Only recently formed, a once ambitious competitor is to be absorbed by the CPA Global organisation, which surely already holds an overwhelmingly dominant position in the unregulated IP services sector. This merger, hard on the heels of the acquisition of Clarivate, will allow CPA Global access to enormous amounts of client data and numerous new clients, some of whom will have moved away from CPA Global only to find themselves right back where they started.
Deposition of former employee opposed by CPA Global
In June this year, lawyers representing Polymer Solutions International, Inc filed an application with the US District Court of Maryland seeking to depose a former CPA Global employee in relation to claims of unauthorised charging for renewals payment services to be brought in the Island of Jersey, where CPA Global has its headquarters. The order was granted and CPA Global promptly intervened seeking to quash the order. If you have access to PACER (Public Access to Court Electronic Records) you can search using the case number 8:18-cv-01864-DKC.
US law allows for discovery orders to be made in relation to proceedings to be brought outside the US under what is called a ‘Section 1782’ procedure. This is not the first time a procedure has been instigated to obtain evidence from former CPA Global employees. In the US class action against CPA Global (see my earlier posts), also pursuing claims of unauthorised charging, an application was filed on 19 January 2017 seeking assistance from the English Courts in obtaining testimony from nine former CPA employees. This application was not pursued further as the case was settled the following month.
Stop the tide
CPA Global is throwing everything it has at the present 1782 process and doing its utmost to prevent evidence being taken from its former employee. There is plenty of fun to be had for the lawyers and countless hours will be spent arguing what are doubtless very interesting points of law. The arguments advanced by CPA Global include assertions that the former employee doesn’t have any relevant knowledge; and yet it is doing all it can to prevent him being deposed. Is it unfair to speculate that CPA Global doesn’t want any of its former employees giving evidence for fear of what they will say?
Set for another fall?
CPA Global has, one imagines, deep pockets and so can afford to throw money at stopping this discovery. It did the same when it tried to stop the Kobre & Kim law firm from using the domain https://cpaglobal-litigation.com, though that didn’t turn out well (see my post). The present proceedings could go to appeal and I suspect CPA Global will keep up the fight for as long as process allows.
Business as usual
Meanwhile, CPA Global continues to charge fees for renewal payment services that are, based on comparative data I have seen, vastly more than any of its major competitors; including applying foreign exchange mark-ups to Official Fees that are commonly between 20% and 50%! With its patent renewals business reported to be 70% of CPA Global’s revenues, and with reported debt funding of £1.7bn to support, it can hardly afford to reduce charges.
If you are using CPA Global to pay your renewals, then I strongly recommend you ask to see its tariff of charges. What you will then also see, unless you have been made an exception, is that it also charges ‘Country Fees’ that, unlike any other competitor I know of, increase with each annuity year. It is time that CPA Global clients woke up to the reality of its charging practices.
Fake news? No, absolutely true - CPA Global was found to have acted in bad faith in trying to prevent use of the domain “cpaglobal-litigation.com”.
You may have missed this story, reported by World IP Review (WIPR) and World Trademark Review (WTR) among others, involving the World Intellectual Property Organization (WIPO) panel decision that went against CPA Global and must have caused some embarrassment at CPA Global HQ.
What had CPA Global so concerned that it pursued such a hopeless claim? The website at https://cpaglobal-litigation.com states its purpose on its homepage:
“Bentham IMF has put in place funding for current and former CPA Global clients to pursue legal proceedings to recover unauthorized charges for patent annuity payment services.
Investigations have uncovered evidence that suggests CPA Global charges fees for patent renewal services that are consistently and significantly more than what is allowed for under its service contracts with clients.”
The decision by CPA Global to attempt to stop the domain name from being used brings to mind a fascinating book (mentioned in my article on unethical behaviour published on 28 March 2017) titled The Power Paradox – how we gain and lose influence by Dr Dacher Keltner. In his book, Keltner demonstrates that those who are afforded power tend to believe that the rules that apply to others don’t apply to them.
WIPR reported on the launch of https://cpaglobal-litigation.com in September last year when CPA Global told the publication: “CPA Global categorically and emphatically denies any wrongdoing in our business. The fees for our service are defined in our agreements with our customers, and we adhere to those agreements fully.”
It went on to say, “We consider any speculation about future litigation that might or might not take place to be a deliberate attempt to tarnish our good business reputation and, as we always have, will continue to vigorously defend ourselves against any such vexatious speculation.”
Vigour is, happily, not enough to sway a WIPO panel. When approached by WTR following announcement of the panel decision “CPA Global declined to comment”.
By order dated 6 October 2017 US District Judge TS Ellis III brought an end to the class action filed against CPA Global alleging systematic and widespread overcharging of clients for patent renewal services. Under the terms of the settlement, 2917 clients will share in US$5,600,000 after deduction of US$1,864,000 to be paid to the plaintiff’s lawyers and US$25,000 to the plaintiff.
The order sets out the factors that support the court’s determination that the settlement is fair and reasonable:
“a. The posture of the case at the time settlement was proposed;
b. The extensive nature of written discovery and document production that had been conducted;
c. The arm’s-length negotiations presided over by mediator Randall Wulff, Esq. following the exchange of mediation statements; and
d. The extensive experience of counsel.”
It also sets out the factors that support the court’s determination that the settlement is adequate:
“a. The relative strength of Plaintiff’s case on the merits;
b. The difficulties of proof or strong defenses Plaintiff would likely encounter if the case had gone to trial;
c. The anticipated duration and expense of the litigation;
d. The degree of opposition to the Settlement; and
e. The Settlement benefits being made available to Settlement Class Members.”
The order also states, in paragraph 24:
“The Settlement Agreement and this Order are not admissions of liability or fault by CPA Global or the CPA Global Released Parties, nor do they constitute a finding of the validity of any claims in the Action or of any wrongdoing or violation of law by CPA Global or the CPA Global Released Parties. The Settlement Agreement and settlement are not a concession by CPA Global or the CPA Global Released Parties, and neither this Order or Judgment, nor any of its terms or provisions, nor any of the negotiations or proceedings connected with it, shall be offered as evidence or received in evidence or used in any way in any pending or future civil, criminal or administrative action or other proceeding to establish any liability or wrongdoing of, or admission by, CPA Global, the CPA Global Released Parties, or any of them.”
- The plaintiff’s case had “relative strength” on the merits but there were also “difficulties of proof or strong defenses”
- CPA Global admit nothing and the settlement cannot be used in any way (in US civil, criminal or administrative process) as evidence of anything
- Evidence submitted in support of the settlement by the plaintiff’s counsel included the statement “After excluding the Administration Fees and the direct foreign patent renewal and agent fees, we concluded that CPA Global had received roughly $11.7 million in alleged overcharges.”
- CPA Global have paid US$5,600,000
What more need one say than 'done deal'?
International law firm Kobre & Kim, along with leading Jersey law firm Baker & Partners, announced today that they have entered into a funding arrangement with Bentham IMF to investigate and possibly sue CPA Global, alleging systematic and widespread overcharging of clients for patent renewal services. The firms are also working with the patent renewals consulting business Patent Annuity Costs Limited, headed by Peter Rouse.
CPA Global is one of the world’s largest patent renewal companies, reportedly processing more than two million patent renewals per year.
The potential actions will allege that CPA Global breached standard service contracts with what may be tens of thousands of clients through concealed mark-ups, in at least one case estimated to exceed 90 percent.
The proposed legal proceedings would be commenced in Jersey, one of the UK’s Channel Islands, where CPA Global is incorporated, on behalf of CPA Global clients whose agreements select Jersey as the forum for any disputes. Bentham IMF will provide non-recourse funding to CPA Global customers who wish to pursue claims against CPA Global.
James Corbett QC of Kobre & Kim, who is leading the investigation and proposed action, said the following:
"Based on the investigation so far, the overcharging could be shocking. Based on models, the aggregate over-charges could total hundreds of millions of dollars over a ten-year claim period."
Baker & Partners’ Senior Partner Stephen Baker said:
"We engaged with Bentham IMF to help clients enforce their rights on a risk-free basis without the need to secure representation. Given the international nature of CPA Global’s business, we have partnered with a global firm to work with our experienced Jersey team to seek effective redress for claimants from around the world."
Bentham IMF Investment Manager Matthew Harrison said:
"Patent holders worldwide contract with CPA Global for the renewal of rights associated with their most valued assets. CPA Global appears to have breached those contracts. Bentham IMF’s funding will enable Kobre & Kim and Baker & Partners to rectify CPA Global’s treatment of its customers while sparing the patent holders from incurring any fees and costs to participate in the litigation."
The potential litigation is funded by Bentham IMF. Participants will not be required to pay any fees unless their claim is successfully resolved, and then only from sums awarded by the Court.
CPA Global customers, past and present, can register for the potential action without charge or obligation at www.cpaglobal-litigation.com. To find out more about the investigation, please contact email@example.com or call global toll free number +1 833 204 1724.
Read the original press release on the Business Wire website
In an earlier article, I discussed the US Class Action and overcharging allegations against the largest provider of patent annuity payment services, CPA Global. Here, I provide an update on the case.
In documents filed with the Eastern District of Virginia on 22 September in support of an “unopposed motion for final approval of settlement and class certification”, Geoffrey Neri, lead Counsel for the plaintiffs, Run Them Sweet LLC, refers to his firm’s analysis of invoices from which “we concluded that CPA Global had received roughly $11.7 million in alleged overcharges, assuming complete success on our theories of liability and damages at class certification and trial.”
Mr Neri explains that to arrive at the figure of US$11.7m, his firm determined there were 2,917 CPA Global clients that fell within the class definition. Working from the invoices for those 2,917 clients they deducted the official fees payable; the actual agent fees paid by CPA Global; and the per renewal ‘Administration Charge’ provided for in each contract, to arrive at the total of US$11.7m.
Based on the US$11.7m figure, the US$5.6m to be paid by CPA Global to settle is a little under half of the alleged overcharges. After deductions, if they are as much as they could be, the class will end up with about 30% of the US$11.7m. This is of course better than nothing and none of the class will have risked a penny (or a cent) to recover what they will receive. Some, however, may well feel that they should not have been subjected to the alleged overcharges in the first place.
A year ago today, a class action was filed against CPA Global in the US alleging a "systematic practice of overbilling and inflating fees". In March this year I reported on the settlement deal struck by CPA Global involving payment of $5.6m to deal with claims of overcharging. On June 2, documents were filed on behalf of CPA Global in support of the proposed settlement which was given preliminary approval by the court on June 9; a hearing for final approval is due to take place in October.
Who is in the class?
The settlement terms are understood to benefit US patent holders with 20 or fewer non-US patent renewals within any one year and a maximum of 40 non-US patents in any one year, between 1 January 2012 and 31 December 2016*. The CPA declaration, made by a consultant who used to work with CPA North America rather than by a CPA employee, refers to a total of 3,059 contracts that break down as follows:
- 1,800 governed by Jersey law and courts
- 800 governed by English law and courts
- 400 governed by Virginia law and courts
- 50 governed by New York law and courts
- 8 governed by Delaware law and courts
- 1 governed by Washington D.C. law and courts
What puzzles me, and may do others, is that the US court (Virginia) in this case can approve a deal between the parties in an action involving contracts over which they do not have jurisdiction; namely, at least, those governed by Jersey or English law and courts. Perhaps such class members will, in effect, be agreeing to amend the governing law provisions of their contracts.
* In a supplemental briefing filed by the Plaintiff in support of the settlement, is stated:
"Settlement class members will not be releasing claims for years in which they have more than 20 foreign patent renewals."
What might class members receive?
Here are some simple assumptions, made necessary because so much important information is deliberately kept out of public records:
- an average patent holder within the class had 10 non-US renewals per year for each year of the five years – total 50 annuities paid; and
- the net settlement fund, after deductions including the claimant’s lawyers’ entitlement, may be only $4m assuming the lawyers get 25% (the settlement allows them 33%, amounting to $1,864,800 according to the draft notice to Class members) and there are other costs of $200,000 including $25,000 for the Plaintiff; and
- there are 3059 claimants within in the class (one per contract) producing a total of 152,950 annuities paid over the five-year period (an average of 30,590 annuities per year); and so
- each claimant receives $26.15 per annuity
The two annuity payments pleaded in the class action claim were alleged to be $294.52 and $311.40 more than they should have been; a total of $605.92 and an average of $302.96. If you round down the average overcharge to $300 then claimants within the class, based on the assumptions made above and the average level of overcharges claimed, would receive 8.74% of what they might have overpaid; not a great deal if my assumptions are correct.
Is a bad deal better than no deal?
It is clearly in the interests of the Plaintiff and Defendants to settle this action. The Plaintiff (who will get $25,000) and Plaintiff’s lawyers (who will get $1,864,800 or less) will be well rewarded and CPA Global will, on the basis of assumptions which I am happy to be shown to be incorrect, have settled 3,059 claims very cheaply indeed.
The Virginia Court has apparently decided, at least on a preliminary basis, that it has jurisdiction over contracts that the parties agreed should be governed by the laws of other countries. Is anyone, I wonder, going to address this issue and will any of the class members be willing to question the deal offered to them?
where does this leave referrers?
In the CPA Global declaration, it is stated that all clients covered by the 3,059 contracts were referred to CPA Global by law firms and patent agents (this is in fact part of the definition of the class). Where does this settlement leave such firms? Should they not be looking into this case, in detail, advising their existing and prospective referral clients of the issues and risks?
Those who receive referral fees will presumably have to weigh up the reputational consequences and potential liabilities arising if the individuals they referred to CPA Global were found to have been overcharged.
Note: this post has undergone some minor corrective and supplemental amendments since first published.
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During Phase 1, Diagnostic, the PatentPlus team of legal and procurement experts will review an organisation's existing patent renewal spend with suppliers, analyze and report on opportunities identified for cost reduction and improvements in patent renewal management. A best practice training workshop will also equip company teams to better manage these suppliers moving forward.
For clients choosing to proceed to Phase 2, Delivery, the PatentPlus team will support implementation of these benefits into the client organization and, where appropriate, establish new contracts with the client’s providers.
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In an earlier article, I discussed the US Class Action against CPA Global, the world’s largest patent annuity payment services provider, involving allegations of overcharging. In this article, I will probe a little into the impact this has on a commoditized yet stubbornly opaque service sector.
The spectre of hidden charges has been haunting this sector for some time, in large part thanks to Dennemeyer, whose US leadership team have been acting as industry Ghostbusters with webinars probing a murky world of unexplained charges. Dennemeyer certainly have an axe to grind, and who can blame them, if competitors have been indeed been making super profits from clients ignorant of the extent of apparent overcharges.
How long has this been going on?
The settlement agreed by CPA Global in the current US Class Action, brought by Run Them Sweet LLC in the summer of 2016, covers a five-year period to the end of December 2016; though this may have more to do with applicable rules governing limitation on claims than anything else. The alleged overcharging, by its nature concealed from clients, could have been going on for far longer; in some jurisdictions, this could mean that time does not begin to run for limitation purposes until a client becomes aware of a potential claim.
What of the rest?
Schadenfreude will likely abound among CPA Global’s competitors who may hope that further litigation will follow brought by claimants not covered by the very limited class defined in the current US action. However, CPA may not be the only suppliers to feel the sting of litigation and at least one other US Class Action may even now be rumbling down the track. Where does this leave patent holders who may be wondering whether they have been overcharged or whether by moving to another supplier they might end up in a similar situation?
Anyone researching leading suppliers will be met with an array of marketing puff that cannot be independently verified. These include, for example, references to: “significant cost-savings” and “minimizing expenses” (Anaqua); ‘‘cost efficiency” and “no hidden or additional fees” (IPAN); “cost effectively” and “no hidden costs” (Pavis); “unmatched fee transparency” and “competitive agent fees” (Clarivate). CPI (Computer Packages Inc.) go so far as to assert that theirs is “the only transparent annuity service” and that they are “at least 10% less expensive (in total cost) than the other major annuity services.” What is a patent holder to make of all this?
Market opacity and procurement discipline
Resistant as the legal services sector is to the involvement of procurement, perhaps because it places less emphasis on relationships and more on factors such as performance and price, the annuity payment sector is one where using a tender process is essential. This is primarily because only in the context of a properly structured tender process will it be possible to have the right questions asked and answered so that apples can be compared with apples. Understandably perhaps, suppliers refuse to disclose essential information other in the context of a confidential tender process.
Help is at hand
My firm has teamed up with procurement industry expert Jonathan O’Brien and his Positive Purchasing firm to create the first dedicated service for patent holders who want to learn how to tackle this somewhat tricky IP service sector. Our Patent Plus service is available now to patent holders looking for value going forward, as well as clarity regarding historical charging.
IP management and software company CPA Global could be put on the market for as much £2 billion ($2.5 billion).
Private equity firm Cinven, the owner of CPA Global, has invited banks to pitch for the work, according to sources speaking to The Sunday Times.
Established in 1969 in Jersey, CPA Global began as a provider of patent renewal services. It started offering trademark services in the 1980s and providing IP software in 2000.
Cinven acquired the company in 2012 for £950 million, according to the Financial Times.
CPA Global now has 25 offices across four continents and 12 countries, and an agent network of 1,300 across 200 jurisdictions.
Sister site LSIPR reported in March that CPA Global had agreed to pay $5.6 million as part of a settlement agreement in a class action lawsuit.
In July last year, Run Them Sweet, a US medical diagnostic company, filed the class action lawsuit alleging it was overcharged for foreign patent renewal fees by CPA Global.
According to the proposed final judgment, the settlement will only benefit US patent owners with fewer than 40 non-US patents renewed in any one year between January 1, 2012 and December 31, 2016.
Peter Rouse, director of Patent Annuity Costs, said that liabilities may affect the profitability of the business and therefore the £2 billion valuation.
“If there’s any merit in these overcharging claims, and others choose to pursue similar claims, it could have a very significant impact on the valuation of CPA Global,” he explained.
Back in October last year, Thomson Reuters completed the sale of its IP and science business to Canada-based Onex Corporation and Baring Private Equity Asia, based in Hong Kong.
The business, which included trademark research and protection company CompuMark and online brand protection company MarkMonitor, was sold for nearly $3.6 billion and renamed Clarivate Analytics.
This article was previously published in World Intellectual Property Review and is reproduced with kind permission.
CPA Global Limited, the world’s largest intellectual property management company, has recently settled a class action case in the US, where it was alleged that it had been overcharging for patent management fees. The alleged overcharging occurred by “inflating certain fees and outright inventing others.” CPA has now settled this case out of court for $5.6 million.
The terms of settlement were arrived at after mediation, with a 64-page Court document filed in the District Court of Eastern Virginia on 13 March 2017. Once approved by the Court, the class action, which commenced on 29 June last year, will end. The Court’s approval process will take a further four months during which time potential claimants will be contacted and given the option to take the money or opt out.
The settlement only benefits US patent holders, with a maximum of 40 non-US patents renewed in any one year, who between 1 January 2012 and 31 December 2016 used CPA Global to pay their annuities. Class members who do not opt out will be compensated from what remains from a $5.6m fund to be provided by CPA. It must also provide last known contact information for current and past clients in the defined class; subject to the Court’s approval, as much as 33% of the settlement fund may be paid to the claimant’s lawyers and $25,000 to the claimant.
Many would commend CPA for resolving the class action before it reached trial and for keeping the class definition so restricted and the settlement fund so small. Once the case had become a ‘rocket docket’ to be tried by end July 2017, the urgency to settle must have been all the greater and doubtless this is what the rocket docket process is designed to encourage. Was this simple expediency aimed at limiting legal and other costs of litigation or was it a deliberate choice to prevent potentially embarrassing evidence being presented in open Court and, worse still, a judgment finding that CPA had indeed been engaged in systematic overcharging?
On the one hand, settlement makes sense for CPA, especially given rumours that there will be a change in ownership within the next six months. On the other, why would CPA pass on the opportunity to have the claims of overcharging tested by a Court in a case which pleaded only two instances of overcharging and involved a claimant with a very small portfolio? As one might expect, the Court document records, at length, that the settlement in no way amounts to an admission of any of the claims in the action and that CPA refutes those claims completely.
CPA may have dodged this bullet but there will almost certainly be more to follow, not least because US law firms will doubtless be offering their services to patent holders outside the prescribed class with larger portfolios and potentially much larger claims. This is not going to go away and CPA can expect further claims in the US and on their home ground in Jersey, UK.
Dennemeyer, the second largest patent annuity payment provider, has run several webinars in which it has presented carefully sanitized data pointing to egregious levels of overcharging by some providers. Patent holders have been given enough cause to question whether they are in fact paying considerably more than the service fee agreed with their provider.
For those willing to look under the covers, my firm offers a ‘no saving, no charge’ service that includes advising on and negotiating terms with their existing providers or with an alternate provider.
Overcharging for patent annuities - the dilemma facing in-house counsel
The world’s largest provider of patent annuity payment services, CPA Global, is the subject of a Class Action in the US in which it is alleged it has been overcharging its clients.
On 9 February 2017, Life Sciences Intellectual Property Review posted an article entitled ‘CPA Global seeks settlement after claims it overcharged patent fees’ in which it was reported as follows:
‘According to a January 30 order, the parties engaged in successful mediation, have agreed in principle to settlement and have signed a memorandum of understanding. In order for the parties to finalise the settlement, the district court granted their request to stay all deadlines for 30 days and cancel the case hearing, which was initially scheduled for February 17.
The case is stayed until March 1.’
One hesitates to believe that an organization of the stature, scale and longevity of CPA Global could possibly be engaged in overcharging of clients and yet one must consider the possibility that the inflation of charges may have been, and may indeed remain, systemic.
Meanwhile, Dennemeyer, the world’s second largest provider of patent annuity payment services, has been running webinars and posted videos reporting overcharging on a massive scale by competitors.
In March 2015 Brandstock, one of the larger European players in the IP services sector, published a report on findings from more than 100 benchmarking projects conducted on behalf of owners of some of the world’s largest patent and trademark portfolios entitled:
‘150 Million US$ Savings – How Far Can You Go? The why, what and how of agent benchmarking and trademark and patent cost reduction’3. In conclusions set out on page 6 of the report, it was stated:
‘Only from a selected group of countries had all agents been applying the correct official fees. In certain regions, many agents applied hefty mark-ups of 30 to 50% and more. Again
a strong North to South and West to East increase was identified. In addition, some providers of global services such as patent annuities made up for their ever-decreasing handling fees with decades of applying incorrect exchange rates, thereby overcharging owners of large patent portfolios by anything from 13 to 35% and resulting in millions of US$ in damages.’
Damned if you do
This information places in-house counsel at risk of being held responsible for any overcharging that took place ‘on their watch’. Yet how should counsel have discovered the overcharging for themselves?
Damned if you don’t
Now that the information is out, are in-house counsel now at risk of being held responsible for not taking steps to address the risk and recover any past overpayments?
In my webinar delivered via BrightTALK on 15 February I explain the basic components of patent annuities and consider the claims against CPA Global. My firm is able to provide expert help to patent holders who are concerned to ensure that they are paying the right fees for their patent annuities.