Kohler Mira Ltd v Bristan Group Ltd

In an inquiry into damages for infringement of unregistered design right, recovery is not limited to losses relating to products protected by the infringed right. Loss concerning unprotected products may be recovered where it is foreseeable, caused by the infringement in the common-sense sense, and not excluded by public or social policy.

Where lost sales cannot be assessed on a rational evidential basis, damages may be assessed by a reasonable royalty. The hypothetical negotiation assumes willing parties and may take account of the defendant’s available profits and alternative licensing opportunities. Overheads are deductible only where the infringing business increased them. Moral prejudice under article 13(1)(a) of the Intellectual Property Enforcement Directive concerns non-economic loss.

The claimant sought an inquiry into damages after an earlier judgment found that three electric showers sold by the defendant infringed certain UK unregistered design rights. The registered design claims had failed.

The claimant claimed lost profits, a reasonable royalty, additional advertising and promotional costs, and a 10 per cent uplift for moral prejudice under article 13(1)(a) of Directive 2004/48/EC. The defendant also sought to rely for the first time on the innocence defence in section 233(1) of the Copyright, Designs and Patents Act 1988.

The issues were whether the late defence could be raised, whether it was established, and how damages should be assessed.

1. Late innocence defence. The defendant was not entitled to rely on section 233(1) of the Copyright, Designs and Patents Act 1988 for the first time at the damages inquiry. Parties should know the arguments being advanced by the close of pleadings, particularly in the IPEC. A defendant wishing to rely on the provision should plead it in the liability proceedings. The policy of finality and proper case management outweighed the defendant’s reasons for raising it late.
2. Alternative basis. If the defence had been available, it would have failed. The defendant had not shown that, at the time of infringement, it neither knew nor had reason to believe that design right subsisted. In the context of industrial articles, a reasonable person will generally have reason to suppose that design right subsists. The assessment remains fact-sensitive, including the age of the design and the results of reasonable inquiries.
3. Lost sales. Applying Livingstone v Rawyards Coal Co and Gerber Garment Technology Inc v Lectra Systems Ltd, loss relating to unprotected products may in principle be recovered. The loss must be foreseeable, caused by the infringement in the common-sense sense, and not excluded by public or social policy. The claimant’s evidence did not provide a rational basis for estimating lost sales, so no lost-profit award was made.
4. Royalty. A reasonable royalty was assessed on all 63,204 infringing sales. The hypothetical parties were willing licensors and licensees, and alternative licensing opportunities were relevant. Following the approach in 32 Red plc v WHG (International) Limited, the available-profit method was adopted. The defendant’s net profit was calculated after disallowing general warehousing, distribution, selling and administrative overheads, consistently with Hollister Inc v Medik Ostomy Supplies Ltd. Thirty per cent of the available profit was allocated to the claimant, producing a royalty of 6.7 per cent of the defendant’s sales price.
5. No award was made for additional promotion. The claim for a 10 per cent uplift failed because the alleged loss of exclusivity was economic, whereas moral prejudice under article 13(1)(a) concerned non-economic loss.
6. Order. Damages were awarded at 6.7 per cent of the price at which the infringing showers were sold. No damages were excluded under section 233(1).