32RED Plc (A Gibraltar Company) v WHG (International) Ltd (A Gibraltar Company) and Others
| Jurisdiction | England & Wales |
| Judge | Mr Justice Newey |
| Judgment Date | 12 April 2013 |
| Neutral Citation | [2013] EWHC 815 (Ch) |
| Docket Number | Case No: HC09C00662 |
| Court | Chancery Division |
| Date | 12 April 2013 |
[2013] EWHC 815 (Ch)
Mr Justice Newey
Case No: HC09C00662
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY
COMMUNITY TRADE MARK COURT
Rolls Building, Royal Courts of Justice
7 Rolls Buildings, Fetter Lane
London, EC4A 1NL
Mr Michael Silverleaf QC and Mr Tom Moody-Stuart (instructed by McDermott Will & Emery UK LLP) for the Claimant
Mr Henry Carr QC and Miss Lindsay Lane (instructed by Linklaters LLP) for the Defendants
Hearing dates: 26-28 February & 4,6 & 7 March 2013
Between January and August of 2009, the defendants infringed trade marks to which the claimant is entitled. An inquiry as to damages was ordered. The task before me is the assessment of those damages.
Basic facts
This section of the judgment is largely derived from the judgment Henderson J gave in these proceedings on 21 January 2011.
The claimant, 32Red plc ("32Red"), has been operating an online casino under the "32Red" brand since 2002. It is not one of the largest operators in its field, but its business is still substantial. In 2009 it had about 25,000 active casino players who placed over 130 million bets with a value of around £170 million, generating gross revenue for 32Red of some £11 million. About 74% of this income was generated by players based in the United Kingdom.
By 2006 32Red was the registered owner of two European Community trade marks: one for the word "32Red" and another for a device consisting of a stylisation of "32Red" in a roulette ball. In the same year, an online casino began to operate under the name "32Vegas". That casino had no connection with 32Red, and its ultimate ownership is still unknown. It was regulated first in Antigua and then in the Canadian Mohawk Territory of Kahnawake. It was, however, prohibited from advertising in the United Kingdom.
In May 2004 32Red's lawyers sent a "cease and desist" letter to Crown Solutions Gaming Limited ("Crown Solutions"), the Antiguan company which had registered the domain name "32vegas. com". The letter complained of infringement of 32Red's intellectual property rights. No reply was, however, received from Crown Solutions, and the matter was allowed to rest. Mr Edward Ware, 32Red's founder and chief executive, explained to Henderson J that the 32Vegas casino appeared to be a small-scale operation, that the threat which it posed to 32Red's business was limited because of its inability to operate in the United Kingdom, and that it was thought that enforcement proceedings would be difficult.
In October 2008 the William Hill group entered into a joint venture with Playtech, one of the leading providers of gaming software. The joint venture involved the purchase of an established online gaming business run by an entity called Uniplay, which was affiliated to Playtech. The Uniplay assets included the unregistered mark "32Vegas" as well as a number of other brands owned by Crown Solutions. From the point of view of the William Hill group, the acquisition by the joint venture of the 32Vegas mark and the online casino business carried on under it was part of a much larger operation which was designed to expand and re-launch William Hill's presence in the online gaming sector.
The joint venture was completed on 30 December 2008. As part of the arrangements, the domain name "32vegas. com" had been transferred from Crown Solutions to a Playtech company called Genuity Services Limited ("Genuity"), and on 30 December 2008 Genuity granted a licence to use the domain name together with any associated marks (whether registered or unregistered) to the first and second defendants, WHG (International) Limited and WHG Trading Limited. These are both Gibraltar-registered companies, and their function at all material times has been to carry on all aspects of the William Hill business that involve online gaming. The online gaming business is known as "William Hill Online".
Under the joint venture, William Hill Online is owned as to 71% by William Hill Organisation Limited ("WHO"), the main trading company within the William Hill group, and as to 29% by Genuity. WHO is a wholly-owned subsidiary of the third defendant, William Hill Plc, which is registered in England and Wales and listed on the London Stock Exchange.
Like 32Red, the William Hill Online companies are licensed by the Gibraltar Licensing Authority and regulated by the Gibraltar Gambling Commission. In consequence, the 32Vegas online casino was no longer barred from advertising in the United Kingdom or elsewhere within the European Community.
On 19 January 2009 32Red's Gibraltar lawyers wrote a "cease and desist" letter to William Hill Online complaining of infringement of its intellectual property rights. 32Red issued the present proceedings on 4 March, but the defendants were not served until 3 July. The reason for the delay was that 32Red had on 27 February filed an application with the Intellectual Property Office for the registration of "32" alone as a United Kingdom trade mark. That application was successful, and the registration was made on 5 June.
A month after being served with these proceedings, William Hill Online ceased to use the name 32Vegas. On 3 August 2009 the 32vegas. com website was replaced by the website 21nova. com. The period during which William Hill Online operated an online casino under the 32Vegas brand thus lasted from 31 December 2008 to 3 August 2009 (i.e. just over seven months).
The case came on for trial in October 2010. In his judgment ( [2011] EWHC 62 (Ch)), Henderson J concluded that 32Red's Community marks were valid and had been infringed. As regards the United Kingdom mark, Henderson J took the view that this had not been infringed, but in this particular respect the Court of Appeal arrived at a different conclusion (see [2012 ] EWCA Civ 19). The upshot, accordingly, was that 32Red succeeded in establishing infringement of its United Kingdom mark as well as its Community marks.
An inquiry as to damages was directed. 32Red accepts that it is not in a position to prove that it suffered a loss of profits as a result of the defendants' infringement of its trade marks, but it claims to be entitled to a sum equal to a reasonable royalty on the strength of the "user principle". This is explained further in paragraphs 22–42 below. I should first, however, refer to the business models used by online casinos such as 32Red and William Hill Online.
Online casino business models
As Mr Mark Bezant, 32Red's expert witness, explained:
"[T]here are two principal types of online casino business models: the 'Single Brand' model where an operator develops, promotes and maintains a single brand (32Red's approach); and the 'Carousel' model where a portfolio of brands is offered by a single operator (the Defendant's and Uniplay's approach). For both models, the provision of bonuses is the most important form of marketing, but operators employing the 'Single Brand' model generally use relatively more conventional marketing".
Henderson J referred to the distinction between the business models in paragraph 31 of his judgment, where he said:
"[T]he business model employed by Uniplay, and intended to be employed for the joint venture, was the antithesis of the model pursued by 32Red, or indeed by William Hill in relation to its core UK activities. Instead of focussing on a single brand and promoting its reputation, the alternative model depended on the provision of a portfolio of brands in common ownership and encouraging customers to switch from one to another. Under this model the reputation of the individual brands was comparatively unimportant, and the principal aim was to ensure that a customer would stay within the network of linked brands and products".
In the previous paragraph of his judgment, Henderson J had quoted evidence given by Mr Thomas Murphy (the general counsel and company secretary of William Hill plc whose evidence Henderson J said he had no hesitation in accepting) as to the commercial rationale of the proposed deal between the William Hill group and Playtech:
" 'Playtech would acquire Uniplay and combine its assets with William Hill's Online offering … There was no reference to particular brands that Uniplay operated; they were not considered important. As we understood the business, part of Uniplay's success came from its ability to move players from one casino to another, so that even if they changed where they were playing, they were still doing business with a Uniplay casino. They used a number of brands …'"
Henderson J went on to say this:
"32 Consistently with this marketing philosophy, Mr Murphy says that none of the board discussions considered the brands which formed part of the Uniplay assets:
'From the William Hill side the joint venture was not focused on the brands, rather it was formed to acquire leading software and expertise in online customer relationship management. The aims were to obtain leading software, reduce the cost of acquiring customers and increase their lifetime value. The joint venture offered the prospect of bringing these improvements to the "William Hill" brand. None of that depended on the identity of the websites being contributed. We did not discuss 32Red.'
33 The joint venture was agreed and announced on 20 October 2008, and … it completed on 30 December 2008. A due diligence exercise was conducted on the Uniplay assets by Playtech's solicitors, which included trade mark issues. In relation to the mark '32Vegas', it emerged that Crown Solutions had applied to register it as a Community trade mark, but the application had been opposed by another company (La Française des...
To continue reading
Request your trial
-
The National Guild of Removers and Storers Ltd v George Anthony Statham and Another
...v 1 Malaysia Racing Team Sdn Bhd [2012] EWHC 606 (Ch); [2012] RPC 29 and by Newey J in 32Red OKC v WHG (International) Limited [2013] EWHC 815 (Ch), which I attempted to summarise in Henderson v All Around the World Recordings Limited [2014] EWHC 3087 (IPEC). For convenience I will repeat ......
-
Reformation Publishing Company Ltd v Cruiseco Ltd
...set out by Arnold J apply. In the inquiry as to damages for infringement of trade marks in 32Red OKC v WHG (International) Limited [2013] EWHC 815 (Ch), Newey J's assessment was by consent also on the basis of willing licensor and willing licensee. Newey J endorsed the principles identifie......
-
Jodie Aysha Henderson v All Around the World Recordings Ltd
...set out by Arnold J apply. In the inquiry as to damages for infringement of trade marks in 32Red OKC v WHG (International) Limited [2013] EWHC 815 (Ch), Newey J's assessment was by consent also on the basis of willing licensor and willing licensee. Newey J endorsed the principles identified......
-
Original Beauty Technology Company Ltd v G4K Fashion Ltd
...out by Arnold J apply. In the inquiry as to damages for infringement of trade marks in 32Red OKC v WHG (International) Limited & ors [2013] EWHC 815 (Ch), Newey J's assessment was by consent also on the basis of willing licensor and willing licensee. Newey J endorsed the principles identif......
-
Considering The 'Hypothetical Negotiation' In Determining Damages For Trade Mark Infringement In The UK On A Notional Royalty Basis
...on a licence basis, such as patents, copyright and registered designs. The case is 32Red Plc v WHG (International) Ltd& Ors [2013] EWHC 815 (Ch ) and can be read in full The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be......
-
Compensation For Infringement Of Intellectual Property Rights
...applies in trade mark or passing-off cases'. Despite this note of caution, in the case of 32Red plc v WHG (International) Ltd [2013] EWHC 815 (Ch) the High Court of England and Wales assessed damages based on the user principle for infringement of the claimant's trademark, '32Red', through ......
-
Compensation For Infringement Of Intellectual Property Rights
...applies in trade mark or passing-off cases'. Despite this note of caution, in the case of 32Red plc v WHG (International) Ltd [2013] EWHC 815 (Ch) the High Court of England and Wales assessed damages based on the user principle for infringement of the claimant's trademark, '32Red', through ......
-
ASSESSMENT OF DAMAGES IN INTELLECTUAL PROPERTY CASES
...FSR 19, CA. 44 Blayney v Clogau St David's Gold Mines [2003] FSR 19 at [20]. 45 See paras 40 and 48 below. 46 [2012] EWHC 616 (Ch). 47 [2013] EWHC 815 (Ch). 48 Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson (1914) 31 RPC 104 at 120; 1914 SC (HL) 18 at 32. 49 (1911) 28 RPC 157 (CA).......
-
THE USER PRINCIPLE
...[2003] FSR 360. 19 Blayney t/a Aardvark Jewelry v Clogau St David's Gold Mines Ltd [2002] EWCA Civ 1007; [2003] FSR 360 at [20]. 20 [2013] EWHC 815. 21 [2004] RPC 40. 22 Reed Executive v Reed Business Information [2004] RPC 40 at [165]. 23 c 27. 24 Chancery Amendment Act 1858 (c 27) s 2. 25......
-
STATUTORY DAMAGES FOR USE OF A “COUNTERFEIT TRADE MARK” AND FOR COPYRIGHT INFRINGEMENT IN SINGAPORE
...even if it is clear that the actual owner of the right would never have licensed, as in, for example, 32Red plc v WHG (International) Ltd[2013] EWHC 815, referred to by the assistant registrar at [27]. 14 It is submitted that the additional damages remedy, which was first introduced in this......