No Win No Fee

From time to time I am asked whether I will take a case on a CFA (conditional fee agreement). A CFA is defined by s.58 (2) (a) of the Courts and Legal Services Act 1990 as “an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances.” In other words, a type of no win no fee agreement. I have always been puzzled why members of the public should expect lawyers to take cases on such a basis. I have never heard of a doctor entering a no cure no fee agreement (though maybe the NHS should look into it) or a teacher offering a no exam pass no fee deal.

Although I always keep an open mind when I get such requests I have yet to enter a CFA. The reason for that is that I have yet to see a case that is so strong that the prospective success fee justifies working for months on end for nada. Like most people I have to eat. I have a mortgage, utility bills and taxes to pay. And no creditor will wait until my solicitors recover costs from a defeated and often recalcitrant defendant.

“But other lawyers will accept instructions on a no win no fee basis” pleads the client sometimes prompted by his or her other professional advisers. “Look at all those firms that advertise their services in A & E or on daytime television.” My answer to that is that they are in a different area of law. CFA make sense where liability is easy to establish and the defendant is an insurance company that can afford to pay substantial damages. Such cases tend to be settled very quickly.

But IP litigation is not like that. For a start liability and damages or other pecuniary relief are usually decided in two separate stages. There often have to be pleadings, disclosure, exchange of witness statements and experts report for each stage of the litigation. That can be expensive and time consuming. Secondly, liability is often difficult to determine. The question whether a patent has been infringed usually turns on the meaning of a claim which may be open to more than one interpretation. Objective similarity in a design right or copyright case may betoken copying but it may equally be explained by functional exigency. Thirdly, since the new Patent County Court rules came into force on 1 Oct 2010 there has been a £50,000 cap to the costs that can be recovered and that includes success fees and after-the-event premiums (see “The New Patents County Court Rules”
IP/IT Update, 31 Oct 2010). Finally, it is often the case that the defendant has no assets left at the end of a long intellectual property case.

“But how come that it can be done in the USA?” Asks the client back from his hols in Florida. “I’ve heard of lots of patent cases there that are funded on a no win no fee agreement.” “A different sort of no win no fee agreement” is my answer. “There lawyers can contract for a share of the damages and not just a mark-up on their fee. Also, damages tend to be awarded by juries and liability and damages are decided in one go.” I should add that the law on CFA and ATE insurance may be reformed by the Sentencing and Punishment of Offenders Bill. If that bill is passed it will be possible to enter damages based agreements and claimants will have to pay success fees and ATE premiums out of their damages (see The Effect of the Legal Aid, Sentencing and Punishment of Offenders Bill on Intellectual Property Litigation” IP/IT Update, 14 July 2011).

So, what’s a small or medium enterprise, inventor or other intellectual property owner to do if he, she or it wants to enforce an intellectual property right? In most cases, the short answer is to take out intellectual property insurance when the right is granted. One can’t rely on general legal expenses insurance since most policies exclude intellectual property claims expressly. I know that there are two schools of thought as to whether IP insurance is worth taking out but in my view it is a lot better than nothing. I identified some insurers in my article “IP Insurance Five Years On”
Inventors Club, 23 Oct 2010. Check them out. There may also be others by now. You can also consider some of the ADR schemes such as IPO examiners’ opinions, the UDRP and Nominet’s DRS for domain name disputes, mediation and arbitration. I discussed all those possibilities in my presentation to the IPO’s awareness day at Leeds Library last September. You can also talk to us either by calling us on 0800 862 0055 or using our contact form.

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About Jane Lambert

I am a barrister specializing in intellectual property, technology, media and entertainment and competition law. I specialize in helping SME (small and medium enterprises) protect and exploit their investment in brands, design, technology and the arts. SME require intellectual property (legal protection for their intellectual assets) at least as much as big business but their limited means restrict the way they can use it. Looking after such clients wisely requires skills and knowledge which have taken me years to learn.
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