The Effect of Fee Shifting on Litigation: Evidence from a Court Reform in the UK

Helmers, C., Lefouili, Y., Love, B. & McDonagh, L. (2016). The Effect of Fee Shifting on Litigation: Evidence from a Court Reform in the UK (Report No. 16-740). Toulouse School of Economics.

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Abstract

We study a U.K. court reform that established a cap on the amount of costs that a successful litigant may recover in a case litigated in the Patents County Court (PCC, now the IP Enterprise Court). We first build a theoretical model showing that the introduction of a costs cap is equivalent to an intermediate cost allocation rule falling between the English and American Rules. Our model suggests that the impact of the introduction of such a fee-shifting rule on the number of claims filed and the settlement rate is ambiguous. It shows, however, that the effect of the costs cap on IP holders' incentives to file a claim is stronger for smaller IP holders. Our empirical analysis of the impact of the costs cap takes advantage of our ability to compare IP litigation in the PCC with IP litigation in the High Court of England and Wales, which was not directly affected by the reform. Contrary to the existing literature, we find that the costs cap increased the number of cases filed by smaller companies and decreased the rate of settlement.

Item Type: Monograph (Working Paper)
Additional Information: The permission to publish this working paper has been granted by the publisher.
Uncontrolled Keywords: Litigation; Fee Shifting; Intellectual Property; Court Reform; UK
Subjects: K Law
Divisions: The City Law School > The City Law School - Academic Programmes
URI: http://openaccess.city.ac.uk/id/eprint/16183

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