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

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Nisa Raises the Bar for UK-IPO Costs Decisions

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With the rising complexity and costs of UK-IPO proceedings, recovery of legal costs for victors is of increasing importance. Likewise, exposure to costs liability is a fact of which all parties need to be aware from the outset of a case. UK-IPO costs decisions are therefore no sideshow, but rather an important source of guidance on how hearing officers apply cost rules and how parties who apply for, or resist, costs orders can best present their case.

The recent decision on costs in Nisa Today's (Holdings) Limited v Wm Morrison Supermarkets PLC (O-197-11) casts some useful light on how costs matters are addressed in a fully-fought IPO opposition where parties win on some, but not all, aspects of a claim.

Gone Shopping

Nisa, well-known in the UK corner-shop type retail marketplace, had filed a UK trademark application for FRESH GO in a stylised form in Classes 29, 30, 31 and 32. Supermarket giant, Morrison, opposed based on its earlier UK registration for the stylised series marks FRESH TO GO and fresh to go in Classes 29, 30 and 31.

Nisa counterclaimed for the invalidity of Morrison's registration, arguing that the mark was non-distinctive, descriptive and common in the trade. Rejecting Morrison's evidence of acquired distinctiveness, the hearing officer declared the registration invalid for all goods except "natural plants, flowers and grasses; foodstuffs for domestic pets; cat litter; malt; supplements for animal foodstuffs". Consequently, Morrison's opposition was restricted accordingly and succeeded only in relation to Nisa's Class 31 goods other than "fresh fruit and vegetables". The case was decided based on likelihood of confusion only; further grounds relating to reputation and likely detriment or unfair advantage to Morrison's earlier mark, and a claim to a right in passing off, failed.

At first instance, the hearing officer dealt very briefly with costs, stating simply that, "both sides have achieved a measure of success. I therefore consider that each should bear its own costs". 
Nisa appealed on costs only, arguing that the ruling should have reflected the fact that it had been largely successful in both the invalidity and the opposition proceedings.

An Appealing Argument

Under S. 68 TMA 1994, the Registrar has the power to award any party such costs as he may consider reasonable and to direct how and by which parties they are to be paid.

Although the Registrar must limit the amount of costs awarded as dictated by the Registry's Tribunal Practice Notes (TPN 2/2000 and 4/2007) he must also apply Part 44.3 of the Civil Procedure Rules when making a decision on costs. Part 44.3(2)(a) states that "the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party". However, Part 44.3(4) prescribes that the judge "must have regard to all the circumstances" which may include "whether a party has succeeded on part of his case, even if he is not wholly successful".

In Nisa, the Appointed Person on appeal decided that the hearing officer's very brief reasoning on her ruling that each party should bear its own costs did not demonstrate that she had exercised her discretion appropriately. While it was true that the opposition had succeeded in part and failed in part, overall Nisa had enjoyed the greater success since the opposition had been upheld only in respect of certain goods in Class 31. Nisa's claims in Classes 29 and 30 remained in their entirety. The parties had therefore by no means come out of the proceedings equally, and it was clear that Nisa was the more successful party.

This outcome was not reflected in the hearing officer's cursory decision that each party should bear its own costs, and the Appointed Person considered that the hearing officer's failure to take into account the fact that Nisa had been more successful overall resulted in an error of principle, which in turn led to a flawed decision on costs.

Following the provisions of CPR 44.3, the Appointed Person held that Nisa should have been considered the successful party and should have been awarded costs subject to a deduction of an amount reflecting the fact that it had not been wholly successful in the opposition and invalidation proceedings (albeit that Morrison's surviving goods were fairly narrow). With this in mind, the Appointed Person awarded costs to Nisa less a reduction of 20%, except in relation to the costs for Nisa's preparation of its evidence and for reviewing Morrison's evidence, as none of the evidence related to any of the goods remaining in Morrison's specification.
Further, since Nisa had succeeded on the appeal, Morrison was ordered to pay Nisa a contribution of £600 toward its costs for preparation and attendance at the appeal hearing.

Comment

Decisions not to grant costs on the basis that both parties "have achieved some measure of success" are not uncommon before the IPO, but the outcome in Nisa shows that this is not a conclusion to be reached lightly.

An analysis of the overall position, including which party has enjoyed the greater success, may take more time on the part of hearing officers, but is far more likely to produce a ruling that will withstand a challenge on appeal, and is therefore considerably less likely to be challenged at all. Given the increasing costs to parties in conducting and defending UK-IPO proceedings, the IPO owes it to parties to devote the time and resources to more considered analysis of costs issues. Not least, better and more reasoned costs decisions at first instance may avoid further bickering in costs-only appeals which often result, ironically, in yet further orders of costs for the handling of the appeal.

Appeals purely on costs are still less common before the IPO than substantive appeals since IPO cost awards tend to be much lower than court awards, but as companies grow more cost-conscious such appeals are likely to become more common where amounts are more substantial and scope for challenge exists.

Certainly, appeals on costs have long been a fixture of proceedings at court level, but squabbling over costs ultimately only creates more costs. Therefore, the more the IPO can do to improve its decision-making in this area, the better. Nisa provides some useful insight on when and why IPO costs decisions should be questioned, and reason to hope that future decisions may be more fully considered.