England and Wales Patents County Court

IN THE PATENTS COUNTY COURT

		St. Dunstan's House 133-137 Fetter Lane London EC4A 1HD
		09/02/2011

His Honour Judge Birss QC :


 


1. I have before me today two inquiries as to damages for trade mark infringement. The two cases raise similar issues but are distinct from one another. They are also very similar to the cases I dealt with last year (see National Guild of Removers & Storers Ltd v Silveria (t/a C S Movers) [2010] EWPCC 15).
2. I assessed the damages due at the hearing on 20^th January 2011. Reasons needed to be provided later to deal with three matters arising. These are those reasons.

Background

3. The National Guild of Removers and Storers Ltd was incorporated in 1991 to represent members of the removals and storers industry. It aims to regulate and supervise its members to maintain amongst them a high level of professional competence and integrity. It runs an ombudsman scheme (the "Removals Industry Ombudsman Scheme") with a code of practice. There is also a scheme for annual inspections, performance monitoring and a conciliation service. The company holds various registered trade marks which members can use to show that they belong to the guild. In 2003 Which? magazine rated the guild as joint top of the trade associations they surveyed.
4. There are rules of membership which provide, amongst other things, for a licence under the trade marks so that the member can use the marks as part of their advertising, for example in Yellow Pages and similar directories. There are provisions dealing with termination and they include provisions for a licence fee to be payable for continued use of the marks post-termination. This might arise for example because the Yellow Pages directory is an annual publication. If, for the sake of argument, the termination took place in the middle of its publication year, the directory would obviously remain current until the end of that period year, including the advertisement containing the trade mark.
5. In the two cases before me the guild is the claimant and the defendant is someone who has infringed the claimant's trade marks and/or committed acts of passing off. It is convenient to deal with the cases together in this single judgment but the cases are distinct and were addressed separately on their merits. In each case Particulars of Claim were served, pleading a case of registered trade mark infringement and passing off. In each case judgment in default of acknowledgement of service and/or defence has been given:

i) in OCL 70067 (defendants: Mr and Mrs Jones) judgment was given on 21^st July 2010 and the order sealed on 23^rd July 2010;

ii) in OCL 70066 (defendant: Mr Mabberley) judgment was given on 21^st July 2010 and the order sealed on 21^st July 2010;

6. In each case an inquiry as to damages was ordered with directions in essentially the same form as I mentioned in my previous judgment (above). Neither of the defendants complied with the orders for disclosure or served any evidence.
7. Mr Jonathan Hill appeared for the claimant. The defendant in OCL 70066 did not appear and was not represented. In OCL 70067 one of the two defendants, Mr Simon Jones appeared and represented himself. In the course of his submissions Mr Jones made various points which could and should have been set out in evidence in accordance with the timetable and/or set out in skeleton argument. However hearing what Mr Jones had to say, it was clear that the best way to move forward was to allow the proceedings to continue in this way, providing of course the claimant was not taken by surprise. It was clear that there was no need to cross-examine the evidence from either side and Mr Hill was content for the court to approach the matter in this way and decide the inquiry. That was the most pragmatic and cost effective way to proceed.
8. Since Mr Jones was in court for the inquiry, I assessed the sums due then and there. Three points arose on which the parties were entitled to detailed reasons, which I reserved. The points are:

i) a question about the form of the order for the inquiry,

ii) a question relating to user damages for trade mark infringement; and

iii) consideration of Mr Jones' submissions and how they affect the rates employed to assess the damages.

(1) the form of the order for the inquiry.

9. The court's orders providing for both inquiries contain an obvious mistake. Each states that the inquiry is into damages for copyright infringement when they obviously ought to have referred to "trade mark" infringement. The error was made in the documents prepared by the claimant for the court at the stage of giving default judgment and was not picked up when the orders were made. It is obviously a slip. The cases are clearly concerned with trade mark infringement. Although I note that the Particulars of Claim do refer to copyright as well, the prayers for relief seek relief for trade mark infringement not copyright. There is no evidence anyone has been prejudiced by the mistake and I would be very surprised if they were. The claimant's evidence makes it clear these are trade mark cases. I will correct the mistake under CPR r 40.12. These inquiries are into damages for trade mark infringement.

(2) user damages for trade mark infringement

10. In General Tire v Firestone [1976] RPC 197 Lord Wilberforce set out two essential principles in valuing a claim for damages for patent infringement, first that the claimant has the burden of proving its loss and second that the defendants being wrongdoers, damages should be liberally assessed but that the object is to compensate the claimant and not punish the defendants (see p212 line 12-19). Plainly these principles apply here.
11. In my previous judgment (paragraphs 13 – 17) I addressed the question of whether damages assessed on a "user" principle were available for trade mark infringement and concluded that they were. Two relevant authorities were not addressed in that judgment and I will address them here. First in Roadtech Computer Systems Ltd v Mandata (Management and Data Services) Ltd [2000] ETMR 970 Master Bowman of the Chancery Division of the High Court recognised the doubt about the matter as a result of Dormueil Freres v Feraglow [1990] RPC 449 but held that since the 1994 Trade Marks Act provides that a trade mark is a property right, no distinction between patents and trade marks for the purpose of the user principle or assessment of damages as a royalty exists (see p974). This is entirely consistent with my previous judgment.
12. The second authority is Jacob LJ in Reed Executive Plc v Reed Business Information Ltd [2004] RPC 40. In this case Jacob LJ addressed the matter of user damages on an obiter basis (and Auld and Rix LJJ agreed). He said the following (at para 165):

"I would add only one further matter in relation to damages. I am by no means convinced that the "user" principle automatically applies in trade mark or passing off cases, especially where the "mark" concerned is not the sort of mark available for hire. The ordinary case is one that just protects goodwill. For damages to be awarded on the user principle is close to saying there is no damage so some will be invented. It is not the same sort of thing as having to pay for use of an invention (the basis of the user principle in patents). At present there is no clear finding that the inquiry should proceed on a user basis. Whether it should do so will be a matter for the Judge – who thus far has said no more than that he "apprehends" that a user basis will be used."

13. These observations are clearly on the point and of high authority. I need to consider them carefully. Jacob LJ draws a distinction between the ordinary case in which the mark just protects goodwill and another kind where the mark is the sort of mark available for hire. The ordinary cases are those in which the mark is used only by one business to distinguish its goods (or services) from those of all other competitive businesses. So for example to a consumer the trade mark "Flash" means a particular brand of cleaning fluid, nothing more. Competitors do not (I presume) pay the owners of Flash floor cleaner a royalty to use that mark on their own cleaning products. In that case the mark is never available to third parties to use for a fee at all. Jacob LJ's point that awarding user damages are close to awarding damages when there is really no damage at all, relates to that sort of case.
14. In the previous case, without the benefit of Jacob LJ's observations, I stated:

"In my judgment, as a matter of principle, where a defendant uses a mark without permission and thereby infringes a registered trade mark or commits an act of passing off, that act is capable of damaging the claimant's property in the mark (see s14(2) of the Trade Marks Act 1994) or property in the goodwill attaching to his business. That is so whether or not a lost sale has taken place. It is the same kind of damage as the damage to a patent monopoly caused by an infringing sale which is not a lost sale to the patentee and for which a reasonable royalty is payable. It is an invasion of a (lawful) monopoly." (Paragraph 17) [A reference to section 2 should be added beside the reference to s14(2) of the 1994 Act above.]

15. For the purpose of deciding the cases before me (and for that matter the previous case) and in the light of the Court of Appeal in the Reed case I do not have to go as far as I put the matter there. The two cases before me are cases in which the mark is, as Jacob LJ put it, "available for hire". It seems to me that whatever the position may be for the "ordinary" case, for the kind of case in which the proprietor licences others to use the trade mark and charges for its use, user damages are available for unlicensed infringing use of the mark. Jacob LJ's statement does not say otherwise. He merely held that such damages are not automatic in every case.
16. For this reason I assessed damages in these cases on the same legal basis as my previous judgment.

(3) Mr Jones submissions

17. Mr Jones contended before me that although the claim is pleaded on the basis that the business he and his now ex-wife conducted was carried on by them as a partnership, in fact the business was run through limited companies, first SPJ Removals Ltd and latterly ARM Associates Ltd. However this inquiry is not the occasion on which to take that point. The proper time to do that was at the stage that judgment was entered against Mr and Mrs Jones on 21^st July 2010. The judgment was a judgment in default of acknowledgement of service. After some discussion in court Mr Jones indicated to me that he was seeking time to take legal advice and, if so advised, to apply to set aside the default judgment since (he contended) the right defendant should have been the company. Whether such an application has any prospect of success at all I cannot say. Mr Hill submitted it did not and referred to correspondence between Mr Jones' accountants and the claimant's solicitors in autumn 2010. Rather than adjourning this inquiry I decided that the just thing to do was to conduct the inquiry and assess the damages but order that if an application to set aside is made, the payment would be stayed pending that application. It could be dealt with quickly and the only significant risk it seems to me would be that Mr Jones risks running up further costs if the application was made but failed.
18. As pleaded in the Particulars of Claim Mr and Mrs Jones are a partnership trading as ATR Removals. Mr Jones signed the contract joining the guild on 4^th April 2008. The relevant guild rules were the 2008 rules. The relevant parts of those rules is set out in paragraph 20-23 of my previous judgment. ATR Removals did not pay the second year's annual subscription and on that basis their membership came to an end on 2^nd July 2009. In September 2008 the guild wrote to Mr Jones confirming that his membership of the guild ended in July.
19. Despite no longer being a member of the guild and therefore having no right to use the trade marks, ATR Removals advertised their business in the 2009/10 Slough, Maidenhead and Bracknell Thomson Local directory using a form of advertisement which contained the guild's marks and used a website which continued to display one of the guild's marks. The website was changed to remove the marks when ATR Removals was contacted by the Guild. The directory obviously could not be changed and remained current afterwards.
20. The website explains that ATR Removals are a family run business established for over 28 years. The site displays two marks which are clearly designed to enhance ATR Removal's reputation with the public. The first is a Trading Standards logo with the words "Buying with confidence" and beside it the statement "Trading Standards Approved. We have been vetted and approved by trading standards to ensure that we operate in a legal, honest and fair way." The second is one of the guild's marks with the words "National GUILD of Removers and Storers" and beside that the statement "this logo identifies a safe remover. We are independently inspected and vetted by an 'ombudsman approved' removals inspectorate."
21. Mr Jones explained to me that his business was still approved by Trading Standards. He clearly regarded that as an important matter. It seems to me that the importance Mr Jones attached to the Trading Standards' approval also applies to the guild. Being able properly to demonstrate what are in effect certificates of good standing either from Trading Standards or the guild clearly has a commercial value. Mr Jones put a monetary value on membership of the guild to a removals business like his. He explained a proprietor of another removals business had estimated that membership of the guild was only worth about £6,000 in annual turnover and £1,500 in profit. Mr Jones' point was to seek to minimise the value of the guild's marks and therefore the damages owed. I cannot resolve whether Mr Jones' figures are an accurate assessment. It seems to me that the fact that the proprietor of a removals business felt able to put a figure on the value of guild membership is itself telling and actually supports the guild's position. The guild operates by putting its marks up for hire (subject to various other important safeguards no doubt) and the businesses paying the "rent" for the marks are doing so because what they are renting has a tangible commercial value to them.

The damages

22. In my previous decision, decided without hearing any submissions from any of the defendants, I decided that for unauthorised use of the marks in a case for which the 2008 guild rules were current, damages could be assessed at £200 per week (see National Guild v Silveria (above) paragraphs 20 - 26, 30, 38 and 42). This works out at £866.67 per month. Mr Hill submitted that that was the figure I should use on this inquiry. There were no relevant differences between the present case and the four in my previous judgment.
23. Mr Jones put forward the following points in support of his case:

i) He contended that the damages owed should be the annual fee the guild charges for its members. Mr Jones contended that fee he paid was £1,000 per year and that represents the right rate to use.

ii) He contended that the figure proposed by the claimant was out of scale with the value to his business of the use of the guild's marks.

iii) He contended that the period during which ATR Removals should be regarded as a member of the guild should continue for a further six months beyond July 2009 to take account of the guild's delays in sending him the marketing materials he should have received as a member.

iv) He contended that the letter in September 2009 should set the date of the end of his membership and not July 2009.

v) He contended that marks on the internet were seen by many more customers and potential customers than marks used in the paper directory and the damages ought to reflect that.

24. In my judgment some of Mr Jones' points are good ones to an extent and do lead to a reduction in the damages claimed. The fact these points were not taken in the previous case is irrelevant. In the previous case I did not have the benefit of hearing from any of the defendants. Mr Jones' case is distinct and he is entitled to defend himself.
25. I begin by reminding myself of the statement of Cozens Hardy MR in Meters v Metropolitan (1911) 28 RPC 157 at p161 line 31 dealing with assessing what a licence fee would be (in order to assess damages) in a case in which the claimant would not have granted a licence in practice. The Master of the Rolls said:

"Therefore in a case such as the present, where licences are not granted to anyone who asks for them for a fixed sum, it is a matter which is to be dealt with in the rough – doing the best one can, not attempting or professing to be minutely accurate – having regard to all the circumstances of the case and saying what upon the whole is the fair thing to be done. "

26. Taking Mr Jones' submissions in the same order as above:

Annual membership fee

27. On the matter of the annual fee, in my judgment Mr Jones' is right to the extent that the guild's annual fee is a relevant factor in assessing the damages but I do not accept that the matter is a simple as saying that the damages are the same as the annual fee. The guild's rules include provisions dealing with use of the marks after membership has ended and these rules therefore provide the starting point for assessing the guild's loss in those circumstances. However the overall exercise ought to take into account the annual fee in assessing the matter. These are damages for trade mark infringement, not for breach of contract, and the terms of the rules are relevant but not determinative. For the sake of argument if the guild were to write in an absurdly high run off fee in the contract that would not suddenly mean they would always be entitled to sums of that magnitude by way of damages for unlicensed trade mark use.
28. The 2008 rules (clause 4.1) provide that the annual membership fee is £2,750. Mr Jones contended that he had paid only £1,000 annual membership. Mr Hill and his instructing solicitor were not in a position to challenge this since Mr Jones had made no attempt to file his evidence in good time in accordance with the directions for this inquiry. Mr Hill submitted that to make the assessment I should rely on the figure set out in the rules (£2750). I agree. Mr Hill on instructions informed me that the annual fee remained the same in 2008 and 2009 (£2,750 according to the rules) but in 2010 it rose to £5,200.
29. For 2008 and 2009 damages of £200 per week would add up to £10,400 per year - just under four times the annual fee for that period. In my judgment that is too high and I will reduce the figure to £150 per week. Doing the best I can in the circumstances that seems to me to be a fair level. For 2010 the annual fee is £5,200 and so £200 per week gives a annual sum which is double the annual fee. I will not alter the £200 per week figure for 2010. In terms of monthly figures these weekly amounts become £650 per month in 2008/09 and £866.67 for 2010.

Out of scale with value of marks to ATR Removals

30. Mr Jones second point was that the damages figures were out of scale with the value to his business of the use of the guild's marks. He said (see paragraph 21 above) membership of the guild was only worth about £6,000 in annual turnover and £1,500 in profit. I accept the principle that the value of a mark to a business is relevant in assessing what they would have paid for the use, and that that must come into the overall consideration of the rate, but in my judgment on the facts of this case I should not adjust the figures any further. I am not doubting Mr Jones' sincerity in giving the estimate but I do not have sufficient evidence on this to satisfy me that the figures before me need to be adjusted.

Shift dates of membership

31. I do not accept that the membership period should be shifted by 6 months to take account of delays in receiving marketing materials. Even if there were delays as Mr Jones contends, and again by raising the matter so late the guild's representatives were in no position to deal with it, it does not matter. At best perhaps Mr Jones might have had a basis for a counterclaim or set off, but the point does not alter the membership period.

September 2009 letter

32. ATR Removals membership ended in July 2009 as a result of non-payment of the membership fees. In my judgment the September 2009 letter from the guild to ATR Removals does not alter that. It simply records that membership ended in July. It is no basis for reducing the damages.

Use on the internet as compared to use in a directory

33. As a matter of principle the nature and extent of the infringing use is obviously relevant to assessing the damage caused to the trade mark owner by the use. Mr Jones told me that today many more customers use the internet to find a removals firm than use paper directories. Mr Hill submitted to the contrary but accepted that in circumstances like these it would be quite absurd to adjourn the inquiry and call for proper evidence. He submitted that I should do my best with the material available.
34. In my judgment the use of the guild's mark by ATR Removals on the internet is likely to have been seen by more customers than the use in the advertisement in the directory. I accept Mr Jones's argument that the damages calculation ought to reflect this so that the sum due for the period when the website was in use should be higher than the sum for the period after the website had been changed. I will award damages at half rate, (£100 per week in 2010) for the period after the website was taken down to reflect the more limited exposure of the directory alone as compared to the website. That will produce a monthly rate of £433.33 for the period in 2010 after the website was changed.

Mr Mabberley t/a Abbeymove and Clear & Store

35. Mr Mabberley did not appear and was not represented. I used the same rates for Mr Mabberley as I have determined for Mr Jones.