CA allows representative action against IP law firm to go ahead

Nugee: All members of the group had same interest in a common issue

The Court of Appeal has given the green light to a representative action against IP law firm Marks & Clerk (M&C) that alleges it overcharged thousands of small businesses by operating a ‘secret commissions’ scheme with IP management business CPA Global.

The judges upheld the High Court decision last year that a company called Commission Recovery Ltd (CRL) – set up by IP enforcement specialist and former solicitor Peter Rouse – was entitled to act as the representative.

It is the first appellate ruling on the representative action regime in CPR 19.8 since the Supreme Court’s landmark 2021 ruling in Lloyd v Google.

Lord Justice Nugee, giving the unanimous ruling, noted that the application to direct that CRL should not act as a representative was not premised on it being unsuitable or that it should be replaced – rather it was “to prevent the litigation being taken forward at all”.

“So in effect the question is whether, under the guise of an application under CPR r19.8(2), the defendants to a claim should be able to have the claim stopped in its tracks entirely.”

He cited Lloyd, in which Lord Leggatt said many of the considerations included in the overriding objective “are likely to militate in favour of allowing a claim, where practicable, to be continued as a representative action rather than leaving members of the class to pursue claims individually”.

Nugee LJ said: “That seems to me applicable to the present case.”

CRL alleges that, over decades, M&C referred its clients’ patent, design and trade mark renewals work to CPA Global, which in turn paid secret commissions to Long Acre Renewals, a partnership set up by current and former partners of M&C.

CRL claims the secret commissions are likely to be more than 20% of the total amount paid by clients to CPA Global for renewal services in some cases, earning M&C between £2m and £3m every year in the UK from the commissions, with the total figure likely to exceed £50m.

Both M&C and Clarivate, which owns CPA Global, strongly deny any wrongdoing. M&C, which has eight offices in the UK and seven more around the world, is regulated by the Intellectual Property Regulation Board.

CRL has taken assignment of the claim of a former M&C client, Bambach Europe, arguing that the case was representative of others.

The Court of Appeal – with the Master of the Rolls, Sir Geoffrey Vos, one of the members of the bench – agreed with the decision of Mr Justice Robin Knowles that the criteria for a representative action were met.

Nugee LJ said that “there is indeed a common issue in which all members of the class have the same interest”.

He explained: “That issue can be simply stated as being whether CRL’s core proposition is correct as a matter of law. To spell it out a bit more fully, is [it] right that, subject to the two potential defences that he acknowledges (disclosure and informed consent, and limitation) all that a client of M&C LLP needs to prove in order to establish liability in bribery and/or breach of fiduciary duty is the fact that it contracted with M&C LLP on its standard terms of business, and the fact that CPA paid commission to LAR in respect of the renewal of its IP rights?”

The judge said it did not matter that, even if CRL succeeded on this, it would not resolve all the issues in the case, even on liability: “It is clear from Lloyd v Google that it is not an impediment to the use of a representative action that not all issues can be resolved on a class basis.”

The Supreme Court highlighted the possibility of adopting a “bifurcated process”, he explained, where common issues of law or fact were decided through a representative claim, leaving any issues which require individual determination to be dealt with subsequently.

The court also rejected the submission that Robin Knowles J erred in not exercising his discretion to direct that CRL not act as a representative.

While there may be “difficulties ahead for CRL”, Nugee LJ said, it was not for the court “to second-guess CRL’s decision that it is commercially worth its while to continue with the litigation unless it can clearly see that the exercise is futile. I do not think that can be said.”

An M&C spokeswoman said: “We have consistently taken the position that CRL’s claim is unsuitable to be pursued as a representative action, and are disappointed with the outcome today.

“However, the judgment leaves open the question as to whether CRL’s class claim can be substantively advanced on a representative basis. We look forward to showing the High Court at trial why it cannot be advanced in that way.”

David Greene, co-president of the Collective Redress Lawyers Association, said the ruling “has provided very helpful clarity in an important developing area of law”.

He explained: “The decision can be seen as a significant step in the development of the collective redress regime in England and Wales ensuring access to justice for SMEs and consumers.”

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