Unauthorised charges for renewals payment services

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.

1782

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.

US class action against CPA Global: latest developments

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.

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. 

Contact me for advice