Bei Yu Industrial Company v Nuby (UK) LLP
| Jurisdiction | England & Wales |
| Judge | Nicholas Caddick |
| Judgment Date | 22 March 2022 |
| Neutral Citation | [2022] EWHC 652 (IPEC) |
| Docket Number | Claim No. IP-2020-000049 |
| Court | Intellectual Property Enterprise Court |
[2022] EWHC 652 (IPEC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)
INTELLECTUAL PROPERTY ENTERPRISE COURT
Mr Nicholas Caddick Q.C.
(sitting as a Deputy High Court Judge)
Claim No. IP-2020-000049
Michael Hicks (instructed by Shakespeare Martineau LLP) for the Claimant
Thomas St Quintin (instructed by HCR Hewitsons) for the First Defendant
Hearing date: 8 th March 2022
Nicholas Caddick Q.C. (sitting as a Deputy High Court Judge):
Introduction
This is a trial of an account of profits. I will refer to the Claimant as “Bei Yu” and to the First Defendant as “Nuby”.
The underlying claim was that Bei Yu's registered Community design (No.001553701-001) and, post-Brexit, its corresponding UK re-registered design (No.9001553702001) had been infringed by Nuby's importation and sale of a baby bath (the “Nuby Baby Bath”).
After disclosure and the exchange of witness statements, Nuby accepted liability and, on 22 June 2021, a Consent Order was made by HHJ Melissa Clark providing for there to be an enquiry as to damages or, at Bei Yu's option, an account of profits. On 28 July 2021, after being provided with financial information by Nuby, Bei Yu elected to pursue an account of profits against Nuby but not against the Second Defendant (“Ms Burnell”, a former managing director of Nuby) on the basis that she had not personally profited from the infringing activities, Ms Burnell, therefore, played no part in this trial.
At the trial, Bei Yu was represented by Michael Hicks of Counsel and Nuby by Thomas St Quintin, also of Counsel.
The applicable law
There was little, if any, difference between the parties as regards the principles of law to be applied in relation to the claim for an account of profits on the facts of this case. I would summarise the relevant principles as follows:
a. The purpose of the account of profits is to deprive Nuby of the profits which it has improperly made by its wrongful importation and sale of the Nuby Baby Bath and to transfer those profits to Bei Yu – see Hotel Cipriani v Cipriani Grosvenor Street [2010] EWHC 628 (Ch) per Briggs J at [8]. In this regard, it is Nuby's actual profit that the court has to identify rather than the profit that Nuby could or ought to have made. In effect, Bei Yu must take Nuby (and its profit) as it is – see Jack Wills Ltd v House of Fraser (Stores) Ltd [2016] EWHC 626 (Ch), at [10]).
b. The relevant profits are the sum left after deducting Nuby's allowable expenses from the sums received or receivable by Nuby in respect of its infringing acts.
c. The allowable expenses will include any costs that were associated solely with Nuby's infringing acts. Those costs might be direct costs (e.g. the costs of purchasing and importing the relevant products) or any increased overheads specifically related to the infringing acts. Such expenses may be deducted in their entirety – see OOO Abbott v Design and Display Ltd [2017] EWHC 932 (IPEC), per HHJ Hacon at [57(1) and (2)].
d. The allowable expenses can also include a proportion of Nuby's general overheads unless (a) the relevant overhead would have been incurred anyway (i.e. it would have been incurred even if the infringing acts had not occurred) and (b) the sale of infringing products would not have been replaced by the sale of non-infringing products – see OOO Abbott per HHJ Hacon at [57(3)].
e. Where a deduction can be made in respect of a general overhead, the amount deducted is such proportion of the overhead figure that can fairly be attributed to Nuby's infringing activities as opposed to its non-infringing activities. This apportionment is done on a broad brush basis — see Jack Wills at [53]. 1 However, it may be appropriate to use different bases of apportionment for different types of overhead. A basis that is fair and appropriate in relation to, for example, an expense relating to the business premises may not be fair and appropriate when applied to, say, wages — see Jack Wills at [53]. As noted by Lewison LJ in OOO Abbott [2016] EWCA Civ 95 at [39], the question posed by the court as regards deductible overheads is a relatively simple one to ask, even if it may not be easy to answer.
f. The evidential burden rests on Nuby to support a claim that it is appropriate to make a deduction on account of a sum said to be an allowable expense under the principles set out in (b) to (e) above – see OOO Abbott [2017] EWHC 932 (IPEC) at [57(4)].
Witnesses
A number of witnesses provided witness statements and were cross examined at the trial.
The first witness was Mr Anthony Tempest who gave evidence on behalf of Nuby. Mr Tempest has been a Product Development Manager at Nuby since 2015. He had no involvement in Nuby's dealings with Amazon, the well-known retailer whose query regarding baby bath tubs at a trade fair in Cologne in September 2017 led ultimately to Nuby embarking on what turned out to be its infringing activities. However, he was involved in Nuby's attempts to source a product (ultimately the Nuby Baby Bath) that was supplied by Nuby to (inter alia) Amazon.
The second witness, also for Nuby, was Mrs Susan Bowman. Mrs Bowman is now Nuby's Head of Finance and was previously a consultant contracted to produce Nuby's management accounts and to oversee its financial systems. She gave evidence about those systems, about Nuby's direct costs and increased overheads relating to the Nuby Baby Bath, about its general overheads and how she apportioned them between its infringing and non-infringing activities. She also dealt with Nuby's sales of a different bath after it stopped selling the Nuby Baby Bath in mid-2021.
Nuby's third witness was Mr Mark Dolan. He joined Nuby in May 2016 as its Sales Director. In October 2017 he became its Sales and Marketing Director and is now its acting Managing Director in place of Ms Burnell. He gave evidence about how Nuby operates. Unlike Mr Tempest (and Mrs Bowman), he had had some involvement in the initial discussions with Amazon.
On behalf of Bei Yu, Mr Hicks noted that Nuby had not adduced evidence from certain individuals who had been more involved in Nuby's dealings with Amazon. However, he did not criticise any of the witnesses actually called. In my judgment, he was right not to do so and I find that they were all helpful witnesses doing their best to assist the court.
The final witness was Mr Martin Chapman. Mr Chapman is a Chartered Accountant who was called by Bei Yu to comment on the evidence and material provided by Nuby. On behalf of Nuby, Mr St Quintin said that he did not criticise Mr Chapman as a witness but he nevertheless criticised Mr Chapman's evidence saying that it had been carelessly prepared and was an attempt to maximise Bei Yu's position without proper analysis. Whilst there are areas where (as set out below) I have accepted Nuby's evidence notwithstanding Mr Chapman's comments, I find that he was a good and considered witness and that his evidence was provided fairly and honestly in order to assist the court. Indeed, he was able to correct various errors in Nuby's figures.
Sales
The starting point is to ascertain the value of Nuby's sales of its infringing Nuby Baby Baths. In this regard, Bei Yu does not challenge Nuby's evidence as to the quantity and value of Nuby Baby Baths sold in the period from 2019 to 2021. As the figures are confidential, I will not refer to them in this judgment.
Direct costs
Nor is there any issue as regards Nuby's direct costs to be deducted from the sales figure. The figure put forward by Nuby in its Points of Defence is, again, confidential. However, Mr Chapman identified errors in Nuby's calculations which meant that that figure had been overstated by £9,317.43. Nuby accepts Mr Chapman's analysis in this regard. Accordingly, I will proceed on the basis that Nuby's direct costs, which can be deducted in full, were the sum referred to in Nuby's Points of Defence, less the figure of £9,317.43.
General overheads – can any deduction be made
There were a number of issues in relation to Nuby's general overheads. The first issue was whether Nuby is entitled in principle to make any deduction at all in relation to its general overheads. In this regard, it was common ground that, to be so entitled, Nuby must establish that, if it had not imported and sold the infringing Nuby Baby Baths, it would have incurred the same overheads in relation to the sale of non-infringing products.
Mr Hicks submitted that Nuby could not discharge this burden. He pointed to a number of emails which Nuby had sent in March 2018 to two potential suppliers of baby baths (Dongguan Babycare Products, trading as Super Shapes (“Super Shape”) and Jieyang Defa Industry Co. (“Defa”)). In these emails, Nuby stated that Amazon was insisting on being supplied with a bath that was, effectively, the same as the registered designs. On this basis, Mr Hicks argued, any product supplied by Nuby would have infringed. He also noted that Nuby had failed to adduce evidence from any of its then employees (such as Ms Burnell, Ms Oliveras or Ms Reed) who might have been able to give evidence as to what Amazon's position had truly been in this regard or, indeed, evidence from Amazon itself. He also noted that Mr Dolan had said, in cross examination, that if the issue had been raised with Amazon, it is possible that Amazon would have put the supply of an alternative design out to tender. Finally, Mr Hicks argued that the fact that Nuby had continued to sell the infringing product to Amazon after receiving Bei Yu's initial complaint showed that it and Amazon were wedded to that product.
Notwithstanding these submissions, for the reasons set out below, on the...
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