The National Guild of Removers and Storers Ltd v Statham & Ors

User-principle damages are compensatory. The court assesses the sum that reasonable parties would have negotiated for permission to carry out the infringing acts, taking account of the parties’ bargaining positions and the commercial circumstances at the date of breach.

The hypothetical licence normally covers only the right infringed and the period of infringement, but its terms may reflect the realities of the parties’ negotiations. A reasonable expectation of third-party use may be considered, whereas hindsight about the actual number of users is generally inappropriate. Unenforceable penalty provisions are not a sound benchmark for the hypothetical bargain.

The claimant trade body obtained summary judgment for passing off against the defendants, who had represented on a third-party website that their removal business remained an NGRS member after membership ended.

The inquiry concerned damages. NGRS claimed £26,866.77, calculated by reference to a post-termination payment of £200 per week. The defendants argued that the relevant website pages had been viewed only by NGRS’s employees and lawyers, that they had promptly removed the representations, and that damages should instead reflect the practical membership fees charged by NGRS.

The central issue was the licence fee that willing parties would hypothetically have negotiated for the relevant use of the NGRS name.

1. Applicable approach. The user principle was a legitimate basis for assessing damages. The court applied the compensatory approach and the hypothetical-negotiation principles identified in Force India Formula One Team Limited v 1 Malaysia Racing Team Sdn Bhd [2012] EWHC 606 (Ch) and 32Red OKC v WHG (International) Limited [2013] EWHC 815 (Ch), as summarised in Henderson v All Around the World Recordings Limited [2014] EWHC 3087 (IPEC).
2. The hypothetical negotiations were to be conducted immediately before membership ended. The licence was directed to the right infringed and the period of infringement. However, the parties could be assumed to negotiate terms reflecting commercial reality, including a longer fixed licence term where appropriate.
3. The parties could be taken to have in mind the use actually made by the defendants, including the relevant website listing, but not the precise number of future website visitors. The proper basis was a reasonable expectation of third-party use, not hindsight based on the limited number of actual users.
4. The post-termination provisions in the NGRS membership rules could be relevant evidence, as in the earlier Silveria and Jones inquiries, but they were not determinative. If those provisions had been shown to be unenforceable penalty clauses, reasonable parties would not have treated them as a sound basis for negotiation.
5. The evidence showed that the defendants would have accepted full NGRS membership for three years, covering the two and a half years of actual use. The evidence also established that NGRS commonly charged between £1,500 and £1,800 per year, and NGRS produced no evidence contradicting it. The appropriate annual fee was therefore £1,800.
6. The defendants were ordered to pay £5,400 damages, representing three years’ membership, plus interest. The court reserved the appropriate rate and period of interest for further submissions.