The Cost of Total Waste -- and how to make a Maltese cross

Another experiment in Total
Waist Management fails ...

There is much talk these days about Scottish independence, now that a referendum on that topic has been promised for 2014. The IPKat however would like to remind his readers that the Scots already have their own legal system and, while they share some statute law with their brethren south of the border, the court structure, much procedural law and a great deal of terminology make that system a focal point of interest and expertise in its own right.

With this background, the IPKat is pleased to host the following piece which he commissioned from his friends Susan Sneddon and Gemma Ogilvie at Maclay Murray & Spens LLP on a decision of the Court of Session last week in  Total Containment Engineering Limited v Total Waste Management Alliance Limited, which you can read here in full if you dare:

"Last Friday, 12 October, a Scottish court issued a fascinating opinion relating to the granting of caution (the Scottish equivalent of security for costs) in a case involving alleged infringement of a European patent.  In this dispute, Lord Hodge had to consider whether the pursuer TCE, a Maltese company, should be ordered to lodge caution with the court before it would be permitted to continue with its action against the defender, TWMA.

Section 726(2) of the Companies Act 1985 provides that if a UK limited company has brought proceedings in Scotland, and it appears that the company will be unable to pay the successful defender's expenses, the court may order the company to find caution and sist (i.e. stay) the proceedings until caution is found. That section applies only to UK companies: since the party bringing the action here was Maltese, the matter had to be decided under the Scottish common law.

Lord Hodge decided that the granting of caution was in the interests of justice in this case. He reached this view based on a number of factors:

1. TCE was a holding company. While it owned the relevant patent, from its published accounts it appeared to have no funds with which to pursue the action or meet any award of expenses if unsuccessful. It was therefore“balance sheet insolvent”. Had it been a UK company, the s.726(2) test would have been made out. Lord Hodge could see no good reason for making it more difficult to find caution against a non-UK company than against a UK company;

2. TCE was incorporated, and the patent was transferred to it, to obtain the tax advantages which Malta offered. It did not have -- and never had -- the financial resources to pursue court actions against alleged infringers. Its business model required outside funding to pursue such actions. Indeed, it had an external funder who was funding the litigation, and who was set to benefit from it if TCE were successful; and

3. The action was likely to be complex, involving each party in substantial expense.

TCE has now been required to pay £25,000 into court before it will be permitted to continue with its action".

Susan and Gemma, whose firm acted for the successful defender, comment that this case provides useful guidance on the availability of caution in Scottish IP actions. It indicates that caution is likely to be available in complex cases where the pursuer has no assets, has an external funder and is set up to hold and litigate IP. It also clarifies that similar considerations should be taken into account whether the company is based in the UK. This decision may act as a deterrent against the bringing of spurious cases by such parties in future [speculates Merpel, might it also be a deterrent to the offshoring of one's patent portfolio?].

How to make a Maltese Cross here
Scottish financial prudence here and here