| What is a Part 36 Offer? | | | | owner. |
| A party to litigation i.e. a civil dispute or a | | | | As there is no innocence defence under UK law |
| commercial dispute which is before the Courts in | | | | to intellectual property rights infringement, it |
| the UK, that party, whether a claimant or | | | | means that the business is liable for the |
| defendant may make a Part 36 Offer under the | | | | infringement, and the question moves on to how |
| Civil Procedure Rules (“CPR”) to apply | | | | much should be paid by way of damages. |
| pressure to the other party to settle the dispute | | | | Information that the Part 36 Offer Must Contain |
| early than what otherwise might be the case. A | | | | An effective Part 36 Offer must meet the |
| Part 36 Offer is made by one a party to settle | | | | following requirements: |
| the litigation before to a hearing and decision by a | | | | • It must be in writing. |
| Judge or decision-maker. | | | | • It must be expressed as being made under |
| Thus, a Part 36 Offer may result in a Court | | | | Part 36. |
| dispute settling at an earlier stage which often | | | | • It must specify the period in which it is open |
| benefits one or even all parties to the dispute, | | | | for acceptance by the other party, which cannot |
| and provides a tool for the weaker party in | | | | be a period less than 21 days (although it can be |
| litigation to. They must be in writing and | | | | a longer period or even an indefinite period). |
| structured in the manner prescribed by Part 36 of | | | | • It must state that it relates to the entire |
| the CPR. | | | | claim or, if it does not, it must state the relevant |
| Why Make a Part 36 Offer in the Course of | | | | part of the claim that it relates to. |
| Litigation? | | | | • It must state whether it takes into account |
| For parties to litigation, there are various reasons | | | | any counterclaim. |
| to consider making a Part 36 offer. For example: | | | | What Happens if a Part 36 Offer is Accepted by |
| • A strategic and well structured Part 36 Offer | | | | the Other Party? |
| may mean that the parties more quickly obtain a | | | | A Part 36 Offer may be accepted at any time |
| satisfactory result in the litigation. | | | | before it expires. If you are a Claimant who has |
| • A Part 36 Offer places pressure on the | | | | made a Part 36 Offer and your offer is accepted |
| other party to the litigation (the party to whom | | | | by the Defendant, you will be entitled to have |
| the offer is made) to seriously consider the | | | | your costs of the litigation paid by the Defendant |
| strength of their case, whether they are | | | | up to the date the Defendant accepted the offer. |
| prepared to settle, or whether they are prepared | | | | Upon acceptance by the Defendant, your claim will |
| to risk a costs penalty if the matter goes to | | | | be stayed. Where the Defendant has accepted |
| hearing and they do not ultimately do better than | | | | your offer to pay you a sum of money, that |
| the offer put to them. For example, if a Claimant | | | | money must be paid to you within 14 days of |
| with a strong claim makes a Part 36 Offer to a | | | | acceptance. |
| Defendant to settle for 85% of the total claim, a | | | | Cost Consequences: What Happens if a Part 36 |
| pragmatic Defendant may jump at the chance to | | | | Offer is Rejected by the Other Party? |
| settle on this basis in view of the risk that if the | | | | If you are the Claimant and the Defendant does |
| claim was heard by a Judge an order would be | | | | not accept your Part 36 Offer, the Defendant will |
| made for payment of the full amount of the | | | | be ordered to pay your costs, including interest |
| claim. | | | | on your costs, if your claim proceeds to hearing |
| • Parties are highly likely to save legal costs in | | | | and you do better than your earlier offer. So (for |
| the longer term through a quicker settlement of | | | | example), if your claim against the Defendant is |
| the litigation. | | | | for £100,000 and you made an offer to settle |
| • Exploring settlement prior to hearing can | | | | for £85,000 at an early stage in the litigation |
| often be advantageous to both parties. At this | | | | which the Defendant did not accept, if the matter |
| stage parties can still negotiate towards a | | | | goes to hearing and you are awarded the full |
| compromise suited to their commercial needs, | | | | £100,000, the Court is likely to order the |
| rather than have an “all or nothing” result | | | | Defendant to pay your costs from the date your |
| imposed on them by the Judge or decision maker | | | | offer expired up to judgment in your claim. |
| at a final hearing. | | | | If you are the Defendant making a Part 36 Offer |
| The effectiveness of a Part 36 Offer lies in its | | | | to the Claimant, if the Claimant does not accept |
| ability to place pressure on the party receiving the | | | | your offer, proceeds to hearing then fails to |
| offer who will know that, if they do not accept | | | | better your offer, the Court is likely to order that |
| your Part 36 offer and fail to beat your Part 36 | | | | the Claimant pay your costs of the litigation from |
| offer at the hearing, the Court is likely to order | | | | the date your offer expired to the date of |
| that they make a considerably larger contribution | | | | judgment. In this case the Claimant will be ordered |
| to your legal costs than they would otherwise | | | | to pay your costs at a higher than usual rate. This |
| have had to make. | | | | type of costs order is known as an indemnity |
| Intellectual Property Rights | | | | costs order. |
| Increasingly, it is a sign of the times that | | | | Part 36 Offers may be made prior to the |
| intellectual property rights owners look to | | | | commencement of legal proceedings or at any |
| threaten legal proceedings against business that | | | | time prior to the hearing of the dispute. In the |
| have appropriated photographs, films, or music | | | | context of intellectual property rights |
| and incorporated that material embodying | | | | infringements, when an offer is made pursuant to |
| intellectual property rights on their websites. | | | | Part 36 of the CPR, if the rights owner does not |
| Frequently, the business owners themselves are | | | | obtain more at the hearing in an Enquiry as to |
| not aware that they have had infringing material | | | | Damages or an Account of Profits, the IP rights |
| on their websites, because they placed their trust | | | | owner will not be entitled to recover their costs; |
| in third party contractors to build their site for | | | | and in fact, provided there has not been some |
| them. These third party contractors are known | | | | disentitling conduct on the part of the Part 36 |
| to misappropriate photographs, images and other | | | | Offeree, they will be entitled to an order to have |
| material within which IP rights vest. The business | | | | their costs paid by the rights owner. Almost |
| owners frequently only find out about the | | | | invariably the legal costs in a fully belted out |
| materials that are an infringement of intellectual | | | | intellectual property dispute will be well in excess |
| property rights when a letter before action is | | | | of the damages that might be awarded for the |
| received from the intellectual property rights | | | | infringement. |