England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY

		Royal Courts of Justice Strand, London, WC2A 2LL
		12/07/2010

MR. JUSTICE FLOYD :

1. In my judgment, dated 28th May 2010, I found that Qualtex UK had threatened to pass off vacuum cleaners by offering and selling a prototype vacuum cleaner at an exhibition in March 2009. However, in paragraphs 45 to 48 of my judgment, I came to the conclusion that that threat ended upon the service of the defence, which made clear that the prototype had been altered in significant ways, and gave an undertaking not to sell the unmodified prototype. The defence was served on 24th June 2009.
2. There are two disputes which remain to be resolved; the first is the question of the appropriate relief. The second is the question of who should bear the costs of the action.
3. So far as relief is concerned, I can divide it into declarations and injunction. Neither side asked for a declaration but to the extent that an injunction was sought by the claimant that must, in my view, be implicit.
4. Numatic seeks a declaration in the following terms:

"The Defendant has threatened to pass off vacuum cleaners as and for the vacuum cleaners of the Claimant, by the offer for sale and sale of vacuum cleaners having the appearance of the vacuum cleaner illustrated in the Schedule to the Order."

The schedule is of the vacuum cleaner exhibited at the exhibition.

5. Qualtex's form of order is as follows:

"(1) The Defendant has not passed off any vacuum cleaners, not of or connected with the Claimant, as and for such.

(2) Prior to the issue of the claim form herein on 19th May 2009 and up to the service of the defence on 24th June 2009 but not thereafter, the Defendant threatened to pass off vacuum cleaners as and for vacuum cleaners of the Claimant by their offer for sale and sale of vacuum cleaners having the get-up of the vacuum cleaner illustrated in the Schedule to this Order."

6. I propose to adopt the wording of paragraph 2 only of the Qualtex's draft, but using the word "appearance" rather than "get-up". It seems to me that that accurately reflects the findings that I have made in my judgment. Paragraph 1 of the Qualtex's draft seems to me to go further and potentially to be misleading. It may not be immediately apparent to the casual reader that the action for a passing off has succeeded to the limited extent indicated by the wording of paragraph 2.
7. I turn therefore to the question of the injunction. As I have held, there was no threat to sell the original prototype subsequent to the service of the defence on 24th June 2009. Therefore, it seems to me that there is no need for an injunction and no purpose in granting one. I therefore do not propose to do so.
8. Numatic suggests that there was a reasonable apprehension on the part of Numatic that Qualtex was not genuine in its intention not to sell the original prototype or colourable variations. I do not think that is justified. It is certainly true that the undertaking was not given until after the commencement of proceedings but there is in my judgment nothing to doubt its genuineness. The result is that there will be a declaration but no injunction.
9. I turn to costs. As the parties could not settle their dispute at the outset or following service of the defence, the action fought all the way to trial even though as I observed in my judgment, it only concerned the right of Qualtex to sell a product which it no longer intended to sell.
10. The approach to the question of costs is not in dispute. It is set out in CPR Part 44 and I do not repeat it here. The overall successful party is undoubtedly Numatic. The undertaking in the defence was given against the background of a denial of liability and of the entitlement of the claimant to any relief. Of course, by its nature it did not deal with costs.
11. I have been referred in detail to the correspondence between the parties, both open and without prejudice, save as to costs. The first significant offer following the defence is that made by Qualtex on 20th July 2009. They said this:

"In the light of recent events and on a commercial basis only, our clients have instructed us to put forward an offer on the basis that your clients discontinue the current proceedings, on the basis that each party pay their own costs to date."

12. The offer was expressed to remain open until 4pm on 31st July, following which it would be withdrawn. The offer was rejected by Numatic on the grounds that were it to be accepted, Numatic would cease to be protected by the interlocutory undertakings which had by that stage been given and also because it did not adequately address the issue of costs. In its letter of response Numatic went on to ask for more changes to be made to the modified prototype. The correspondence following that letter continued until August of 2009 without any agreement being reached, but with Qualtex indicating that Numatic should settle by paying 90% of Qualtex's costs.
13. The parties returned to the subject of disposing of the action in February 2010 in a letter of 1st February from Numatic's solicitors. In that letter they put forward an offer which involved acknowledging that the Qualtex final product, which they had by then received a sample of, was not something which would pass off. It went on to seek an undertaking from Qualtex, in somewhat wide form, including an undertaking not to use the bowler hat shape or any similar shape in the course of trade in vacuum cleaners. That offer met a very hostile response the following day directly from Mr. Hulme Senior, the chairman of and consultant to Qualtex.
14. On 28th April 2010 Qualtex's current solicitors wrote. Coming to the matter relatively fresh, they offered or suggested that Numatic should accept the undertaking in the defence and pay Qualtex's costs thereafter. They accepted in that letter for the first time, for the purposes of the offer, that Numatic had a realistic argument for payment of its costs up to the date of service of the defence, excluding the costs of what they described as "the irrelevant survey". They suggested that those costs were very likely to be far outweighed by the irrecoverable costs element of the very substantial costs subsequently incurred by their client. To the extent that that was the case, I would interject that it must be due in part to the defendant's failure to recognise the obligation to pay the costs at an earlier stage.
15. Relying on Carver v British Airports Authority Plc [2009] 1 WLR 113 2008 EWCA Civ 412, Qualtex says that the claimant here has achieved nothing of value beyond what was on offer from the defence, alternatively from the 20th July 2009 offer, or alternatively from the April 2010 offer.
16. On the face of it, Numatic has succeeded in a quia timet action. The bringing of the action is what I believe persuaded the defendant to change. On normal principles the claimant would be entitled to its costs absent some reason to make another order.
17. I therefore turn to whether either of the three offers should alter that position. I do not think that service of the defence should do so. The undertaking offered indicated that there was no longer a threat but the action and the entitlement to costs was hotly disputed. Mr. Baldwin, who appears for Qualtex suggested that some form of application could have been made at that stage or following the July 20th letter by Numatic but it seems to me that it is far from clear what application that could have been or what would have been its outcome.
18. The offer in July 2009 also took no account of costs. To be effective that offer would have had to make it clear that liability for costs up to the service of defence was at least in principle accepted. That was not done, the suggestion being that both sides should simply discontinue with no order as to costs.
19. The offer in April 2010 was made on the basis that it was unreasonable to pursue the action after the service of the defence. Again, given the defendant's attitude to costs, I do not think that it was. Subject to what follows therefore, I do not think that any offer made affords sufficient justification for me to deprive Numatic of its costs.
20. I therefore turn to two subsidiary questions. The first is the survey evidence. It is suggested that the survey was of no value and also that it racked up costs at an early stage which made the action difficult to settle. The survey was indeed subject to some criticism. It was not the subject of prior application to the court as has been suggested to be the appropriate procedure. Parts of it were unhelpful and all of it could have been better conducted. However, so far as the costs are concerned, I have little material on which to judge how much cheaper a better conducted survey would have been. I do not propose therefore at this stage to make any deduction in respect of those parts of the survey which were not useful, although the point will be in principle be open on assessment. It follows that I do not think that the conducting of the survey can be the subject of making a different order for costs either. What should have been done to accept at an early stage that the reasonable costs of the claimant up to that point were accepted.
21. Secondly, Mr. Baldwin runs, with less enthusiasm than his main points, the suggestion that I should make a deduction in respect of those aspects of the action which have not succeeded, namely actual as opposed to threatened passing off and the existence of a continuing threat. I do think that a small deduction is in order to reflect the fact that Numatic lost on the question of the existence of a continuing threat. Some significant time at the trial was taken up on this although I suspect it is a small amount in relation to the overall costs of bringing the action to trial.
22. I propose to make a deduction of 5% from the Numatic's costs and a further 2.5% to take account of the Qualtex's costs on this issue, given that their costs are roughly one half of those of Numatic. The result is that the Numatic will recover 92.5% of its costs as a result of that deduction.
23. So far as actual passing off versus threatened passing off is concerned, I do not believe there is a sufficient distinction between the two issues to justify making a deduction. Evidence which is relevant to one is relevant to the other. Therefore, I do not propose to make any deduction in respect of that.
24. In the result therefore, and in summary, there will be a declaration in the form that I have indicated but no injunction. The claimant will recover 92.5% of its costs to be assessed.

MR. BLOCH: My Lord, the only outstanding issue is the question of the sum on account. We have the costs schedule, which one finds in bundle P behind tab 12. My Lord has already heard that the total sum is, as my learned friends would characterise it, "an outrageous £800,000" or slightly more. Of course, at this stage my Lord will only order that sum which you are satisfied falls within that which we might ultimately get. It makes little sense, I suspect, to go through item by item but I would ask for £450,000.

MR. JUSTICE FLOYD: Mr. Baldwin.

MR BALDWIN: My Lord, that figure is too high. The first thing that one does in assessing an interim bill is, as my learned friend said, you have to be satisfied that you will recover this in any event. The first thing is you have to ask yourself is why is theirs twice ours. His interim suggestion of £450,000 is £50,000, talking in round figures, higher than ours. We would be anticipating a substantial reduction in their costs from £800,000 down to something sensible because nothing actually has been put forward as to why theirs is twice ours. They have a talented legal team, but I have had a talented legal team supporting me as well.

MR. JUSTICE FLOYD: Yes. I suppose the claimant makes rather more of the running in a passing off case as you have to marshal all the witnesses and so on, but that does not justify the factor of two.

MR. BALDWIN: Indeed but there has to be some justification for being way over what our costs are. What we would be suggesting is, if you take a figure of say 60% of our costs, that would be something you can be pretty confident about that we would have to pay, which is £120,000, ballpark -- no, that is not right.

MR. JUSTICE FLOYD: £240,000.

MR. BALDWIN: Yes. That is the figure we will be suggesting.

MR. JUSTICE FLOYD: Yes I will make it an interim payment in the sum of £300,000.

MR. BLOCH: My Lord.

MR. JUSTICE FLOYD: Does that deal with everything? MR. BLOCH: I do not know whether interest has been agreed. We may have to deal with that.

MR. BALDWIN: 28 days for the payment of the interim order?

MR. JUSTICE FLOYD: 28 days. Thank you both very much indeed.