The Effect of Fee Shifting on Litigation: Evidence from a Policy Innovation in Intermediate Cost Shifting

American Law & Economics Review (forthcoming 2021)

Santa Clara Univ. Legal Studies Research Paper

76 Pages Posted: 10 May 2021

See all articles by Christian Helmers

Christian Helmers

Universidad Carlos III de Madrid; Santa Clara University - Leavey School of Business

Yassine Lefouili

University of Toulouse 1 - Toulouse School of Economics (TSE)

Brian J. Love

Santa Clara University School of Law

Luke McDonagh

LSE Law; London School of Economics and Political Science

Date Written: January 29, 2021

Abstract

We study the effect of fee shifting rules on litigation. First, we build a model to study the theoretical effect of a change in cost-recovery rules on case filings, (post-filing) settlement, win rates, and plaintiffs' average litigation expenditures. We then undertake an empirical analysis of the introduction of an intermediate cost shifting rule that falls between the English and American Rules: a reform that limits the size of fee awards to successful litigants in cases decided by the Intellectual Property Enterprise Court (IPEC), one of two venues where IP cases may be filed in England and Wales. Our empirical analysis takes advantage of heterogeneity among case types and compares IPEC cases with intellectual property cases litigated at the High Court of England and Wales, which was not subject to this reform. We find that patent case filings increased following the IPEC’s shift from a pure English Rule to a rule that caps costs awards. Consistent with our model's predictions, we also find evidence that smaller plaintiffs both won less often and settled more often post-reform, as well as evidence that larger plaintiffs spent less on litigation post-reform.

Keywords: Litigation, fee shifting, court reform, intellectual property, UK

JEL Classification: K10, K30, K41

Suggested Citation

Helmers, Christian and Helmers, Christian and Lefouili, Yassine and Love, Brian J. and McDonagh, Luke, The Effect of Fee Shifting on Litigation: Evidence from a Policy Innovation in Intermediate Cost Shifting (January 29, 2021). American Law & Economics Review (forthcoming 2021) , Santa Clara Univ. Legal Studies Research Paper, Available at SSRN: https://ssrn.com/abstract=3841084

Christian Helmers

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903
Spain

Santa Clara University - Leavey School of Business ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States

Yassine Lefouili

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Brian J. Love (Contact Author)

Santa Clara University School of Law ( email )

500 El Camino Real
Santa Clara, CA 95053
United States

Luke McDonagh

LSE Law ( email )

United Kingdom

London School of Economics and Political Science ( email )

United Kingdom

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