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UNITARY PATENT

In 2012 Member States and the European Parliament agreed on the "patent package" - a legislative initiative consisting of two...

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PCC Kicks GLEE Up to High Court

Davids who stand up to Goliaths typically attract sympathy. That may not necessarily apply, however, when David started the fight and can punch above his weight. This realisation dawned recently on an English comedy club chain when it sued the makers of the hit television series GLEE in the cost-capped PCC, but ended up being transferred to the High Court (Comic Enterprises Ltd.v Twentieth Century Fox Film Corporation [2012] EWPCC 13). The factors that led to transfer make essential reading for anyone hoping to take advantage of the PCC's cost-capped litigation regime.

It Started Out As a Joke

Since 1994, the claimant (Comic Enterprises) had operated comedy venues including live music and cabaret in the UK under the names The Glee Club, Glee and The Glee Comedy Club. It maintained a website at www.glee.co.uk and owned registered UK trademark no. 2200698 dating from 19 June 1999 for a series of two marks, covering inter alia clothing, entertainment services, and production and presentation of television programmes.

The defendant produced the popular television series, "Glee", first broadcast in the US in May 2009 and in the UK in December 2009. At the time the transfer issue was heard in the PCC, the show was in its third season. The second UK season averaged 2.2 million viewers and was the most-watched series on UK satellite channels. The show spawned substantial UK sales of compilation albums and singles, a Glee film and successful Glee concert tour in 2011, and sales of show-related merchandise, including clothing.

The defendant too had registered UK trademarks and CTMs, in its case for the word mark GLEE covering inter alia clothing and entertainment services, but these were obtained only after the claimant's UK registration.

Although the claimant had known about the Glee television series since 2010, it took no action at the time because it assumed that the series might flop. In fact the opposite happened, and in September 2011 the claimant issued proceedings in the PCC for trademark infringement and passing off, sliding in with a substantial damages claim just before rules came into force that would have required such a claim to be brought in the High Court. The timing of the claim ensured, however, that the claim would be heard within the protective confines of the PCC's cost-capped regime, thereby limiting the claimant's costs exposure in the event that its claim failed.

Not So Fast

While the claimant was relatively small (albeit with a turnover of some £2.5m to £3.4m), the defendant film company had much deeper pockets. It sought transfer of the case to the High Court, where the claimant would be likely to incur costs in the region of £400K - £750K and would face an uncapped costs award if it lost. Tactically, this would also allow the defendant to seek security for costs from the claimant, whose size and financial means made its ability to pay a sizeable costs award questionable.

In reviewing the application for transfer, the PCC recited the following points to consider:

• the financial position of the parties;

• the value of the claim;

• the complexity of the issues (and in particular the amount and scale of any disclosure or cross-examination likely to be needed);

• the estimated length of trial (bearing in mind that PCC trials were normally limited to two days);

• the public importance of the claim; and

• whether one or both of the parties would be denied access to justice for lack of financial means if the case were heard in the High Court.

The judge noted that each case had to be considered on its merits and none of the above factors constituted a hard and fast rule. The PCC could accommodate, and had accommodated, trials in excess of two days, and, for its part, the High Court could order a costs cap when giving directions in a case. So, there was some degree of flexibility in both forums.

Overall, however, the parties' arguments turned mainly on the question of access to justice. The claimant submitted that it would be financially devastated by an uncapped High Court costs award, and that the defendant would seek to twist its arm by seeking an immediate order for security for costs if the case were transferred. The defendant essentially admitted the latter point but conceded that it would if necessary, as a condition of transfer, refrain from seeking security.

The judge accepted that the High Court costs regime could have a severe impact on the claimant, but did not consider that it was so serious as to deprive the claimant of access to justice. However, this was not the crucial point. What mattered most here was that although the claimant sought the protection of the PCC's capped costs regime, it had conducted the case from the start as though it were a High Court action.

In particular, the claimant had taken every point and sought to maintain broad and unspecific claims despite requests by the defendant for further information on inter alia which goods and services of the defendant were alleged to be similar to the claimant's goods and services. The claimant refused to provide details of all the instances of confusion relied upon on the basis that it was premature, which was at odds with the PCC's front-loaded procedure. The claimant's approach was likely to make substantial disclosure, cross-examination and multiple witnesses necessary, and although the PCC could accommodate this in certain circumstances, the overall conduct of the claimant in this case had been unrealistic and unsuited to the PCC's streamlined, costs-capped regime.

Relevant, too, was the high value of the claim (in excess of £500K) and the fact that the claimant sought injunctive relief, even though the financial consequences of that on the defendant would be worth "many millions if not tens of millions of pounds". The claimant was unwilling to relinquish its claim to an injunction, and while the judge accepted that parties may wish to take such a stand as a "bargaining chip", they nonetheless had to consider carefully the impact of the relief claimed if they wished to secure the advantages of litigating in the PCC.

Taking all these factors into account, the judge granted the application and ordered the case transferred to the High Court, subject to an order that the defendant would not apply for security for costs.

Comment

The lesson from this case is clear: if a party wants to litigate in the PCC, it must act like it.

Criticisms of the claimant's conduct pepper this judgment: "the claimant is seeking to have its cake and eat it"; "the claimant is not approaching this case as if it is a Patents County Court claim"; "the claimant's approach has been to run this case as a full scale High Court style action with a claim for an injunction with catastrophic consequences for the defendant".

Only the perceived risk that the defendant would use its commercial strength as a weapon gave the judge qualms about ordering transfer, and those qualms did not in the end stop him.

Had the claimant narrowed the issues and provided more detailed information on its claim, its more modest means might have tipped the balance toward remaining in the PCC. However, the claimant's insistence on maintaining its claim to an injunction was probably always unrealistic for a PCC action given the potentially catastrophic effect that such relief would have on the defendant's multi-million pound business in the Glee series. Had the claimant been able to use the nature of the relief claimed as a bargaining chip in successful negotiations for a money settlement, things may have turned out very differently. As it happened, though, the price of maintaining the claim to an injunction turned out to be transfer to the High Court.

The application for transfer in this case was made rather late, at the case management stage. The judge therefore ordered that costs incurred to date, including for the CMC and the application for transfer, should be assessed under the PCC's cost-capped regime. Had the defendant applied for transfer when the action was served, it might have protected its entitlement to costs on the High Court scale from the outset, although on these facts it is arguable that the claimant's conduct only made an application for transfer appropriate some time after the proceedings were underway.

In any event, those contemplating action in the PCC can learn from the claimant's misfortune in this case. Clarifying and narrowing the issues early on and pleading realistic relief are all part of the price of securing the cost advantages of the PCC. Given that the same standard of conduct is expected in the High Court, where the penalties of falling short are far harsher, it is frankly a price worth paying.