Scomadi Ltd & Anor v RA Engineering Co. Ltd & Ors

In construing an informally drafted commercial agreement, the court must identify what a reasonable person with the relevant background knowledge would understand the parties to mean, testing competing interpretations against the contractual language and commercial consequences. A practical benefit, including continuation of a commercial venture, may constitute consideration for a promise. A registered Community design is assessed from the registration representations, by reference to the informed user, design corpus, designer’s freedom and the overall impression. The exclusion for features solely dictated by technical function is narrow: technical influence is insufficient where aesthetic considerations remain relevant. A design with narrow protection may nevertheless be infringed by a non-identical product where the overall impression is not different.

The claim arose from a failed commercial relationship concerning the design, manufacture and distribution of retro-style scooters. Scomadi and Hanway had entered into a Design and Manufacture Agreement, followed by a Supplementary Agreement addressing royalties, design contributions and the consequences of Scomadi using another manufacturer.

The court determined the enforceability and construction of the Supplementary Agreement, whether Hanway was entitled to terminate the contractual arrangement, and whether three Royal Alloy scooter models infringed three registered Community designs. The principal issues concerned the meaning of the Supplementary Agreement, the significance of Hanway’s design contribution, the meaning of finding a third-party manufacturer, design validity, technical function and overall impression.

1. The Supplementary Agreement was supported by consideration. Continuation of the venture conferred a practical benefit of the kind identified in Williams v Roffey [1990] 2 WLR 1153. The variation from a 6% royalty to a flat payment also supplied consideration because the possibility of increased benefit was sufficient.

2. The contractual language was construed in its commercial and factual context. Hanway’s substantial contribution to the production-ready designs was part of that background, and clause 2A operated as an estoppel concerning Hanway’s design rights, applying Peekay Intermark v Australia and New Zealand Banking Group [2006] EWCA Civ 386. The Supplementary Agreement varied the Design and Manufacture Agreement and created a regime under which both parties could continue manufacturing scooters made to the jointly owned designs if Scomadi went elsewhere.

3. Finding a third-party manufacturer did not require a formal contract. It was sufficient that Scomadi had taken the commercial decision to proceed with Pimol’s company. Hanway was therefore entitled to terminate the contractual arrangement, and the alleged breaches relied on by Scomadi were not fundamental.

4. RCD1 and RCD2 were valid, although their protection was narrow because their differences from the Lambretta prior art were detailed. RCD3 was invalid by concession.

5. The assessment of validity and infringement required identification of the informed user and design corpus, comparison with the prior art or accused product, and assessment of the overall impression having regard to the product, corpus and degree of design freedom. The exclusion for features solely dictated by technical function did not apply because aesthetic considerations had influenced the scooter designs.

6. The GT infringed RCD2 but not RCD1. The GP1 and GP2 infringed neither RCD1 nor RCD2. The Defendants were entitled to manufacture and sell all three models under the true construction of the Supplementary Agreement. Declarations of non-infringement were available in principle for the GP1 and GP2.