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Cite as: [2003] EWCA Civ 401

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		Neutral Citation Number: [2003] EWCA Civ 401
		Case No: A3/2002/2590

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(MR JUSTICE JACOB)

Royal Courts of Justice
Strand, London, WC2A 2LL

27th March 2003

B e f o r e :

LORD JUSTICE PETER GIBSON
LORD JUSTICE CARNWATH
and
MR JUSTICE BLACKBURNE
____________________

Between:

	(1) WORLD WIDE FUND FOR NATURE (formerly WORLD WILDLIFE FUND) (2) WORLD WILDLIFE FUND INCORPORATED	Respondent
	- and -
	WORLD WRESTLING FEDERATION ENTERTAINMENT INCORPORATED	Intervener
	and
	THQ/JAKKS PACIFIC LLC	Appellant

____________________

for the Appellant
Mr Christopher Morcom QC and Mr Ashley Roughton (instructed by Edwin Coe)
for the Respondent
Mr Christopher Carr QC and Mr Guy Hollingworth ( instructed by S J Berwin)
for the Intervener
Hearing dates : 24th – 25th February 2003
____________________

HTML VERSION OF JUDGMENT : APPROVED BY THE COURT FOR HANDING DOWN (SUBJECT TO EDITORIAL CORRECTIONS)
____________________

Lord Justice Carnwath:

Background

"In summer time village cricket is the delight of everyone" was how Lord Denning MR famously began his judgment in Miller v Jackson [1977] 1 QB 966, 976. An injunction had been granted to local householders who complained of cricket balls landing in their gardens. Lord Denning feared that, if it were upheld, cricket would cease in the village and "the young men will turn to other things…" He held that the public interest in the playing of cricket should prevail over the individual interests of the householders, and, instead of the injunction, awarded £400 for past and future inconvenience. 25 years on, young men have turned to other things, including video games, and the resulting worldwide market runs to many millions of pounds. Mr Carr QC, for the Federation, urges upon us that that the very size of the market shows that there is a similar public interest in protecting the availability of such games, which the court should take into account in exercising any discretion. How Lord Denning would have reacted to that submission, we do not know. I will have to consider it further at the end of this judgment.

This case follows one decided by this court early last year (WWF & Anor v World Wrestling Federation Entertainment Inc [2002] EWCA Civ 196; [2000] FSR 530) ("the 2002 judgment"). We there upheld an injunction against the Federation, designed to enforce an agreement made in 1994 ("the 1994 Agreement") between the Fund and the Federation, settling a long-running dispute over the use of the "WWF" symbol. Following an unsuccessful petition to the House of Lords, the injunction came into effect on 10^th November 2002. The most important part of the injunction, for present purposes, was in the following terms:

"…the Defendant be restrained whether directly or indirectly and whether by its officers, servants, agents, subsidiaries, licensees or sublicensees, its television or other affiliates or otherwise howsoever from doing the following acts or any of them in any country of the world for the purposes of or in connection with its business save as otherwise permitted by the Agreement or the Letter Agreement referred to therein:

(a) using the initials WWF orally or in visual form, whether in upper case or lower case, other than in the form of the Titan logo identified in Article 1 of the Agreement;…"

There was no appeal to this court against the terms of the order. The Federation has taken extensive and costly steps to comply with the injunction, including rebranding under the symbol "WWE".

The history of the dispute up to February 2002 is sufficiently set out in the 2002 judgment. To set the scene for the present dispute, it is useful to repeat from that judgment (para 7) the summary by Mr Olins (one of the Federation's experts) of the nature of its business:

"… over the period from 1983 when the new management took over and the initials WWF were introduced, until today, the Federation has been transformed from a smallish promoter of a minority sporting entertainment into a significant global player in the leisure and entertainment world…

The core product around which the brand is based is live wrestling, the core idea is raw aggression. A cast of heroes and villains, who become the stars, feature in a series of simple predictable stories. The brand is then extended into every possible distribution channel, from the core activity, live events, to cable and broadcast TV, pay-for-view, on-line, home video through to character merchandising and licensing. In 1999 there were 100 licensees around the globe who created clothing, tapes, videos, games, cut-out figures all featuring the Federation's stars and the Federation's logo and initials, generating sales of $400 million."

That passage highlights the importance of licensees to the overall profitability of the Federation's business. The present applicant ("THQ") is one of those licensees, pursuant to a Consumer Products Licence Agreement ("the 1998 Agreement") made in June 1998. Under the licence, it develops, publishes and distributes on a worldwide basis video and computer games featuring the wrestling characters (referred to in the agreement as the "Talent") of the Federation. The THQ games also used the Federation's "Scratch Logo" in the gameplay of the games, in promotional materials and on the packaging of the games. This was a stylised form of the initials "WWF", which was adopted by the Federation in early 1998 (before the 1998 Agreement). In the 2002 judgment, we described the purpose of the change to the scratch logo (para 31-32):

"This was another stylised version of the letters WWF. This was developed, according to Mrs McMahon, to meet the perceived need for a logo "designed to appeal to a tougher, edgier audience and fanbase". Mr Olins describes the change as "an abrupt change", where "the commercial situation demands something new and different" and as marking " a break from the past". He contrasts it with "incremental change", an example of which was the earlier change to the tilted version of the block logo.

Again, this change was part of a deliberate marketing strategy, and again it seems to have been successful, to the extent that, according to Mrs McMahon, the Scratch Logo "has today become synonymous with the Federation"."

We rejected an argument for the Federation that the use of the Scratch Logo was permitted under the 1994 Agreement (paras 37-9).

THQ was not a party to the 1994 Agreement, and, according to the evidence before us, did not see a copy until very recently. It was not a party to the proceedings between the Fund and the Federation. It has never itself been accused by the Fund of infringing its rights. However, we have been shown letters from the Federation to its licensees, beginning in January 2002, informing them of the state of the injunction proceedings. A further letter to THQ, dated 1^st July 2002, referred to the refusal of permission to appeal to the House of Lords, and continued:

"As we have previously alerted you, this means that retailers must obtain title to any merchandise with the old 'WWF' scratch logo on or in the product, packaging and/or advertising material prior to November 10, 2002; otherwise such merchandise cannot be sold."

THQ was told that all future products and packaging must contain the new "WWE" logo.

We have not been shown THQ's replies to those letters. However, we have been shown a report filed by the Federation with the US Securities and Exchange Commission ("the SEC"), dated 9^th December 2002, which gave an account of the English litigation with the Fund. After a reference to the decision of Jacob J on the present application (given on 26^th November 2002), it stated:

"The Company previously directed THQ/Jakks not to distribute videogames containing such references to the WWF scratch logo after November 10, 2002. THQ/Jakks has advised the Company that it will comply with that direction."

There is an issue about The Federation's power to give a binding direction to this effect. However, for obvious reasons it is in THQ's commercial interests to bring its own products and marketing into line with the new WWE branding as soon as practicable. According to the evidence before us, that is what has happened. THQ has taken steps to eliminate all references to the WWF scratch logo from the packaging and promotional materials of existing games, and it has not been incorporated in any new games developed since the injunction.

The problem, which gave rise to the present proceedings, is one of practicality. Approximately 12 existing games had the WWF scratch logo embedded into the computer programming code of the gameplay of these games. The cost and the technical difficulty of reprogramming videogames, it is said, makes it impossible for practical purposes to reprogramme these games so as to eliminate all references to the WWF scratch logo from the gameplay. These games apparently have significant future commercial value to THQ, which it is anxious to exploit, provided it can do so without being held liable for contempt under the injunction against The Federation. Having failed to obtain an assurance from the Fund that it would not proceed against it when the injunction came into effect on 10^th November, THQ made the present application to the court on 8^th November, and ceased shipping any further copies containing the WWF scratch logo.

The application was made within the existing proceedings between the Fund and the Federation, and sought the following relief:

"(1) a declaration that the continued marketing of video games by the Applicant after 10 November 2002 which contain the initials WWF is neither in breach of the order of the Honourable Mr Justice Jacob dated 1st October 2001 ("the Order") nor would constitute a contempt of court; or alternatively

(2) an order that if and insofar as the Applicant is continuing to market products containing the initials WWF the subject of the Order, the marketing of which would constitute a contempt of court, the effect of the injunction to be stayed for such period as shall to this Honourable Court seem fit."

The substantive hearing came on before Jacob J on 25^th and 26^th November. He gave judgment on the morning of 26^th November, immediately after the closing submissions, refusing the relief claimed.

The Federation's intervention

Although served with THQ's application, the Federation did not take any part in the hearing below, but the proceedings were watched by a solicitor on its behalf. The judge took an adverse view of certain aspects of the Federation's conduct. That adverse view was made clear during the hearing and repeated in strong terms in the judgment. It undoubtedly influenced the judge's exercise of his discretion against THQ. A flavour is given by the following extract from his treatment of that issue:

"It seems to me that (THQ) must look to the Federation for the losses which have been caused. It was the Federation that got them into this mess. It was the Federation which lulled them to make the mess worse. If the loss is substantial, then the claims will be substantial…."

In those circumstances, the Federation has applied for permission to intervene in the proceedings in this court. The application was opposed by the Fund, though without great vigour, mainly on the ground that the Federation had the opportunity to appear below and failed to take it. We gave permission, not only because we considered it right for the Federation to have the opportunity to respond to the criticisms made by the judge, which had not been part of the pleaded case of the Fund; but more generally because it is directly interested in some of the main issues in the case, particularly those relating to the construction of the 1998 Agreement.

One aspect of the judge's criticisms related to alleged misstatements by the Federation's general counsel, Mr Kaufman, in relation to the existence of an agreement with the Fund to defer the effective date of the order. Mr Carr QC, on behalf of the Federation has given us more detailed information about the course of events, and exchanges, leading up to the hearing before Jacob J. This point is of very little relevance to the issues we have to decide. However, in fairness to Mr Kaufman, I should say that, to my mind, the material now before us shows that the issue was not as clear-cut as it appeared to the judge, and does not support the extreme view taken by him.

The issues

The reasoning of the judge, and the subject-matter of the appeal, can be conveniently divided into four separate issues:

i) He construed the injunction as imposing an "absolute" obligation on the Federation to discontinue all use of the prohibited marks by licensees, regardless of its ability by contract or otherwise to control their use (the "Absolute Liability" issue).

ii) In the alternative, he interpreted the 1998 Agreement (in particular clause J(2)) as giving the Federation the power to require THQ to stop using the Scratch Logo (the "Interpretation" issue).

iii) On either view, he held that THQ's continued use of the scratch logo would involve a breach of the order by the Federation, and that the breach would be aided and abetted by the acts of THQ, were they to continue marketing the games in question (the "Aiding and Abetting" issue).

iv) He declined to exercise his discretion to stay the order, as respects THQ, leaving it to its remedy against the Federation (see para 10 above) (the "Stay" issue).

The absolute liability issue

I have already referred to the terms of the relevant part of the order. The Federation was restrained from carrying out the prohibited acts:

"…whether directly or indirectly and whether by its officers, servants, agents, subsidiaries, licensees or sublicensees, its television or other affiliates or otherwise howsoever…"

The judge accepted (following Marengo v Daily Sketch [1948] 1 All ER 406) that, notwithstanding the specific mention of licensees and others, the only person directly bound by the order was the Federation. However, he held that the Federation was absolutely liable in respect of the actions of Licensees:

"In short, is the injunction absolute in the sense that no matter how faultless the Federation may be, how well they try to stop the licensee, they are liable for contempt of court if they fail? As a matter of contract law that is what they contracted for. They contracted not to use via their licensees, as an absolute matter. If they have given a licensee a licence which cannot be revoked that does not prevent them from being liable under the contract for its breach. The breach is not merely the grant of the licence. It is the use by the licensee that they have contracted will not happen….

It seems to me that whilst normally injunctions bind only the defendant this is an exceptional case where the defendant has undertaken an absolute obligation and is bound by an absolute obligation in the same terms as its contractual obligation. Accordingly, if THQ do the acts of using the initials "WWF", the Federation will be in contempt of court….

The position here seems to me to be much the same as the position in relation to contempt by a corporation which has taken every stop it possibly can to prevent its employees causing it to breach a court order. There is absolute liability on the corporation in those circumstances, as is made clear in the House of Lords in The Director General of Fair Trading v. Pioneer Concrete UK Limited [1995] 1 A.C. 456."

On this view, it was irrelevant whether the Federation had in fact done all in its power to prevent offending use by THQ (which the judge doubted); that would "go to mitigation only".

Mr Thorley challenges the judge's view both of the 1994 Agreement and of the injunction. As he submits, the proper interpretation of the Order, mirroring clause 2.1(1) of the 1994 Agreement, was that the Federation was restrained from "using or causing to be used the initials WWF":

"The qualification to the injunction "whether by themselves etc" does no more than identify that the Federation cannot avoid the scope of the injunction by (subsequent to its grant) authorising or causing the doing of the prohibited acts by others. It does not make the continued doing of acts by third parties authorised prior to the date of the injunction a breach of the Order."

In my view, Mr Thorley is correct. Although the injunction was no doubt framed with the 1994 Agreement in mind, it must stand on its own terms. It imposes obligations on the Federation, not anyone else. In the absence of clear words, it cannot be interpreted as imposing on the Federation responsibility for acts of independent third parties. The difficulty, if there is one, arises from the extension of the familiar formula "by their officers, servants or agents" to other categories. The Federation is directly responsible for the acts of its officers, servants or agents, within the course of their duties, but not for those of independent contractors such as THQ. It is necessary to give some effect to the reference to licensees, but there is no reason in my view to interpret it as requiring the Federation to do things which are outside its powers. I agree with Mr Thorley that its effect is to restrain the Federation from (in the future) authorising or causing the doing of the prohibited acts by licensees; but not to make it absolutely liable for actions of licensees under existing agreements.

Mr Morcom, while supporting the judge's conclusion, did not rely on the Pioneer Concrete case. In my view, he was correct not to do so. That was a case arising out of a breach of the Restrictive Trade Practices Act. An injunction had been granted against various companies to restrain further breaches of the Act. Thereafter servants of the companies (apparently in express disobedience of the instructions of higher management) entered into oral arrangements which were in breach of the injunction. The company was held liable for breach of the injunctions. That was because:

"A limited company, as such cannot carry on business. It can only do so by employing human beings to act on its behalf. The actions of its employees, acting in the course of their employment, are what constitute the carrying on of business by the company." (p 474G, per Lord Nolan)

"An employee who acts for the company within the scope of his employment is the company." (p 465D, per Lord Templeman)

There is no parallel with the position of independent contractors.

The interpretation issue

Even though the Federation is not "absolutely liable", it is common ground that it has some responsibility in relation to the acts of its licensees. This follows from the principle stated in Hone v. Page [1980] FSR 501 at 507, Slade J:-

"I think that a man must be deemed to do a relevant act 'by his servants or agents' within the meaning of an undertaking given in this form if (a) the persons who did the acts were his servants or agents, (b) the acts were done in the course of the service or agency, and (c) he either (i) authorised the acts or (ii) could reasonably have foreseen the possibility of such acts and failed to take all reasonable steps to prevent them."

This statement was adopted by this court in A-G for Tuvalu v. PDC Limited [1990] 1 WLR 926, 936 and Re Supply of Ready Mixed Concrete [1992] 1 QB 213, 236, 243). The latter case was overruled in the Pioneer Concrete case (see above), but only in its application of requirement (c) to an employee. As has been seen, the company was held liable for the acts of its employees, even though it had specifically prohibited the acts in question.

However, Mr Thorley accepts that Slade J's formulation is in principle applicable to the question arising in this case, that is whether the Federation has breached the injunction "by its licensees". He accepts, accordingly, that there is to be implied into the standard form of injunction, a requirement on the party enjoined (as he puts it in his skeleton):

"to take such steps as are within its power to prevent its independent contractors from performing acts which, if performed by the party enjoined, would be in breach."

I agree, and I did not understand Mr Carr (for the Federation) to dissent. It is possible therefore for acts of THQ to result in the Federation being in contempt of the order, if it fails to take all reasonable steps within its power to prevent such acts. This does not mean that THQ itself is liable. This depends on the third issue, to which I shall come, concerning the principles of "aiding and abetting".

In order to establish in what circumstances the Federation might be in contempt as a result of the act of THQ, it is necessary to discover what, if any, "steps" were "within its power" under its agreement with THQ. The judge held that the Federation did have power to control THQ, by virtue of clause J(2) of the 1998 Agreement. Before looking at his reasoning, it is necessary to see that clause in the context of the 1998 Agreement as a whole.

By clause 5 of the main 1998 Agreement THQ has to develop at least two licensed products per year and these are to be heavily advertised (see clause 9). The products have to be approved in advance (see A(2)), and once approved the quality of the goods has to be maintained (A(3)). Clause E(1) relates to ownership of trade marks, once the 1998 Agreement ends, and leaves the Federation to license a third party to make equivalent computer games in the future using the trade marks without opposition by THQ. "Trademarks" are defined widely to include "all symbols, designs, styles, emblems, logos and marks used in connection with" the Federation's events; and "intellectual property" includes all trademarks as so defined, and "all other proprietary rights relating to the Events" (cl 1 (k),(e)). Clause M(2) makes it plain that no agency or joint venture is created. The agreement is to be interpreted in accordance with the laws of the State of New York (clause M(9)).

For present purposes the most relevant clauses are G(1), H(2) and J(2). Clause G(1) contains a "representation and warranty", under several heads, relating to the Federation's exclusive ownership of the relevant intellectual property rights. In particular it is warranted that:

"(viii) The intellectual property… does not… infringe upon any trade mark, statutory or common law copyright or other rights of third parties…."

Clause H(2) provides for "indemnification" of THQ by the Federation. Since there was some disagreement as to its precise effect, I will set it out in full:

"(The Federation) agrees to indemnify and hold the Licensee harmless from any and all claims (and liabilities, judgments, penalties, losses, costs, damages, and expenses resulting therefrom, including reasonable attorneys' fees, but excluding lost profits) made by third parties against the Licensee asserting rights in one or more elements of the Intellectual Property and based solely upon the use of the Intellectual Property by the Licensee in strict accordance with the terms of this Agreement or arising from any act or violation of this Agreement by (the Federation) or its subsidiaries or the employees or agents of any of the foregoing." (emphasis added)

It is not entirely clear, and it is unnecessary to decide, how precisely the last part is to be construed. Mr Thorley's submission, which appears to me correct, is that the contrast is (as indicated by the italicised words) between claims "asserting rights" based on the Licensee's use, and claims "arising from" acts of the Federation. The more important question is whether this clause (in particular the exclusion of claims for loss of profits) limits the effect of the general warranty under G(1). The judge did not deal in terms with this point, nor refer expressly to clause G(1). He commented:

"I am told that there may be some doubt about this but certainly one would have thought that in general terms if a licensor purports to grant a licence under some rights which he is unable to do the licensee would be able to claim. That would be a matter for the American courts and not for me…."

Although the matter was not fully discussed before us, I would be inclined to agree with the judge's view. I would expect clear words to be needed to limit the ordinary consequences of breach of the general warranty under clause G(1). Clause H(2) is not happily drafted, and is far from clear. On its face it appears to me to have a more limited and specific purpose, which is to give a right to recovery of losses and expenses (other than lost profits) due to claims arising from the ordinary use of the rights by THQ, regardless of any fault on the part of the Federation. This view is supported by the reference to "any act or violation" by the Federation. Unless that is to be treated as a mistake of drafting, a breach of contract by the Federation is not a prerequisite to liability under this clause. If that is the correct view, it is not inconsistent with a more general right of recovery, under clause G(1), for breaches by the Federation of those warranties.

Against that background, I turn to clause J(2). The relevant parts are as follows:

"… if the parties learn that another party has or claims rights in a trademark name or design which would or might conflict with the proposed or actual use of an element of the Intellectual Property by the Licensee, (the Federation) and the Licensee agree in any such case to consult with each other on a suitable course of action…. The Licensee agrees at the request of (the Federation) to… discontinue use of such element… if (the Federation), in its sole discretion, reasonably exercised, determines that such action is necessary or desirable to resolve or settle the claim…"

The judge rejected a submission, for THQ, that this was limited to new claims.

"Mr. Thorley says that this clause is limited to third party intellectual property right claims which are being advanced newly after the date of the license agreement against Titan or the licensee. I see no reason so to limit it. This clause is about troubles concerning the use of the licensed intellectual property."

Before us, there seemed to be some ambivalence about the respective positions of THQ and the Federation in relation to this clause. This may have been because each was concerned to protect its position in the face of possible future litigation between them in the American courts.

Mr Carr went so far as to submit that this was not really the concern of the English courts at all. I cannot accept that. If it is necessary, in the application of the English law of contempt, to ascertain what powers a party has to control its licensees, then the fact that the issue turns on a contract under New York law does not absolve this court from the need to determine the point. (In the absence of evidence of New York law, it is treated as the same as English law.) I accept that the court needs to step gently before interpreting an English order so as to impose liability on a foreign company, which is not a party to the injunction and has not chosen this country as a forum (see e.g. Derby & Co v Weldon (Nos 3 & 4) [1990] Ch 65, 82 per Lord Donaldson MR). That may be relevant to the position of THQ. However, it is not a point open to the Federation, which accepted this country's jurisdiction in the 1994 Agreement, and is subject to an order of this court in consequence.

THQ, through Mr Thorley, submitted that clause J(2) has no application to the subject-matter of this case because, first, it is directed to assertions of intellectual property rights and does not extend to assertions of contractual rights; and, secondly, it relates to claims or suits made, or learnt about, after the date of the agreement. Neither point seems to me convincing.

The evident intention of J(2) is to give the Federation strong policing powers, subject to reasonableness, over the use of its marks. Given that purpose, and the wide definitions of "trademarks" and "intellectual property", I see no reason why the rights asserted by the Fund should not be within it. The Fund's contractual right to control use of the symbol or design represented by the WWF scratch logo can fairly be regarded, in my view, as a "right in a trademark" within the meaning of the clause, and one which "would or might" conflict with its use by THQ. As to the second point, although the facts on which the claim was based (in particular the 1994 Agreement) arose before the 1998 Agreement, the force of the Fund's case in respect of the scratch logo was not finally established until the Court of Appeal's decision. THQ may justifiably complain that it was not warned of the problem at an earlier date, but the policing power under J(2) only needed to be used when the Fund's claim was established. That was the crucial event for the purposes of the clause, and both parties "learnt" of it in 2002 (compare the wide meaning given to the word "discovers" in the tax context: Cenlon Finance Ltd v Cenlon [1962] AC 782, 794). In my view, that was sufficient "learning" to bring clause J(2) into play.

The Federation's position, according to evidence of Mr Kaufman, was that it would rely on the judge's interpretation of clause J(2) to resist any claim by THQ in the American courts for losses arising out of the discontinuance of the use of the scratch logo. That assumes that any exercise of the Federation's powers of control under J(2) is exempt from liability under the general warranty in clause G(1). Although the point has not been fully argued, I do not see why this should be so. The Federation may need wide powers to control the use of its marks, to protect its relations with third parties and the public; but there seems no reason why this should exempt it from claims by the licensees, if the challenge arises from its own default. Clause J(2) contains no specific exception from G(1).

Before us, Mr Carr took a rather different line. He relied on the reference, in clause J(2) to the need for "reasonableness" in the exercise of the Federation's powers of control. The judge failed to consider whether that requirement would be fulfilled by requiring THQ to discontinue the use of the scratch logo, even where the cost was wholly disproportionate to any harm to the Fund. It is difficult to consider that submission on its own. As regards THQ, the reasonableness of such action would seem inevitably dependent on whether the Federation (contrary to its present position) accepted responsibility to bear the resulting losses, caused by its own breach of warranty under G(1). As regards the Fund, one is drawn into a circular argument. What the Federation may reasonably require of THQ may depend on what the Fund can force it to do under the injunction; but that in turn (at least under the Hone v Page formula) depends on what "reasonable steps" were open to the Federation to control THQ.

I do not think that we need to resolve these issues. As has been seen, from the statement in the SEC filing, the Federation has asserted the right to "direct" discontinuance of the use of its logo by licensees, and THQ has apparently accepted it. There is no suggestion that the power of "direction" there referred to is to be found anywhere other than in clause J(2). The discrepancy between the SEC statement and the submissions before us, has not been explained. On the other hand, clause J(2) does appear to allow some play for questions of reasonableness and proportionality, which may in turn be influenced by the construction of the Federation's liability under G(1).

To conclude, the question for us, under this issue, is whether the activities of THQ would or might constitute a contempt by the Federation. That is a necessary step to the next issue, which is whether THQ is in some way party to any such contempt. Under the Hone v Page formula, the Federation would be in contempt, only if it has power to stop THQ's use, and has failed unreasonably to exercise it. In my view (as confirmed by its own public position) it does have a power of control, the precise limits of which may be open to argument. However, there is presently no evidence that it has failed to exercise such powers as it has. It has issued a direction to licensees to discontinue use of the scratch logo, which, as far as we know, has generally been complied with. Insofar as discontinuance is resisted by THQ, in the limited circumstances raised by this case, it is not attributable to any failure by the Federation, but arises from a genuine issue of practicability. On the material presently available, therefore, there is no basis for holding that the Federation is, or is likely to be, in breach of the injunction, by failing to take action against THQ. Clearly, it remains open to the Fund to seek to establish, in appropriate proceedings against the Federation, that it can and should do more to control even this limited use; or alternatively to establish a right to some share of the proceeds. However, we must proceed on the cases and evidence as presented to us.

Aiding and abetting

The judge took a simple view of this point. Having found that THQ's activities would amount to a contempt, by virtue both of a breach of its "absolute liability" and its failure to exercise its powers under clause J(2), he said:

"It follows, as it seems to me as night follows day, that THQ find themselves in the position that if they continue to use "WWF" they will be aiding and abetting that breach. It will be their acts that amount to a breach by the Federation of the injunction."

He rejected Mr Morcom's alternative argument that THQ could be held responsible because its continued use "would amount to the undermining of the final order made in the action." Mr Morcom in effect conceded this argument was not open to him on the then state of the authorities, notably the view expressed by the Lord Phillips MR in Attorney General v. Punch Limited & Anor [2001] QB 1028, that this principle applied only to interlocutory injunctions.

Since then the House of Lords decision in the Punch case ([2002] UKHL 50; [2003] 2 WLR 49) has thrown new light on the issue. Mr Morcom renews the submission under both heads. He supports the judge's reasoning as to "aiding and abetting", which he equates with "assisting" (following Lord Nicholls in Punch at para 3). As Mr Morcom puts it in his skeleton -

"The Appellant has full knowledge of the Order. Moreover, the Appellant will not only be doing the acts which the Federation is prohibited from doing. It will be paying royalties to the Federation in respect of those acts. This is clearly "assisting" the Federation to breach the Order."

Secondly, following Attorney-General v Times Newspapers [1992] 1AC 191, he submits that a third party can be in contempt, without aiding and abetting a breach of the order, if by his conduct he knowingly impeded or interfered with the administration of justice by the Court in the action between the parties. This jurisdiction was confirmed by the House of Lords in Punch. As Lord Nicholls said:

"Aiding and abetting a breach of the order by the person specifically restrained by the order is not always an essential ingredient of 'third party' contempt. The purpose of a court in making an order may be deliberately frustrated by a third party even though he is acting independently of the party against whom the order was made." (para 4, emphasis added)

Mr Morcom submits that the House of Lords decision in Punch has made clear that this "deliberate frustration" basis of liability is not limited to interlocutory orders, as previously suggested by Lord Phillips. In the present case, he says, the purpose of the order would be frustrated if THQ were left free to continue to use the WWF logo and to pay royalties for it to the Federation.

This submission, of course, starts from the judge's holding of "absolute liability", that is that any use of the logo by THQ is a breach of the injunction by the Federation. On that view, one can see the attraction of the view that, since the offending acts are those of THQ, it is inevitably "assisting" the breach. That simple view is challenged by Mr Thorley and Mr Carr, on the grounds that, although THQ's acts cause the breach, they are the independent acts of an independent party, and are not the results of the kind of concerted action that is implicit in "aiding and abetting". In view of my disagreement with the judge's conclusion on the absolute liability issue, I need not resolve that dispute.

On the judge's alternative basis, applying clause J(2), different considerations arise. If the Federation failed to act under that clause, would THQ be liable for either "aiding and abetting" or "deliberately frustrating"? Here the starting point for the inquiry is much less clear-cut. Use of the logo by THQ does not automatically result in contempt by the Federation. That depends on whether the Federation has taken all reasonable steps, within its power, to control that use. As I have said, there is no basis, on the material before us, for holding that the Federation has failed, or is likely to fail, in that respect.

In any event, on the evidence, the breach (if any) is the result of THQ's independent commercial interests, and is not indicative of any concerted action with the Federation. The mere fact that the Federation will receive contractual royalties does not make it any less an independent act of THQ. In my view, even if there were to be a contempt by the Federation, it could not on the present evidence be said to be "aided and abetted" by THQ.

As to the alternative of "deliberate frustration", I accept that the precise limits of this form of liability are open to debate following the recent House of Lords decision in Punch, taken with the speeches in the Times case. Some of the speeches in the Times case referred specifically to "interference with the administration of justice" (see e.g. [1992] 1 AC at 206 G, per Lord Brandon; 218, per Lord Oliver). Lord Jauncey put the matter more broadly: "knowingly acting in a way which will frustrate the operation of an injunction" (p 231). However, he emphasised that there must be limits:

"… not every frustrating act will necessarily constitute the actus reus of contempt. There may be cases where the perfectly legitimate pursuit of a purpose by a stranger has the incidental result of frustrating an order. It does not inevitably follow that such pursuit will constitute contempt, quite apart from questions of mens rea." (p231C)

Similarly, in Punch (at para 87), although Lord Nicholls spoke generally of "deliberately frustrating" the purpose of an order (see above), Lord Hope referred more specifically to the administration of justice. He explained the distinction between the liability of those directly bound and that of third parties:

"Where the alleged contemnor is a party to the litigation and bound by the order or is someone acting for him or at his direction, all that has to be proved is that the order was served on that person and that he has done that which the order has prohibited. But where it is alleged that a stranger to the litigation is in contempt the position is different. As Salmon LJ said in Jennison v Baker [1972] 2 QB 52, 61, the public at large no less than the individual litigant have a very real interest in justice being effectively administered. The power to commit for contempt ensures that acts and words tending to obstruct the administration of justice are prohibited. So a stranger is liable for contempt if his act constitutes a wilful interference with the administration of justice by the court in the proceedings in which the order was made. It has also to be shown there was an intention on his part to interfere with or impede the administration of justice. This is an essential ingredient, and it has to be established to the criminal standard of proof. But the intent need not be stated expressly or admitted by the defendant. As is the case where the question of intention, or mens rea, arises in criminal cases, it can be inferred from all the circumstances including the foreseeability of the consequences of the defendant's conduct: Attorney General v Newspaper Publishing plc [1988] Ch 333, 374-375, per Sir John Donaldson MR."

It is unnecessary to explore this difficult issue in more detail. On any view of the matter, I consider that THQ's actual and proposed conduct (as explained in the evidence before us) falls well short of what is required. There is no interference with the administration of justice. THQ is an independent party pursuing its own legitimate commercial interests under a licence granted to it well before the order was made.

Accordingly, I accept the submissions of the appellant on this issue. In my view, the judge was wrong to hold that, on the facts before him, THQ would be liable for contempt of the order against the Federation.

The stay issue

If I am right on the previous issue, the question of a stay does not arise. I can therefore comment briefly. THQ submitted that, if this court were to uphold the judge's decision on the previous issues, then it should grant a stay of the order as it affects THQ. It suggested that the stay should be granted in respect of all existing games until they are withdrawn from the market on THQ undertaking:

(a) to identify all such games;

(b) to use the new packaging and not to revert to any packaging containing the marks and logos the subject of the injunction;

(c) not hereafter to place any advertisements containing the offending marks and logos;

(d) to keep full and proper accounts of all games supplied by them subsequent to the making of the stay and to supply the same to the Fund's solicitors at regular intervals.

(e) to notify the Fund's solicitors when each game, the subject of the stay, is withdrawn from the market.

In support, Mr Thorley relies on Miller v. Jackson [1977] 1 QB 966, to which I have already referred, and in particular to the summary of the law by Cumming-Bruce L.J. (p 988), where he approved a passage (repeated in the current edition of Spry's Equitable Remedies (6th edition), p 402), as follows:

"Regard must be had not only to the dry strict rights of the Plaintiff and the Defendant, but also the surrounding circumstances, to the rights or interests of other persons which may be more or less involved. So it is that where the Plaintiff has prima facie a right to specific relief, a court of equity will, if occasion should arise, weigh the disadvantage or hardship which he will suffer if relief were refused against any hardship or disadvantage which would be caused to third persons or to the public generally if relief were granted."

As between THQ and the Fund, the judge accepted that the balance was in favour of granting a stay, having regard to Mr Thorley's submissions, which he quoted and apparently accepted:

"Through no fault of their own his clients have got these deeply embedded "WWF"s. If they stop now - and I should interpolate that they have stopped since 10th November, quite properly - then there will be vast financial damage. Some will be quantifiable (freezing of existing stocks) but quite apart from that there will be unquantifiable damage. That will be first of all what the loss of future sales would have been; second, the effect of having to withdraw these products on THQ's competitive position in the market; third, THQ's inability to develop new games if they try to remove the "WWF" from the existing games. Whichever way they turn they will suffer vast damage and unquantifiable damage. On the other hand, he says, there is no evidence that THQ's activities in using the WWF name over the last few years has ever caused a single instance of confusion. The damage to THQ is certain. Any damage to the Fund is slight.

Mr. Morcom asserts that there would be dilution of the exclusivity of WWF and injurious association of the kind I indicated in my earlier judgment. But these, says Mr. Thorley, cannot begin to outweigh the certain damage which his client is bound to suffer."