The Patents Court’s decision in Parsons v Convatec Limited [2026] EWHC 300 (Pat) addresses costs budgeting in a claim valued at up to £366 million, providing important guidance on the inter partes treatment of premium-rate solicitors’ fees, the limits of budget comparisons between parties, and the court’s approach to assertions that artificial intelligence should reduce litigation costs.
Background
This matter concerned costs budgeting in a substantial claim brought by the claimant, Dr David Parsons, against the defendant, Convatec Limited, under section 40 of the Patents Act 1977. Dr Parsons sought a payment equal to 10–15% of the value of the defendant’s global sales of certain products, which on his own formulation could amount to some £366 million. The claim involved seven patent families and 73 individual patents, and a 27-day trial was listed for 2027. Despite the scale of the claim, both parties agreed that costs budgeting was appropriate.
A preliminary issue regarding the potential impact of section 106 of the Patents Act on the level at which the defendant’s budget should be approved was reserved for a separate judgment. This decision proceeded on the assumption that section 106 had no effect. The outcome of that reserved judgment may have further implications for the approved budget figures.
Costs Issues Before the Court
The court was required to review and approve the parties’ costs budgets in accordance with CPR Part 3 and Practice Direction 3E. The primary focus was on phases of the defendant’s budget which were not agreed, with the claimant challenging the estimated costs as unreasonable and disproportionate. The claimant also raised a general criticism of the defendant’s incurred costs and conduct. The only phase of the claimant’s own budget that was not agreed was for disclosure. The court’s task was to determine the reasonable and proportionate costs for each future phase, having regard to the factors in CPR 44.3(5) and 44.4(3), including the sums in issue, the complexity of the litigation, and any wider factors such as the new issue of law arising under section 40 of the Act.
The Parties’ Positions
The claimant argued that the defendant’s incurred costs to date were at least double his own and were based on hourly rates that were excessive at the most senior levels, with Grade A rates of £1,100, £915 and £675 respectively, compared with corresponding figures of £700 and £525 for the claimant’s solicitors. He invited the court to deprecate this conduct and to adopt a hard-line approach to the defendant’s forward budget, relying on CIP Properties (AIPT) Ltd v Galliford Try Infrastructure Ltd. For specific phases, the claimant contended that the defendant’s solicitors’ costs were top-heavy, that four counsel including IP specialists were unnecessary, and offered lower sums for the CMC, disclosure, witness statements, and trial preparation, often pointing to his own budget as a comparator. The claimant also suggested that efficiency savings could be achieved through the use of AI in the disclosure exercise.
The defendant defended its budget as reasonable and proportionate given the exceptional scale and complexity of the claim. It emphasised the very high sums in issue, the complexity involving seven patent families and 73 patents, and the new issue of law regarding the scope of the enlarged section 40. The defendant argued it had a significantly greater disclosure exercise, requiring the location and hosting of some one million documents spanning 32 years, and that its case involved an additional dimension concerning the source of any benefit derived from the patents, justifying the instruction of IP specialist counsel and more extensive evidence. It maintained that its chosen solicitors, while expensive, were justified by the nature of the dispute, and that its budget represented costs within a reasonable and proportionate range.
The Court’s Decision
The court applied the principles from Various Shared Appreciation Mortgage Borrowers v BOS [2022] EWHC 254 (Ch), approving budgets for each phase with revisions where necessary.
General Approach
The court confirmed that the assessment was from an inter partes perspective: there is nothing wrong with a party instructing a particularly expensive firm because the case is important and they want to win, but the question is what is reasonable and proportionate to be incurred on an inter partes basis. Critically, the court emphasised that the costs budgeting exercise cannot be resolved simply by determining “appropriate” hourly rates. High hourly rates do not of themselves render costs unreasonable or disproportionate. The judge illustrated this with a practical example: a senior partner at Freshfields might complete a task in one hour at £1,100 that a more junior fee earner would take three hours to accomplish. Provided £1,100 is not an unreasonable or disproportionate cost for that task, the high hourly rate is not, of itself, a problem. The court’s quest, applying Discovery Land Company v Axis Specialty Europe, was for a figure within a reasonable and proportionate range, not the absolute lowest amount a party could be expected to spend.
The court also confirmed that a comparison between budgets may be informative but can never be determinative. Asymmetry between the parties’ budgets could be explained by differences in the volume of work, differing strategic approaches to the case, or even one side having underestimated costs.
The court rejected the claimant’s invitation to adopt a hard-line approach of the kind set out in CIP Properties, noting that this submission had not been pressed in oral argument. While opinions could reasonably differ on whether the defendant’s incurred costs were reasonable and proportionate, the court did not consider them so obviously unreasonable as to call into question the reliability of the forward budget. The criticism was, in the court’s view, nothing more than the usual debate about proportionality and reasonableness of costs, albeit involving large figures. Assessment of the reasonableness of incurred costs was a matter for a costs judge performing a detailed assessment, not for the budgeting judge.
Defendant’s Budget — Phase-by-Phase
Case Management Conference: The defendant estimated £193,600 for a further one-day CMC. The court allowed £170,000, making a modest reduction to reflect the cost of the defendant’s solicitors, particularly the proportion attributable to Grade A fee earners (£77,600 out of £118,600 in solicitors’ costs), given that counsel were also instructed at an estimated cost of £75,000.
Disclosure: The defendant estimated £1,515,775, comprising £100,000 for counsel, £270,000 for document hosting disbursements, and £1,145,775 for solicitors’ fees. The court allowed £1,300,000. It accepted that the defendant had a difficult and extensive disclosure exercise, involving the location and hosting of approximately one million documents across 32 years of the claimant’s career, and found nothing unreasonable about the number of Relativity accounts or the hosting fees. The court also accepted that investing time in training machine-learning systems for the initial stage of disclosure was a proportionate and reasonable approach.
However, the court found an element of “luxury” in the estimate. Some of that came from the hourly rates applied to Grade A fee earners, with approximately £215,000 of costs attributable to very senior staff at very high rates. Further luxury, in the court’s judgment, came from the number of hours estimated by more junior fee earners who were also charged at rates above guideline levels on work that, while extensive, was reasonably commoditised.
Significantly, the court addressed the claimant’s argument that AI should reduce the defendant’s disclosure costs. The judge observed that it is easy to assert that AI should reduce costs, but the claimant had not identified specific steps involving AI that the defendant should be taking but was not. The defendant was already adopting an orthodox approach to disclosure, including investing in machine-learning systems. The court declined to reduce the budget on the basis of a general assertion about AI efficiencies without evidence of particular savings that were being foregone.
Witness Statements: The defendant estimated £978,600 based on six factual witnesses, compared with the claimant’s estimate of £493,000 for three witnesses. The court allowed £700,000. It accepted that the defendant had a legitimate additional dimension to its evidence — disputing the extent to which any benefit derived from the patents rather than from marketing, production, distribution, or regulatory matters — and found the claimant’s offer of £382,000 much too low. However, the court considered the mix of hours unreasonable on an inter partes basis, with Grade A fee earners estimated to spend 580 hours and more junior fee earners 900 hours on six witness statements, taking into account the requirements of Practice Direction 57AC. It also noted that the three additional witnesses would not be addressing matters as complex as the inventorship and patent issues covered by the first three.
Pre-Trial Review: The defendant estimated £257,900 for a two-day PTR. The court allowed £200,000. While acknowledging one would not necessarily expect a packed agenda at the PTR given the quality of representation on both sides, the PTR was listed for two days and that could not be ignored. The court found the claimant’s own estimate for counsel (£25,000 for a two-day hearing) to be on the low side, and concluded the truth lay somewhere in the middle.
Trial Preparation: The defendant estimated £2,051,250 on the basis of a single expert. The court reduced this by £350,000 in total (to £1,701,250), comprising a £200,000 reduction for counsel brief fees and a £150,000 reduction for solicitors’ costs. The court accepted that it was reasonable and proportionate for the defendant to instruct a four-person counsel team including IP specialists, given the nature of the inventorship dispute and the expansive way in which the claimant put his case on section 40. However, it was not satisfied that it was reasonable for the defendant’s counsel team to receive brief fees almost twice those of the claimant’s team. On solicitors’ costs, the court identified a top-heavy team at expensive hourly rates, a risk of overlap with counsel, and an element of what it described as a “Rolls-Royce service” that was unreasonable on an inter partes basis.
Trial: The defendant estimated £1,850,300 based on a single expert and 30 trial sitting days (although the trial itself was listed for 27 days). The court reduced this by £330,000 (to £1,520,300). The reduction equated to the cost of having a Grade A partner, at a charge-out rate of £1,100 per hour, sitting in court for 10 hours per day for the duration of the trial, in addition to the same level of involvement from three other team members. The court considered it unreasonable and disproportionate on an inter partes basis for a full four-person solicitor team to be in court listening to counsel’s submissions throughout the trial. Consistent with its broad-brush evaluative approach, the judge acknowledged that removing the Grade A partner’s time made no allowance for residual work that partner might do outside court, but equally left untouched the other team members’ court attendance costs. Refreshers for counsel and the defendant’s expert attendance costs of £60,000 were approved, with the court finding the claimant’s own estimate of £16,500 for expert attendance too low to be a reliable guide.
Claimant’s Budget
Disclosure: The claimant estimated £859,500. The court allowed £650,000, finding that the defendant’s disclosure exercise was approximately twice as large as the claimant’s. Having allowed the defendant £1,300,000 for disclosure, the court considered £650,000 a reasonable and proportionate figure for the claimant’s less exacting exercise. An unexplained increase of £330,000 from the previous iteration of the claimant’s budget raised a flag but was not in itself a reason for reduction.
The budgets for other phases, including expert reports (budgeted on an agreed assumption of a single expert), were approved as presented or agreed. If the assumption of a single expert proved inaccurate following the May 2026 CMC, the expert evidence budgets would need to be revisited.
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