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The general rule, in intellectual property infringement claims and prosecutions pursued through the English courts and the UKIPO’s tribunal, is the same as with any English court case: “loser pays”.  But “loser pays” does not mean “loser pays everything”, and the winning party – be it a successful claimant or defendant – will almost certainly be left significantly out of pocket.

In most cases, the Court will award costs that reflect a proportion of the winner’s total legal costs.  In the High Court, that will ordinarily be on the ‘standard basis’, requiring costs to be reasonable and proportionate.  At the UKIPO, the Registrar will ordinarily assess costs in accordance with a set scale that is updated from time to time. 

However, outside the general rule, the court and the UKIPO will in exceptional cases deviate from the norm, awarding exceptional costs.  Below is an example of an indemnity costs award in the High Court, and two examples of “off-the-scale” costs awards at the UKIPO.

Indemnity Costs in the High Court

The High Court can award indemnity costs in exceptional circumstances, giving the successful party a higher percentage of its costs than would otherwise be the case.  Under an indemnity costs order, all reasonable costs are recoverable, regardless of proportionality, shifting the balance heavily against the paying party.

Indemnity costs are typically awarded in cases involving misconduct, dishonesty, or unreasonable litigation conduct.  Three Rivers DC v Governor and Co of the Bank of England [2006] Costs LR 714d, provides some useful guidance at paragraph 25 as to circumstances in which indemnity costs may be awarded, including aggressively pursuing hopeless claims, or pursuing claims in bad faith to put commercial pressure on the defendant.

A recent example is the costs award at the hearing that followed our client Easyfundraising’s defence of easyGroup’s claims of trade mark infringement and passing off in easyGroup v Easyfundraising.  Easyfundraising successfully defended all of easyGroup’s claims, and the Judge then heard arguments on costs.  Chris Aikens guided the judge through the 13-year history of the dispute, including our attempts to settle through “without prejudice save as to costs correspondence”.  Accepting the submissions on its behalf, the Judge awarded Easyfundraising its costs on the indemnity basis.  He outlined a number of actions taken by easyGroup that were unreasonable, and set out some of those factors which were sufficient to justify indemnity costs, and which were exemplified by the Three Rivers case:

     1.   easyGroup’s issue of proceedings in February 2022, having not served a letter before action since December 2017, was labelled “bullying and intimidatory behaviour”;

     2.   easyGroup’s raising, then dropping, then raising again serious allegations of detriment to repute and ‘riding on the coattails’, which were not supported by any evidence and were very weak, and some of which were dropped at trial without warning, was, the judge said, “a wholly inappropriate and unreasonable way to deal with an allegation of that seriousness, which should never have been made in the first place”;

     3.   easyGroup’s claims of infringement were “weak from the outset”, and it took a “rather extraordinary approach… to the evidence in this case”, failing to adduce any evidence from easyGroup itself; and

     4.   easyGroup pursued a “hopeless” claim against the Fourth Defendant, an investor in the Easyfundraising business, without properly establishing the basis for pursuing that claim – the judge concluded that he was “entirely satisfied” that the Fourth Defendant was “joined as a defendant in order to exert commercial pressure on the other defendants to drop their opposition to the claim that the claimant had brought”.

Off the scale costs at the UKIPO

The UKIPO’s ordinary scale of costs is designed to provide an accessible, low-cost tribunal with predictable costs.  However, in exceptional cases, the UKIPO may award off the scale costs, departing from its usual capped approach.

Off the scale costs can be granted where a party’s conduct has been unreasonable, vexatious, or abusive.  There is no closed list of what might amount to “off the scale” conduct, but examples include the filing and pursuit of baseless claims, or engaging in tactics designed to delay proceedings.  The UKIPO justifies the award of off the scale costs on the basis that they penalise bad behaviour, whilst compensating the other party for costs incurred due to the misconduct. 

At Hansel Henson, we have had notable successes in applying for and being awarded off the scale costs:

     1.   BL O/513/21. 

In this case, our client successfully defended its registered design protecting the shape of a cut diamond.  Following submissions by the parties, the Hearing Officer then awarded costs off the scale, though still capped at 25% of total costs.  The Hearing Officer’s decision was based on the following factors:

   (1)    the applicant’s case was poorly pleaded from the outset;

   (2)    the case against the proprietor which was subsequently pursued was made very late in the day;

   (3)    five pieces of prior art were abandoned just before the hearing;

   (4)    the wrong witness was put forward to answer questions regarding sales made under the contested design; and

   (5)    the actual person responsible for this area of work was referred to at the hearing by both of the applicant’s witnesses and yet was not asked to file a witness statement in support of its case and could not, therefore, be cross-examined by the proprietor. 

The Hearing Officer concluded that she had no doubt that the manner in which the applicant for invalidity has conducted the proceedings had led to unnecessary additional work for the proprietor.

The Hearing Officer’s decision on validity was subsequently appealed to the Appointed Person. The appeal was dismissed, and the Appointed Person then made a separate decision as to costs, in O-154-22. The Appointed Person issued yet another off the scale costs award, agreeing with our submissions that the appellant’s conduct on all three areas identified by us had been unreasonable:

   (1)    it had pursued an appeal that was hopeless, and only announced at the hearing that those grounds would not be pursued, at which point our client had incurred substantial costs; 

   (2)    the appellant had dismissed its legal representatives but then failed to appoint new representatives promptly, and then tried to use that as an excuse to delay the appeal hearing; and

   (3)    the appellant had filed poorly formulated grounds of appeal, failing to make clear what grounds they sought to challenge the Hearing Officer’s findings on individual character.Ultimately, the Appointed Person ordered that the appellant should pay 80% of our client’s costs of the appeal.

     2.   O/1024/24

This case was a consolidated trade mark opposition and invalidation matter.  The case is unusual, because our client’s opponent, Mr Maksumov, withdrew his oppositions and surrendered his remaining trade mark very shortly before a hearing was due to take place.  The UKIPO agreed with us that a surrender of a trade mark is not the same as invalidating it, and had Mr Maksumov confirm that he also withdrew his defence to the invalidation application.  The Hearing Officer then requested submissions on costs prior to giving his decision based on the papers.  In summary, we submitted that Ontario should be granted off the scale costs because: (1) Mr Maksumov had acted in bad faith; and (2) of his unreasonable behaviour during the course of the matter.  

The UKIPO decided to invalidate Mr Maksumov’s trade mark on the basis that Ontario’s grounds for invalidation were no longer denied.  However, the UKIPO considered this not to amount to an admission of having acted in bad faith, or of unreasonable behaviour for deciding whether to grant off the scale costs.  Therefore the Hearing Officer went on to consider the evidence and submissions to decide our client’s application for off the scale costs. 

The Hearing Officer was required to determine the question of the other side’s bad faith and dishonesty by reference to the evidence filed in the matter, and to draw out from that evidence a number of key facts. Ultimately, he decided that Mr Maksumov’s trade mark application had been unreasonable and commercially dishonest, behaviour which was sufficiently exceptional to justify an award of off the scale costs.  The Hearing Office also took into account the late withdrawal of Mr Maksumov’s trade mark and defence.  The Hearing Officer made some reductions, but awarded a sum amounting to around 90% of our client’s costs. 

Conclusion

Whilst the UK courts and tribunals generally employ the “loser pays” principle, successful litigants are still left substantially out of pocket.  In all three of the cases above, our clients were delighted to have recovered very much more than they would have done.

A number of practical points to follow from this for those who are involved in litigation:

• Look to engage in reasonable settlement discussions wherever possible;
• Make use of without prejudice save as to costs correspondence wherever possible; and
• Behave reasonably.  Amongst other things, and particularly where you have a weak case, do not be a bully!