TIPLO Dinner Meeting, Tuesday 20th October 2009
Alternative IP Litigation Funding - Possibilities and Pitfalls
Against the backdrop of the recently published ( interim) “Jackson Report” covering the hot topic of costs in legal proceedings , TIPLO pulled off something of a coup in having Lord Justice Rupert Jackson himself as the presiding Chairman of last night’s debate . Gray’s Inn Hall had a packed audience in rapt attention as we listened to Lord Justice Jackson’s opening remarks and his somewhat regretful comment that as he is outside his official consultation period he may have to turn a “deaf ear” to some elements of the debate ! The audience included a large range of practitioners and members of the Judiciary, legal luminaries and academics, including Lord Justice Mummery, Lord Justice Jacob, Mr Justice Eady, Mr Justice Floyd and Francis Jacobs.
The debate following dinner and the excellent addresses by the two speakers was both animated and stimulating. Many practitioners, including Martin Howe QC, Tony Willoughby, Tibor Gold and Ian Morris gave the benefit of their own experiences , concerns and views , whilst, as ever, Lord Justice Robin Jacob aired some incisive and firmly held views .
The first speaker , David Greene of Edwin Coe professed himself to be a “Claimants’ lawyer” with considerable experience in conducting litigation on the basis of CFAs ie; “Conditional Fee Arrangements”. He shared with us his view that litigation generally can be a “big dipper” with a roller coaster effect on the emotions of a client as well as a waxing and waning of enthusiasm for the whole process. He added however that in analogous terms, conducting litigation on a full CFA basis was to try and ride a “bucking bronco”. If this is true then Mr Coe clearly deserves to wear a stetson and tour the rodeos of Texas State, as he has proven in many cases that he is more than a match for such challenge.
Mr Greene educated us as to the somewhat recent history of the increasing adoption of CFAs in the UK, commencing only 10 years ago with the Access to Justice Act in 1999. He commented on the effect and impact of the Woolf reforms on CFAs and the inherent wariness of many parties who perceive a lack of “Policing” of the terms and effect of the arrangement to be unsettling. Apparently, to a large extent , a good framework of imposed regulations has evolved to assist in this area, although there has been an unfortunate increase in “satellite litigation” relating to costs recovery.
It is easy to see why CFAs have been more readily accepted in some areas of law and litigation , for example Personal Injury cases in which much of the core evidence is given in more predictable ways , for example via expert reports. Such evidence is routinely and readily available at an early stage of proceeding and there is less room for material uncertainty as to outcome and merit. Mr Greene readily accepted that IP cases are, on the contrary, often inherently unpredictable; especially at an early stage, prior to disclosure and /or witness evidence . The merits of an action are almost bound to change as matters progress and there is a greater risk factor in such cases. This, the speaker suggested, was why there had been a relatively poor uptake of CFAs as a viable option for IP cases. However, he hopes that greater flexibility in the terms and conditions and availability of CFAs ( on a full or partial basis) will lead to an increased use of this type of funding facilitation.
He concluded his remarks by observing that there is, currently , perhaps a greater degree of accommodation to accepting the partial CFA model amongst firms of specialist solicitors than at the specialist IP Bar. He also feels it likely that contingency fees will be likely to be seen in the future.
The second speaker of the evening was Christian Steurwald, Head of UK Litigation Funding at Allianz. He managed to convert what could easily have sounded rather like a “sales pitch for Allianz” into an interesting and thought provoking series of well analysed commentaries. The audience were taken through the recent history of the development, challenges and changes to the regulations and legal framework in England and Wales which has recently prompted a German–based funder to even consider coming into the UK market .
Mr Steurwald was keen to point out that third party funding of litigation , as offered by Allianz, is “not an insurance service” , nor is it a “banking service” . He sees the funders’ role as “investing in the legal team and the party, and investing in the Claimant’s likely returns via the litigation.” He sees the role of the funder to facilitate and enable the progress of the Claimant’s litigation . Clearly the goal must be the prospect of considerable damages or other monetary compensation, and it was later pointed out by a number of people that in IP cases the ultimate goal is more often the securing of an injunction and delivery up etc. and damages or an account of profits can be a secondary concern, and only assessed after the trial on liability. Does this then not make IP cases of less attractiveness to funders such as Allianz ? It certainly seems that this may be the case as apparently only “one case per year” funded ( presumably by Allianz) has been an IP case ( this was reported during the question time element of the evening by Lord Justice Jacob who had apparently gained this information from the speaker during dinner !).
As a German based funder, Allianz is well placed to confirm that UK legal costs are, on average “5- 10 times higher” than for comparable cases in other continental European countries . The speaker commented that, in simple terms, many people and businesses cannot afford to incur the costs risks of litigating here in the UK . Of course many do, and many who have access to forum shopping, nevertheless “shop in the UK”, by choice. One may therefore opine that this is due to the quality of the legal advice, the legal services on offer and /or the prospects of their preferred judicial outcome. In any event, following early fears based on the problems of maintenance and champerty, funders have now stepped into the UK market. Allianz was pleased in particular to hear from Lord Justice Jackson in his lengthy and recent interim report, that “the doctrine of maintenance and champerty is from a different age”.
It should also be noted that since the publication of the Civil Justice Council’s paper which has been helpful in clearing the way for third party funding, was only in 2007, this area is both new and relatively untested, as yet. Mr Steurwald’s clear message however is that the “time is right for their services!” He was keen to stress that running litigation with a funder involved does not hamper the case, and the funder’s role is impartial. He also pointed out the benefit of the funder’s closer control of costs spend and maintaining a budgetary control which can prove comforting to a client.
Echoing his co-speaker’s encouragement for “flexibility in funding” , Mr Steurwald also explained that Allianz is ready, willing and able, to be innovative in their approach to a funding package offered for any specific case, and they approach matters very much on a “case by case” basis. He cited examples of their funding being limited to the costs of a single expert report, or to a small percentage of counsel’s fees . In some cases , he said the funding could be for 100% of all fees and disbursements but in many it will be for a proportion only. The fluidity of the approach means that a funder can come on board not only at the outset of proceedings but at any stage along the way.
One of the great advantages of funding, said Mr Steurwald, is its effect of levelling the playing field between SMEs and larger companies . Use of a Funding Partner can serve to “ balance an inequality of firepower”. According to his statistics , approximately 70% of funded cases settle pre-trial.
It was also interesting to note that apparently the UK is the “only country on the planet” that offers after the event insurance (ATE) . Apparently this is not a service offered by funders such as Allianz but Mr Steurwald sees the benefits of the wide availability of ATEs insurance from a number of reliable service providers. He also suggested that as a “rule of thumb” if your case qualifies for funding it will also qualify for ATE insurance.
In concluding, and reminding the audience that Lord Justice Jackson’s final report is eagerly awaited in the near future, Mr Steurwald rounded up with a trio of issues that a funder will look to in determining eligibility for funding;
1) A legal opinion that the chances are “ good , to very good”.
2) A realistic budget – prepared by the legal team with sensible and realistic contingencies.
3) A small and limited number of core documents.
Lord Justice Jackson fielded a large number of comments and contributions from the audience at the conclusion of the speakers’ addresses, and he himself summarised that we had heard about two main methods of funding;
- The CFA basis , in which the burden is laid on the “other party” to the litigation.
- And the 3rd party funding route, which lays the principal burden on ones own client .
Both options clearly have merit, but it seems that the overwhelming view of the IP litigator that there is no simple solution that can readily be made to “fit” the unusual and somewhat unpredictable vagaries of IP litigation before the courts of England and Wales. It remains to be seen if any of the comments from speakers and /or contributors make their way into Lord Justice Jackson’s final report when it is published. However, suffice to say that there are a huge range of issues that were raised and debated during the evening, and the audience certainly left with food for thought as well as the benefit of a splendid dinner provided by the chefs of Gray’s Inn.
Reported by : Denise McFarland, Three New Square IP Chambers
Lincoln’s Inn WC2, www.3newsquare.co.uk
TIPLO Committee Member