The Intellectual Property Enterprise Court (IPEC) has ruled that the IPEC costs cap can be exceeded where Part 36 of the Civil Procedure Rules (CPR) applies.

The ruling was made by HHJ Hacon in PPL v Raymond Hagan & Ors [2016] EWHC 3076 (IPEC) on 30 November 2016.

PPL is a music licensing company. PPL brought a claim against Mr Hagan for playing music at his bars without a licence. Judgment against Mr Hagan for copyright infringement was given and an injunction was awarded in 2014. Compensatory damages were awarded in respect of the licence fees that should have been paid (approximately £14,000) and a costs award was also made in PPL's favour (approximately £45,000).

Nevertheless, PPL pursued its claim for additional damages, interest on damages and interest on costs; it is these issues which were addressed in the court's 30 November 2016 decision.

Fixed Costs and Part 36

In 2013, PPL made a Part 36 offer to Mr Hagan settle the litigation, in return for an injunction and a payment of £5,000. Mr Hagan did not accept the offer.

Under CPR 36.3(1)(b), if a defendant fails to accept a claimant's offer to settle and on subsequent judgment the claimant receives an award more advantageous than its offer, the court has discretion to make certain additional awards on costs, damages and interest against the defendant. In the IPEC however, awards of costs are usually limited to £50,000 (CPR 45.31). 

With PPL already having received a judgment for £44,587.01 in costs, there was clearly a risk that any discretionary awards under Part 36 could conflict with the cap. The court was therefore required to decide which rule should be favoured when exercising that discretion. It decided that Part 36 should prevail.   

HHJ Hacon referred to a Court of Appeal decision of Lord Dyson (Solomon v Cromwell Group plc [2010] W.L.R. 1048), which discussed cost caps in road traffic accident cases, and gave two reasons as to why Part 36 overrides the IPEC costs cap:

  1. if fixed costs were intended to prevail, Part 36 would say so explicitly (and with respect to the IPEC, the rules do not); and
  2. had there been any doubt on which should prevail, the Explanatory Memorandum for the Part 36 rules in any event said that a "claimant will not be limited to receiving his fixed costs…".

It is in part the costs cap which makes the IPEC such an attractive forum for parties wishing to bring proceedings. However, successful parties may also tend to feel disappointed not to recover as great a proportion of their costs as they might have done in another court.

The judge reiterated that "the principle to be maintained in relation to CPR 36.14(3) is… to generate a vigorous incentive to make and accept claimant's Part 36 offers."

Additional damages

HHJ Hacon also made some noteworthy points about the inter-relationship between the provisions for additional damages under the Copyright Designs and Patents Act 1988 (s.97(2)) and the damages provisions of Article 13 of the IP Enforcement Directive (IPED).

Article 13 sets the minimum damages that member states should award, although a claimant may rely on either set of provisions according to whichever best protects its position, provided it does not benefit from both cumulatively. The Article 13 base line, concluded the judge, was met in this case by the award for the unpaid licence fees.

However, Article 3 IPED requires all remedies for infringement to be "effective, proportionate and dissuasive". Emphasising the importance of the "dissuasive" element, the judge decided to award PPL additional damages of £2,000 under s.97(2) on account of the defendant's flagrancy; Mr Hagan knew he was required to keep a licence for his bars (he had previously held a PPL licence but had failed to renew it) and his infringements continued even after proceedings had been started.  

The judge also issued a warning to other potential defendants: while in this instance the bankrupt Mr Hagan was unlikely to infringe again, other "potential flagrant infringers" pose a greater threat. Observing that some of those "may require a good deal more dissuading", the judge warned that such defendants might expose themselves to "an award of additional damages on a higher scale".

Concluding remarks on IPEC costs caps

HHJ Hacon's 30 November 2016 judgment in PPL v Hagan provides a useful reminder that the IPEC costs caps, whilst being non-discretionary, do not apply in every circumstance. By slightly rebalancing the position in favour of successful parties, perhaps the decision will further encourage settlement in IPEC cases while helping the court to maintain its appeal.

Another example can be found in CPR 45.30(2), which states the costs caps do not apply where either a party has behaved in a manner which amounts to an abuse of process, or where the claim concerns infringement or revocation of a patent, trade mark or registered design, the validity of which has been certified in earlier proceedings.