Paying for the privilege

Abstract

The value of IP rights is a subject much beloved by commentators; the cost of litigating them is one that is far less so. Non-practitioners are discouraged from writing about costs because it is felt that a person whose perspective is not that of the practitioner is too far removed from the reality of practice to be able to discuss the issues objectively. An exception may be made for economists: their take on the quantum of consideration generated by the lawyer–client relationship is based on an appreciation of economic forces and value concepts, rather than on considerations of perceived injustice. But for the rest, only a real lawyer can comprehend the forces that drive the fee scales and charging practice of IP litigators. The cost of IP litigation is as much an integral element of the IP system as the validity of patents or the scope of the own-name defence. It troubles most IP owners even before it is incurred; even if it did not, it would trouble the pension and investment funds that constitute so large a slice of corporate ownership. That it should trouble businesses of all sizes, aptitudes, and outlooks is unsurprising. A business can make a ‘yes or no’ decision as to whether to enter a new market, outsource a manufacturing process, or invest in a new IT system— but it cannot make a ‘yes or no’ choice as to whether to be involved in an IP suit unless it can safely say that it is incapable of being at the wrong end of one. It is sometimes erroneously thought that any business can live within its means. With unlimited resources, it can pay for the highest level of legal representation whereas the poorer, smaller players who must count their pence can engage the expertise of humbler law firms. But this is only half the picture. Depending on the jurisdiction and the nature of the infringement, an unsuccessful small litigant may be ordered to pay all, or at least the lion’s share, of the costs of the more assetwealthy foe which has sued him and won. The scale and the nature of costs, as well as the question as to who must bear them, are both issues that hit the headlines from time to time, nowhere more prominently than in the recent dispute between the BlackBerry manufacturer Research in Motion (RIM) and patent-holding enterprise Visto before the Patents Court for England and Wales. It appears that the cost incurred by RIM in its successful fending off of patent infringement claims made by Visto exceeded £5 million, or around five times more than the costs incurred by its adversary. Following the trial of the substantive legal issues, the trial judge, Mr Justice Floyd, presided over further court proceedings the object of which was to decide who paid these costs. In doing so, he took the opportunity to pass comment on the magnitude of RIM’s legal bill. There could be no doubt that RIM’s lawyers, Magic Circle firm Allen & Overy, had committed vast resources to preserve their client’s interests in the valuable hand-held communication device market. The firm had, over a 15month period, devoted some nine man-years to RIM’s cause and the judgment mentions some remarkable figures that need not be repeated here. To the outside world, sums of this nature suggest profiteering or profligacy on the part of the law firm involved—but in an IP context they are easy to explain, if not always so easy to justify. Given the complexity of the field of technology involved, the range of legal issues and the need to invoke a wide range of professional skills, this action was always going to incur a big spend. A further factor here was that, set against the value of the market for RIM’s products, the cost of even these extremely expensive proceedings was relatively trivial. RIM is reported to have instructed its solicitors to ‘pull out all the stops’—and that presumably is what occurred. Despite the large sums spent by RIM in these proceedings, it cannot be said that the company bought victory by outspending its adversary. Visto itself ‘won’ on a number of points before the court, including the ultimately theoretical but initially crucial claim that RIM’s actions constituted an infringement. Visto’s successes entitled it to relief from the full burden of RIM’s costs, but even so it was left with a sizeable bill for the other side’s legal services. The moral of this episode, if there is one, is that having a patent is a privilege for which one must expect to pay.