🇬🇧 United Kingdom
This note provides a summary of the way in which IT and IP claims are handled in the English courts. Unlike most other European legal systems it is important to remember that:
- there is no Civil Code in England;
- English civil law consists of Parliamentary legislation and decisions of the courts;
- English courts interpret legislation and are normally required to follow decisions by the same or higher courts.
Civil courts are divided between the High Court (dealing with larger and more complex cases in excess of £50,000) and County Courts. The High Court is divided into 3 divisions:
- Queen’s Bench Division – dealing with mainly commercial and contractual claims which includes IT disputes being heard by the Technology & Construction Court (TCC);
- Chancery Division – dealing with IP and company law disputes;
- Family Division.
Appeals from all Divisions are heard by the Court of Appeal (normally 3 judges) and on particularly important legal issues a final appeal is possible to the Supreme Court (5 judges). Matters are also sometimes referred to the European Court of Justice for guidance when an interpretation of EU law is required.
Since 1998, the Civil Procedure Rules (CPR) govern all litigation in the English Courts, including IT and IP claims. The CPR aimed to harmonise and simplify English litigation procedure in order to:
- ensure cases are handled justly;
- speed up litigation;
- reduce overall costs;
- deal with cases proportionately given the amounts at stake.
Parties are now required to act reasonably in exchanging information and documents in order to try to settle disputes before starting formal litigation; there are also special rules applying to particular types of disputes setting out the procedure parties are expected to follow (“pre-action protocols”). Failure to follow these rules or acting unreasonably risks the courts imposing sanctions on the offending party: costs sanctions are common which means that some of the other party’s legal costs will need to be paid or, the offending party will be denied some or all of its legal costs from the other party, even if it wins.
The stages are as follows:
- the claim – the Claimant issues a claim form setting out the key elements of the claim and facts relied upon (but not the evidence) and serves it on the defendant; a fee is payable depending on size of the claim;
- the defence – the Defendant then has to indicate whether it accepts or contests the claim – if the latter, it will need to serve a defence (normally within 28 days); the defence is a vital document – if weak, the Claimant can try to have it “struck out”, ie ask the court to decide in favour of the Claimant on the basis that the defence has no legal prospect of success; failure to serve a defence in time will also allows the Claimant to enter a judgment in default; as the usual rule in English proceedings is that the loser pays the winner’s legal costs, where a Defendant is confident of defeating a claim and it appears that the Claimant may be unable to pay the Defendant’s costs, the Defendant can ask the court to order the Claimant to provide security for costs as a condition of continuing its action;
- additional court documents may be served seeking to clarify each party’s position;
- case management – the courts are increasingly active in managing cases to ensure that: issues are identified early, a trial timetable is agreed, unnecessary costs are not incurred by the parties and that the parties try to settle the dispute by alternative dispute resolution;
- attempts to settle the dispute – whilst offers to settle the dispute can be made at any time, there is clearly an advantage to do so as early as possible to minimise overall costs; the CPR allows either party to make a written offer (“Part 36 Offer”) to settle and if the other party refuses it and recovers less from a trial, the refusing party will suffer adverse costs orders and/or higher interest payments; in addition, the court’s active case management includes encouraging settlement through mediation and, where parties unreasonably refuse to do so, have penalised this behaviour through costs orders in favour of the other side;
- disclosure of documents – each party is required to disclose to the other side documents which: (i) it relies on; (ii) adversely affects its own case; and (iii) adversely affects or supports the other party’s case; disclosure applies to all documents (including confidential or electronic documents and other materials) and the only documents which do not need to be disclosed are those covered by legal professional privilege (normally this will be genuine settlement negotiations and legal advice relating to the litigation); disclosure is wider in scope than in most civil law countries and is often a key stage in the action as the strength of a claim is often much clearer after all relevant documents have been disclosed;
- witness statements – in order for a party to give oral evidence at trial, it needs to disclose this in a witness statement; these statements will be exchanged by the parties several weeks before the trial date; at trial, all witnesses may be questioned on their statement by the other side’s lawyer to help the judge form a view of the evidence given;
- expert evidence – this will often be required in IT and IP disputes and can be given with the Court’s permission; experts need to be independent and they have an overriding duty to the court rather than their instructing party; it is normal for each party’s experts to prepare a report and meet to discuss their reports to identify where they agree and disagree in advance of the trial; if a trial proceeds, experts are likely to give evidence and to be questioned by the other party’s lawyer and the judge: it is vital to select a true “expert” who is reasonable and honest in his approach as the English courts have been highly critical in the past of experts who have adopted a “hired gun” approach and not been independent;
- trial – all IT and IP cases are heard by a single judge (no juries used); although legal arguments and evidence is submitted orally to the court, the judge will normally have read each party’s summary of its case, key documents, witness statements and expert reports before the trial begins; each party’s lawyer states its arguments to the judge and calls witnesses and experts relied upon and the trial ends with each lawyer summarising its case and the legal arguments it relies on; generally, the judge does not make his own investigation but may ask each party to clarify its position; the court’s judgment is normally given at a later date allowing the judge time to consider all the issues and arguments presented;
- appeals – the appealing party must obtain the permission of the High Court or the Court of Appeal and permission is only granted in certain circumstances; appeals tend to be much shorter than the original trial given that witnesses and experts do not normally appear and the Court of Appeal will normally accept the facts as found by the trial judge; the appeal will focus on questions of law and whether the trial judge made a serious mistake on a legal issue or finding of fact;
- costs – English courts have a wide discretion to award legal costs at the end of a trial: normally, the losing party will be ordered to pay the winner’s legal costs and this normally means that 60-70% of its actual costs will be paid;
- enforcement – where a Defendant does not make payment as ordered by the court, the Claimant can use procedures such as seizing and selling assets belonging to the Defendant or take a charging order over the defendant’s property or commence insolvency proceedings on the basis of the unpaid judgment debt.
Most IT claims relating to the design, supply and/or installation of computer/IT systems will be heard in the TCC, which is part of the Queen’s Bench Division. Features of the TCC include the following:
- as the TCC judges have technical/scientific experience, TCC cases need to be technically complex or otherwise need a TCC judge;
- the TCC is based in London and 11 other English cities – London normally only deals with claims valued at £250,000 or more;
- active case management in relation to setting a trial date and timetable and identifying the key issues involved (trial dates are normally 12 months or so after the claim is served but depends on estimated length of the trial);
- as well as promoting mediation and other forms of Alternative Dispute Resolution (ADR), it also offers Early Neutral Evaluation which is a non-binding, without prejudice written
- evaluation of the dispute by a TCC judge at an early stage of proceedings; the judge giving the evaluation will not take any further part in the proceedings if they continue to trial and the evaluation is confidential to the parties.
Protecting Evidence. In many IT disputes, it is important to ensure that non-documentary materials are preserved as they will be highly relevant. For example, there may be claims that early versions of software were riddled with errors evidencing a breach by the developer – copies of these versions need to be preserved for possible inspection by experts. Accordingly, either written undertakings need to be given by the other side promising this or formal court orders obtained.
Preliminary Issues. Litigation relating to technology projects is often time-consuming and expensive due to the large number of documents that need to be checked and reviewed. In addition, many IT cases in practice turn on whether or not the supplier’s limitation of liability clause is enforceable or not which could drastically reduce the level of damages awarded. As a result, it may well make sense to have certain “preliminary issues” such as the validity of a limitation clause decided by the court before the trial as this often leads to a claim being withdrawn or a settlement being negotiated, saving overall time and costs. Similarly, the court will sometimes order a “split trial” where the initial trial only determines if the claim succeeds and a later trial concentrates on the damages payable (which can be a highly complex and expensive exercise).
Disclosure & The Smoking Gun. As all relevant documents relating to a claim need to be disclosed, care should be taken to ensure that the other side has disclosed everything that it should: for example, if there is a claim that the other side’s staff lacked key skills or performed badly, it will be useful to check any internal appraisals to see if any shortcomings were identified and there may also be internal reports created which shed light on the allegations made; equally, it is important to ensure that any new documents created relating to litigation are protected by litigation privilege so that they do not need to be disclosed at all.
In the High Court, IP disputes are heard in the Patents Court of the Chancery Division, following the general procedures set out above. Although this allows IP cases to be analysed thoroughly by judges with IP experience, it can be expensive and for major patent disputes it is generally reckoned that each party’s costs will be in the region of £1m.
IP Enterprise Court (IPEC). In an attempt to reduce costs for small and medium sized IP claims that do not need to be heard by the High Court, IPEC has been introduced which replaces the old Patents County Court. It is designed to reduce costs and speed up the litigation procedure and its main features are:
- a multi-track procedure in which damages awarded by the court are capped at £500,000;
- the winning party cannot recover more than £50,000 costs from the losing party;
- the procedure is managed very actively by the court to ensure that a larger, richer party cannot take an unfair advantage over the smaller party;
- cross-examination is limited and trials cannot last for more than 2 days;
- trials to be held within 12 months of the start of a claim.
It is reckoned that a party’s costs in relation to fighting a claim in the IPEC multi-track are £100,000 to £200,000.
Disclosure in IP Cases. The English rules can be very useful, particularly in multijurisdictional disputes. In Dansico v Novozymes, (a patent case concerning methods of making animal feed), Dansico were trying to revoke Novozymes’ patent in several EU countries on the grounds that it was obvious and not novel.
Dansico was successful in obtaining details of Novozymes’ experiments on making animal feed which showed that the patented method did not always improve the prior results obtained, which was a prerequisite for the granting of the patent. The English court gave permission for the evidence to be used in parallel proceedings at the European Patent Office with the result that the patent was also revoked in Germany, Denmark and The Netherlands.
Read each chapter
- Judicial and political bodies of the European Union
- Interaction between European and national norms
- In which country should you sue / be sued?
- Legal protection of author rights (copyright)
- Legal protection of a trademark
- Legal protection of a computer program
- Legal protection of a database
- Legal protection of a patent
- IP enforcement in the European union
- Legal protection of personal data (until May, 25th, 2018)
- Cross-border flow of personal data (actual situation)