IP law firm fails in bid to strike out ‘secret commissions’ claim

Rouse: Shameful practice

A leading intellectual property (IP) law firm has failed in its bid to strike out a representative action brought over ten of millions of pounds in alleged secret commissions it earned on IP renewals.

Mr Justice Robin Knowles held that Commission Recovery Ltd (CRL) – a vehicle set up by well-known former IP solicitor Peter Rouse – met the hurdle to be the representative claimant as set out in the 2021 Supreme Court ruling in Lloyd v Google.

The case against Marks & Clerk (M&C) will go ahead under CPR 19.6 on an opt-out basis, with CRL having taken an assignment of the claim of a now-dissolved former M&C client, Bambach Saddle Seat (Europe) Ltd.

Mr Rouse alleges that CPA Global, an IP management organisation now known as Clarivate PLC, paid M&C secret commissions in return for referring its clients to CPA to handle their IP renewals, in breach of the firm’s fiduciary duties.

CPA allegedly paid these commissions to Long Acre Renewals, a partnership set up by M&C’s current and former partners. M&C and CPA have both strongly denied any wrongdoing.

The judge said the commissions involved may range from 12% to 60% and total tens of millions of pounds – CRL estimates, pending disclosure, that M&C has received an average of £2-3m per year for at least the past 20 years.

M&C, which is regulated by IPReg (the Intellectual Property Regulation Board), sought to strike out the claim and for a direction that CRL may not act as a representative.

The judge first rejected M&C’s argument that the assignment from Bambach was an unlawful champertous assignment of a bare right to litigate.

He said: “I ask myself, in the present case, what purpose is served if the law treats this assignment as unlawful? In my view none…

“There is no material risk in the present context to the reputation of justice. Whatever the merits in the present case, in another they could be very compelling.

“If the law treated an assignment of this type as lawful there is no reason why the claim could not proceed in an organised, dignified, way. The defendants are fully protected by the case management procedures available to the court.”

Knowles J also dismissed the argument that the potential claimants did not have the “same interest” under the test set out in Lloyd v Google.

“The dates of the contracts with the first defendant and with CPA will differ, and amounts paid by and to CPA may differ, but these points do not affect suitability for representative proceedings and can be ascertained.

“It is clear enough that the class is only intended to comprise those to whom the commission was not disclosed, but there is an evidential basis for non-disclosure being the starting position for the position of all clients concerned.”

Quoting the Supreme Court in Lloyd, the judge also said there were also some of the “advantages in terms of justice and efficiency” if “common issues of law or fact are decided through a representative claim, leaving [over] issues which require individual determination”.

He went on to exercise his discretion to allow CRL to represent the class on an opt-out basis.

Knowles J added: “But I would consider, at the defendants’ request, authorising a suitable form of communication from the court (sent by the defendants’ solicitors as the court’s officers) to all material clients advising them expressly that they may ‘opt out’.”

He said the responses, or lack of them, may “materially further inform the overall picture” and the defendants may at a later date ask the court to reassess CRL’s position as the representative.

Mr Rouse said: “There are many other firms who have also routinely referred IP renewals to CPA Global and been paid large commissions for doing so.

“The regulator, IPReg, has so far done nothing to address this clear breach of the long-standing professional obligation to put a client’s interests before their own.

“This shameful practice has gone on far too long and there are far too many IP owners who have been paying far more than necessary because their legal advisors have been more concerned to line their own pockets.”

Daniel Spendlove, the lead partner at Signature Litigation, the City firm representing CRL, commented: “This judgment is significant for the legal industry, providing greater clarity on the limits of England and Wales’s representative action regime.

“The alleged actions of Marks & Clerk in hiding their commission payments from current and former clients, and failing to account for them as the law requires, paints IP professionals engaging in these practices in a very negative light.”

An M&C spokeswoman said: “We are disappointed with the judgment. We believe that CRL’s claims are motivated by its and its funder’s commercial aims and are wholly unsuitable to be pursued as a representative action under CPR 19.6.

“The allegations in the claims mischaracterise the work M&C undertakes and its relationship with CPA, and we strongly deny any wrongdoing. M&C will be seeking leave to appeal to the Court of Appeal and intends to pursue its appeal vigorously.”

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