32Red Plc v WHG (International) Ltd& Ors

Damages for trade mark infringement may be assessed on the user principle by reference to the sum that reasonable parties would have agreed for permission to use the mark. The hypothetical negotiation concerns the actual parties, with their objective strengths, weaknesses and commercial circumstances, while disregarding unwillingness to contract or unreasonable personal characteristics.

Available alternative courses of action are relevant if they could coexist with the assumed infringement. A defendant may therefore rely on the relatively low cost of re-branding when negotiating a royalty, even though the substitute mark need not have identical attributes. The licence must reflect the infringement that occurred, including its subject matter, duration and practical exclusivity.

The claimant owned trade marks incorporating the name 32Red. The defendants operated an online casino under the confusingly similar name 32Vegas between December 2008 and August 2009, thereby infringing the claimant’s United Kingdom and Community trade marks. The infringement and the relevant trade mark findings had been established at trial and on appeal.

The claimant accepted that it could not prove lost profits and sought damages calculated as a reasonable royalty under the user principle. The defendants accepted that such damages could potentially be available, but contended that the sum should be modest because the casino operated within a carousel of brands and could readily have been re-branded. The principal issues concerned the relevance of the parties’ characteristics and circumstances, and of alternative courses of action, in the hypothetical negotiation.

1. Applicable principle. The court assessed damages on the user principle: a person who wrongfully uses another’s property may be required to pay a reasonable sum for that use. The assessment remained compensatory. It required consideration of what sum would have been agreed in a hypothetical negotiation between reasonable parties at the date of infringement, using the information and commercial context then available. The parties were the actual parties, but were assumed to be willing to negotiate and to act reasonably.
2. Relevant circumstances. Objective circumstances affecting the value of the use were relevant. Financial inability to pay, personal characteristics and an actual unwillingness to contract were not. The hypothetical licence concerned permission to use 32Vegas, not permission to use the claimant’s own 32Red name. It was for the period of infringement, although the parties would have considered benefits obtained after that period. It was effectively exclusive because that reflected the practical reality.
3. Alternative courses. The availability and cost of re-branding were central to the negotiation. The alternative did not need to possess all the attributes of the infringing name. It could be considered provided it was consistent with the assumed agreement that the infringement would occur and did not eliminate the infringement itself.
4. Valuation. The available comparables were of limited assistance because they concerned materially different brands, transactions or commercial arrangements. The economic benefits to the defendants supplied the best starting point. The evidence indicated that the carousel model made individual brands relatively unimportant and that re-branding had caused no demonstrated significant financial damage, although some allowance was appropriate for inconvenience, disruption risk, continued benefits and practical exclusivity.
5. Disposition. A royalty substantially exceeding the defendants’ likely re-branding costs would have been disproportionate. Doing the best possible on the evidence, the court assessed the licence fee at £150,000 and awarded that sum as damages.

The infringement findings were made at trial by Henderson J in [2011] EWHC 62 (Ch). The Court of Appeal subsequently reached a different conclusion concerning infringement of the United Kingdom mark: [2012] EWCA Civ 19. An inquiry as to damages was then conducted before the present court, which awarded £150,000.