US class action against CPA Global: latest developments
Just over a year ago, 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 a maximum of 40 non-US patents renewed 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 3,050 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
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.
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 3050 claimants within in the class (one per contract) producing a total of 152,500 annuities paid over the five-year period (an average of 30,500 annuities per year); and so
- each claimant receives $26.23 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 3,050 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 3,050 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.
This blog was originally published on the Patent Annuity Costs website