UK: IPEC damages cap of £500,000 does not apply separately to each defendant in an action where there are multiple defendants

Last Updated: 31 October 2014
Article by Caroline Bass

Summary

In the case of Abbott and another v Design & Display Ltd and another  [2014] EWHC 3234 (IPEC), 10 October 2014, Mr Justice Birss ruled that the IPEC damages cap of £500,000 as set out in CPR 63.17A is to apply to all defendants in a single action and not in relation to each defendant. Under CPR 45.30(2)(a) the court has no discretion to lift this cap unless the parties have expressly agreed to it. In this combined action for patent infringement brought by Abbott against two defendants, the judge refused to interpret CPR 63.17A to mean that damages of up to £500,000 could be sought from each of the defendants even though one of the defendants revealed at a late stage (having already made a Part 36 offer which had been accepted) that it had grossly underestimated the extent of its infringing sales.

Facts of the case

Abbott brought a single action in the IPEC against two separate parties (1) Design & Display ("Design") and (2) Eureka Display ("Eureka"). Abbott alleged that both defendants sold inserts and slatted panels which infringed its patent. Although the defendants' products were different in some regards, Abbott decided to bring just one, combined action as the nature of both its claim and the defendants' respective counterclaims were sufficiently similar.

Following the trial on liability, Mr Justice Birss held the patent to be valid and to have been infringed by both defendants. Abbott elected for an account of profits and following the CMC, Abbott accepted a part 36 offer made by the second defendant, Eureka. To ensure the easy resolution of any apportionment of costs that may be needed between the defendants, Abbott and Eureka agreed to postpone the matter of costs against Eureka until the account against Design had been determined.

Shortly after the hearing of the account against Design, Eureka came forward with further information that revealed the extent of its relevant sales to be far greater than it had initially indicated and indeed allowed for in its part 36 offer that had been accepted by Abbott. This Part 36 was accordingly set aside and the agreed stay of proceedings was set aside.

In light of the full extent of Eureka's sales, it became clear that Abbott, but for the IPEC's cap of on damages, would be entitled to recover considerably more than £500,000 from the two defendants. To ensure that it got what it was properly owed, Abbott asked the judge to interpret CPR 63.17A to mean that the cap of £500,000 should apply separately to each defendant.

The cap on damages

Under CPR 45.30(2)(a) the cap on damages (or an account of profits) of £500,000 is absolute unless agreed otherwise by all parties. In the absence of such agreement, the court has no discretion to lift the cap.

In this case, Abbott asserted that the wording of CPR 63.17A was such that it deliberately distinguished between "proceedings" and "claim." Their argument followed that a claimant will have separate claims against each defendant when there are more than one of them and in relation to each such claim the cap is £500,000. The judge rejected this argument and considered that any such distinction would have been spelt out in clear and unequivocal terms by the draftsmen. This approach is consistent with that taken in Samsung Electronics (UK) Ltd v Apple Inc where the Court of Appeal rejected a similar argument that there was an intended linguistic distinction between "proceedings" and "action".

The defendants sought to rely on the authority of Gimex International Groupe Import Export v The Chill Bag Company[2012] EWPCC Civ34 which concerned the IPEC's cap on costs. In this case the claimant wanted to apportion its costs on the basis that the £50,000 cap should be applied to each defendant separately, allowing it to recover a total of £90,000.  Abbott rejected this authority and argued that a cap on costs, which has the potential to benefit both sides, is not analogous to a cap on damages which only stands to benefit a defendant. The judge appreciated this point but did not agree that this non-reciprocity of benefit placed the claimant in an unfair position.

Where a claimant, at the outset, knows that its claim is worth more than £500,000 it has a number of options; it can bring a single action in the Chancery division where no such cap applies or it can bring separate proceedings in IPEC. If the claimant issues proceedings in the IPEC and then only later becomes aware that its claim is worth more than what it seemed at the outset, it has the option to make an application to transfer the proceedings to the Chancery Division. The judge did suggest (expressly without reference to the present case) that where a party has deliberately concealed information or not provided it through negligent investigation, he considered it likely that a court would be sympathetic to an application to transfer. The judge also mused that if Abbott were to make such an application, the defendants, in the interest of limiting their respective costs liability, may be minded to agree to the lifting of the damages/profits cap to ensure the proceedings remain in the IPEC.

Abbott indicated that if the judge held CPR 63.17A to apply to proceedings as a whole, against all defendants, then it would be making an application to transfer these proceedings. This being the case, the proceedings were stayed pending the outcome of this application.

Comment

Given the importance of the role that certainty as to costs plays in the IPEC, this is an unsurprising judgment. It nevertheless puts the point beyond doubt and provides helpful clarity to any claimant that has issued in the IPEC and later discovers that it has grossly underestimated the value of its claim.

The judgment also provides commentary on Part 36 offers which has not been considered in this blog piece.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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