Kohler Mira Ltd v Bristan Group Ltd
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Hacon,Judge Hacon |
| Judgment Date | 13 June 2014 |
| Neutral Citation | [2014] EWHC 1931 (IPEC) |
| Court | Intellectual Property Enterprise Court |
| Docket Number | Case No: CC11P04062 |
| Date | 13 June 2014 |
[2014] EWHC 1931 (IPEC)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY ENTERPRISE COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
His Honour Judge Hacon
Case No: CC11P04062
Douglas Campbell (instructed by Wragge & Co LLP) for the Claimant
Hugo Cuddigan (instructed by Withers & Rogers LLP) for the Defendant
Hearing date: 29th April 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is an inquiry as to damages following the judgment of HH Judge Birss QC (as he then was) of 28 January 2013, reported at [2014] FSR 1, and his order of the same date. The action was about electric shower units. It was for infringement of two Community registered designs ("RCDs") and a number of UK unregistered design rights ("UDRs"). Judge Birss found that the RCDs were valid and not infringed. He also found that three products sold by the Defendant ("Bristan"), namely the Glee, Joy and Smile electric showers, infringed certain of the UDRs owned by the Claimant ("Kohler"). This inquiry therefore relates only to the damages due to Kohler for infringement of the UDRs.
Damages are claimed by Kohler under 4 heads. They are:
(1) Profits lost by Kohler on the sale of showers that Kohler would have made if Bristan had not infringed.
(2) A royalty on sales by Bristan of infringing showers which did not cause Kohler to lose sales.
(3) Additional advertising and promotional costs incurred by Kohler as a result of Bristan's infringement.
(4) An uplift of 10% on the sums due under heads (1) to (3) for moral prejudice caused to Kohler by the infringement, having regard to art.13(1)(a) of the Intellectual Property Enforcement Directive 2004/48/EC.
Kohler accepts that the damages available are subject to two caps:
(a) The £500,000 overall cap on damages applicable in this court.
(b) The cap on damages provided for by s.239(1)(c) of the Copyright, Designs and Patents Act 1988 ("the 1988 Act"). This provides that where the defendant has undertaken to take a licence of right under UDRs in infringement proceedings, the damages shall not exceed double the amount which would have been payable by him as a licensee, if such a licence had been granted before the earliest infringement.
Innocence
Before turning to the heads of damage claimed by Kohler, it is convenient to deal first with an argument advanced by Bristan based on s.233(1) of the 1988 Act. This reads:
" Where in an action for infringement of design right brought by virtue of section 226 (primary infringement) it is shown that at the time of the infringement the defendant did not know, and had no reason to believe, that design right subsisted in the design to which the action relates, the [claimant] is not entitled to damages against him, but without prejudice to any other remedy."
Reliance on s.233(1) was not pleaded by Bristan in its Defence in the substantive proceedings and so this was not a matter which concerned Judge Birss. It gives rise to two sub-issues: (a) was Bristan entitled to raise s.233(1) for the first time in the inquiry and (b) if so, does it afford Bristan a good defence?
Whether Bristan can rely on s.233(1) for the first time at the inquiry
Bristan advanced the following reasons in support of its case that, notwithstanding its failure to plead or otherwise raise s.233(1) at the trial before Judge Birss, it could do so now.
(i) Time was short at the trial.
(ii) The trial was also concerned with RCDs, in relation to which Kohler did not succeed. But had it succeeded, Kohler would have obtained an injunction and damages such that there would be no reason to be concerned about the level of parallel damages for infringement of UDRs. Argument in relation to s.233(1) would have been a waste of time.
(iii) Section 233(1) only bites on damages prior to 6 December 2011.
(iv) Kohler relied on a number of UDRs of which 4 were held to attract design right protection and to be infringed. The innocence defence might have been sensitive to which UDRs were held to subsist and be infringed.
Kohler argued that it was too late now to take the point under s.233(1). Its reasons were:
(i) It is too late as a matter of law, see the judgment of Warren J in Adobe Systems Inc v Netcom Online.co.uk Limited [2012] EWHC 446 (Ch).
(ii) Kohler would have cross-examined the relevant witnesses at trial, whereas Bristan has not called the witnesses who know the relevant facts at the inquiry.
Taking Bristan's points first, the issue being addressed in Adobe was not quite the same as that arising in these proceedings. In Adobe there was a consent order by which the defendants acknowledged that their importation of certain products had infringed the claimant's registered trade mark. At the inquiry the defendants sought to raise three arguments which, if correct, would have established that in fact they had defences to the allegation of trade mark infringement. These three new arguments were:
(a) the claimant's trade mark rights had been exhausted by the time of the defendants' importation since the products had been marketed with the consent of an undertaking economically linked with the claimant;
(b) the claimant had abused its dominant position contrary to art.102 of the Treaty on the Functioning of the European Union ("TFEU");
(c) the claimant had entered into agreements restricting competition contrary to art.101 TFEU.
Warren J assumed without going further that all three points were arguable. Regarding the first of them, Warren J had no hesitation in ruling that it was too late to raise the defence at the inquiry because of the public interest in the finality of litigation (see [37]–[39]). In relation to the second and third new arguments, Warren J took the view that the position was less straightforward since there was a countervailing policy consideration, namely that the courts should not enforce arrangements which are in breach of competition law (see [40]). Nonetheless the strong public interest in the finality of litigation should prevail and the fact of the order having been made meant there was no failure to meet the requirements of EU competition law (see [49]–[53]). It was also not open to the defendants to raise exactly the same defences under the guise of arguments in relation to the assessment of quantum of damages (see [83]–[84]).
The present case differs in that Bristan does not seek to impugn any part of the order of Judge Birss made following his judgment. His declaration that certain of Kohler's UDRs were infringed is unchallenged. Bristan argues that s233(1) is only engaged now because it is just about the availability of damages – it is not concerned with infringement.
That may be right, but seems to me to ignore policy issues which, although they are not identical to those considered by Warren J, are important for all that. Parties should know where they stand in relation to each side's arguments by the time the pleadings are closed – not least in the IPEC. If it is a defendant's case that damages to which the claimant would be entitled if he wins are never going to be available because of s.233(1), this should be made clear in the pleadings for the trial on liability. It may have a significant effect on the way the claimant pursues the proceedings and also the degree to which the claimant may be amenable to settlement. If the claimant succeeds at trial, knowledge of whether an argument is being advanced under s.233(1) might easily affect whether the claimant elects to go for an inquiry or an account of profits. Mr Cuddigan, who appeared for Bristan, argued that if Kohler made the wrong election in the present case, that was its own fault for not taking into account the possibility that Bristan might rely on s.233(1). I reject that. It was Bristan's choice whether to rely on the subsection and Kohler's right to know in good time what choice Bristan had made.
In this court cards should not be held behind the back of litigants after the case management conference, to be played as and when seems tactically best, or alternatively only when a party notices that a card might be put into play.
If Bristan had pleaded reliance on s.233(1), it would have been perfectly legitimate at the case management conference in the substantive proceedings for Bristan to have raised the question whether, as a matter of procedural economy, argument on the point might better be left to the inquiry, if there was to be one. The various arguments now raised by Bristan (summarised above) could have been advanced. The court might have decided they were telling and may have ruled that s.233(1) should be left to the inquiry. There would have been no question of either party concealing part of its case from the other and in particular Kohler would have approached the proceedings in full knowledge of all points being taken against it.
It seems to me that just as Warren J felt he had a discretion to allow defences to be raised for the first time at an inquiry (or so I infer from his judgment) and that such discretion should be exercised by reference to policy considerations, I should approach Bristan's application to rely on s.233(1) in the same way. In my judgment Bristan is not entitled to rely on that subsection for the reasons of policy I have referred to. These are not outweighed by other considerations.
Whether there is a good defence under s.233(1)
In case I am wrong in the exercise of that discretion, I turn to consider whether Bristan has established a defence under s.233(1). Bristan must show that at the time of the...
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