England and Wales High Court (Patents Court) Decisions

B E T W E E N

Miss Denise McFarland instructed by Martineau Johnson for the First and Third Defendants

This is the official judgment of the court and I direct that no further note or transcript be made

DATED: 1st May 1998

1. This is the judgment on the trial of a preliminary issue in a registered design action. The plaintiff, Carflow Products (UK) Limited is the registered proprietor of design no. 2024874 which is for a type of car security device known as a steering wheel lock. The First defendant, Linwood Securities (Birmingham) Limited, manufactures and markets a steering wheel lock under the trade mark "TOPLOCK". Carflow alleged that the TOPLOCK infringed its registered design and certain unregistered design rights relating to its own steering wheel lock sold under the name "LONGARM". The second defendant, Argos Distributors Limited, is a company in the Argos group which runs the well known Argos shops. It has been a customer of Linwood for the TOPLOCK. The third defendant, Mr. Martin Bond, is the managing director of Linwood. It is not clear what activities of Mr. Bond, if any, justified making him a defendant to these proceedings.

2. The issues of validity and infringement of the registered design came before Jacob J. in July of 1996. There was a finding that the registered design had not been infringed. The counterclaim for cancellation of the registration was discontinued on the application of the first and third defendants. However certain statements had been made by Carflow to Argos in respect of its sales of TOPLOCK. It is not now in dispute that those statements amounted to threats within section 26 of the Registered Designs Act, 1949. The defendants counterclaimed for relief under that section. In view of the finding of non-infringement, Carflow was not in a position to justify. The defendants also counterclaimed in respect of actionable threats in relation to design right under section 253(1) of the Copyright Designs and Patents Act, 1988. Carflow had no defence to that claim either. The result is that Jacob J. gave judgment for the defendants on that part of the counterclaim and ordered an inquiry as to damages for threats.

3. On 15 November 1996 I gave directions in the inquiry. However that was immediately followed by the commencement of a second action by Carflow in which it asserted that there had been fraud and a conspiracy to pervert the course of justice at the hearing of the first action. In view of this, the inquiry in this action was stayed. The second action came on for trial before Jacob J. and was dismissed in June 1997. The stay was lifted.

4. There is no dispute that threats were made to Argos and that subsequently Argos withdrew the TOPLOCK from sale and from its proposed next catalogue. Those actions are said to have caused considerable financial loss to Linwood. However Carflow's position is that such losses were not caused by the threats. It says that the relevant decisions to withdraw the product were only taken after the Writ in this action was served on Argos on 6 April 1995. It was the commencement of these proceedings and not the threats which caused any loss.

5. The losses said to have been caused by Argos' decision to withdraw TOPLOCK are a substantial part of the damages claimed. On 13 January 1998 I ordered the trial of the following preliminary issue:

6. It is that preliminary issue which I have now to decide.

9. To determine whether or not the proven threats caused the losses said to flow from Argos' decision to withdraw TOPLOCK from sale and from the catalogue, it is first necessary to decide, on a balance of probabilities, why that decision was taken. On this issue three witnesses were called. On Linwood's side, Mr. Bond gave evidence. He told me what he believed to be the reasons for Argos having taken the decision, but was not party to Argos' decision making. His beliefs, although sincerely held, do not help me to decide what in fact motivated Argos. The other witnesses both came from Argos. As Miss McFarland noted, Argos supplied witnesses "effectively off their own bat". Those witnesses are Miss Sally Hopwood, Company Solicitor to Argos and Mr. Adrian Linger, Argos' Buyer who had responsibility for the TOPLOCK product. It is not suggested that Argos was in any way in Carflow's pocket. On the contrary, Carflow is not one of Argos' suppliers. Linwood still is. The evidence produced was drafted by Argos without help from Carflow or Linwood or their respective lawyers. The independence of Miss Hopwood and Mr. Linger was not challenged by either side.

10. Before turning to the evidence from these two witnesses, it is useful to have in mind the chronology of events. On 10 February, 1995 Messrs Withers & Rogers, Carflow's Patent Agents, sent the threatening letter to Argos. It contains the following passages:

11. The reference to two inconsistent deadlines, one of one week and the other of two weeks, is somewhat confusing. On 13 February, Mrs Hopwood responded on behalf of Argos. She noted that a copy of the registered design was not enclosed with Withers & Rogers' letter and said that she could not advise her client until that was supplied. She also said that Argos was taking Carflow's allegations seriously and would act promptly when the registered design was received. On 15 February Withers & Rogers replied. They enclosed a copy of the registration and extended the deadline(s) until 23 February. On 22 February Miss Hopwood gave Argos' response. It denied infringement and said the dispute should be resolved between Carflow and Linwood. No undertakings to withdraw the TOPLOCK from the market were given. Argos continued to sell the product and progressed plans to put it in its forthcoming catalogue. Nothing was heard from Carflow for another six weeks. Then, on 6 April, the defendants were served with the Writ in the current proceedings together with a notice of motion for interlocutory relief. On 18 April, Argos decided internally that unless there was a material change in circumstances it would not feature TOPLOCK in the Autumn/Winter 1995 Catalogue. It also decided to extricate itself from the proceedings by offering to drop the product. The product was withdrawn on 4 May. A settlement of the interlocutory proceedings between Argos and Carflow was entered into. On 13 May Mr. Linger withdrew the product from the next catalogue. Two days later Carflow released Argos from its undertaking. Argos put TOPLOCK back on sale some ten days later but it was too late to be reinserted in the catalogue.

12. Miss Hopwood supplies the internal advice which informs Argos in relation to legal problems which arise from time to time. In her witness statement she said that, on receipt of the threatening letter she made inquiries about the product, its sales performance and the relationship with the supplier. She said that she discovered that the product was due to be inserted in the Autumn/Winter 1995 Catalogue and that a warranty had been obtained from Linwood. She said that Argos could have withdrawn TOPLOCK at that time, but it did not. However she did fax Linwood on 22 February as follows:

13. Her witness statement then states as follows:

14. She said that it was as a consequence of this that the decisions were taken to offer to withdraw TOPLOCK from sale and to withdraw it from the catalogue.

15. Miss Hopwood's oral evidence was clear and straightforward. She said that the decision to withdraw the product was primarily caused by the issue of the proceedings because she was concerned about the effect of the interlocutory injunction being sought. She was asked what would have happened if no proceedings had been commenced. She said that although it would have depended on all the circumstances "in all probability we would not have withdrawn" the product. She said that when the threatening letter was received "we considered whether to withdraw the product from sale but decided not to do so." This evidence was amplified later on. She said that Argos decided not to withdraw the product from sale at that time but kept that decision under review. She said that the review was not very active "until the Writ was issued". She also said that "if we had wanted to withdraw it we would have, but the Writ changed the circumstances." She confirmed that it was unlikely that Argos would have withdrawn the product had the Writ not been served.

16. Mr. Linger's witness statement explains that he was

17. Mr. Linger's oral evidence was brief. He said that the selection of products to include in the Autumn/Winter catalogue was made by 12 January. There was a review on 10 February. He said that it is very unusual after that date to make a change in the catalogue contents although it is possible to do so, with ever mounting inconvenience and cost, until the end of April or beginning of May. He said firmly that the decision to include TOPLOCK in the catalogue was taken in January and that Argos "was not deterred by the threat" from Withers & Rogers. He said that such threats are received from time to time.

18. In my view, on this evidence it is impossible to conclude that the threats caused the losses which may have been incurred by Linwood arising from its three week withdrawal from sale and the permanent removal from the Autumn/Winter catalogue. It seems to me that once the deadline in the Withers & Rogers letter had passed, it was most unlikely that Argos would withdraw TOPLOCK. Not only is this the effect of Miss Hopwood's and Mr. Linger's evidence, but it fits in with the commercial requirements of Argos. Argos' position was protected to some extent by its warranty from Linwood. Furthermore it had already taken the decision to put the product in the next catalogue. The normal last date for that decision had passed. Although it would have been possible to withdraw the product up to the end of April, as Mr. Linger made clear, that would be a progressively harder and more expensive decision to implement. Once Argos had reached the beginning of March, the prospect of it withdrawing TOPLOCK from sale diminished further. On the balance of probabilities the effect of the threatening letter was spent by the end of February once the extended deadline had passed. What caused the product to be removed from sale and deleted from the catalogue was the commencement of the action and the service of the Notice of Motion.

19. Miss McFarland said that there had been no waiver of the original threat and that the Writ merely "crystallised" it. She said that the decision to withdraw the product had its roots in and sprang from the threat. Its echoes continue.

20. These attractive expressions do not change the reality. Absent the Writ the product would not have been withdrawn. The Writ did not crystallise the threat. It was an entirely new event which determined Argos' future actions. It is apparent that Carflow issued the threat for the purpose of driving Argos to drop TOPLOCK. It was because the threat was unsuccessful that Argos was sued. That achieved for Carflow what its threat had failed to achieve. Once the Writ had been served, the prior correspondence was of little more than historical interest. It played no part in the decision to withdraw TOPLOCK.

21. For these reasons the question posed in the preliminary issue is answered in the negative.