England and Wales Patents County Court

IN THE PATENTS COUNTY COURT

		St Dunstan's House 133-137 Fetter Lane London, EC4A 1BT
		7th July 2011

HIS HONOUR JUDGE BIRSS:

1. This is an action for infringement of European Community Registered Design number 000908272-0001. It relates to door knobs. The Claimants, Martin Moore Ltd, instructed McDaniel & Co, represented before me today by Mr Gareth Tilley, are the proprietors of this registered design, and they contend that the Defendants, Mark Plant Ltd and Mr Mark Plant himself, have infringed it. The Defendants have instructed Barry's IP Lawyers, and they have Mr Hugo Cuddigan before me today.
2. The issue which falls to be decided is whether the action has settled. The sequence of events is as follows. On 19th November 2010 McDaniel & Co for the Claimants wrote to Mark Plant an essentially conventional letter before action, alleging infringement of registered design and unregistered design right. They also included a draft undertaking which would bring the proceedings to an end, and wrote that they required the Defendants to enter into the attached undertakings within fourteen days of the date of the letter, failing which their client would have no alternative but to commence proceedings against the Defendants without further expense. Correspondence ensued between the parties and the proceedings in fact were commenced on, I think it was 6th April. By that stage the claim was limited to a claim for a registered design infringement only.
3. The Defendants always made it clear that they denied infringement, and on 3rd May the Defendants' then solicitors, J H Powell & Co, wrote explaining that their clients did not accept they had infringed, also explaining that the total number of knobs which were involved in this case was 88 knobs, and that Mr Plant had no intention of using the design in future. Then the following paragraph appears at the end of the letter:

"Notwithstanding the above and entirely without prejudice, our client recognises the commercial expediency of settling at an early stage potentially expensive litigation. In that respect he offers to pay £1,000 towards your client's costs and disbursements to date. The backplate was supplied at cost and the knobs were a stock item from suppliers, hence no profit has been made. We will also include an undertaking not to use your client's registered design. This offer is in full and final settlement of all claims your client has."

There is no question that that was an offer capable of acceptance, and if it was accepted then it would bring the proceedings, at least as they were at that stage, to a conclusion.

4. On 3rd May, the very same day, McDaniel & Co wrote in reply:

"We are taking our client's instructions and will revert to you as soon as possible."

Then on 6th May McDaniel wrote a lengthy letter dealing with the merits of the case and, as they saw it, a lack of a defence, and then mentioned the offer on the third page of this letter, stating that:

"Your clients' offer is noted, upon which we are currently taking our client's instructions. However, we would make some comments on that offer."

They then proceeded for a page or so of text to suggest that the offer was not likely to be acceptable. However it was clear in this letter that they were still taking instructions on the matter.

5. On 10th May McDaniel then wrote, stating:

"We enclose by way of service our client's application for notice of default judgment."

This was on the footing that McDaniel understood that no acknowledge of service had been filed and therefore they were seeking judgment in default. Mr Cuddigan for the Defendants submits that that letter can and should be regarded as an unequivocal rejection of the offer to settle which had been made by his clients. In my judgment it might just be possible to construe it in that way were it not for the fact that ultimately it seems to me to be irrelevant, because on 12th May 2011, as a result of a change of solicitors on the Defendants' side from Messrs J H Powell to Barry's, Barry's wrote two letters. The first letter stated that they had not had the opportunity to take full instructions, but the second letter of the same day, headed: "Without prejudice save as to costs," states as follows:

"If your client is not prepared to accept our clients' offer, we ask that you indicate the amount your client would be prepared to accept and how any such sum has been calculated."

6. It seems to me that, first of all, the principle to be applied is to ask how would an objective person seeing this letter interpret such a letter? And it seems to me to be beyond any real doubt that an objective reader of this letter would understand that the offer from the Defendants to settle, which is also referred to in an earlier page in the same letter, was still open for acceptance. I can quite see that perhaps it might be thought that upon reflection the Defendants may regret that they did that, but it seems to me to be absolutely clear on an objective construction that that 12^th May letter makes it clear to the Claimants that the offer is still open at that stage. The real issue is what happened after that.
7. Another important element to the letter of 12th May was that it refers to the acknowledgement of service and also states:

"Our client also proposes to counterclaim for the invalidity of your client's design."

I will come back to that.

8. The next thing that happened is that Barry's wrote on 16th May. They indicated that they had found some prior art which they said rendered the community registered designs invalid for lack of novelty. The letter ended with the following paragraph:

"We ask that your client discontinue these proceedings forthwith, failing which we will apply to the court to have the action struck out and will bring this correspondence to the attention of the court on the issue of costs."

They then go on and deal with other matters.

9. Then on 17th May it is common ground that a phone call took place between Mr Barry and I think Mr Lee of McDaniel, and it is common ground that what happened is accurately set out in a letter of Barry's on 27th May, as follows:

"Having heard nothing from you, we attempted to contact your Mr Lee by telephone on 17th May. We called at 12.33 and left a message. We called again at 14.23, 15.24 and 15.25. On the final occasion it was only after asking to be put through to a partner that we were put through to Mr Lee. In the telephone conversation we told Mr Lee that in our view it was clear from the prior art that the claim was bound to fail. If his client did not discontinue the proceedings forthwith, our client would be forced to incur significant costs, which our client would seek to recover from the Claimant on an indemnity basis. We told Mr Lee that the purpose of the phone call was to give the Claimant a final warning of our clients' intentions. However, Mr Lee was not prepared to give assurances that the action would be discontinued. At that point the Claimant's solicitors can have been in no doubt that the offer made by our clients' previous solicitors was no longer open for acceptance. Our clients had clearly, unambiguously changed their position; nothing short of discontinuance was acceptable."

I should make clear, having just read out the entire paragraph, that I am not suggesting (and it is not suggested) that the last two sentences are accepted by the Claimants - those two sentences are a matter of comment. In effect they address the issue I have to decide.

10. Then on 19th May Barry's served a Defence and Counterclaim, which included the counterclaim for revocation based on the prior art that they had been referring to.
11. Also on 19th May I dealt on paper with the application for judgment in default. I dismissed that application. Then on the same day the court received an e-mail from the Claimants suggesting that that should be reconsidered. I decided not to reconsider it, which meant that the application was dismissed.
12. The next thing that happened was on 26th May, when McDaniel & Co wrote:

"We acknowledge receipt of your clients' defence and counterclaim. Whilst our position regarding the strength of our client's claim has not changed, it seems that this matter will quickly escalate into a costly dispute, therefore our client accepts your clients' offer as set out in the letter of J H Powell dated 3rd May 2011. We look forward to your Tomlin order in due course for consideration."

Mr Cuddigan for the Defendants submits that the comment about the strength of the case and the cost escalating was disingenuous - I do not need to resolve that matter in order to decide the matter before me. What is clear is that in the letter of 26th May the Claimants were purporting to accept the offer that they contend was still open. The issue I have to decide is whether, for various reasons, the offer was still open on 26th May. The Defendants contend that it was not, and I will deal with the reasons why; the Claimant of course contends that it was. Finally, I also have to decide, if the matter has settled, whether the settlement included the counterclaim for revocation.

13. The first question to decide is what was the effect of the events on 16th and 17th May. I put them together because in my judgment they effectively amount to the same thing. The Defendants submit that those events amount to a withdrawal of the offer that they had made. They say that it was made absolutely clear that circumstances were changing because of the new prior art, and what was asked was that the Claimant should discontinue the proceedings, failing which they would apply to have the action struck out and bring the matter to the attention of the court on the issue of costs. In the phone call the costs were referred to as to be considered on an indemnity basis.
14. In response, Mr Tilley submits that this is simply taking a step in the proceedings and cannot be expected to amount to a withdrawal of an offer. He also submits that on analysis the invitation to discontinue was not a statement with the status of a contractual offer because there was no possible consideration for that offer. In relation to the consideration point, Mr Cuddigan points out that if the claimants had accepted the offer to discontinue the proceedings, the consideration is that they would not have been liable for the costs of the action being struck out, either on the standard or indemnity basis.
15. In my judgment, looking at the matter as a whole, it is absolutely plain that by 26th May circumstances had changed. It seems to me that the correct analysis is that that is what happened, looking at 16th May, 17th May and for that matter 19th May, as a whole. In my judgment the correct approach is to take an objective construction of what was going on. To an objective party in the position of the Claimants, seeing what was emanating from the Defendants over the series of events from 16th, 17th and 19th, but in particular the 16th and 17th, it would have been clear that the Defendants had by then withdrawn the offer that they were making to settle these proceedings on the previous basis. It seems to me that once the Defendants were writing to say that the claimant should discontinue the proceedings, failing which the defendants would apply to strike the matter out because they had found new prior art, no reasonable claimant in the position that they were in could have thought that the offer was still on the table. It does seem to me that the offer was still on the table on 12th May, but the events on 16th and 17th May took it off. On that basis the offer was not open for acceptance.
16. I will also consider the argument that the offer would only be open for a reasonable time and that as a result would not have been open by 26^th May anyway. The parties agree that the reasonable ambit for the reasonable time was fourteen to twenty-eight days from the date of the offer. The problem about that is that fourteen days would mean it was not accepted in time, whereas twenty-eight days would, because the offer was accepted twenty-three days after it was made.
17. It seems to me that in the circumstances of this case Mr Cuddigan's submission is right, that the period in which the offer would be open would be a short one. He referred to a number of factors: the costliness of the litigation; the fact the offer was made at the beginning; the de minimis exploitation by his client; the undertaking was an undertaking to stop and there was no damages being offered, and only £1,000 was being offered by way of costs, which was clearly an offer which would only be attractive for a short period of time. However, while I accept Mr Cuddigan's submissions in general terms, it does seem to me that on 12th May his instructing solicitors made it clear the offer was still open. For me to hold that purely as a matter of effluxion of time the offer was not still open later on by 23rd May, would not be right.
18. It seems to me that what is right is that by then it was absolutely plain that the Defendants were not making an offer to settle this case on the basis that it had done on 3rd May. I will dismiss this application.
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HIS HONOUR JUDGE BIRSS:

19. It now falls for me to decide what to do about the costs. Under the rules applicable to Patents County Court CPR 63.26 says as follows:

"(1) Subject to paragraph (2), the court will reserve the costs of an application to the conclusion of the trial when they will be subject to summary assessment.

"(2) Where a party has behaved unreasonably the court will make an order for costs at the conclusion of the hearing."

Mr Cuddigan rightly points out that in my judgment dismissing this application I concluded that no reasonable claimant in the position of the Claimants in this case could have thought that the offer was still open for acceptance when they purported to accept it. He submits that that means that I have concluded that 63.26(2) is engaged.

20. In my judgment Mr Tilley is right: that is not a conclusion that 63.26(2) is engaged; 63.26(2) in my judgment is concerned with the behaviour of the parties in terms of the behaviour of the process of the court, and that is different from making assessment in relation to the objective construction of the parties' intentions, and I will therefore not apply sub (2), in which case sub (1) applies and the costs will be reserved.
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