Blayney Trading as Aardvark Jewelry and Clogau T. David's Gold mines Ltd and Others
| Jurisdiction | England & Wales |
| Judge | The Vice-Chancellor |
| Judgment Date | 16 July 2002 |
| Neutral Citation | [2002] EWCA Civ 1007 |
| Docket Number | Case No: A3/2001/1755 |
| Court | Court of Appeal (Civil Division) |
| Date | 16 July 2002 |
[2002] EWCA Civ 1007
The Vice-Chancellor
Lord Justice Rix
Lord Justice Jonathan Parker
Case No: A3/2001/1755
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
MR. KIM LEWISON QC
Royal Courts of Justice
Strand,
London, WC2A 2LL
Mr. Roger Wyand QC and Mr. Michael Edenborough (instructed by Messrs Martineau Johnson) for the Appellant
Mr. Mark Vanhegan (instructed by Messrs DLA) for the Respondents
Introduction
The claimant, Mr Blayney, is a jeweller. He trades in the name of Aardvark Jewelry. The jewelry he sells is made by hand. In 1986 he made a gold ring to a twist strand plait design. In 1990 Mr Blayney met the fourth defendant Mr Roberts. Mr Roberts is the effective owner, through one or more of the other defendants (to whom I shall refer collectively as "Clogau"), of the Clogau St David's Gold Mine, which is one of the few effective gold mines left in Wales. Welsh gold is much sought after because of the rose tint caused by the presence of certain impurities.
In January 1991 Mr Blayney entered into a business relationship with Clogau whereby he bought Welsh gold from Clogau, incorporated it into his ring and other articles of jewelry to a similar plait design, called "Lovers Twist", and sold such articles to Clogau for resale to third parties. In November 1992 the relationship broke down. Mr Blayney stopped receiving supplies of Welsh gold from Clogau and Clogau stopped buying Lovers Twist articles from Mr Blayney. Instead Clogau engaged the services of a Mr Paget, who had formerly been employed by Mr Blayney, to make such articles for Clogau.
From November 1992 to March 1997, when these proceedings were commenced, Clogau continued to sell Lovers Twist articles to others but they were made by Mr Paget not Mr Blayney. During the same period Mr Blayney also sold Lovers Twist articles. Mr Blayney's articles sold between November 1992 and February 1996 did not incorporate any Welsh gold. In the latter month Mr Blayney secured a supply of Welsh gold and thereafter incorporated it into the Lovers Twist articles he made.
In the proceedings to which I have referred Mr Blayney contended that the sales of Lovers Twist articles made by Clogau in the period from November 1992 to March 1997 were infringements of his copyright in the design. In due course his claim was conceded by Clogau and on 26th July 2000 an order was made by consent directing, amongst other things, an account of profits or an inquiry as to damages. After the usual disclosure, Mr Blayney decided to pursue an inquiry as to damages.
The inquiry was made by Mr Kim Lewison QC, sitting as a deputy judge of the Chancery Division. He gave judgment (now reported at [2002] FSR 14, 233) on 20th July 2001. He assessed the damages to be paid by Clogau to Mr Blayney as £18,492.03 with interest to be calculated by the joint financial expert. This is the appeal of Mr Blayney from that order. He contends that the judge was wrong in a number of respects the cumulative effect of which is substantially to undervalue the compensation to which he is entitled.
The principal conclusions of the judge may be summarised as follows (references being to paragraphs in his judgment):
(1) Damages were to be assessed liberally on the basis of such inferences as the evidence justified. [76]
(2) Damages were to be assessed by reference to two periods, November 1992 to February 1996 and March 1996 to March 1997. The difference between them is that in the latter period but not the former Mr Blayney was incorporating Welsh gold which the judge considered to be an important selling point. [85 and 73]
(3) Damages were to be assessed by reference to the profit Mr Blayney would have made in respect of such of the sales of infringing articles effected by Clogau as he could show he would have made but for the infringement. [81–84]
(4) In the absence of any evidence as to an appropriate rate of royalty for sales of infringing articles by Clogau which Mr Blayney could not show he would have made but for the infringement Mr Blayney was not entitled to damages. [108–113]
(5) Mr Blayney had not made out a case for an award of additional damages under s.97(2) Copyright Designs & Patents Act 1988. [117–123]
In applying those principles and arriving at a figure of £18,492.03 Mr Lewison QC made the following findings:
(1) Clogau sold 3,776 infringing articles of which some were sold by retail and some by direct sales to the public. The breakdown between the two periods and the methods of sale is
First Period
Retail Sales 1,373
Direct Sales 884
Total 2,257
Second Period
Retail Sales 1,341
Direct Sales 178
Total 1,519
Overall total 3,776
(2) During the first period Mr Blayney would have effected 10% of the retail sales made by Clogau, namely 138. [95] The notional loss of profit on those sales was to be measured by reference to the profits available to Mr Blayney on sales of such items to retailers. The joint accountancy expert Mr Swift considered that if all 3,776 items had been sold by Mr Blayney to retailers Mr Blayney would have made additional profits of £121,648. Such profits should be attributed to all sales pro rata so that the loss in respect of 138 sales in the first period was £4,445.82. [96]
(3) With regard to sales in the second period the evidence showed that Clogau jewelry outsold that of Mr Blayney by a factor of 10:1 and that the Clogau range of products was five to ten times larger than that of Mr Blayney. The judge continued [92]
"I find that, for the purpose of assessing damages, the Clogau range sells approximately twice as well as [Mr Blayney's]. On this basis [Mr Blayney] would have sold one third of the number of items that Clogau sold to retailers."
On that basis Mr Blayney would have made 25% of the retail sales made by Clogau in the second period (336) which at the same pro rata profit rate gave rise to a notional loss of profit of £10,824.60. [103]
(4) As Mr Blayney did not sell by mail order a liberal assessment of damages did not justify finding that more than 100 of the 1062 direct sales made by Clogau in both periods had been lost to Mr Blayney. Applying the same pro rata profit rate the loss sustained by Mr Blayney was £3,221.61. [106]
(5) Mr Blayney had failed to make out a case for damages in respect of the remaining 3,202 infringing sales effected by Clogau (see my paragraphs 6(4) and (5) above).
The respects in which Mr Blayney contends that the judge was wrong may be described as follows:
(1) The judge should have awarded compensation for the remaining 3,202 sales referred to in paragraph 7(5) above either (i) in the form of a notional royalty, or (ii) as additional damages under s.97(2) Copyright Designs & Patents Act 1988.
(2) In assessing compensation for those sales the judge found to have been lost to Mr Blayney because of the infringement the judge was wrong to take the same pro rata rate of profit for both periods.
(3) In assessing the number of sales lost to Mr Blayney because of the infringement in the second period the judge made two errors in that (a) he should have taken the mean of 7.5 as the factor by which Clogau's range exceeded that of Mr Blayney and (b) the fraction referred to in the passage from the judgment I have quoted in paragraph 7(3) above should be one half not one third.
(4) The judge underestimated the number of direct or mail order sales lost to Mr Blayney because he overlooked evidence indicating, contrary to his conclusion in paragraph 104, that this form of sale had been employed by Mr Blayney.
The judge gave permission to appeal on issues 1 and 2. He was not asked to give permission to appeal on issues 3 and 4. Mr Blayney seeks the necessary permission from this court. We heard argument from both sides on all these issues whether or not permission to appeal had been granted. I will deal with the issues in the order in which I have set them out. As the conclusion on one issue may affect the calculations in respect of another I will leave to the concluding section of this judgment the monetary effect (if any) on the award of damages.
(i). Notional Royalty
(a) Recoverability at law
Though the judge found that Clogau had sold 3,776 pieces of jewelry which infringed Mr Blayney's copyright, in the event he allowed him damages by way of compensation in respect of only 574 of them. This arose from the failure of Mr Blayney either to prove that but for the infringements he would have sold a larger number of his own products or to adduce evidence from which the judge was willing to infer an appropriate rate of royalty. It is not now disputed that the onus of proving lost sales was on Mr Blayney. Nor, subject to issues 3 and 4, are the judge's conclusions on those matters challenged. The contention of Mr Blayney is that the judge did have adequate material on which to assess a reasonable royalty to be paid in respect of the remaining 3,202 infringing sales. This is challenged by Clogau on the bases that (a) such damages are not recoverable in law, (b) the point was not taken before the judge and (c) the matters relied on are not material to this issue.
The leading authority on the question of damages for infringement of an intellectual property right is the speech of Lord Wilberforce in General Tire and Rubber Co. v Firestone Tyre and Rubber Co Ltd [1976] RPC 197. That case concerned the amount of damages payable in respect of the infringement of a patent relating to an oil-extended rubber. The plaintiffs claimed damages by reference to...
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