An update on the UPC consultation on Court fees and recoverable costs and the issues that this consultation raises:

On 23rd June was organised in London by the IPO and CIPA an event on the consultation launched in May by the Preparatory Committee on Court fees and recoverable costs. The consultation focuses primarily on Court fee structure, SMEs support, Opt-out and Recoverable costs. This event aimed at raising issues relevant to the consultation and encouraging responses from the general public.

You can see our post on the consultation here. The consultation documents can be found here. You can participate to the consultation by clicking here.  The link to the video of the IPO and CIFA event can be found here.

The UPC Blog participated to the webinar and has summarised for you the Background of the consultation, The Issues at stake in the consultation document and the Discussion that followed between the participants.

I. The background of the consultation:

The background was presented by Janis Makarewich-Hall (Head of UPC Taskforce at the IPO) who insisted that the court fees consultation document does not represent “a done deal”. The contents of this document could in fact evolve following the results of the consultation.

Janis  Makarewich-Hall explained that the propositions listed in the consultation document had first been circulated to all participating member states but that the responsibility for the fee structure was split between two committees: the legal and finance committees.

Part of the finance committee’s work is to calculate the court fees so that the court is self-sustaining by the end of the transitional period, this consequently entails a regular review of the fee structure. The structure however follows completely new rules specific to the Unified Patent Court and unrelated to national norms that were considered inappropriate.

II. What are the main points of the consultation?

Counter claim for revocation: The main issue at stake is whether a value-based fee (or high fee) is established or whether a low fixed fee is a better choice. The UK wanted a low fixed fee as it fears that a value-based fee could be seen as an impairment to the defence. The compromise that was suggested by the expert panel was to have both fees combined.

SMEs :  The second issue that is addressed by the consultation is the impact of the court fee structure on SMEs. In order to avoid adopting a fee structure that would be detrimental to SME a few options were considered. Some states wanted to focus and promote behaviours favoured by SMEs, such as early settlement. Others wanted more direct support with either reductions of fees or no value based fees. The consultation documents includes these two options and the public is invited to comment on what they think more suited to SMEs.

Recoverable costs: The maximum ceiling of 3 millions for recoverable costs has been controversial and some states have expressed their concerns considering that it is too high and therefore should be reduced.

Opt-out fee: Most member states felt that 100 euros would have been fair (after taking into consideration the administrative costs of the Opt-out procedure) based on an EPO estimate. A compromise of 80 euros was however agreed.

The consultation is opened until 31st July. All the responses will then be sent to the Preparatory Committee, which will take the final decision in its December and February meetings.

III. Discussion of the key points:

In the second part of the event the participants were invited to critically assess the propositions submitted in the consultation document.

 Court structure fees (Kevin Mooney, Simmons & Simmons):

Under Article 36,  during the transitional period, the UPC is financed by litigants  and its budget is balanced by member states’ contributions.  However it is important to note that the budget of the court has not yet been published;  it is thus impossible for users to know the financial assumptions underlying the level of court fees which justify the current fee structure.

The fees are fixed by the Administrative committee, and will evolve in line with the needs of the court. The fees are at the moment divided between fixed fees and value based fees. It is however not yet known when the value based fee will apply. Under article 370 there are 7 fixed fees with an additional value based fee, and 18 fixed fee only actions. The fixed fees start at 80 euros for the opt-out and go up to 20,000 euros for the revocation. Value-based fees will cost up to 220,000 euros for the most valuable cases (more than 30 millions). The guidelines that will determine the method of assessment of the value-based fee have not been published yet but it appears that the case will be valued on a notional royalty for the period of the alleged infringement. Moreover, the valuation should relate to the whole action.

One issue highlighted by Kevin Mooney is the fact that under Article 70, value-based fees should be paid in advance which reveals a problem of timing as the value might not be known from the start. Targeted support measures for small and medium-sized enterprises and micro entities may be considered. However the word “may” highlights the fact that it is not compulsory.

Kevin Mooney suggested moreover  to consider  the following questions when responding:

  • A value based fee for infringement action and for an application to determine damages will apply, when the fee should have initially covered the whole action. The same applies to appeals as the consultation document shows that there could be a further fee payable on appeal. So does this amount to a double payment of a value-based fee by the applicant ?
  • Should the value based fee element have been removed from the revocation actions? Should someone counterclaiming for infringement in a revocation action have to pay a value based fee? Is a value based fee appropriate for appeal actions? Is the Court not getting double fees in some circumstances?

Fee structure and SMEs (Justice Birss):

The consultation proposes three alternatives for the fee structure concerning the SMEs:

  •  Alternative 1 : would apply to SMEs only , which would have discounts based on the behaviours of SMEs such as the use of a single judge or early settlements.
  • Alternative 2 : would apply to SMEs and Universities, Public Organisation, micro-entities and Public research organisations. All of them could be exempt from value based fees.
  • Alternative 3 : would apply to any entity whose economic stability would be threatened.

 Justice Birss further highlighted two more systems that could benefit SMEs :

  • The first one is a cap on recoverable costs which would support SMEs. This has already proved effective in other jurisdictions but the necessary and appropriate levels would need to be discussed and agreed.
  • The second one would be a definition of what attracts value based fees that take directly take into consideration the needs of SMEs. A value-based fee for infringement for example would very detrimental to SMEs.

Opt out  (Richard Vary, Nokia):

As Richard Vary explained, a fee for opting-out and opting back in will apply to deter companies opting all or most of their patents in fear of the new court. The fee will be 80 euros for opt-out fees.

The opt-out fee however raises questions. Applicants will in fact be charged for a system they do not want to use and will therefore subsidise a system that they decided to leave. The direct financial consequence of that will be that the more people opt-out, the more money the court receives but the less work it has to do.

Richard Vary  also suggested that there should be a reduced opt-out fee for patentees who want to opt-out more than one patent, as he believes the administrative costs is unlikely to increase when dealing with patents that all belong to the same patentee.

Recoverable costs (Alan Johnson, Bristows):

It is important to note first that recoverable costs under article 69(1) include legal representation, court fees, and costs incurred in court. However it appears that the table of recoverable costs caps that is submitted in the consultation document only relates to the legal representation; court fees would thus be recoverable on top of this.

Another issue arises with recoverable cost caps, which should apply per action. However if a patentee brings a case  for infringement and validity, should it be considered as one or two actions ?

The assessment of the value is also a problem as it is unclear whether the “value of action” is to be necessary the same as that assessed for the value based-fee. The following problem may occur: if patentees assess a large value for theirs patents they can therefore recover a large amount of costs, if defendants on the contrary, only see this action as being of a small value they would therefore only recover small costs. So Alan Johnson argues that there is a risk that “recovery is determined by who starts the action”.

 In case of multiple defendants there is also a question of whether it is possible for the applicant to recover multiple costs from multiple defendants. Is the payment shared between all the defendants? On the contrary if the defendants win do they all get their costs?

 The problem of VAT is also a further point to consider when responding to the consultation as whether the value of action includes VAT, or  what would happen if one party is registered for VAT while another is not, are not addressed in the consultation document.

The consultation closes on 31st July and as the panel explained there is no particular structure to the consultation as far as the responses are concerned. However, it was also noted that comments along the four topics discussed (counterclaims for revocation, SMEs, the opt-out and recoverable costs) might be a good place to start…