England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENT COURT

		19th January 1996

The plaintiff designs, makes and markets relocatable office partition systems. It calls its system "Avanti", As is usual in this sort of business the plaintiff has a technical brochure ("the Avanti brochure") which describes the details of the system and gives its technical specification. The Avanti brochure consists of four sheets including some small diagrams. The words of the brochure are the subject of copyright as a literary work. The copyright belongs to the plaintiff.

The first defendant (I am not concerned with the other defendant) produced a rival system to that of the plaintiff called "Ecosystem". It is compatible with that of the plaintiff So an ultimate customer, wishing to extend his Avanti system, could do so by buying the Ecosystem. The plaintiff, in a pending action, claims that the Ecosystem or parts of it infringe copyright in the design drawings for the Avanti system. Whether that is so remains to be decided in an action which could be heard in some months time. For present purposes, however, it was agreed that I should treat the actual manufacture and sale of the Ecosystem as lawful.

The first defendant took a short cut in preparing its technical brochure. It copied the very words of the Avanti brochure and thereby infringed the copyright therein. It has admitted it has done wrong thereby and submitted to judgment before Carnwath J on 18th July 1995. It also submitted to an inquiry as to the damages caused by its infringement of copyright in the Avanti brochure.

In that inquiry the plaintiff has served a Statement of Contentions. In a nutshell it says the damage attributable to the brochure is the entire consequence of the competition from the defendant's Ecosystem. So even though only 20 pirate brochures were distributed (presumably to all the Plaintiffs distributors) the damage caused is over £lm, excluding interest. The relevant Contentions are;

"7 The Defendant distributed the copies of the Defendant's Infringing Brochure to represent that its office partition system had exactly the same technical specifications as the Plaintiffs "Avanti" system and could be used in conjunction with the Plaintiffs "Avanti" system, and in particular sold to customers wishing to extend their existing "Avanti" system of office partitioning.

8. The Plaintiffs distributors were thereby offered the Defendant's cheaper office partition system as a direct substitute to the Plaintiffs "Avanti" system by the infringing act of issuing the Defendant's Infringing Brochure to the public.

9. The Defendant's infringing acts of printing copies of the Defendant's Infringing Brochure and issuing copies to the public had the effect of diverting sales of office partitioning and associated items from the Plaintiff to the Defendant.

10. Further, the Defendant intended to compete for the Plaintiffs business by printing and issuing to the public the aforesaid copies of the Defendant's Infringing Brochure. [Particulars of this are given, including reliance on the fact that directors of the defendant are ex-employees of the plaintiff].

Heads of Damage Claimed

11. The Plaintiff claims the following heads of loss and damage have flowed from the Defendant's acts of copyright infringement and foreseeably so:

(a) Past loss of sales of office partitioning and associated items. [Later paragraphs set out details of alleged lost sales which, in all, are put at £439,216.]

(b) Future lost sales made through distributors that moved to the Defendant. [Later paragraphs put this at not less than the sales already lost, i.e. £439,216.]

(c) "Springboard" into the market. The Defendant has achieved an accelerated market share and will enjoy sales to other distributors at the Plaintiffs expense as a result. [Later paragraphs put this at £20,000.]

(d) Price depression. The Plaintiff was compelled to lower its price below that which it would have been to reduce the effect of the Defendant's Infringing acts. This will continue to affect the Plaintiff in the future. [Later paragraphs put this at £46,960 for the past and not less than £93,920 for the future]."

There is also a claim for damages on the basis of a reasonable royalty, a claim with which I am not concerned. There is no claim for additional damages pursuant to s.97(2) of the Copyright Designs and Patents Act 1988.

The first defendant applies to have these paragraphs (including the later detailed paragraphs I have summarised in square brackets) struck out of the Contentions. It does so pursuant to the provisions of O.18 r. 19(1)) of the RSC. Although the summons refers to all the three sub-paragraphs of that rule and the inherent jurisdiction, it was agreed that the real question was one of law: assuming the facts alleged are true, do these paragraphs disclose a claim sustainable in law?

Mr Speck, for the plaintiff, put its case elegantly and succinctly thus:

(i) The losses would not have occurred but for the infringement;

(ii) The but for test is admittedly not a sufficient condition for damage to be recoverable, it is a necessary condition and it is satisfied here on the pleaded facts;

(iii) A further condition is that the damage must be a foreseeable consequence of the wrongful act. Here the damage is pleaded as intended, the extreme form of foreseeable;

(iv) Normally if the but for and foreseeability tests are satisfied by some claimed head of damage, then it is recoverable. The cases show that there has to be some policy reason why a head of damage satisfying both tests should be excluded. There can be no such policy reason here. On the contrary given that the damage was effectively intended (because the competition was intended), policy strongly suggests that it should be recoverable. Otherwise it will have paid the defendant to infringe.

Mr Speck says the clear analogy is with my own decision in Gerber v Lectra^[1]. I held that where a defendant had sold an article in breach of patent, the plaintiff could recover for the foreseeable damage which would not have been suffered but for the infringing sales. So I held that heads of damage the same or similar to those specified here were recoverable. In particular I held that damages for lost sales, price reduction, lost consequential sales of service and spares, and springboard were all recoverable as a result of the sales of the infringing article.

Mr Silverleaf, for the first defendant says the flaw in the apparent syllogism is that the heads of damage claimed do not flow from the infringement - the taking of the exact text of the brochure. They flow primarily from competition in (assumed) lawful articles. To the extent that that competition was induced or encouraged by the infringing brochure, it is not the text of the brochure which mattered at all. What mattered was the (true) message conveyed: that the Ecosystem was competition was induced or encouraged by the infringing brochure, it is not the text of the brochure which mattered at all. What mattered was the (true) message conveyed: that the Ecosystem was equivalent to the Avanti and cheaper. Indeed the starting point of the argument, paragraph 7 of the Contentions, does not place any reliance on the infringement (i.e. the taking of the text) as such at all. It relies on the message conveyed.

Mr Speck ripostes that this is merely saying that the defendant could have achieved the same effect by a non-infringing route. Such a defence has never been allowed in patent cases (it is proposition 4 in Gerber^[2]). The court is concerned to compensate the plaintiff for what the defendant has done wrongfully in those cases. The same should be true of copyright.

I think, however that Mr Silverleaf is right and that the riposte is no answer. The position is not the same as if the sale of the actual articles, the Ecosystem, was itself unlawful. One must concentrate here on what amounted to infringement. That was the taking and publishing of the text. The competition by the defendant did not depend on that. There is no sufficient nexus between the use of the actual text and the competition which is the cause of the alleged damage. Copyright protects the literary input of the author. What is complained of here does not relate to that input.

For the same reason I reject Mr Speck's suggestion that if the claimed damage is not recoverable it will have paid the defendant to infringe. It was not the taking of the text which paid, it was the competition in lawful articles which did not depend upon the text having been taken. The position is not the same as in Gerber, where, for instance, the plaintiffs lost sales of spares were crucially dependent on the lost sales of patented machines.

I am reinforced in my view by the authorities. First there is Paterson Zochonis v Merfarken^[3], also a strike out case. There a printer infringed copyright in the design of packaging. He was not liable for the subsequent passing off by his customer. Robert Goff LJ said^[4];

"The law of copyright is a self-contained branch of the law concerned with the protection of a particular proprietary right. The provisions regulating the protection of that right, including for example, those which provide for strict liability or liability based on fault, are framed with regard to a particular interest, viz the proprietary right in question. It would be undesirable as a matter of policy to extend the statutory remedies to recovery of damages in respect of the invasion of a different interest."

The policy which protects the literary input of the author from being taken does not extend to anything and everything which may happen thereafter. Mr Speck, skilfully and persistently, said Paterson was distinguishable. There the defendant was innocent of the use to which the box was to be put. Here the defendant knew and intended the use. But that is beside the point. It does not answer the crucial point that it is merely the message conveyed by which is alleged to have caused the damage.

Another way of looking at the problem is illustrated by another strike out case, Galoo v Bright Grahame Murray^[5]. The third plaintiff loaned money to and bought shares in the companies (then in liquidation) who were the other plaintiffs. The companies' own auditors had allegedly been negligent. It was said that the auditors, in breach of their duties (in contract and tort) to the companies, failed to discover that the companies were insolvent. If they had not been negligent (i.e. but for) the truth would have been apparent, the companies would have stopped trading, the third plaintiff would not have bought the shares and would not have loaned money to the companies. The claims by the companies and the third plaintiff were struck out. It was accepted that in the context there was no difference between the claims in contract and in tort^[6]. Glidewell LJ said^[7];

"If a breach of contract by a defendant is to be held to entitle the plaintiff to claim damages, it must first be held to have been an 'effective' or 'dominant' cause of his loss It is necessary to distinguish between a breach of contract which causes a loss to the plaintiff and one which merely gives the opportunity for him to sustain the loss, is helpful but leaves the question to be answered, How does the court decide whether the breach of duty was the cause of the loss or merely the occasion for the loss?'

The answer in my judgment is supplied by the Australian decisions to which I have referred, which I hold to represent the law of England as well as of Australia, in relation to a breach of duty imposed on a defendant whether by contract or in tort in a situation analogous to breach of contract. The answer in the end is 'By the application of the court's common sense.'

Here in my judgment and in my common sense the competition from the defendant was not effectively caused by the defendant's copying the text of the 4 page descriptive brochure. Accordingly I think the pleaded claim, even if true, would not entitle the plaintiff to the damages claimed. So I propose to strike out the relevant paragraphs.

Note 1   [1995] RPC 383    [Back]

Note 2   at p.394    [Back]

Note 3   [1986] 3 All ER 522.    [Back]

Note 4   at p.538    [Back]

Note 5   [1995] 1 All ER 16    [Back]

Note 6   see p.24h    [Back]

Note 7   p.29h    [Back]