number of witnesses are required the case may be unsuitable for the IPEC.
* Value of the claim. Subject to the agreement of the parties, there is a limit on the damages available in the IPEC of £500,000. However, assessing the value of a claim is not only concerned with damages. Putting a value on a claim is a notoriously difficult exercise, taking into account factors such as possible damages, the value of an injunction and the possible effect on competition in a market if a patent was revoked. The value of the claim will generally be a secondary indicator of its suitability for hearing in the IPEC. It may sometimes be inferred that a claim of very high value will require evidence and argument of an amount which will render the claim unsuitable for the IPEC. On the other hand, if a claim is otherwise appropriate for hearing in the IPEC it will be unusual for this to be ruled out solely because of an estimate of the claim's value."
Chancery Masters Guidelines
Master Clark also mentioned the Chancery Masters Guidelines for the Transfer of Claims (20 May 2015):
"8. … The value of a claim is not a consideration which has greater weight than the other criteria set out in CPR 30(3)(2) but it is likely to be a factor with considerable influence in making a decision about transfer to the County Court or a specialist list. The figure of £100,000 mentioned in PD29 is not generally regarded as a relevant measure for money claims in the Chancery Division in London.
9 If the value of the claim is ascertainable, particular focus should be given to the possibility of transferring Part 7 claims with a value of less than £500,000. Factors which may point to retention of such claims in the High Court include:
(a) complex facts and/or
(b) complex or non-routine legal issues and/or
(c) complex relief and/or
(d) parties based outside the jurisdiction and/or
(e) public interest or importance and/or
(f) large numbers of parties and/or
(g) related claim and/or
(h) the saving of costs and/or
(i) efficiency in the use of judicial resources ."
Applying these Principles
Master Clark also mentioned the Chancery Masters Guidelines for the Transfer of Claims (20 May 2015):
"8. … The value of a claim is not a consideration which has greater weight than the other criteria set out in CPR 30(3)(2) but it is likely to be a factor with considerable influence in making a decision about transfer to the County Court or a specialist list. The figure of £100,000 mentioned in PD29 is not generally regarded as a relevant measure for money claims in the Chancery Division in London.
9 If the value of the claim is ascertainable, particular focus should be given to the possibility of transferring Part 7 claims with a value of less than £500,000. Factors which may point to retention of such claims in the High Court include:
(a) complex facts and/or
(b) complex or non-routine legal issues and/or
(c) complex relief and/or
(d) parties based outside the jurisdiction and/or
(e) public interest or importance and/or
(f) large numbers of parties and/or
(g) related claim and/or
(h) the saving of costs and/or
(i) efficiency in the use of judicial resources ."
Applying these Principles
The master considered the following issues at para [26]:
"(1) The defendants' finances and their ability to afford to defend the claim in the High Court;
(2) the value of the claim
(i) the value of the monetary relief sought;
(ii) the value of the injunctive relief sought;
(iii) the value of the Marks, which the defendants seek to revoke/be declared invalid;
(3) the complexity of the issues;
(4) the estimated length of the trial."
"(1) The defendants' finances and their ability to afford to defend the claim in the High Court;
(2) the value of the claim
(i) the value of the monetary relief sought;
(ii) the value of the injunctive relief sought;
(iii) the value of the Marks, which the defendants seek to revoke/be declared invalid;
(3) the complexity of the issues;
(4) the estimated length of the trial."
As to the first issue the master considered the defendants' ability to litigate to be a "neutral factor". The defendants consisted of a limited company and its director who was sued as a joint tortfeaor. It was clear from its accounts that the company was unable to afford High Court litigation but it was part of a larger group which included profitable companies with significant assets and its director disclosed very little information about his means.
As to the claim for monetary relief, the master found at [40]:
"On the claimant's best case therefore, including royalties payable on all of the swing tag products, the total royalties payable would be £454,706. However, from this must be deducted payments made by or on behalf of the Delaware company of £141,125, giving a net monetary value of the claim of £313,581. This is well within the maximum value of damages awardable by the IPEC; and well within the range of value which requires the court to give serious consideration to transfer out of the High Court. "
"On the claimant's best case therefore, including royalties payable on all of the swing tag products, the total royalties payable would be £454,706. However, from this must be deducted payments made by or on behalf of the Delaware company of £141,125, giving a net monetary value of the claim of £313,581. This is well within the maximum value of damages awardable by the IPEC; and well within the range of value which requires the court to give serious consideration to transfer out of the High Court. "
The master noted at [41] that one effect of the injunction would be to prevent the defendants from selling the remainder of the old stock in their possession thereby depriving the claimant of any financial benefit from such sales. He was not therefore satisfied that the claimant would obtain any significant benefit from the injunction it sought.
As to the value of the claimant's marks, Master Clark said that in the absence of evidence as to the monetary value of the claimant's exploitation of those marks, it was not possible to form any view as to their value.
The issues in the case were:
(1) whether an implied licence came into existence;
(2) Whether the claimant's consent to the manufacture of the co-branded items during the term of the licence exhausted its rights in respect of those items;
(3) Whether the defendants' use of the marks is descriptive use within the meaning of art 14 of the EU Trade Mark Regulation;
(4) Whether the Marks were invalid for lack of distinctiveness or descriptiveness as at the date of filing.
The master held that none of those issues was unsuitable for determination by the IPEC.
As for the length of the trial, the claimant had estimated 5 days which the master considered to be an over estimate, even without IPEC streamlined procedures. "Given those procedures," he added "I consider that this claim could be heard within the usual two days required for an IPEC case."
He concluded at [55]:
"Having considered all the factors set out above, in my judgment, they point clearly to the conclusion that this is a claim which is suitable for the IPEC and ought not to be retained in the High Court."
"Having considered all the factors set out above, in my judgment, they point clearly to the conclusion that this is a claim which is suitable for the IPEC and ought not to be retained in the High Court."
Comment
This is a short judgment on a short point but one that arises frequently. It considers conveniently the law to be applied, the practice to be followed and the issues to be addressed. It is likely to be cited frequently in skeleton arguments. Anyone wishing to discuss this case or civil procedure generally should call me on 020 7404 5252 during office hours or send me a message through my contact page.
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