England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMMUNITY TRADE MARKS COURT
INTELLECTUAL PROPERTY

		Royal Courts of Justice The Rolls Building 7 Rolls Buildings London, EC4A 1NL
		31st July 2014

MR. JUSTICE BIRSS:

1. This is the first of a series of judgments that I will give this morning dealing with the various consequential matters arising from my main judgment in this case, which I have just handed down, which is reference [2014] EWHC 2631 Chancery.

DRAFTING OF THE INJUNCTION

2. The issue is the precise drafting of the injunction to be granted. The parties are agreed that in the circumstances arising from the judgment I have just given, an injunction restraining the defendant from infringing the UK trade mark in the United Kingdom and the Community trade mark in European Union and drafted in general terms (subject to a point I will deal with) is appropriate. In my judgment, they are correct in that agreement, given the variety of ways in which the defendant has been found to infringe those marks.
3. The point at issue is whether or not the injunction should contain a proviso in the following terms:

"Provided that the use of the sign 'VICTORIA'S SECRET PINK' where all three words are in the same font and size, spaced equally and given equal prominence, is not within the scope of the foregoing injunctions or either of them".

That is the proviso. The point is that in the judgment I held that the only use made of the phrase VICTORIA'S SECRET PINK in lockup format, which is what that proviso refers to, was on a Facebook page belonging to the defendant or another member of the same Victoria's Secret group. I held that that Facebook page was not directed to the EU and, accordingly, whatever is on it cannot infringe either the UK trade mark or the CTM.

4. I also held, since it was argued fully before me, that the use of VICTORIA'S SECRET PINK in lockup format on that Facebook page, in the context of that Facebook page, was not an infringement even if the page had been EU facing, either under Article 9(1)(b) or Article 9(1)(c) of the CTMR or the corresponding provisions in the 1994 Act.
5. Miss Himsworth, on behalf of Victoria's Secret, submits that it is important that the proviso is included in fairness to the defendant and acts as a fair balancing of the parties' rights in these circumstances, in particular because the court did not make a finding that VICTORIA'S SECRET PINK in lockup format is an infringement. Accordingly, VICTORIA'S SECRET PINK in lockup format is not part of the list of things which the defendant has been told not to do. The point, therefore, is to avoid, from the defendant's perspective, a potential chilling effect of the injunction; and by "chilling effect", what is meant is that the defendant otherwise will not be entirely clear about what it can and cannot do.
6. Miss Himsworth is right that I have not held that the use of VICTORIA'S SECRET PINK in lockup format is an infringement of either of the claimant's registered trade mark rights. However, it is important, as Miss May points out, that that finding was a finding in relation to the use on the Facebook page and was specifically in relation to the context of the use on the Facebook page. I should say that a focus on that context was an important part of the defendant's case in these proceedings.
7. Thus, while I have not held, for example, that VICTORIA'S SECRET PINK in lockup format is an infringement, I have not been asked to make any finding about whether (for the sake of argument) a T-shirt with the words VICTORIA'S SECRET PINK in lockup format emblazoned across the front would or would not be an infringement of the registered trade mark.
8. In my judgment, the claimant is right that this proviso would mean that the defendant had the advantage of a finding that (for the sake of argument) VICTORIA'S SECRET PINK in lockup format emblazoned across an article of clothing was not an infringement of these registered rights. I have not made that finding. I have not found that it does infringe, but I have not found that it does not.
9. The chilling effect referred to by counsel for Victoria's Secret is something which Victoria's Secret could (and if they were truly concerned about it, should many months ago) have raised by means of an application for a declaration of non-infringement.
10. This point about VICTORIA'S SECRET PINK in lockup format is something which has been a running issue in these proceedings for a very, very long time. I referred in my judgment to the fact that the defendant's witness statements characterised all the use by the defendant which was complained of in this case as use of "VICTORIA'S SECRET PINK". I will not repeat what I said in my judgment beyond noting that I held that that is not an accurate characterisation of what the defendant is doing in this jurisdiction.
11. Miss Himsworth refers me to the judgment of the Court of Appeal in Specsavers v. Asda [2012] EWCA Civ 494 and, in particular, to paragraphs 6 to 11, which deal with the proper scope of trade mark injunctions. I will not attempt to summarise what is said in that judgment beyond saying that it is clear that the court must always have in mind a proper and fair scope of an injunction and questions such as proportionality and fairness. I also remind myself, as Miss Himsworth reminded me, that the Enforcement Directive requires the court to have a focus on specificity and proportionality.
12. Bearing those matters in mind, it still seems to me that the proviso would not be fair or proportionate in this case. The effect of inserting this proviso into the injunction would be to give the defendant the benefit of a finding which the court has simply not made. That would be neither fair nor proportionate.
13. On the other hand, I should make it clear that this judgment that I have just articulated now has already said -- and I will repeat -- that the court has not found that VICTORIA'S SECRET PINK in lockup format used in any way by the defendant is an infringement of the claimant's registered trade mark rights. That is a clear result from these proceedings, and that is a fair position for the parties in which to find themselves in the circumstances of this case. That is my decision.

PUBLICATION

14. The issue I have to decide now is whether to stay any publication under Article 15 of the Enforcement Directive pending a hearing in October. The parties are agreed that certain matters in this case, following from my judgment, need to be adjourned until October so that they can be addressed properly. In particular and of most importance is the question of a stay of the injunctions pending appeal. Miss May submits, on behalf of the claimant, that I should make the publication notice order now, which in large measure is agreed. The defendant does not dispute that the claimant should have some kind of publication notice order in its favour, although there are real disputes about the precise form and nature and place in which these publications should be made. However, the defendant submits that I should not make this order now because they wish to say that it should be stayed pending appeal. If I make the order now, I deprive the defendant of the ability to argue that the order should be stayed pending appeal. Once I have made the publication order the publications will take place and the defendant's desire to seek a stay pending appeal will be rendered entirely pointless.
15. It is plain that the fair and correct thing to do in these circumstances is to stay the publication order over to October. I also bear in mind that there are some points in dispute on the evidence although, as Miss May rightly points out, in fact, one could separate the points which are disputed on the evidence from the other issues which could be decided today. That is a factor, although a small factor. The real point (as I have already explained) is that it would prejudice the defendant's application. That is the reason I am going to stay the publication order.
16. I will add that an important element in all of these publication orders is that both parties are fully entitled to say whatever they like, subject to the general law relating to how they publicise or not the outcome of proceedings. Judgments are public in this country. The full judgment with the names of the parties will appear on the internet probably within the next 24 hours, if experience is anything to go by. The thought that the claimant will be deprived of a public opportunity to explain its success in these proceedings is not correct.

ISLAND RECORDS v TRING

17. I now need to decide some points relating to the precise drafting of what is known as the Island Records v Tring order ([1995] FSR 560). That is the order whereby the defendant provides information to allow the claimant to elect whether to seek an enquiry as to damages or an account of profits. There is no dispute that the claimant is entitled to an order. The issues relate to some details relating to its drafting.
18. Miss Himsworth states on instructions that her clients would need 56 days to provide the information which they propose should be provided. There was at least at one stage a suggestion that the extra information which the claimant says should be provided, and which I need to address in a minute, would potentially take even longer. I did not find that credible. Accordingly, the debate about 56 days does not really have anything to do with the other issues. The order will say 56 days. I still have to decide whether it should be stayed until October.
19. The first major question is whether the person verifying the statement should be as the claimant contends "the chief financial officer or financial director" of the defendant or should be the "officer of the defendant", as proposed by the defendant.
20. Having regard to the history of this case and the fact that the defendant's principal witness Mr. Waters had included financial information in his witness statement which, it is fair to say, he was not fully able to be sure about when he gave evidence, I accept the claimant's proposal. It is important that this evidence is verified by someone who is a person prepared to take proper responsibility for it and is at a senior level in the company. The only real difference, I suspect, between the wording analytically is that it could be conceivable that the person verifying it who was an officer of the defendant would be someone other than the financial officer which seems to me to make little sense.
21. Accordingly, I will adopt the claimant's wording.
22. The next question I have to decide is whether to do essentially two things.
23. It is agreed that the sales of the goods will be listed and it is also agreed that the revenues received and receivable will be set out. The issue is about the costs. The defendant says it should provide an "approximate estimate" of the costs with an explanation of how the estimate was calculated. The claimant submits that the term "approximate" should not be used in the order. The statement should indicate all the costs, explain how they were calculated and should be broken down into three groups: direct costs, indirect costs and "recharges for licence fees, buying fees, management, administration and/or shared services; and/or any other intergroup recharges".
24. The defendant submits that that sort of detail is unnecessary and disproportionate. The claimant submits that that sort of detail is necessary and is proportionate in order to allow the claimant to fairly make the election to which it is entitled.
25. In my judgment, the correct way to deal with this is as follows. The word "approximate" is not a sensible word to use in the circumstances. I will require the defendant to produce a fair estimate of all its costs which are said to be attributable to the infringing goods including a statement as to how the costs estimate was calculated.
26. I do not see any reason why the further breakdown is necessary. When the defendant comes to explain how the costs estimate was calculated it will be able, if it thinks it would be of assistance, to breakdown costs in some suitable way and it may find, before the election is made, the claimant says that it is not able fairly to elect. If the claimant can make a credible case that it cannot fairly elect based on the information which the defendant has provided, then it will be open to the claimant, if the defendant cannot agree, to come back to court before the election has to take place. There is a liberty to apply which is in the order and not in dispute. That is my decision.

STAY OF ISLAND RECORDS v TRING DISCLOSURE

27. I am afraid I am not going to stay the Island Records v Tring disclosure. It seems to me that there is no good reason to do so. The only potential reason which might have been relevant was a possible argument about the recoverability of costs in the event that an appeal went in the defendant's favour.
28. However, the parties are agreed and, I believe rightly, that, in so far as the defendant incurs what would otherwise be recoverable costs in complying with this order, and in the event that any appeal went in the defendant's favour, those recoverable costs would be costs which the defendant could in principle recover from the claimant provided of course it can persuade the court to make an appropriate order.
29. On that basis there will be no stay of the Island Records v Tring.

CPR 31.22

30. I will make the order under CPR 31.22 in relation to all the documents that you have drawn to my attention. You are quite right, of course, that it is a matter that should be drawn properly to the court's attention because the court should not simply make orders sealing up documents after trial without analysis.
31. The documents you are seeking to cover by a permanent 31.22 order fall into two categories. One is the confidential financial information which I have already redacted from the public form of the judgment for the reasons articulated in the evidence which I was provided with, I think, yesterday. Those figures, as they are broken down, are not publicly available and would be of significant advantage to the claimant's competitors. There is no good reason why the public needs to see each individual breakdown of those figures. That is a good reason why your clients are entitled to keep them confidential post trial.
32. The other documents are elements of your client's style guide. I must say at first sight it was not clear to me why the style guide for a retailer of clothing such as your client needs to be kept confidential, but you have explained to me what is a good reason, in that the details provided in the style guide would be of assistance to counterfeiters since they explain precisely how and where the branding is applied to your client's goods. It is notorious in counterfeiting cases that the one thing that counterfeiters really need to know is exactly how to apply the marks to the various goods in order to make counterfeits.
33. I am quite satisfied on that basis that this information should be the subject of a permanent 31.22 order.

COSTS

34. It now falls for me to deal with costs. This is one of the first times I have been required to get into much of the detail relating to the impact of costs budgeting on the costs orders which are made following trial. It is apparent, if I may say so without any disrespect, that it is also an early stage in both sides' legal teams having to deal with how costs budgeting impacts on the handling of costs after trial.
35. This case began in the Patents County Court (now called the Intellectual Property Enterprise Court), where costs are capped, and where costs budgeting does not apply. The action reached the point of the case management conference. In October 2013 there was an application by the defendant to transfer the case to the High Court. It was contested but was successful. From then on the case proceeded in the High Court. The matter came before Arnold J and at that stage the question of costs budgeting naturally arose, since the matter was to proceed in the High Court.
36. The parties exchanged budgets and attempted to agree them. The case management conference in the High Court was adjourned for the parties to send their costs budgets to the judge and to see if there was a necessity for a further hearing which would, of course, have been a costs management hearing. The parties exchanged budgets and exchanged correspondence dealing with detailed points which needed to be explained. The detail does not matter. In approximately December 2013 they were able to agree each parties' respective costs budget.
37. In accordance with the procedure the budgets include figures for the costs already incurred and estimates for the costs in future. The important one now is the claimant's budget. The claimant's budget agreed in December was dated 19th December 2013. In that budget a total of £185,937.20 (= £22,781.70 plus £163,155.50) had been incurred already. The balance to take the case to trial produced a total overall figure of £576,927.20. That was the budget which the defendant agreed was a budget for the claimant. A corresponding budget was agreed for the defendant by the claimant.
38. The budgets were sent to the court and an e-mail was sent to the judge's clerk explaining that the parties had agreed costs budgets. In the light of that agreement, they were awaiting the judge's instruction as to whether he still wished them to attend a case management conference. It was clear that the court decided there was no need for a further case management conference, having considered the budgets.
39. The effect of this was that, in fact, no costs management order was made at that time. This is important because rule 3.18 is as follows:

"In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –

(a) have regard to the receiving party's last approved or agreed budget for each phase of the proceedings; and

(b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so.

(Attention is drawn to rule 44.3(2)(a) and rule 44.3(5), which concern proportionality of costs.)"

40. A point taken by Miss Himsworth today is that, in fact, no costs management order has been made in these proceedings and therefore rule 3.18 does not apply.
41. Miss May submits that it would be quite unfair to regard this case as a case in which no costs management order had been made formally; given that it was quite clear that what was envisaged was that the court would consider the budgets and would call the parties in for a costs management hearing if the court was concerned about the budgets. Therefore, tacitly the court has approved the budgets. All that has happened is simply that in order to save costs and unnecessary expense, no formal order approving a costs budget has been made.
42. In my judgment Miss May's submission is right. It would be unfair, given the way this case has gone, to treat it as a case in which no costs management order had been made.
43. I should say that in future I think this is an indication that even when the parties have agreed and the court is satisfied that the budgets do not require the parties to attend for a costs management hearing, it will be necessary to ensure that a costs management order to that effect is made, even if it is made by consent with the court's approval.
44. The matter proceeded to trial and the parties exchanged further budgets and agreed them. The last of the claimant's budgets which was agreed by the defendant was a budget dated 11th June 2014. At that stage the incurred costs were £310,599.15 (= £37,481.65 plus £273,117.50) and the total was £628,129.15. That was a budget which the defendant agreed.
45. On 24th July 2014 the claimant's solicitors wrote to the court including a further budget which it sought to be approved. The point of the approval was to approve the increase in that budget from the previously agreed budget. That occasion was after the trial and after the draft judgment had been provided to the parties but before the judgment was formally handed down.
46. The increase was to take the figure of about £628,000 to £678,009.10. The increase involved two elements.
47. First, the actual costs incurred by the claimant until the date of that budget (19th July 2014) had reached a total of £644,829.10. In Mr. Walsh's evidence (who is the solicitor for the claimant) he explained that the reason for that increase was because the trial had started a day later than had been anticipated which increased the costs somewhat and also that the trial had included a day in the middle for the parties to prepare written closings and that increased the overall length of the proceedings.
48. Second, Mr. Walsh then explained the increase from about £644,000 to about £678,000. It related to the costs of dealing with the judgment and attending the hearing today. Those matters had not previously been included in the claimant's estimate.
49. I take into account my general experience of dealing with cases of this kind. I also bear in mind that at the time the claimant's budget was £628,129.15 (which had been agreed by the defendant), the defendant's budget (which had been agreed by the claimant) was a larger sum of £660,000. I find that the claimant's increased 19th July 2014 budget is reasonable. I will approve that increase in the budget.
50. That means that I have today made a costs management order such as one referred to in rule 3.18. I would have been more circumspect about making such an order had I not already made the finding that, in substance, a costs management order should be treated as having been made in these proceedings in December of last year. If it was the case that it could fairly be said that no costs management order had been made before, I would have approached the matter differently today.
51. The position before the court is that there is an approved budget for the winning party of £678,009.10.
52. The next matter I have to decide is a payment on account of costs. The claimants contend that they should receive an interim award equal to their actual costs spent to date which are, at least at the time they made the submission, £644,829. They referred to rule 3.18, which is that the court will not depart in assessing costs on a standard basis from an approved or agreed budget unless satisfied there is good reason to do so. They submitted that this rule has an impact when one comes to decide upon the correct sum by way of a payment on account or interim award of costs. The effect of the rule is that the irreducible minimum which one can fairly identify as the correct payment to be awarded should generally be the approved figure in the costs budget.
53. Miss Himsworth submits that that is not right. Her first submission was that rule 3.18 did not apply because there had been no formal costs management order in this case. I have already addressed that submission. As I said before, this case should be treated as a case in which a costs management order approving the parties' agreed budgets was made in December 2013.
54. The next point which Miss Himsworth makes is that because this case began in the Patents County Court, the recoverable costs which had actually been incurred for the period when the matter was in the PCC should be treated as being capped by the provisions applicable to the costs in the Patents County Court/IPEC at the time they were incurred.
55. At the time the first costs budget was approved in December 2013, approximately £185,000 had been incurred in the past. It is fair to say that a not trivial portion of those had been incurred after the matter had been transferred. Doing the best one can with the information one has, it would appear that a sum of the order of maybe £150,000 or so of the claimant's costs were incurred while the action was in the Patents County Court. If those costs were assessed using the costs capping procedure in the Patents County Court/IPEC, then the amount which would be recovered by a successful party would be a sum of the order of £17,000. The question is whether that should be taken into account in assessing the interim payment.
56. A relevant factor is that it is the paying party, that is to say the defendant, who wanted the case transferred to the High Court. The defendant wished for this action to be transferred to the High Court. That had the consequence that the costs capping provisions no longer applied. No order dealing with the impact on costs of the transfer of the case from the PCC/IPEC to the High Court was made when the matter was transferred. If the defendant had wanted a direction that after transfer and at the end of the case the costs capping provisions were to applied to the costs already incurred, it could have asked for such an order at the time of the transfer. In my judgment it is fair in this case not to take the costs capping provisions into account. That is not to say that in other cases and in other circumstances, a different result might be a fair one. In this case I do not take that factor into account.
57. The next point is as follows. The defendant submits that the fair quantification would be a sum of the order of £350,000. That is, I accept, a sum which one would ordinarily have awarded in a case like this before costs budgeting. The figure is a little over 50% of the incurred costs by the receiving party. Generally speaking, applying Mars v Teknowledge [2000] FSR 138, that would be the sort of figure one would expect to have awarded, possibly slightly more, possibly slightly less. The question is whether the costs budgeting rules have a significant impact on these orders.
58. I have an action with an approved costs budget of about £678,000 and a request by the claimant for an interim payment of about £644,000. The question is what is a fair sum to award. It seems to me that the principle applicable in Mars v Teknowledge is still the same as it ever was. The court should strive to ensure that it does not overpay and should select a figure which is an irreducible minimum.
59. Miss May refers to the sentence bridging pages 125 and 126 in the commentary on r3.18 in the current edition of the White Book. She submits that the impact of rule 3.18 is that unless there is a good reason to depart from the budget, the overall figure for assessed costs can never be less than the budget, but it can be less than the total of the budget sum, plus the reasonably incurred and reasonable in amount non-budgeted sum.
60. The sum sought by the claimants is essentially the budgeted sum at the time they asked for it. It seems to me that the impact of costs budgeting on the determination of a sum for a payment on account of costs is very significant although I am not persuaded that it is so significant that I should simply award the budgeted sum. Bearing in mind that unless there is good reason to depart from the budget, the budget will not be departed from, but also taking into account the vagaries of litigation and things that might occur and the fact that it is, at least, possible that the assessed costs will be less, although no good reason why that is so has been advanced before me, I will make an award of 90% of the sum in the claimant's budget (£644,829.10) rounded up to the nearest thousand. I will not do the mathematics in my head.