Experience Hendrix LLC & anor v Times Newspapers Ltd

In intellectual property proceedings, costs may properly be decided at the infringement stage even though the amount of damages or an account of profits remains unresolved. The usual staged procedure separates liability and entitlement to relief from the later assessment of quantum. A defendant’s money offer and proposed destruction of infringing material must be assessed against the claimant’s actual requirements, including delivery up, declaratory relief and the need to establish title and infringement. The court must consider the substance and reality of what each party obtained. A different costs approach may be justified where the evidence shows that the claimant was concerned only with money and the additional relief was immaterial.

The claimants obtained summary judgment on infringement, together with injunctive and declaratory relief, delivery up of infringing material and Island v Tring disclosure. The court had already ordered the defendant to pay the claimants’ costs, with an interim payment of £100,000.

The defendant then relied on a Part 36 offer comprising a monetary sum, undertakings to destroy recordings and undertakings not to distribute or exploit them. It argued that costs should be reserved until the damages or profits inquiry established whether the offer had been beaten. The claimants maintained that they required the further relief obtained through judgment. The issues were whether the earlier costs order should be revisited and whether the interim payment should be reduced.

1. The court refused to alter its earlier order that the claimants should receive the costs of the summary judgment application and the claim generally. The interim payment was reduced from £100,000 to £90,000 because counsel’s fees had been overstated in the costs schedule.

2. In most intellectual property infringement cases, proceedings operate in two stages. The first establishes infringement and entitlement to relief. Island v Tring disclosure then enables the claimant to elect between damages and an account of profits. The second stage determines quantum. The existence of an unresolved quantum issue does not ordinarily justify reserving the costs of the first stage.

3. The approach in Roache v News Group Newspapers Ltd [1998] EMLR 161 requires attention to the substance and reality of what was won. It did not displace the established staged practice in intellectual property cases. A Roache-type approach might nevertheless be appropriate if the evidence clearly showed that the claimant cared only about money and that the additional relief was immaterial.

4. The Part 36 offer did not provide the claimants with everything they sought. Their response required delivery up and further distribution undertakings. Those requirements were substantive, not a throw-away request. The claimants also had a legitimate interest in obtaining a judgment establishing their title and infringement, particularly because it would assist in preventing future unauthorised use.

5. The reasoning in Colgate Palmolive Ltd v Markwell Finance Ltd [1990] RPC 197 supported costs at the first stage, although the court recognised the procedural distinction identified in Roache. The established approach had also been applied in Brugger v Medicaid [1996] FSR 362. No conclusion was required on whether C&H Engineering v F Klucznik & Son Ltd [1992] FSR 667 remained good law after the CPR.

6. The court expressed doubt that the contents of without prejudice settlement discussions could ordinarily be deployed to demonstrate what had been discussed. That issue did not require determination because the claimants had waived privilege for the limited purpose of the costs application.