Uwug Ltd & Anor v Ball (t/a Red)

In an inquiry into damages for infringement of registered and unregistered design rights, loss must be caused by the infringement. A claimant seeking lost profits from supplies that the defendant allegedly should have made must prove both the financial ability and willingness to purchase those supplies. A reasonable royalty under the user principle is assessed by reference to the terms that would probably have been agreed in a hypothetical licence negotiation. An earlier draft proposal may provide the best evidence of the appropriate rate, even though it was never communicated to the infringer.

The claimants sought damages following an earlier finding that Derek Ball had infringed registered and unregistered design rights in a metal frame. The inquiry concerned lost profits on sales that Uwug Ltd allegedly would have made, profits on associated goods, a reasonable royalty for sales unaffected by the infringement, and loss of future business opportunities.

The court examined whether Uwug had been financially able and willing to purchase further frames, and what royalty would have been agreed in a hypothetical negotiation. The central issues were causation and the proper measure of damages.

1. Lost profits on sales by Uwug. The claimant had to establish that Uwug was financially able and willing to buy the second batch of frames from Mr Ball. The evidence showed that Uwug was unable, or increasingly unable, to pay and, in any event, was not prepared to buy further frames after the first batch. The breakdown in the parties’ relationship and the decision to seek another manufacturer were the real reasons for the failure to purchase. Mr Ball’s infringing sales therefore did not cause the claimed lost profits.
2. Convoyed goods. Since the alleged lost frame sales were not caused by the infringement, the related claim for lost profits on convoyed goods also failed.
3. User principle. The proper hypothesis was a negotiation in February 2011 for a licence permitting Mr Ball to sell the frames lawfully. The amount proposed for sales by Uwug did not necessarily represent the royalty Mr Ball would have paid for his own sales. The draft agreement prepared by Mr Haiss, although never sent to Mr Ball and never negotiated, was the best guide to the likely bargain. Taking account of its terms and the surrounding circumstances, the appropriate royalty was 10% of Mr Ball’s selling price for each infringing frame sold to a third party.
4. Future loss. The claimant’s case assumed that a profitable frame business would have been established and continued. That business was not shown to have failed because of Mr Ball’s infringement, and there was no evidence of an alternative supplier ready to support it. The claim for future loss was rejected.
5. Mr Haiss was accordingly entitled to damages equivalent to 10% of Mr Ball’s selling price for each infringing frame sold to a third party. The parties were left to calculate the sum, with interest to be addressed separately.