We were instructed to assist an engineering design company (“the client”) in recovering unpaid invoices (with a value of £300,000+) (“the invoices”) from a manufacturer (“the debtor”). The debtor was disputing the invoices and alleging that the client had not provided its services with reasonable skill and care.
In every dispute, our primary objective is to get the best possible settlement as soon as possible. The general rule in litigation is that the loser pays the winners reasonable legal costs. It is for the court to determine what is and is not ‘reasonable’. If there is any doubt as to reasonableness, the court rules provide that it be decided in favour of the losing party (i.e. the paying party). As a result, litigants rarely recover 100% of their legal costs. Solicitors refer to the difference between costs incurred and the costs recovered as ‘irrecoverable costs’. As litigation progresses, costs can soon escalate (as can the irrecoverable costs). This is just one reason that our objective in every claim is to bring proceedings to a conclusion as quickly as possible.
We met with the client and devised a strategy to ensure payment of the invoices without delay. The key in every dispute is to find the ‘pressure point’, the fact or issue that will force and/or strongly encourage the other party to come to the table and discuss settlement. In this case, the ‘pressure point’ was intellectual property rights. In particular, unregistered design rights.
For unregistered designs, the basic rule is that the designer (the person who creates the design) is the owner of that design (section 215(1), Copyright, Designs and Patents Act 1988). There are of course exceptions to that rule; such as designs created by an employee in the course of his or her employment which will belong to the employer (section 215(3), CDPA). Another exception used to be that commissioned designs belonged to the commissioner (this was changed with effect from 1 October 2014 by the Intellectual Property Act 2014).
In this case, the client was commissioned to create designs (it was this work that the invoices related to). We quickly worked with the client to establish that the design rights were essential to the manufacturing work the debtor was undertaking. It was essential to the debtor that they had the design rights; if they did not, it would jeopardise a multi-million-pound project.
We wrote to the debtor demanding payment of the invoices and outlining the design right issues that the debtor faced. The debtor instructed solicitors who responded to our letter on behalf of the debtor. Because of the pressure point, the debtor was keen to reach an amicable settlement without delay. The parties agreed to engage in Alternative Dispute Resolution (“ADR”). ADR can take many forms; to name a few: (1) settlement meetings; (2) mediations (which are settlement meetings facilitated by a third party); and (3) arbitration. In this case, mediation was chosen as a suitable form of ADR.
At mediation, the parties agreed on terms of settlement. The client was very happy with the outcome. In particular, the client received a substantial payment without having to engage in protracted litigation. This saved the client money (in respect of irrecoverable costs) and management time.