Stretchline Intellectual Properties Ltd v H & M Hennes & Mauritz UK Ltd

An injunction for breach of a settlement agreement is discretionary and preventive. Where the agreement regulates conduct akin to patent infringement, the court may apply the principles governing permanent injunctions in intellectual property cases. Relief may be refused where the breaches are historic, further breach is unlikely, and an injunction would be disproportionate or inconsistent with an agreed contractual procedure.

An account of profits is not ordinarily available for breach of contract merely because the contract concerns intellectual property rights. It remains an exceptional and discretionary remedy. A claimant is not entitled to an election between an account and damages unless circumstances justify such relief.

Following an earlier judgment finding breach of a settlement agreement, Stretchline sought an injunction restraining further breaches and disclosure to enable it to elect between an account of profits and an inquiry as to damages.

The settlement agreement regulated H&M’s supply and sale of garments containing fusible yarn. It also required the parties to co-operate when a potential breach was identified. The court had to decide whether further breach was likely, whether an injunction was appropriate, and whether an account of profits could be ordered for breach of contract.

1. Injunction. An injunction is a discretionary and preventive remedy. The relevant question was whether further breach was likely and whether relief was appropriate in all the circumstances. The court applied the principles stated in Cantor Gaming Ltd v GameAccount Global Ltd and Coflexip SA v Stolt Comex Seaway MS Ltd. The same approach could apply where a settlement agreement prohibited conduct akin to patent infringement.
2. The identified breaches were historic. The relevant suppliers were no longer used, no infringing items had been identified for almost two years, and H&M had taken steps to prevent recurrence. The court was satisfied that further infringement was unlikely. Granting an injunction could expose H&M to disproportionate contempt consequences for accidental infringement. The preventive principle in Proctor v Bayley therefore justified refusal of relief.
3. Clause 3.3 of the settlement agreement established a mandatory co-operation and investigation procedure for suspected breaches. It would be inconsistent with that agreed arrangement to give H&M an immediate exposure to contempt proceedings. A further breach might justify a different conclusion, but that point had not yet been reached. The injunction was refused on the basis of H&M’s undertaking to send a further compliance letter to suppliers and disclose it.
4. The injunction sought was in any event too broad because it extended beyond the United Kingdom and beyond the patent in respect of which breach had been established. Allegations concerning other patents or foreign sales could be considered, if properly pursued, in a damages inquiry.
5. Account of profits. The statutory account remedy in patent proceedings under section 61(1)(d) of the Patents Act 1977 did not apply to a contract claim. Under Attorney-General v Blake, an account of profits could exceptionally be ordered for breach of contract where justice required it. The existence of an undertaking not to infringe intellectual property rights did not itself establish exceptional circumstances. The cases of WWF World Wide Fund for Nature v World Wrestling Federation Entertainment Inc. and Experience Hendrix LLC v PPX Enterprises Inc. illustrated the absence of such circumstances in comparable settlement-agreement claims. No account was ordered, and the requested disclosure did not arise.

The judgment records that the patent infringement claim had been discontinued following the Court of Appeal’s decision in the same litigation. The present judgment concerned remedies for breach of the settlement agreement at first instance.