Makeality Ltd v City Doggo Ltd & Anor

Factual and Procedural Background

The Claimant, proprietor of a registered United Kingdom Trade Mark for a pet training product, initiated proceedings against the Defendants alleging trade mark infringement and passing off related to the Defendants' sale of a similar product under a competing sign. The Defendants denied infringement and joint liability. The claim was issued in the Intellectual Property Enterprise Court ("IPEC") and concerned the appropriate track allocation, with the Claimant advocating for multi-track allocation due to the claim's complexity and value, and the Defendants contending for the small claims track based on the claim's limited financial value and simplicity.

The case management judge ordered the claim's transfer from the multi-track to the small claims track, a decision the Claimant appealed. The appeal raised two grounds: whether the claim should remain on the multi-track and whether the small claims track's costs regime complies with the Enforcement Directive's requirements on legal costs.

Legal Issues Presented

1. Whether the claim should be allocated to the IPEC multi-track or the small claims track, considering factors including the financial value and complexity of the case.
2. Whether the costs regime of the IPEC small claims track complies with Article 14 of the European Enforcement Directive concerning the recovery of reasonable and proportionate legal costs by the successful party.

Arguments of the Parties

Appellant's Arguments

• The judge erred in transferring the claim to the small claims track as most factors favored retention on the multi-track, including the claim's complexity and potential damages exceeding £10,000.
• The IPEC small claims track costs regime does not comply with Article 14 of the Enforcement Directive because it does not allow recovery of a significant and appropriate part of reasonable lawyers' fees, limiting recovery to £260 for injunction claims.
• The court must consider the inability to recover reasonable legal costs when allocating intellectual property claims to the small claims track, particularly where parties are legally represented.
• The judge failed to properly consider the complexity of the case and the fact that both parties were legally represented.

Respondents' Arguments

• The judge's decision to transfer the claim to the small claims track was correct and based on robust case management principles.
• The IPEC small claims track costs regime complies with Article 14 of the Enforcement Directive, as held in prior authority, because it is designed for low-value, less complex claims where costs recovery is limited to promote access to justice.
• Article 14 does not have horizontal direct effect; thus, the Claimant cannot rely on it against private parties, and UK law post-2023 no longer incorporates EU supremacy principles that would require compliance with Article 14.
• The Claimant's arguments based on EU law are no longer applicable due to the Retained EU Law (Revocation and Reform) Act 2023, which removed supremacy and general principles of EU law from domestic law after 31 December 2023.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analyzed the case management judge's decision to transfer the claim from the multi-track to the small claims track, focusing on the financial value, complexity, and procedural context. The judge found insufficient evidence to support a claim value exceeding £10,000, noting the Claimant's failure to provide sales or profit figures despite challenge. The Defendants' estimate of profits was below £10,000, and the court accepted this as a reasonable basis for allocation.

The court considered the complexity of the case and found it suitable for a one-day hearing on the small claims track, consistent with the nature of similar cases previously handled by IPEC. The presence of legal representation did not preclude allocation to the small claims track, as the rules permit representation and the parties were small companies. The court emphasized the importance of proportionate costs and resource allocation for low-value claims.

Regarding the costs regime, the court examined Article 14 of the Enforcement Directive and its UK implementation, noting that the small claims track was introduced after the Directive’s implementation and without specific consideration of Article 14. The court analyzed the Court of Justice of the European Union's ruling in United Video Properties and prior domestic authority affirming the small claims track's compliance with Article 14.

The court rejected the Claimant's argument that the small claims track costs regime fails to comply with Article 14, emphasizing that Article 14 lacks horizontal direct effect and that post-2023 UK legislation removes the supremacy of EU law, rendering EU-based arguments inapplicable. It held that the small claims track regime's limited costs recovery aligns with its purpose and legislative framework, and that the Claimant's interpretation would effectively prevent intellectual property claims with legal representation from being allocated to the small claims track, contrary to the scheme's design.

Finally, the court applied established appellate principles, affirming that case management decisions by experienced judges are entitled to deference and should only be overturned on narrow grounds. The court found no error in the judge's factual or legal assessment and upheld the transfer decision.

Holding and Implications

The appeal is DISMISSED.

The court upheld the transfer of the claim from the IPEC multi-track to the small claims track, concluding that the claim's financial value and complexity justified this allocation. It confirmed that the IPEC small claims track costs regime complies with the Enforcement Directive as interpreted by the Court of Justice and domestic authorities, and that post-2023 UK law precludes reliance on EU law supremacy or direct effect principles in this context.

This decision enforces the principle that low-value intellectual property claims may be litigated in the small claims track with limited costs recovery, promoting access to justice and proportionate litigation costs. No new precedent altering the existing legal framework was established; rather, the ruling reaffirms the appropriateness of the IPEC small claims track for certain disputes and the limits on costs recovery therein.