Far Out Productions Inc v Unilever UK & CN Holdings Ltd and others [2009] EWHC 3484 (Ch), a Chancery Division decision last December 2009 from Nicholas Strauss QC, sitting as a deputy judge, dealt with an interesting question relating to costs in IP litigation.Far Out, a substantial Californian corporation, brought proceedings alleging that music production company Water Music (the fourth defendant) deliberately infringed its copyright and deliberately concealed that infringement. As it turned out, Far Out -- which brought no significant evidence in support of its claim -- knew that Water Music was a small family company with an excellent reputation, which would inevitably be subjected to great pressure by litigation involving detailed investigation into a routine piece of business which had been conducted over ten years earlier. Far Out was also responsible for considerable delays, which resulted in the proceedings, and the consequent pressure on Water Music, extending over a period of more than four years before Far Out eventually dropped the claim. This occurred shortly after mediation but before the service of Water Music's witness statements. Appealing to the fact that it was so good as to drop its action, Far Out then applied to the court to be relieved from the usual consequence in costs of discontinuing its action and arguing that it had been necessary to bring proceedings, and to join Water Music in the proceedings, because the first to third defendants (part of the Unilever group) had failed to make a reasonable offer. Accordingly, Far Out submitted, Water Music should pay Far Out's costs and try to get them back against the other defendants -- either that or no costs order should be made.
Nicholas Strauss QC dismissed Far Out's application. In his view the Civil Procedure Rules (CPR 38.6) provided that, unless the court ordered otherwise, a claimant who discontinued an action was liable for the costs which a defendant, against whom the claimant discontinued, incurred on or before the date on which notice of discontinuance was served on the defendant. This rule would apply unless there were a valid reason for departing from it, and it was for the party seeking to vary that rule to bear the burden of proving that it should not apply. If Far Out had properly evaluated its prospects of success on deliberate infringement against any of the defendants, it would have come to the conclusion that its case was inherently improbable. He added:
"The claimant [submits] that the 4th defendant should pay the claimant's costs, and be responsible for its own. I reject this out of hand. It is not easy to imagine circumstances in which a defendant against whom proceedings have been discontinued should nevertheless pay the costs. There may be circumstances in which such an order would be appropriate, but it is certainly not appropriate in this case".
