CPA Global agrees to pay $5.6m to settle US class action alleging overcharging

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. 

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Damned if you do – Damned if you don’t

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 feesin 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.

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