Pre-Action Correspondence - Not Just a Box to be ticked or a Hoop to be jumped through.

Leeds Law Courts

(c) 2005 Jane Lambert: all rights reserved

Jane Lambert

Until the Civil Procedure Rules ("CPR") came into force in 1999 solicitors specializing in intellectual property law heralded litigation with an ultimatum called a letter before action. Written in haughty if not insulting terms and accompanied by a humiliating form of undertakings, they were intended to shock the recipient into submission. They rarely achieved the desired result. As often as not they were simply ignored.  Occasionally, they were answered by a defiant response.  As a result, a lot of actions were launched that could easily have been settled without recourse to litigation.

As I wrote in Dispute Resolution all that was supposed to change with the introduction of Pre-Action Protocols and the Practice Direction-Pre-Action Conduct and Protocols:

"The objective of the Practice Direction and the Pre-Action Protocols is to enable the parties to identify the issues in dispute and, wherever possible, to resolve them through negotiation or some other form of alternative dispute resolution ("ADR")."

For some practitioners, it took a long time for the change to sink in and they continued to act as they did before; but recent sharp increases in issue fees have done much to change attitudes.

Both the Practice Direction and Protocols require an intending claimant to serve a letter before claim. Paragraph 6 (a) specifies that the letter should "include the basis on which the claim is made, a summary of the facts, what the claimant wants from the defendant, and if money, how the amount is calculated." In the Intellectual Property Enterprise Court, including the small claims track, claimants have to state whether they have complied with paragraph 6 of the Practice Direction (Pre-Action Conduct) (see CPR 63.20 (2)).

The letter before claim serves two purposes. 

First, like old style letters before action, letters before claim should put the intended defendant on notice that a claim may be made against him or her. Unless he or she acknowledges the letter promptly and investigates the claim, the intending claimant may well go to court which will cost both sides a lot of money. 

Secondly, letters before claim also serve as a checklist for the intending claimant.  In a claim for copyright infringement, for example, they prompt him or her to identify the copyright work, to ascertain the name of the author, to satisfy him or herself that the author was a qualifying person within the meaning of s.154 of the Copyright, Designs and Patents Act 1988 and to enquire whether the author was employed by the claimant or, if not, whether the author assigned copyright properly.  It is amazing how many copyright actions have been launched without someone taking those steps. Even more amazing is how far they get and how much money is wasted before they have to be abandoned.

In that regard, it is worth consulting the Code of Practice for pre-action conduct in intellectual property disputes on ReedSmith's website. That Code was drawn up by a distinguished panel of experts which included the late Sir Hugh Laddie in 2004 and it remains useful despite the passage of time.  The Code amplifies the requirements of para 6 (a) of the Practice Direction.  

Para 3.2 requires the letter before claim to:

"(a) state that the letter follows this Code and that the defendant should also do so; 

(b) unless the letter is being sent to the legal advisors of the defendant, enclose a copy of this Code; 

(c) identify the claimant; 

(d) list the remedies that the claimant seeks; 

(e) give details of any funding arrangements entered into."

The Code contains a number of appendices for breach of confidence, copyright, moral right, database right and unregistered design right infringement, passing off, patent and registered design infringement, registered trade marks and threats.  Claimants should turn to the relevant appendix for their cause of action.  

Thus, if the claim is for breach of confidence, the claimant should consult the breach of conduct appendix and insert the following particulars:

"(f) identify the nature of the confidential information, including why it is confidential. Sufficient information must be given to enable the defendant to understand the complaint being made. However, the confidential nature of that information may make it difficult for the claimant to disclose details in the absence of a formal confidentiality regime. In those circumstances, the claimant should attempt to establish a suitable formal confidentiality regime with the defendant;
(g) state how the confidential information came into existence;

(h) provide details of the claimant’s ownership of the confidential information; 

(i) provide details of how the defendant came into possession of the confidential information; 

(j) provide details of why the information was communicated to the defendant in circumstances which impose a duty of confidence on the defendant, including the details of any contractual provisions on which the claimant wishes to rely; 

(k) provide details of how the defendant has breached, or will breach the duty of confidence including, if known, to whom it is believed that the defendant has disclosed, or will disclose the information and in what form."

Paragraph 6 (b) of the Practice Direction requires intended defendants to respond within a reasonable time which is 14 days in a straight forward case and no more than 3 months in a very complex one. Para 4 (1) of the Code applies this obligation to IP cases:

"If the defendant is unable to respond within 14 days or, if the letter of claim specifies a shorter period of time, within that time period, the defendant should contact the claimant, explaining why and giving a date by which the defendant will be in a position to respond. In almost all cases a defendant will be expected to have provided a substantive response within 28 days of receipt of the letter of claim."

Para 6 (b) of the Practice Direction also requires the intended defendant to state "whether the claim is accepted and, if it is not accepted, the reasons why, together with an explanation as to which facts and parts of the claim are disputed and whether the defendant is making a counterclaim as well as providing details of any counterclaim." Again the Code provides guidance.  Para 4.2 of the Code requires the response to 

"(a) state whether, or to what extent, the claim is accepted or rejected;

(b) if the claim is accepted in whole or in part, state which parts of it are accepted and which are rejected and indicate which remedies the defendant is willing to offer. This should include whether the defendant is prepared to cease all or any of the activities complained of (and if so, which) and whether the defendant is prepared to give undertakings not to repeat them; 

(c) if the defendant is willing to offer a financial remedy, provide the claimant with relevant information to enable the claimant to determine the basis upon which the sum has been calculated. In such circumstances it may be reasonable for the defendant to require such information to be kept confidential by the claimant or its advisors; 

(d) if more information is required, specify precisely what information is needed to enable the claim to be dealt with and why; 

(e) if the claim is rejected, explain the reasons for that rejection, giving a sufficient indication of any facts on which the defendant currently relies in support of any substantive defence; 

(f) where the defendant is considering making a counterclaim, give such details of the counterclaim as would be required to be given by a claimant intending to bring such a claim; 

(g) give details of any funding arrangements entered into."

If the claim is for breach of confidence, the intended defendant should also turn to para 4.2A of the Code and 

"(h) explain why the defendant was or is entitled to use or disclose the information. This should include, where appropriate, an explanation as to why the defendant disputes that the information is confidential, is owned by the claimant and has been or will be disclosed to or by the defendant."

If the claim is for any other IP infringement, the intended defendant should find the appendix that corresponds to the cause of action.

Both parties are required by para 6 (c) of the Practice Direction to disclose key documents relevant to the issues in dispute.  They must also keep in mind para 4 of the Practice Dircction that stresses that:

"A pre-action protocol or this Practice Direction must not be used by a party as a tactical device to secure an unfair advantage over another party. Only reasonable and proportionate steps should be taken by the parties to identify, narrow and resolve the legal, factual or expert issues."

Para 5 of the Practice Direction warns that disproportionate costs in complying with any pre-action protocol or this Practice Direction, those costs will not be recoverable as part of the costs of the proceedings.

Neither the Practice Direction nor the Code provides for replies, rejoinders or other protracted correspondence. Para 12 of the Practice Direction provides for stocktaking and drawing up lists of issues.  Para 8 reminds the parties that litigation is a last resort and that they should consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings. Para 9 states that either side can make CPR Part 36 offers before or after proceedings have been issued. Para 10 suggests the various forms of ADR which I discussed in detail in Dispute Resolution.  It is stressed that this process should be one of rapid fire procedure to be completed within a few weeks. 

If negotiations take place, it should be remembered that they can be of two kinds:

• Positional: where the parties start from fixed positions and trade concessions until they reach terms upon which they can both agree. The dialogue between vendor and purchaser over the price of a house is a good example.
• Principled: where the parties look for a solution that satisfies their interests but it may bear no resemblance to either party’s negotiating objectives.

Both have their place in dispute resolution but, even if you adopt a positional stance, it is always worth imagining yourself in the opposite party's position, considering his or her options, ruling out what he or she is unlikely to accept and considering any terms that he or she might wish to accept with which you could live.

Should amplification or clarification of any part of this post be required, call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact form,

Further Reading

Date	Author	Title
30 July 2017	Jane Lambert	Dispute Resolution