Mira secures significant damages award

07 July 2014

Following last year's judgment that Bristan had infringed Mira's UK unregistered design rights, the parties were back in court this year for the damages enquiry. Such enquiries are rare, particularly in the Intellectual Property Enterprise Court (IPEC). However, in the absence of an acceptable offer of settlement, Mira fought on to the enquiry and secured a damages award of over £227,000 plus interest and costs - the second highest award in the IPEC since procedural reforms were introduced in 2010.

In January 2013 Bristan was found to have infringed Mira's UK unregistered design rights. The designs were embodied in Mira's striking Azora shower design. Bristan escaped liability for infringement of Mira's Community registered rights, as the dotted lines in Mira's design registrations were interpreted to mean transparency and Bristan's copy products did not have a transparent front face.

Most cases never reach a quantum trial because the costs of fighting the quantum stage can be as much as, if not more than, the cost of the substantive proceedings.Further, the restricted costs recovery cap in the IPEC (£25,000 for a damages enquiry or an account of profits) provides a further incentive for the parties to settle.

However, this case went the full distance. The damages enquiry was heard by HHJ Hacon in April this year in a one day hearing during which four witnesses were cross-examined. Judgment was handed down on 13 June 2014.

Innocence defence

Bristan raised an innocence defence pursuant to section 233(1) CDPA 1988 for the first time in the quantum proceedings. Had Bristan been able to show that at the time of the infringement it did not know, and had no reason to believe, that design right subsisted in the relevant design, Mira would not have been entitled to any damages.

HHJ Hacon believed he had a discretion as to whether to allow Bristan to raise the defence at such a late stage but that such discretion should be exercised by reference to policy considerations. He refused to allow the s.233(1) defence pleading, and said:

"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".

In any event, the argument would have also failed on the evidence. Bristan's witness gave evidence of his belief that Bristan was innocent of copying (despite liability having already being decided against Bristan) rather than any absence of knowledge or reason to believe on Bristan's part that design right subsisted.

The judge held that Bristan came "nowhere close" to establishing a defence under s 233(1).

Lost profit claim

Mira claimed its lost profit on sales of showers it would have made if Bristan had not infringed, and a royalty on sales of infringing showers which did not cause it to lose sales.

Bristan sold over 63,000 infringing showers in the lower price range. Because of the price differential between the Mira showers which embodied the protected designs (the "Mira originals") and the infringing showers, it could not reliably be inferred that the absence of infringing showers from the market would have led to equivalent sales of Mira's originals. Mira argued that some sales would be lost in that category and others in its lower priced band.

Although Mira's lower priced products did not embody the infringed designs, it is possible to claim for damage to a secondary interest which is unprotected by the right that has been infringed so long as such damage is foreseeable, caused by the wrong, and not excluded by public or social policy.

Hacon held there was not enough evidence to establish the extent to which Bristan's customers would have regarded Mira's lower price range products as suitable alternatives. He thought the losses under the lost profits head were "too speculative" to provide a useful basis for calculating damages, even on a rough and ready basis. His preferred approach was to calculate damages on the basis of a reasonable royalty on infringing sales.

Reasonable royalty

In the absence of any comparable licences from which a reasonable royalty could be inferred, Hacon used the "available profits" method. The profits made by the defendant are calculated, and it is assumed that the parties would have foreseen this figure and had it in mind when negotiating a licence.

Bristan's profits were to be assessed without deductions for warehousing and distribution or selling and administration. Hacon calculated the profits available to be 22.2% of Bristan's sales prices.

In terms of how profits should be split between Mira and Bristan, the judge took account of the fact that, in the substantive proceedings, Birss J had recognised the Mira originals as "something of a breakthrough in the industry". Hacon took account of this and awarded Mira 30% of the 22.2% profits available. This gave an effective royalty rate of 6.7% on the sales of infringing products.

Advertising and promotional costs

Hacon said he was left with no impression at all as to the quantum of extra promotion justifiable and made no award under this head.

Uplift under the IP Enforcement Directive

It was unclear what amounted to moral prejudice but it did not relate to an economic factor and is only likely to arise in very particular circumstances. No award was made under this head.

Comment

The very fact that this case went all the way to an enquiry makes it unusual and particularly so in the context of the IPEC with its constraints on evidence, court time and cost recovery.

One wonders what kind of additional evidence the judge envisaged could have been provided in the IPEC in order to reach a more definite conclusion about lost profit, which was the basis of both parties' arguments.

One would have thought the interim payment of over £105,000 awarded to Mira at the Case Management Conference in November 2013 would have acted as a catalyst for settlement. Not so in this case. In the absence of an acceptable offer of settlement, Mira fought on to the enquiry and secured a damages award of over £227,000 plus interest and costs.

Although the stated cap on damages recoverable in the IPEC is £500,000, a quick review of IPEC damages awards since 2010 when the procedure was overhauled reveals that awards tend to be much lower, and there is none over £250,000. Mira's award seems to be second only to an award of £234,000 in the patent case Xena Systems Ltd v Cantideck in 2013. Mira's case is also a rarity in terms of a designs case reaching an enquiry under the new regime.


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