Salts Healthcare v Pelican Healthcare: IPEC Scale Costs Survive Transfer to Patents Court [2026] EWCA Civ 93
IPEC — 2026-02-19
Court of Appeal holds that pre-transfer IPEC scale costs should be preserved when a case moves to the Patents Court, unless the transferring judge's indication is departed from with good reason.
Overview
Date: 19 February 2026
Judge: Lord Justice Arnold (with Lord Justice Newey and Lord Justice Miles)
Court: Court of Appeal (Civil Division)
Citation: [2026] EWCA Civ 93
Appeal from: [2025] EWHC 497 (Pat), Ian Karet OBE sitting as a Deputy High Court Judge
Case No: CA-2025-000934
Hearing dates: 3-4 February 2026
Nature of Proceedings: Appeal on patent infringement, validity, and costs; the costs issue concerned whether pre-transfer costs should be subject to IPEC scale caps after transfer to the Patents Court
Key Issues:
- Whether costs incurred in IPEC proceedings prior to transfer to the Patents Court must be assessed on the IPEC scale
- The power of the transferring court under PD 30 paragraph 9.2(1) to specify terms preserving IPEC scale costs
- The discretion of the receiving court where the transferring judge has indicated, but not ordered, that pre-transfer costs should remain on the IPEC scale
- The weight to be given to a recital in the transfer order recording the IPEC judge's indication on costs
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In Salts Healthcare Ltd v Pelican Healthcare Ltd [2026] EWCA Civ 93, the Court of Appeal addressed the treatment of costs incurred in the Intellectual Property Enterprise Court before a case is transferred to the Patents Court. The decision establishes an important framework governing pre-transfer costs where proceedings move from the capped IPEC regime to the open costs regime of the Patents Court, with broader implications for any transfer out of a scale or fixed costs regime.
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The Facts
Salts Healthcare Limited brought a claim for patent infringement against Pelican Healthcare Limited in IPEC, alleging that Pelican's ModaVi range of ostomy bags infringed its patent for an ostomy appliance design featuring internal weld portions intended to reduce bulging and sagging. The patent dispute was a substantial piece of intellectual property litigation, with ten independent claims and contested issues of construction, infringement (both literal and by equivalence under the Actavis doctrine), and validity.
On 24 May 2023, Pelican applied to transfer the claim from IPEC to the Patents Court. On 11 July 2023, HHJ Hacon granted the application and ordered the transfer. Pelican had argued that pre-transfer costs should not be confined to the IPEC scale, submitting that the IPEC judge was "in a good position" to decide that point and "in a better position than any subsequent court" to do so. Salts opposed Pelican's submission but did not itself seek an express order preserving the IPEC scale for pre-transfer costs.
HHJ Hacon declined to make the order Pelican sought. His order reserved costs but included a recital recording that the court had indicated "at the hearing of the application to transfer that costs prior to transfer should be assessed in accordance with the usual IPEC scale cost caps pursuant to CPR r.46.21 and Practice Direction 46 albeit costs were reserved and this was an issue for the judge making the assessment."
At trial in the Patents Court, Ian Karet OBE sitting as a Deputy High Court Judge dismissed Salts' infringement claim and found one claim of the patent invalid as granted. On costs, the judge declined to limit Pelican's pre-transfer costs to the IPEC scale, holding that "it is not an invariable rule that costs incurred in IPEC before transfer to the Patents Court can only be assessed at the IPEC scale" and that Pelican, having successfully defended the claim, "should be able to recover its costs of doing that in the court in which the matter was determined" (at [21]-[22] of the costs judgment).
The Court of Appeal (Lord Justice Arnold, with Lord Justice Newey and Lord Justice Miles agreeing) dismissed the appeal on infringement, allowed it on the validity of claim 8, and allowed the appeal on pre-transfer costs, varying the order to limit pre-transfer costs to the IPEC scale.
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Legal Analysis
1. The IPEC Scale Costs Regime and Its Purpose
The Court of Appeal set out the relevant provisions of the CPR governing IPEC costs in detail (at [130]-[134]). Under CPR r.46.20(1), the scale costs regime in Section VII of Part 46 "applies to proceedings in the Intellectual Property Enterprise Court." Rule 46.21 caps total costs at £60,000 on final determination of liability and £30,000 on an inquiry as to damages. The only exceptions are abuse of process or a certificate of contested validity (r.46.20(2)).
Arnold LJ endorsed the statement of purpose given by HHJ Birss QC (as he then was) in Westwood v Knight [2011] EWPCC 11 at [20]:
> "The purpose of the limits is to aim for certainty for litigants... The correct approach must be to apply the limits if they can possibly be applied, recognising however that in the end the court always has a discretion as to costs... It is a discretion which in my judgment will very rarely (if ever) be exercised to exceed the limits set by Section VII... Before they embark on litigation to enforce their intellectual property rights (or defend themselves) the potential users of the Patents County Court system need to be able to make a prediction in advance as to their likely costs exposure."
Arnold LJ said he "entirely endorse[d]" this statement and described it as "one of the key reforms to procedure in the Patents County Court, now IPEC, implemented following the Working Group's report in order to improve access to justice for individuals and SMEs in intellectual property disputes" (at [149]). He went further, reserving for future consideration whether there is even a residual discretion to depart from scale costs in exceptional cases, noting HHJ Birss QC's observation in Henderson v All Around the World Recordings Ltd [2013] EWPCC 19 at [12] that "the point of the PCC costs rules [is] to favour certainty as opposed to a fully compensatory approach to costs."
2. Rule 46.20(1) Does Not Provide a Clear Answer on Post-Transfer Treatment
The central question was what happens to pre-transfer costs once a case leaves IPEC. Salts' primary argument was that the scale cost limits applied for as long as the claim proceeded in IPEC, that they could only be displaced under r.46.20(2), and that a subsequent transfer did not change this.
Pelican relied on an analogy with CPR r.27.15(1), which provides that when a small claims track case is re-allocated to another track, costs are assessed as if the claim had been allocated to the higher track from the outset. Arnold LJ held this analogy was "if anything, a point against Pelican's interpretation, because there is no counterpart to rule 27.15(1) in the rules applicable to IPEC" (at [147]). The absence of an equivalent deeming provision in the IPEC rules was a significant indicator that Parliament had not intended the same retrospective approach.
Arnold LJ acknowledged, however, that rule 46.20(1) did not provide a clear answer to the question of what happens to pre-transfer costs after transfer, which made it "necessary to consider the legislative scheme more broadly" (at [146]).
3. PD 30 Para 9.2(1): The Key Mechanism for Preserving IPEC Scale Costs
The Court of Appeal identified paragraph 9.2(1) of Practice Direction 30 as "the key to the present issue" (at [150]). This provision empowers IPEC, when transferring a case, to "specify terms for such a transfer." Arnold LJ held that this includes the power to order that pre-transfer costs shall be assessed on the IPEC scale in any event.
The only previous authority on this provision was Comic Enterprises Ltd v Twentieth Century Fox Film Corp [2012] EWPCC 13, where HHJ Birss QC stated at [57]:
> "I will also include a further term in the order for transfer pursuant to PD30 paragraph 9.2(1) namely that the costs incurred in these proceedings prior to transfer will be assessed in accordance with the Patents County Court scale in any event. Such an order is not appropriate in every case but it is appropriate here."
Arnold LJ agreed with and applied this approach, holding that:
1. Paragraph 9.2(1) empowers IPEC to order that pre-transfer costs shall be assessed on the IPEC scale.
2. Whether to make such an order lies in the discretion of the transferring judge.
3. If no such order is made, the Patents Court has a discretion as to whether or not to assess pre-transfer costs on the IPEC scale.
This three-part framework (at [151]) is the core holding on costs.
4. The Weight of a Recital: An Indication Should Only Be Departed From With Good Reason
The most practically significant holding concerned the effect of HHJ Hacon's recital. Although HHJ Hacon had not made a binding order under PD 30 para 9.2(1), his order recited that "costs prior to transfer should be assessed in accordance with the usual IPEC scale cost caps."
The trial judge had treated this recital as merely preserving his discretion, and had exercised that discretion by allowing open costs for the pre-transfer period. Arnold LJ held that this approach was flawed (at [153]):
> HHJ Hacon's order recited that "costs prior to transfer should be assessed in accordance with the usual IPEC scale cost caps", albeit that he left it open to the Patents Court to make a different order. In my judgment it follows that the exercise of the discretion should have been approached on the basis that HHJ Hacon's indication could be departed from if, but only if, there was a good reason to do so. The judge did not give any reason for departing from HHJ Hacon's indication. Rather, he treated the pre-transfer costs as being at large, and hence subject to the approach to costs ordinarily applicable in the Patents Court.
This creates a qualified presumption: where the IPEC judge has indicated that pre-transfer costs should remain on the IPEC scale, the receiving court may depart from that indication, but only with good reason. The burden, in practice, falls on the party seeking above-scale costs to demonstrate why the IPEC judge's indication should not be followed.
5. Re-exercise of the Discretion: Conduct at the Time of Transfer Is the Relevant Factor
Having found the trial judge's exercise of discretion flawed, the Court of Appeal re-exercised it. Pelican argued that Salts' conduct of the proceedings prior to transfer justified above-scale costs. Arnold LJ rejected this, holding (at [154]):
> The factors relied upon by Pelican in support of that contention all concern Salts' conduct of the proceedings in the period prior to transfer. As Pelican's own submission to him recognised, HHJ Hacon was well placed to assess that conduct, because he took it into account when making the order for transfer, but he did not consider that it justified Salts being exposed to above-scale costs. I am not persuaded that this Court should take a different view.
The Court varied the trial judge's costs order to limit pre-transfer costs to the IPEC scale.
6. The Principle Extends Beyond IPEC and the Patents Court
Arnold LJ expressly stated that his analysis was not limited to the specific factual scenario before the court (at [155]):
> For the avoidance of doubt, I should make it clear that, although I have referred in the preceding discussion to transfers from IPEC to the Patents Court, because that is the factual scenario in the present case, the same analysis applies to transfers of copyright and trade mark claims from IPEC to the High Court.
This broadens the principle to all transfers out of IPEC, regardless of the receiving court.
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Practical Implications
For Costs Lawyers
1. Pre-transfer costs should be argued on the IPEC scale unless the transfer order says otherwise. Where a case has been transferred from IPEC without an express order under PD 30 para 9.2(1), costs lawyers acting for receiving parties should check the transfer order for any indication or recital about costs. If the IPEC judge indicated that pre-transfer costs should be on the scale, this creates a qualified presumption in favour of the scale regime.
2. Any recital or indication by the IPEC judge carries significant weight. The Court of Appeal held that the receiving court can only depart from such an indication with good reason. This is a useful tool for receiving parties at detailed assessment: even where there is no binding order, the transfer judge's recorded view on costs is not merely advisory.
3. The absence of a r.27.15(1) equivalent in IPEC rules favours scale costs. In costs arguments, the small claims track analogy (where re-allocation retrospectively changes the costs regime) should be resisted. Arnold LJ held this analogy cuts against open costs, not in favour of them.
4. Broader application to Fixed Recoverable Costs and other capped regimes. Although this case concerned IPEC, the reasoning about party expectations and the purpose of costs certainty has obvious read-across to disputes about costs where cases move between tracks or regimes. Where a party commenced proceedings in a costs-capped environment, and incurred costs on that basis, arguments for retrospective removal of the cap face a high bar.
5. Reserve the question of residual discretion. Arnold LJ expressly reserved whether there is any residual discretion to exceed IPEC scale costs even in exceptional cases. Until this is resolved, costs lawyers should be aware that the IPEC cap may be even more rigid than previously understood.
For Litigation Practitioners
1. Seek an express PD 30 para 9.2(1) order at the transfer hearing. Practitioners acting for parties who wish to preserve IPEC scale costs on transfer should not rely on informal indications. The safest course is to seek a specific term in the transfer order providing that pre-transfer costs will be assessed on the IPEC scale. The court has the power to make such an order and, as Comic Enterprises demonstrates, will do so where appropriate.
2. Resist transfer without addressing costs terms. The party opposing transfer (or seeking to preserve scale costs) must actively engage with the costs question at the transfer hearing. In this case, Salts opposed Pelican's submission but did not itself seek an express protective order. Although the recital ultimately saved Salts on appeal, the litigation would have been avoided had a binding order been sought and made.
3. Parties seeking above-scale pre-transfer costs face a high threshold. Where the IPEC judge has given any indication in favour of scale costs, the receiving court will only depart from it with good reason. Arguments based on the opposing party's conduct will carry limited weight if the IPEC judge has already assessed that conduct and declined to allow above-scale costs.
4. Consider the costs implications before applying to transfer. The decision confirms that a party which succeeds in having a case transferred out of IPEC does not automatically gain the benefit of open costs for the pre-transfer period. The scale regime exists to provide certainty to litigants, and this certainty is not retrospectively removed simply because the case proved too substantial for IPEC.
5. The principle applies to all IPEC transfers, not just patent cases. Arnold LJ explicitly extended the analysis to transfers of copyright and trade mark claims from IPEC to the High Court. Any litigation in IPEC that is subsequently transferred will be subject to the same framework.
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Conclusion
Salts Healthcare Ltd v Pelican Healthcare Ltd establishes a clear framework for the treatment of pre-transfer costs when proceedings move from IPEC to the Patents Court or High Court. The IPEC judge has the power under PD 30 para 9.2(1) to order that pre-transfer costs remain on the IPEC scale. Where the judge makes an indication to that effect, even in a recital rather than a binding order, the receiving court may only depart from it with good reason. In the absence of any order or indication, the receiving court has a discretion, but the underlying policy of certainty for litigants in IPEC proceedings will be a significant factor.
The financial significance should not be underestimated. The IPEC scale caps total liability costs at £60,000, and pre-transfer work in a case like this, involving substantial pleadings, evidence, and interlocutory applications, could easily generate costs well in excess of that figure if assessed on the open Patents Court basis. The Court of Appeal's decision ensures that parties who commenced proceedings in IPEC on the understanding that costs exposure was capped are not retrospectively exposed to uncapped costs for the period when the case was properly within the IPEC regime.
The decision also has broader implications. Arnold LJ's endorsement of the purpose of IPEC scale costs, his observation that the absence of a r.27.15(1) equivalent in the IPEC rules tells against retrospective adjustment, and his reservation of the question whether there is even a residual discretion to exceed scale costs in exceptional cases, all point towards a robust protection of costs certainty in capped regimes. This reasoning will be cited in disputes about costs treatment on transfer or re-allocation well beyond the intellectual property context, including in arguments about the scope and application of Fixed Recoverable Costs.
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Citation: Salts Healthcare Ltd v Pelican Healthcare Ltd [2026] EWCA Civ 93
Full judgment available at: BAILII
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