England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
PATENTS COURT
His Honour Judge Fysh QC
HC08C00480

		Royal Courts of Justice Strand, London, WC2A 2LL
		25th May 2010

Lord Justice Patten :

1. This is an appeal by the claimant, Mr Victor Ifejika ("Victor"), against an order of HHJ Fysh QC (sitting as a Deputy Judge of the Chancery Division) dated 8^th October 2009 which was made on an application by the Defendants for judgment under CPR Part 24. The appeal is brought with the permission of the judge.
2. The action was commenced on 21^st February 2008. Victor seeks an injunction and damages in respect of the alleged infringement of UK Registered Design No. 2 003 357 and of unregistered design right in what is referred to in the pleadings as the Hot House prototype. Both are designs for a contact lens cleaning device. The registered design is said to have originated out of drawings produced by a design company called Murdoch's Industrial Design Limited ("Murdoch") which in the particulars of claim Victor alleges that he commissioned and paid for in order to enable him to produce a prototype (the CLC 60) which forms the subject matter of the registered design ("the Design"). The Hot House prototype was created from manufacturing drawings produced by a firm called Hot House Development Partners and again (it is alleged) was commissioned and paid for by Victor.
3. Although the Defendants' Part 24 application related to both aspects of the claim, the judge acceded to it only in respect of the registered design claim and it is not therefore necessary to say anything further about the allegations of infringement in respect of unregistered design right. These will proceed to trial in any event in accordance with the amended pleadings, permission for which was given as part of the order of 8^th October. It will, however, be necessary to refer to parts of the consolidated particulars of claim (which were served after the hearing but before judgment) because these also set out the latest version of Victor's pleaded case on registered design infringement.
4. As of the hearing on 23^rd July 2009 Victor's pleaded case (in the form of amended particulars of claim dated 26^th May 2009) was that he is the registered proprietor of the Design as a result of an assignment in writing made between him and CCL Vision Limited ("CCL") dated 19^th February 2008. The Design was first registered on 15^th December 1989 in the name of CCL as a result of an application made on behalf of the company by a firm of chartered patent attorneys, Graham Jones & Company.
5. CCL was incorporated in 1989 as a joint venture company between Victor and his brother, Charles, the first defendant. Each of them had one share. But subsequently the share capital was increased in May 1991 to 19,999 issued shares of which Victor held 19,998. We are told that this was done in order to satisfy the requirements of banks and other creditors but nothing turns on this for the purposes of this appeal.
6. As mentioned earlier, the amended particulars of claim alleged (in paragraph 5) that the Murdoch design drawings used to produce the CLC 60 were commissioned and paid for by Victor but no date was given as to when they were made. However, in a request for further information served on 3^rd July 2008, the defendants asked for particulars of when the drawings referred to were commissioned and produced. This information was supplied on 8^th September 2008. The response was that the drawings were commissioned on or about 7^th February 1989 and that they were produced on or about 10^th February 1989.
7. It was therefore Victor's pleaded case before the judge that the CLC 60 prototype was based on February 1989 Murdoch drawings and this is confirmed in the consolidated particulars of claim served subsequently on 28^th July 2009 which (in paragraph 3) described the 1989 drawings as modifications of some initial drawings produced by Murdoch in November 1988. As part of this appeal Victor has made an application to adduce further evidence which includes some of the prototype designs, although he tells us that the 1989 design drawings no longer exist. That application was not, however, pursued when we indicated that we could not embark on any kind of fact-finding exercise of our own. What is, however, important, as I have indicated, is that it was Victor's pleaded case at the time of the Part 24 hearing that the CLC 60 prototype emerged from the February 1989 design drawings and not from the work originally carried out by Murdoch in 1988.
8. The claim that the Design has been infringed is based on the manufacture and sale of at least two contact lens cleaning devices by the Second Defendant which is a company owned and controlled by Charles. The sales relied on took place between March 2002 and October 2003. By 1991 CCL was in severe financial difficulties. On 12^th December 1995 it was struck off the Register of Companies and subsequently dissolved for failing to file accounts. By the time that the sales of the allegedly infringing products took place it had therefore ceased to exist and the Design had probably become the property of the Crown as bona vacantia pursuant to the provisions of s.654 of the Companies Act 1985. But on 17^th November 2003 (on the application of Victor) Registrar Derrett made an order under s.653 of the Companies Act restoring CCL to the register. The statutory effect of that order was that the company was deemed to have continued in existence as if its name had not been struck off the register: see s.653(3). Notwithstanding this there may be an issue if the registered design claim is tried as to whether CCL is entitled to damages for infringement in respect of the period when it remained struck off. That is not, however, a matter for us and will not, of course, affect the claim for an injunction or for delivery up.
9. In their defence served on 3^rd July 2008 the Defendants (in paragraphs 14-17) do put in issue the effect of the dissolution of CCL and whether it retained the right and title to the Design. But their principal defence was to deny Victor's claim that he commissioned the drawings on which the Design is based and to allege that the relevant commission was by Charles or by Charles and Victor jointly. This was pleaded by reference to the initial design drawings made by Murdoch in 1988. The defence does not make any reference to the drawings produced in 1989 and was not amended even when the further information supplied in September 2008 confirmed that Victor was relying on the 1989 drawings in the particulars of claim. On the basis that Charles commissioned the relevant drawings (or did so jointly with Victor), the Defendants denied that Victor was ever the sole proprietor of the Design. In paragraph 7 of the defence they pleaded that there had been no assignment of title to CCL by either Charles alone or by him and Victor jointly and that, in these circumstances, Victor could confer no title to the as yet unregistered design rights on CCL. The registration of the company as the proprietor of the Design on 15^th December 1989 was therefore invalid.
10. In their request for further information the Defendants had also asked for particulars of the basis on which it was alleged that CCL was entitled to register itself as proprietor of the Design and for copies of any relevant assignments of the design rights relied upon. This request was answered by paragraph 9 of the reply also served on 8^th September 2008. In paragraph 8 of the reply Victor repeated his claim that Murdoch produced design drawings prior to the application for registration of the Design and that the 1988 drawings were preliminary drawings produced for the purposes of a DTI project which ended on 30^th November 1988. In paragraph 9 his counsel (Mr Hamer) pleaded that:-

"… The Claimant chose to register the design in the name of CCL Vision Limited, because CCL Vision Limited was the vehicle by which he intended to exploit the said design. No assignment was necessary: the company held the same on trust for the Claimant."

11. The Defendants' application for Part 24 judgment was issued on 27^th January 2009. It asked for judgment for the Defendants in the action on the basis that the registered design was invalid and that the entire action was an abuse of process. The second ground relates to some earlier proceedings in the Patent Office in which Victor unsuccessfully sought a declaration of entitlement to European Patent (UK) No. 394254 and to the points taken in the defence about the dissolution of CCL. But the only reference to the validity of the registration contained in Charles' witness statement in support of the application is his evidence that he commissioned the relevant Murdoch designs and that CCL was intended to be no more than an exclusive licensee of the Design and not the owner of it. Victor, he alleges, procured the registration of Charles' design rights in the name of the company without his knowledge or consent. There has, however, been no application either as part of the proceedings or otherwise for cancellation of the registration under s.20 of the Registered Designs Act 1949 ("RDA").
12. If Charles is right and the relevant design drawings were commissioned from Murdoch by him or by him and Victor jointly then he either alone (or jointly with Victor) would be the original proprietor of the Design. Although the author of the design is, generally speaking, the proprietor, his rights are overridden when the design work was carried out pursuant to a commission for money or money's worth. This was the effect of the proviso to s.2(1) of the RDA prior to its amendment by the Copyright, Designs and Patents Act 1988 and the provisions of s.2(1A) of the amended RDA are to the same effect. The judge thought that the relevant version of the RDA was the pre-1989 version because the relevant design work was completed in 1988, although the quotations from the Act in his judgment appear to be those from the 1989 amended version. He was wrong about this if the design drawings on which the Design is based were those created by Murdoch in 1989 and, to avoid confusion, I propose to refer to the relevant sections of the RDA in its post-1988 amended form. For the purposes of the issues raised by this appeal, there are no changes of substance between the pre-1989 and the 1989 versions of the Act.
13. If it is correct that Charles was involved in commissioning the design drawings it would not have been possible for Victor to pass title in the unregistered design rights in the CLC 60 prototype to CCL nor would the company have been entitled to seek registration of the Design in its own name. This is because of RDA s.1(2) which provides that:-

"A design which is new may, upon application by the person claiming to be the proprietor, be registered under this Act in respect of any article, or set of articles, specified in the application."

14. The phrase "the person claiming to be the proprietor" in s.1(2) means the person who is the proprietor of the design in accordance with the provisions of the RDA in the sense that, on any application under s.20 for the deletion of a registration on the ground that the applicant for registration was not the proprietor, the Court will be required to determine the issue of title and cannot uphold the registration merely on the basis that it was made in good faith: see AL BASSAM Trade Mark [1995] RPC 511 at page 522.
15. Judge Fysh applied these principles in Woodhouse UK PLC v Architectural Lighting Systems [2006] RPC 1 to justify the cancellation of a registration where the title of the existing proprietor depended on an assignment from a company which had been registered as proprietor of the design by mistake and was never intended to have any title or interest in the registered design. The identity of the proprietor is defined by s.2(2) of the RDA in these terms:-

"Where a design, or the right to apply a design to any article, becomes vested, whether by assignment, transmission or operation of law, in any person other than the original proprietor, either alone or jointly with the original proprietor, that other person, or as the case may be the original proprietor and that other person, shall be treated for the purposes of this Act as the proprietor of the design or as the proprietor of the design in relation to that article".

16. Registration of title is made in the register of designs maintained pursuant to s.17 of the RDA. This includes the names and addresses of proprietors of registered designs but s.17(2) provides that:-

"No notice of any trust, whether express, implied or constructive, shall be entered in the register of designs, and the registrar shall not be affected by any such notice."

17. The judge correctly recognised that he could not determine the issue between the parties as to who had commissioned the drawings for the Design. He therefore proceeded on the assumption that Victor had (as he alleged) commissioned and paid for the relevant Murdoch drawings and was therefore the original proprietor of the Design under the provisions of s.2(1A) of the RDA. This led him on to consider whether CCL became the proprietor of the Design so as to be entitled to apply for registration under s.1(2) in its own name. He noted that there was no evidence (or pleading) of any written assignment of the Design to CCL and that, on this basis, Ms Edwards-Stuart for the Defendants invited him to give judgment for her clients on the registered design claim. She contended that the original registration of the Design by CCL was invalid and that the subsequent assignment of the Design to Victor could not therefore be effective as an assignment of the registered design for the purposes of s.19(1) of the RDA.
18. The judge was asked to apply the principles set out in his judgment in Woodhouse to the present case. The decision in Woodhouse is not surprising on its own facts. The claimant's predecessor in title was registered as proprietor by error and was never intended to have any interest in the registered design. But the issue in this case is whether the intention on the part of Victor that CCL should be registered as the proprietor of the Design in order to exploit it for the benefit of Victor or Victor and Charles as shareholders in CCL was sufficient to bring the company within the provisions of s.2(2) of the RDA and so qualify it as the proprietor of the Design.
19. The judge concluded that the absence of a prior legal assignment of the Design to CCL was fatal. In paragraph 22 of his judgment he refers to paragraphs 8 and 9 of the particulars of claim which plead that it was always intended by Victor that he and not CCL should be the legal or beneficial owner of the Murdoch design. This was a mistake by the judge. These paragraphs in fact refer to the Hot House designs which are relevant only to the unregistered design right claim. But he goes on, correctly, to identify the challenge to Victor's title in the defence as being based on Charles' own claim to have commissioned the drawings which led to the Design. Victor's response to this in paragraph 9 of the reply referred to earlier is that no assignment was necessary and that, following registration, CCL held the Design on trust for him.
20. After the hearing counsel on both sides sent to the judge some additional submissions which he took into account in formulating his judgment. Ms Edwards-Stuart took the point that it had never been alleged by Victor in his pleadings that there had been any written assignment of the design rights to CCL and that to allege (as Mr Hamer did in argument) that the rights had been intended to be or become vested in CCL was to rely on what she described as a new and unpleaded defence. Mr Hamer, in his supplemental note, emphasised that the point about the lack of assignment was a point for the Defendants to take and that it had not been relied upon as a ground in itself for challenging the validity of the registration in CCL's name. This was not a case like Woodhouse. It had always been Victor's intention that CCL should be vested with the design rights so as to be able to exploit and protect them. The registration of the Design in its name was intended to recognise and give effect to this.
21. The judge held in paragraph 26 of his judgment that "an intention by A to procure B to exploit A's IP rights cannot ipso facto carry with it a transfer of those rights so as to vest them in B as their proprietor".
22. His reasoning is set out in more detail in paragraphs 23-4:-

"23. Mr Hamer's response to Charles' amended application before me was in my view, full of difficulties. Though on its face the application for the Design had indeed not literally been made in accordance with RDA, section 1(2), the distinction, said Mr Hamer, was cosmetic and of no importance. I should, he said, treat it as if it had been made by Victor. Though the Design had at all material times been legally held by Victor, he had intended (if necessary) to vest the legal title to the Design in CCL (and not merely to licence it – see above); it had been in his mind (at some unspecified time) to do so in order to implement his commercial intentions. CCL was thus the equitable owner or trustee of the Design and as such, was entitled to apply to register. It was unnecessary to record any of this in a 'formal' assignment prior to registration, said Mr Hamer, because CCL held the Design 'on trust for the Claimant'.

24. In a witness statement Victor said this (§38):

"…the company [CCL] held the Registered Design (and other IP rights in the Cleaner) on trust for me as it made sense to apply for the Registered Design in the name of the vehicle through which I was intending to exploit it; this would avoid issues other companies might have when dealing with CCL in respect of the design".

Victor therefore seems to have considered the design rights in the Murdoch design to have been his, not CCL's all along. On the other hand Charles seems to have considered the legal title to the rights in the Murdoch design were his all along and not CCL's. What is clear on both sides is that RDA, s.1(2) was not followed. That to my mind is fatal to the application and has resulted in an invalid Design."

23. Between the time when the judgment was sent to the parties' counsel in draft on 27^th July 2009 and was handed down as an approved judgment in October, Mr Hamer sent to the judge some further written submissions. Although intended to support an application for permission to appeal, these submissions queried whether the judge had really understood the case which Victor was putting forward. The note re-emphasised that the registration of the Design in the name of CCL was not a mistake (as in Woodhouse) but was deliberate. It was the culmination of the arrangements under which CCL would not merely be a licensee but would own the design rights and exploit them on behalf of Victor. I read these submissions as amounting to an argument that the combination of Victor's intention to vest his rights in CCL, coupled with the registration of the Design in the company's name, operated to assign the rights to the company in equity and so gave it title as a proprietor entitled to registration under s.2(2) of the RDA.
24. The judge made no changes to his judgment in the light of these further submissions but gave Victor permission to appeal. In his treatment of the issue of beneficial ownership in paragraphs 23 and 24 of his judgment he expresses no view as to whether it is at least arguable as a matter of law that the combination of factors he describes could have been effective to create an equitable assignment of the design rights in favour of CCL. Instead he bases his view that the registration was invalid on the fact that the requirements of s.1(2) of the RDA were not complied with. The closest he gets to analysing the arguments on equitable assignment is in paragraph 26 of his judgment quoted earlier: i.e. that an intention to transfer the rights cannot ipso facto operate to vest them in the intended transferee.
25. I take the view that the judge was wrong on both of the grounds which he relied upon to support the cancellation of the registration. Design rights like any other form of chose in action can be assigned either at law or in equity. This is recognised by the provisions of s.2(2). Although a written legal assignment is the usual method of transmission, s.2(2) imposes no requirements as to the form any assignment or transmission of the right should take and the general rules relating to equitable assignments are therefore applicable.
26. For property to be assigned in equity what is needed is the sufficient expression of an intention to assign in the context of a transaction from which it can be inferred that the property was intended to pass. This principle is set out in Lord Macnaghten's speech in William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454 (at page 462) where the seller of goods agreed with its bankers that they should receive the purchase monies direct from the purchasers. The bank gave notice to the purchasers of this arrangement and received the price. This was held to be an effective assignment of the debt. In some cases where the creditor has given authority to a person to receive the monies due and to pay them on to a third party, this has been construed simply as the creation of an agency and not an assignment of the debt to the intermediary. It may be that this is what the judge had in mind in paragraph 26 of his judgment.
27. But the facts of this case cannot be limited to a mere agency. It seems to be common ground that CCL was intended to be used to exploit the Design. That involved it becoming the registered proprietor. It matters not whether the Design was to be held on trust for Victor. Only the registered proprietor may take proceedings for infringement and license the use of the Design. Beneficial interests are excluded from the register. If he is able to establish, as he alleges, that the design was intended to be transferred to CCL for these purposes the evidence of that intention, coupled with registration of the Design in CCL's name, is, in my view, likely to be sufficient to create an equitable assignment of the design rights to CCL. Ms Edwards-Stuart did not seriously contend otherwise. Her principal response to this line of argument was that it was not properly pleaded. But that is because the absence of title was not taken as a discrete point in the defence. In any event, paragraph 9 of the reply seems to me in reality to raise the issue, although it could have been expressed in clearer terms. It pleads the reason why CCL was registered as proprietor of the Design; that there was no (written or express) assignment; but that the company held the Design on trust for Victor. There can be no trust unless there is trust property vested in the trustee so that the pleading (if only by necessary implication) makes it clear that Victor was asserting a transfer of title to the company which was completed by the process of registration.
28. If (as I consider) it is at least seriously arguable that there was an equitable assignment of the design rights to CCL by these arrangements then the company satisfied the definition of proprietor in s.2(2). As such, it was entitled to apply for registration under s.1(2). The judge's suggestion that s.1(2) was not complied with seems to be based on a point about timing: i.e. that the rights must have become vested by assignment in CCL prior to the making of the application. But that is not correct. The application for registration has to be made by the person claiming to be proprietor. That requirement is satisfied, in my view, when the applicant will, as a result of the registration, acquire the necessary rights by equitable assignment or by operation of law. There does not have to be some scintilla temporis as between the completion of the assignment and registration. Were that so the ability of s.2(2) to comprehend equitable assignees of the design rights would be severely limited.
29. There is, however, a much shorter answer to the challenge to the current registration. Even if the Defendants are right and the circumstances leading up to the registration of CCL as proprietor of the Design were not effective to create an equitable assignment of the design rights to the company and a valid registration of the Design, the only consequence of that would have been that Victor, as the original proprietor, would have remained the legal owner of the design rights. He can establish a title to those rights as original proprietor regardless of whether they were effectively assigned to CCL and regardless of whether the subsequent re-assignment of the Design to him was valid. The register, as it now stands, records him as the registered proprietor of the Design which is the position that would have obtained had he applied for registration in his own name as original proprietor under s.1(2).
30. If Victor can establish that he commissioned the relevant drawings and was therefore the original proprietor of the Design he has an effective answer to any challenge by the Defendants to his title. Although his application for registration was made under s.19 RDA on the basis of the assignment from CCL, it could equally have been made under s.1(2) and it would be a triumph of form over substance for the court to exercise its discretion under s.20 of the RDA so as to order cancellation of the registration rather than a variation to reflect the correct basis of registration. The judge's exercise of discretion seems to me to be wrong in principle and what he should have done was to dismiss the Part 24 application.
31. I should mention for completeness that Victor at the hearing of this appeal raised an argument to the effect that the commission given to Murdoch to produce the 1989 drawings from which the Design was taken was given by him not in his personal capacity but as a director and on behalf of CCL. If this is right then CCL itself would have been the original proprietor and none of the points taken about the validity of its application for registration would arise. This allegation is not currently pleaded and would have to be introduced by way of amendment at a subsequent CMC. I have not therefore taken it into account in reaching my conclusions on this appeal, although (if originally pleaded) most of the argument we have heard would have been unnecessary. On either view of the matter, it may ultimately be necessary for CCL to be added as a party.
32. I would therefore allow this appeal.

Lord Justice Rix:

33. I agree.

Lord Justice Maurice Kay :

34. I also agree.