Intellectual Property Litigation in England and Wales

The Rolls Building
Author Judicial Office Licence CC BY-SA 4.0  Source Wikimedia Commons

Last week I chaired 4 of the 5 daily sessions of Informa's Cambridge IP "Winter School" and delivered 3 of the talks. The title of the last of those talks (which was also the last talk of the Winter School) was IP Litigation in England and Wales. I offered that talk because not all the attendees in previous years' summer schools had been legally qualified and many of those who were so qualified were new to IP.  It seemed to me that there was not much point in discussing the complexities of IP litigation without a grounding in the basics.

IP litigation differs from other types of civil litigation in many ways.  It has its own rules and practice direction.  Much IP business is conducted in specialist courts and all of the rest are in a specialist list in the Chancery Division.  IP litigation can be particularly expensive which is why threats to bring patent, design or trade mark infringement proceedings are actionable unless they can be justified.  The expense of such litigation explains why many IP disputes are resolved upon the grant of denial of an interim remedy.  There are highly developed alternatives to litigation such as the Intellectual Property Office's opinion service and ICANN and Nominet's domain name dispute resolution services.  

The rules that govern IP litigation are Part 63 of the Civil Procedure Rules ("CPR Part 63") and the Part 63 Practice Direction ("PD Part 63").  Both CPR Part 63 and PD Part 63 are divided into sections.  Section I of both CPR Part 63 and the PD Part 63 deal with patents, registered designs, chip topographies and plant breeders rights. Section II of both CPR Part 63 and the PD Part 63 deal with all other intellectual property rights.

CPR 63.2 (2) requires patent, registered design, semiconductor topography and plant varieties cases to be started either in the Patents Court or the Intellectual Property Enterprise Court ("IPEC"). The Patents Court is established by s.6 (1) (a) pf the Senior Courts Act 1981 as part of the Chancery Division.  I should mention at this point that s.61 (1) and para 1 (i) of Sched 1 of that Act distributes all IP work in the High Court to the Chancery Division.  The Patents Court consists of judges such as Mr Justice Meade and Mr Justice Mellor who have spent their careers at the IP bar as well as judges who practised in other areas of law who can resolve IP disputes. Those judges are referred to collectively as "the assigned judges". Guidance on the work of the Patents Court can be found in the Patents Court Guide.

IPEC is the successor to the Patents County Court which had been established pursuant to s.287 (1) of the Copyright, Designs and Patents Act 1988. S.17 (5) and para 30 (9) of Sched 9 to the Crime and Courts Act 2013 repealed s.287 of the 1988 Act with effect from 1 Oct 2013.  Art 26 of The Civil Procedure (Amendment No.7) Rules 2013 established IPEC  in place of the Patents County Court as a specialist list in the Chancery Division.  IPEC hears all IP cases (and not just patent, registered design, semiconductor topography and plant breeders' rights ones) that can be tried within 2 days where the claim is for £500,000 or less.  Further information on IPEC can be found in The Intellectual Property Enterprise Court Guide.

Claims for £10,000 or less for the infringement of IP rights other than patents, registered designs, semiconductor topographies or plant breeders rights; can be brought in IPEC's small claims track.  Such claims are conducted in accordance with CPR Part 27.  Claims are tried by district judges sitting in the Royal Courts of Justice or the Birmingham, Bristol, Cardiff, Leeds, Liverpool, Manchester and Newcastle District Registries.  Guidance on IPEC's small claims track can be found in The Guide to the Intellectual Property Enterprise Court Small Claims TrackIt is important to note that the IPEC small claims track is part of the Chancery Division and not the County Court.

IP claims that do not fall within the jurisdiction of the Patents Court or IPEC proceed in the Intellectual Property list of the Chancery Division.  Proceedings can be issued and cases can be heard in London or in any court centre where there is a chancery district registry.  CPR 63.13 (c) provides for litigation in the County Court but it is unlikely that many IP owners would wish to do so when they can come before a specialist judge in IPEC. Claims in the Chancery Division's IP list would tend to be the heavier copyright, design right, trade mark, breach of confidence and passing off claims.  Information on proceedings in the Chancery Division can be obtained from the Chancery Guide.

According to TaylorWessing's Patent Map, England is the most expensive country in Europe in which to bring a patent infringement action.  Costs range between £200,000 and £1 million.  IP litigation has always been expensive which explains why Lord Esher MR exclaimed in Ungar v Sugg (1892) 9 RPC 117:

"A man had better have his patent infringed, or have anything happen to him in this world, short of losing all his family by influenza, than have a dispute about a patent."

Because of the expense, the mere hint of an infringement action has been enough to dissuade distributions from stocking products that compete with allegedly patented products.  Obviously, threats of infringement proceedings can be abused. To prevent such abuse Parliament passed the Patents, Designs and Trade Marks Act 1883. S.32 of that Act created a cause of action against anyone who threatened patent infringement proceedings without justification.  A similar provision has been re-enacted in every subsequent patent statute as well as in registered design, trade mark and unregistered design right legislation. 

Although the Intellectual Property (Unjustified Threats) Act 2017 has drawn the teeth of the unjustified threats provisions of the Patents Act 1977, Trade Marks Act 1994, Registered Designs Act 1949 and the Copyright, Designs and Patents Act 1988, practitioners and their clients still have to be careful.  The sort of letter before claim that would be perfectly acceptable in any other type of litigation can still provoke an action for a declaration that the threats are unjustified, an injunction against repeated or continuing threats and damages. 

It is not just formal letters that can result in a claim.  S.70 (1) of the Patents Act 1977 provides that a communication contains a “threat of infringement proceedings” if "a reasonable person in the position of a recipient would understand from the communication that 

(a) a patent exists, and 
(b) a person intends to bring proceedings (whether in a court in the United Kingdom or elsewhere) against another person for infringement of the patent by—
(i) an act done in the United Kingdom, or
(ii) an act which, if done, would be done in the United Kingdom."

Consequently, an IP owner has to consider carefully what he or she says in an email, on his company's website or even after a round of golf with one of his distributors in the 19th hole.

Notwithstanding the risk of threats actions, IP rights owners are expected to comply with the Practice Direction - Pre-Action Conduct and Protocols just like every other claimant.   Para 8 of that practice direction states that litigation should be a last resort.  Unless there is a compelling reason not to do so, parties should exchange correspondence and information before taking any other steps in the proceedings. Although it was prepared over 14 years ago, Reed Smith’s Code of Practice for Pre-action Conduct in Intellectual Property Disputes contains useful guidance on the preparation of letters before claim and responses.  For further information on the practice direction, see my articles Practice Direction - Pre-Action Conduct and Protocols Update which I posted to this publication on 12 Oct 2019, Pre-Action Correspondence - Not Just a Box to be ticked or a Hoop to be jumped through of 2 Aug 2017 and What to do about the new Practice Direction - Pre-Action Conduct of 6 May 2021.

Para 8 also encourages parties to consider whether negotiation or some other form of ADR might enable them to settle their dispute without commencing proceedings. The practice direction suggests mediation, arbitration and early neutral evaluation. Both the Intellectual Property Office and the World Intellectual Property Organization offer very cost-effective specialist mediation schemes for IP disputes.  The IPO also offers early neutral evaluation of patent disputes under s.74A of the Patents Act 1977.  For £200 a patent examiner will express a non-binding opinion on whether a patent is valid, whether it has been infringed or any other patent issue.  The examiner will take account of representations and evidence provided by all sides to a dispute. The Intellectual Property Act 2014 provided for an opinions service on designs but that legislation has not yet been implemented.  The policies for resolving domain name disputes within a short time for a modest fee established by ICANN (the Internet Corporation for Assigned Names and Numbers) and country code domain name authorities are spectacularly successful early neutral evaluation schemes.

Many IP disputes are settled at a very early stage by the grant or refusal of an interim injunction or some other interim remedy. For instance, if a business has to rebrand between the issue of proceedings and trial it may see very little purpose in proceeding to trial however aggrieved it may feel. The interim remedies that can be ordered include:
  • Interim injunctions;
  • Norwich Pharmacal orders;
  • Search orders;
  • Freezing injunctions and
  • Blocking orders.
The power to grant these orders is made under CPR 25.1. The procedure is governed by the Part 25A Practice Direction and the Chancery Guide. An application notice, draft minute of order, witness statements exhibiting relevant documents or other material evidence in support of the application should be filed and served on the respondent at least 3 clear days before the hearing unless there is a good reason not to do so. Sometimes the respondent is prepared to give undertakings or other relief. If not, he or she may ask for an opportunity to serve evidence in reply. In those circumstances, the application is stood over to be heard as “an application by order”. The applications judge will decide the application in accordance with the House of Lords’ decision in American Cyanamid Co (No 1) v Ethicon Ltd[1975] UKHL 1, [1975] 1 All ER 504, [1975] AC 396, [1977] FSR 593, [1975] 2 WLR 316.

Norwich Pharmacal orders are useful for identifying wrongdoers and tracing the movement of money. In Norwich Pharmacal Co. and Others v Customs and Excise Commissioners [1974] [1973] UKHL 6, [1973] FSR 365, [1974] AC 133, [1973] 3 WLR 164, [1974] RPC 101, [1973] 2 All ER 943, a patentee sought an order to compel the customs authorities to disclose the names of importers of a substance that was believed to infringe its patent. The case proceeded eventually to the House of Lords. In his speech, Lord Reid said:

“If through no fault of his own a person gets mixed up in the tortious acts of others so as to facilitate their wrongdoing he may incur no personal liability but he comes under a duty to assist the person who has been wronged by giving him full information and disclosing the identity of the wrongdoers”.

In England and Wales, orders of this kind have been made against the organizers of internet chat rooms, a social media platform and an online payments processor. In Australia, Perram J of the Australian Federal Court ordered several Australian Internet service providers to disclose the names of subscribers who had used the ISPs’ facilities to download unlicensed copies of the claimant’s film in Dallas Buyers Club LLC v iiNet Limited (No 3). In a similar case in Canada, the applications judge ordered an ISP to disclose the contact details of a subscriber who was believed to have infringed copyright in a film through file sharing.

A search order is an injunction requiring the person in charge of business or residential premises or other private space such as an aircraft, ship or vehicle to admit a party of lawyers and experts to such space and allow them to search for, and record or take copies or samples of, any evidence that may be relevant to proceedings that have been or are about to be launched.

The application for a search order is made in the absence of the party whose premises are to be searched. Such orders are made only if the court can be persuaded that the respondent would frustrate the intended proceedings by not disclosing or even hiding, destroying or otherwise putting relevant evidence beyond the reach of the court. The application must be supported by affidavits or affirmations showing not only a strong claim against the respondent for the infringement of an IP right or other wrongdoing but also that the respondent might hide or destroy evidence. Usually, that means proving that the respondent has withheld evidence or otherwise acted dishonestly or improperly in the past, or that he or she has a strong incentive to do so in the circumstances. The applicant has a duty to make full and frank disclosure of all relevant facts and matters, whether favourable to its case or not, including any submissions that could have been made by the respondent had he or she been represented before the court.

A solicitor from a law firm that is not connected with the claimant’s solicitors known as “the supervising solicitor” serves the order, application, supporting evidence and court transcript on the person or persons in charge of the premises and explains its effect in everyday language. The respondent is allowed a reasonable opportunity to seek legal advice provided that he or she does not frustrate or delay the search unduly.

Once they are admitted to the premises, the applicant’s solicitors and experts conduct their search. The supervising solicitor makes sure that they act strictly in accordance with the order and with due regard to the rights of the respondent. At the end of the search, the supervising solicitor reports in writing to the court. The court considers the report at a hearing that takes place a few days after the search.

Search orders were sought frequently when infringing copies of films, games or sound recordings were recorded on discs or tapes that could be intercepted in storage or transit. There has been less scope for such orders now that piracy takes place online. Nevertheless, there are still circumstances when searches can be useful. Search orders are expensive to obtain and execute and applicants risk being ordered to compensate the respondent in damages if the court decides that the order should never have been sought. For all that, they remain a useful remedy. A successful search can have a devastating psychological effect on the willingness of an infringer to resist a claim or persist in wrongdoing. 

If a court has reason to believe that a respondent would try to defeat a judgment by hiding, dissipating or removing assets against which judgment could be levied, it can restrict the use and movement of any funds or other assets in the respondent’s possession or control beyond what is reasonable for everyday business and living expenses or obtaining legal advice by an order known as a freezing injunction.

Like search orders, freezing injunctions are at the very limits of the court’s jurisdiction. Applications for freezing injunctions are made in the absence of the respondent and usually before proceedings are issued or served. The court has to be persuaded that there is a strong case against the respondent, that he or she has assets and that he or she has hidden such assets or otherwise acted dishonestly or improperly in the past or is likely to do so in the circumstances. As with applications for search orders, written evidence must be sworn or affirmed before a solicitor or commissioner of oaths. Applicants have a duty to disclose to the court all facts and matters upon which a respondent might be expected to rely. Should a freezing injunction be made it may be served not only on the respondent but also on his or her bankers and any other intermediary holding the respondent’s assets. A hearing to review the order usually takes place a few days after execution.

Freezing injunctions are expensive to obtain and there is always a risk that the applicant may be ordered to compensate the respondent if the court subsequently decides that the order should never have been made. However, the psychological impact of a freezing injunction on a respondent can be as great as that of a search order. In Twentieth Century Fox Film Corporation and others v Harris and others [2014] EWHC 1568 (Ch) which concerned Newzbin2, a web-based service facilitating downloading from newsgroups, Mr Justice Barling  noted at paragraph [23] of his judgment:

“On 23 November 2012 the Claimants obtained an interim freezing order against Mr. Harris, K, the Foundation and Mr E. On November 26, 2012, the present proceedings, together with the freezing order, were served on those Defendants. Two days later, on November 28, 2012, the N[ewzbin]2 website ceased operations”.

It would appear that it was the service of the freezing injunction on the director and shareholder of the company that controlled the Newzbin2 website which closed it down rather than the blocking order that Arnold J made against British Telecommunications over a year earlier (see Twentieth Century Fox Film Corporation and another v Newzbin Ltd [2011] Bus LR D49, [2010] FSR 21, [2010] EMLR 17, [2010] EWHC 608 (Ch), [2010] ECC 13, [2010] ECDR 8).

Blocking orders are injunctions to restrain an ISP or other intermediary from allowing its services to be used to infringe copyright. More specifically, they require the intermediary to restrict their subscribers’ access to websites distributing infringing material or, more recently, streaming services accessible through set-top boxes loaded with special software. Save for the first application for a blocking order, which was refused on the grounds that the relief sought was too wide and unnecessary in view of the relief already granted blocking orders are made almost as a matter of course in England and Wales. The defendants, who tend to be ISPs, rarely defend them. The parties affected by them have every incentive not to come before the courts. To a large extent, the court acts administratively rather than judicially when considering applications for blocking orders.

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