28 March 2016

The Institute for Capitalizing on Creativity: "Tales from the Drawing Board"

St Andrews from St Rule's Tower
Author Peter Gordon
Source Wikipedia
Creative Commons Licence

The Department for Culture, Media and Sport refers collectively to the following industries as "the creative industriels":
  • Advertising and marketing
  • Architecture
  • Crafts
  • Product design, graphic design and fashion design
  • Film, TV, video, radio and photography
  • IT, software, video games and computer services
  • Publishing and translation
  • Museums, galleries and libraries
  • Music, performing arts, visual arts and cultural education
According to the Creative Industries Economic Estimates published by the Department in January of this year, the gross value added ("GVA") for the creative industries was £84.1 billion in 2014 and accounted for 5.2% of the UK economy. Between 1997 and 2014, the GVA of those industries increased by 6.0% each year compared to 4.3% for the UK economy.  It accounted for 3.9% of UK GVA in 1997 and increased to 5.2 per cent in 2014. Those industries employed 1.8 million individuals in 2014 in both creative and support jobs.  The creative industries' exports amounted to £17.9 billion in 2013 which accounted for 8.7% of British exports.

As the creative sector is an important part of the British economy I am pleased to see that my alma mater has instituted The Institute for Capitalising on Creativity ("ICC") in conjunction with Abertay UniversityDuncan of Jordanstone College of Art & Design and the Royal Conservatoire of Scotland which I happened to mention in my dance blog Terpsichore this morning. The ICC describes itself on the home page of its website as "a multi-disciplinary team of researchers and educators who apply their skills to the management challenges of one of the fastest growing economic sectors, the Creative Industries." Its work includes carrying out research which culminated in the publication of Creative Industries Scotland:Capitalising on CreativityReport on ESRC grant RES 187-24-0014 , post-graduate education and various services to business that include holding events and publishing.

One of the ICC's works that caught my attention over this bank holiday weekend was Tales from theDrawing Board:IP wisdom and woes fromScotland’s creative industries by Melinda Grewar, Barbara Townley, and Eilidh Young With legal observations form Philip Hannay of Cloch Solicitors in Glasgow. This work is a series of interviews with various business owners in computer games, dance and theatre, fashion and product design, film and television and music and publishing with a page or two of commentary by Mr Hannay at the end of each section.  It is well written and as it turned out quite compelling holiday reading.

Mr Hannay's comments are very interesting and perceptive though I can't agree with everything he says. For instance, in a comment on Polybius Games, a computer games developer that had created an ingenious product for young hotel guests, carried out its own enquiries as to the sort of legal protection that it needed for its intellectual assets and registered its own trade mark, Mr Hannay wrote:
"The case study of Polybius Games illustrates the first dilemma experienced by many early stage ventures over whether to action professional IP advice, which can form a significant proportion of an often very limited budget. While there is much to be said for the streamlined Gov.UK websites, user friendly UK-IPO staff, and bounty of free online resources on offer, a DIY approach may not only backfire on IP strategy by absorbing critical creative and management time – thus eating away at any first mover advantage – but an insufficient rights specification, or worst of all the forfeit of IPR on successful challenge, plus the absence of a professional representative on record can detract massively from the maximisation of IP value. There is no substitute for experience. In truth, cost is often not the actual detraction from taking professional advice or instructing legal assistance, cash flow is."
I may have missed something but it seems to me that Polybius got its legal protection just about right without incurring professional fees.

Other interesting chapters include one by  Angharad McLaren Textiles who was accused of infringing one of her own designs. She had not registered the design but someone else had and she received a letter before claim from solicitors acting for the registered proprietor just before she was due to display the design at an exhibition. Fortunately, she had an audit trail of her creation which would have invalidated the registration and she was able to persuade the complainant's lawyers to think again.  I have had to advise in similar cases like that arise because there is no substantive examination of design registration applications in this country or indeed the European Union as a whole.  As I said in my case note on the Trunki case (see Supreme Court upholds Court of Appeal in Trunki 10 March 2016):
"It is far too easy to register a design in this country and the rest of the EU as there is no substantial examination of applications by the IPO or OHIM with the result that there is nothing to stop unmeritorious designs appearing on the register. One of the very few things that could be said for Brexit is that we would no longer be bound by the Community Design Regulation (Council Regulation (EC) No 6/2002 of 12 December 2001on Community designs (OJ EC No L 3 of 5.1.2002, p. 1) and Parliament would be free to repeal those amendments to the Registered Designs Act 1949 that were required by the Design Directive (Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs OJ L 289 , 28/10/1998 P. 28 - 35). It would be an opportunity to replace our law with something along the lines of the American design patent except that the public should have the added protection of a thorough prior art search by the Registry and an opportunity to third parties to oppose the application before it is granted."
As I am something of a dance fan and still take ballet classes several times a week nearly half a century after my first plié I was gratified to see that two of the articles were on David Hughes Dance, "a small to middling company" based in Edinburgh and A Curious Seed about choreographer Christine Devaney.

If anyone wants to discuss this article or legal protection for creative output in general he or she should not hesitate to call me during office hours on 020 7404 5252 or send me a message through my contact form.

10 March 2016

Supreme Court upholds Court of Appeal in Trunki

The judgment of the Supreme Court in PMS International Group Plc v Magmatic Ltd[2016] UKSC 12 has attracted a lot of flak over the last 24 hours much of it unjustified. According to the BBC website, Mr Robert Law, the founder of the Magmatic Ltd. which supplies Trunki suitcases, predicted chaos after the Supreme Court upheld the Court of Appeal's decision that I discussed in Registered Community Designs: Magmatic Ltd v PMS International Ltd on 4 March 2014. In that decision the Court of Appeal allowed an appeal against Mr Justice Arnold's finding that the Kiddee Cases shown below had infringed Magmatic Ltd.'s registered Community design the representation of which appears above (see Trunki loses ride-on animal suitcase court case 9 March 2016 BBC).

While I have every sympathy with Mr Law who must have spent enormous sums on fruitless litigation and will no doubt face more expense after detailed assessment of the other side's costs there would have been far greater uncertainty in registered design law had the case gone the other way.  The purpose of that law is to confer a monopoly of designs that are new and have individual character and not to protect bright ideas as such. It is often forgotten that intellectual property law is intended to strike a balance between several conflicting public imperatives of which incentive to create and innovate is only one. There has been a tendency over the years to criminalize intellectual property infringement but monopolies and exclusive rights restrict competition to the detriment of consumers. Claiming the protection of the law for economic activity where such protection is unjustified at the expense of the public is no more moral in my book than infringing an intellectual property right where such right can be justified.

In the last 30 years or so the balance between the conflicting public interests has tilted decidedly in favour of those seeking more protection for the so-called "creative industries" as governments around the world have yielded to the pestering of well-funded lobby groups and nowhere is that more true than in design. It is far too easy to register a design in this country and the rest of the EU as there is no substantial examination of applications by the IPO or OHIM with the result that there is nothing to stop unmeritorious designs appearing on the register. One of the very few things that could be said for Brexit is that we would no longer be bound by the Community Design Regulation (Council Regulation (EC) No 6/2002 of 12 December 2001on Community designs (OJ EC No L 3 of 5.1.2002, p. 1) and Parliament would be free to repeal those amendments to the Registered Designs Act 1949 that were required by the Design Directive (Directive 98/71/EC of the European Parliament and of the Council of 13 October 1998 on the legal protection of designs OJ L 289 , 28/10/1998 P. 28 - 35). It would be an opportunity to replace our law with something along the lines of the American design patent except that the public should have the added protection of a thorough prior art search by the Registry and an opportunity to third parties to oppose the application before it is granted.

The judgment of the Supreme Court in the Trunki case delivered by Lord Neuberger and the key to understanding their Lordships' reasoning appears at para [57]. After expressing regret that he had to dismiss the appeal as "the conception of the Trunki, a ride-on wheeled case which looks like an animal, seems to have been both original and clever" and that the defendant had "conceived the idea of manufacturing a Kiddee Case as a result of seeing a Trunki, and discovering that a discount model was not available" he explained that the appeal the appeal was concerned not with an idea or an invention, but with a design.

Lord Neuberger summarized the issues that the Supreme Court had to decide at para [26] of his judgment:
"the arguments of substance before us have been limited (and rightly so) to the questions whether the Court of Appeal’s criticisms of Arnold J’s approach, as set out in paras 41-42 and 47-48 of Kitchin LJ’s judgment, were correct. Subject to one point, if we consider that those criticisms were justified, then Magmatic’s appeal should be dismissed and the Court of Appeal’s order upheld; and if we consider that they were unjustified, Magmatic’s appeal must be allowed and Arnold J’s order restored."

I discussed the Court of Appeal's criticisms in my case note on the decision of the Court of Appeal:
"The Court of Appeal held that Mr Justice Arnold erred in principle in approaching the matter as he did and that he was wrong to disregard all of the decoration on the Kiddee Case. As to the Court of Appeal's previous decision in Procter & GambleLord Justice Kitchin said at paragraph [37] that Lord Justice Jacob's observation was entirely right in the context in which it was made but it did not apply to every case. In particular, it did not apply to cases where surface decoration (or the absence thereof) was a feature of the design as was the case in Samsung Electronics (UK) Ltd v Apple Inc [2012] EWCA Civ 1339 (18 Oct 2012). In disregarding surface decoration, Mr Justice Arnold had fallen into error in two respects:
'The [RCD] consists of six monochrome representations of a suitcase. These representations are not simple line drawings, however. Rather, they are computer generated three dimensional images which show the suitcase from different perspectives and angles and show the effect of light upon its surfaces. Further and importantly, the suitcase looks like a horned animal with a nose and a tail, and it does so both because of its shape and because its flanks and front are not adorned with any other imagery which counteracts or interferes with the impression the shape creates. As [counsel for PMS] submits, the [RCD] is, in that sense, relatively uncluttered and it conveys a distinct visual message. Here then the first of the judge's errors can be seen: he failed to appreciate that this is a design for a suitcase which, considered as a whole, looks like a horned animal.'
Secondly, although the judge was right to find that as the representations of the design in the left hand column were in monochrome the design was not limited to particular colours, he had been wrong to ignore the distinct contrast in colour in the representations between the wheels and the strap, on the one hand, and the rest of the suitcase on the other. Moreover the wheels and straps of the defendant's cases were the same colour as the rest of the structure. Because of those differences the Kiddies' Cases did not infringe the RCD."
Between paras [37] and [54] Lord Neuberger considered each of the Court of Appeal's criticisms  of Mr Justice Arnold's judgment and concluded at para [55] that they were fair.

"The effect of this analysis is that the Court of Appeal was right to hold that the design claimed in this case was for a wheeled suitcase in the shape of a horned animal, but that it was not a claim for the shape alone, but for one with a strap, strips and wheels and spokes in a colour (or possibly colours) which contrasted with that of the remainder of the product."
Having found that the trial judge had erred the Court of Appeal was entitled to consider the matter anew and substitute its own judgment for that of the court below. As the Supreme Court could not fault the Court of Appeal's approach in the matter it could not disturb its judgment.

Trunki and the Comptroller had requested a reference to the Court of Justice of the European Union. Lord Neuberger dealt with that request very shortly at para [59]:

"Despite the fact that the Comptroller General supports the contention that there should be a reference, I do not consider that this appeal raises any issue which should be referred to the CJEU. All the criticisms made by the Court of Appeal raise the question of how to interpret particular images on a particular Community Registered Design. I do not consider that these criticisms raise a point of EU law, or indeed a point which is suitable to be referred to the CJEU. If we were to refer such an issue to the CJEU, it appears to me that they would say that we should interpret the images on a Community Registered Design by reference to how it would appear to a reader in the light of the terms of the Principal Regulation, the Implementation Regulation and the practice of OHIM."
He accepted at [60] that the contention that absence of ornamentation cannot be a feature of an RCD raised a point of EU law but did not refer it to the CJEU because it did not arise on the appeal and if it had he would have considered it to be unarguable:
"Minimalism can self-evidently be an important aspect of a design just as intensive decoration can be. It would be extraordinary if absence of ornamentation could not be a feature of a design, and, unsurprisingly, no authority has been cited to support such a proposition. On the contrary."
Should anyone wish to  discuss this case or design law in general please call me on 020 7404 5252 during office hours or use my contact form. 

The Draft Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016

Jane Lambert

In Implementing the Unitary Patent in the UK 22 Feb 2016 I discussed the consultation on the implementation of the Unified Patent Court Agreement in the legal systems of the United Kingdom. The consultation document, which was entitled Technical Review and Call for Evidence on Secondary Legislation Implementing the Agreement on a Unified Patent Court and EU Regulations Establishing the Unitary Patent, contained a draft statutory instrument upon which the public's views were canvassed. I discussed the responses to that consultation and the government's reply. The government has now published a draft statutory instrument known as The Patents (European Patent with Unitary Effect and Unified Patent Court) Order 2016 which will come into effect on the date of entry into force of the Agreement on a Unified Patent Court.

The Draft Order

The draft order consists of three articles:
  • Art 1 concerns citation, the entry into effect and the extent of the order;
  • Art 2 amends the Patents Act 1977; and
  • Art 3 provides that any question whether an act done before commencement infringes a patent is to be determined in accordance with the law relating to infringement in force at the time the act was done.
Entry into Effect

Art 89 (1) of the UPC Agreement provides:
"This Agreement shall enter into force on 1 January 2014 or on the first day of the fourth month after the deposit of the thirteenth instrument of ratification or accession in accordance with Article 84, including the three Member States in which the highest number of European patents had effect in the year preceding the year in which the signature of the Agreement takes place or on the first day of the fourth month after the date of entry into force of the amendments to Regulation (EU) No 1215/2012 concerning its relationship with this Agreement, whichever is the latest."
The three member states in which the highest number of European patents had effect in the year preceding the year in which the signature of the UPC Agreement are France. Germany and the UK. France and 8 other countries have so far ratified the Agreement and s.17 of the Intellectual Property Act 2014 inserts a new s.88A and a new s.88B into the Act to enable the UK to do so. The German federal Ministry of Justice and Consumer Protection has introduced draft legislation to enable Germany to ratify the Agreement (see Entwurf eines Gesetzes zu dem Übereinkommen vom 19. Februar 2013 über ein Einheitliches Patentgericht). If, as is expected, that bill passes before the end of the summer the conditions set out in art 89 (1) of the Agreement will have been fulfilled by the end of the year and the Agreement and statutory instrument will come into force early in 2017.

Changes to the Patents Act 1977

Art 2 is by far the longest and most complex part of the draft Order.

The following sections are to be amended:

  • s.58 (references of disputes as to Crown use), 
  • s.69 (meaning of infringement), 
  • s.77 ((effect of European patent (UK), 
  • s.91 (evidence of conventions and instruments under conventions), 
  • s.92 (obtaining evidence for proceedings under the European Patent Convention), and
  • s.130 (interpretation).
A new s.83A is to be inserted which in turn inserts new Schedules A3 and A4.   Schedule A3 will provide for the application of the Act in relation to unitary patents.  Schedule A4 will provide for the jurisdiction of the Unified Patent Court with regard to unitary patents and European patents (UK).

Further Information

As the changes are too complex to be discussed in a single article I shall deal with them separately in future posts. Should anyone wish to discuss this article or the unitary patent or Unified Patent Court generally please call me on 020 7404 5252 during normal office hours or use my contact form.

07 March 2016

Account of Profits - OOO Abbott and Another v Design & Display Ltd and Another

Royal Courts of Justice
Author Anthony M
Source Wikipedia
Creative Commons Licence

When a patent is infringed the patentee has the choice of an inquiry as to damages or an account of profits under s.61 (1) of the Patents Act 1977.  A similar choice is available to any other intellectual property right owner whose right is infringed. In OOO Abbott and another v Design & Display Ltd and another [2016] EWCA Civ 95 Lord Justice Lewison set out the basic principles at para [7] of his judgment:
"Section 61 (1) (d) of the Patents Act 1977 entitles a patentee to claim against an infringer an account of the profits "derived by him from the infringement". An account of profits is confined to profits actually made, its purpose being not to punish the defendant but to prevent his unjust enrichment. The underlying theory is that the infringer is treated as having carried on his business (to the extent that it infringes) on behalf of the patentee. The broad principle is that the patentee is entitled to profits that have been earned by the use of his invention. If the patentee does not recover those profits, the infringer will have been unjustly enriched. So the purpose of the account is to quantify the extent to which the infringer would be unjustly enriched if he were to retain the profits derived by him from the infringement. That requires the fact finder first to identify the patentee's invention and second to decide what (if any) profits the infringer derived from the use of that invention. The second of these questions may give rise to difficulty where the infringer sells products associated with the subject matter of the patent (often called "convoyed goods") or products into which the subject matter of the patent is incorporated. The court must determine what profit has been earned, in a legal sense, by the infringer's wrongful acts. It is clear, then, that an account of profits looks at the facts through the lens of what the infringer has done; and what the patentee might have suffered by way of loss in the real world is irrelevant."
The judgment in which Lord Justice Lawson said those words was an appeal by Design & Display Ltd, against the decision of  His Honour Judge Hacon in  OOO Abbott and another v Design & Display Ltd and another [2014] EWHC 2924 (IPEC) (4 Sept 2014) in an account of Design & Display Ltd.'s profits ressulting from the infringement of European Patent (UK) No. 1,816,931 for a "Display panel and display system",

The Action

The account was ordered because Mr. Justice Birss had decided in OOO Abbott and another v Design & Display Ltd. and another [2013] EWPCC 27 that  that patent was valid and had been infringed. His Lordship gave the claimants the choice of an inquiry as to damages or an account of profits and they elected an account.  His Honour Judge Hacon took the account and directed a number of issues to be determined upon the taking of the account. The claimants and second defendant subsequently settled their differences so the account was between Design and Display Ltd. and the claimants.

The Patent

The patent in suit was described by Mr Justice Birss in his judgment as follows:
"[4] The case concerns display panels used in shops. Shopfitters often use a wooden wall called a slatwall as a panel on which to construct displays. Today the slatwall is made of MDF and has horizontal slots. Back plates or other shelf fixings can be fitted into the slots in order to secure display accessories such as shelves, brackets and hangers. The merchandise is displayed from the display accessories. The fittings are inserted into the jaws of the mouth of the slot and hooked into the top of an internal chamber of the slot lying behind its mouth.
[5] The slots are made by a computer controlled router moving across the width of the panel. A router makes a T shaped slot and leaves visible machined surfaces within the slot having machined away the decorative veneer that generally covers the face of the MDF. Also the edges of the veneer around the mouth of the slot are susceptible to damage as display accessories are hooked in and removed.
[6] For these reasons it became standard practice to provide inserts for slots, as protection against damage and to hide the machined surfaces. To an extent the inserts also strengthen the panel. The accessories are then fitted into the inserts rather than being fitted directly into the bare slots.
[7] The inserts are made by extrusion. By 2004 the standard inserts used were of two kinds: "slide-in" or "snap-in". As the name suggests slide-in inserts were slid into place from the edge of the slat wall. They were made of aluminium. They could be T-shaped, corresponding to the T shaped cross-section of the slot or else they could be L-shaped, using only the top arm of the slot. A problem with slide-in inserts was that if the edge of the slatwall was not accessible, for example at a corner, there is no room to slide the insert into place. Snap-in inserts solve this problem by being inserted from the front with a spring action. Because they needed to be compressible, they were made of PVC instead of aluminium.
[8] The invention in this case is a snap-in insert made from a resilient metal like aluminium."
The Infringing Activities

In his judgement, Judge Hacon found that the defendants had done the following:
"[5] Design & Display manufactures and sells retail equipment, including display panels for use in shops. The evidence of Clive Lloyd, managing director of Design & Display, was that its primary business was as a joiner for shopfitters, making bespoke items of shop furniture, which Mr Lloyd called 'equipment'. This equipment included displays, some of which had slatted panels (sometimes referred to as slatboards or slatwalls) sold both in standard sizes and as custom-sized panels. These were the panels with horizontal slots into which the aluminium inserts could be introduced – in the case of the infringing inserts, introduced by a snap-in process. Shelves or hangars for displaying the goods could then by located into the inserts.
[6] In the relevant period Design & Display sold the slatted panels in two ways. First, it sold the panels with inserts separately for subsequent assembly by the customer. At the trial these were referred to as 'unincorporated' panels and inserts. Secondly, Design & Display sold pre-assembled displays of which the panels with inserts were part. These were referred to as 'incorporated' panels and inserts. In addition, some unincorporated inserts were sold without slatted panels.
[7] Design & Display did not itself make the inserts but purchased them from an aluminium extruder in the form of lengths which were cut into sections to make the individual inserts. The panels were purchased in the form of plain MDF panels into which the slots were machined by Design & Display."
Judge Hacon's Decision

One of the issues that Judge Hacon determined was whether  the claimants were entitled to the profits which accrued to either defendant as a result of the sale of slatted panel sold together with the clip in aluminium extrusions.  Another was the allowable costs that the defendants were entitled to deduct from the accountable profits.

On the first issue Judge Hacon decided at para [33] that the scope of the profit derived from Design & Display's infringement extended to the profit made from sales of panels in which the infringing inserts were incorporated.

On the second, he allowed at para [49]  the labour costs incurred in cutting the slots in the display panels to accommodate infringing inserts but no other expenses.

The Appeal

Design & Display Ltd appealed against Judge Hacon's findings. The questions before their Lordships were whether Design & Display was liable for the whole of the profits made on the sale of panels sold together with infringing inserts and whether Design & Display was entitled to set off any part of its general overheads against the gross profit for which it was accountable.

The Decision

The appeal was allowed and the Court of Appeal sent the case back to the Intellectual Property Court to reassess the moneys for which Design & Display had to account.

The Accountable Profits

Referring to para [7] of his judgment, which I have quoted above, Lord Justice Lewison said at para [8] that the first question was the identification of the invention.  The reason for that was that for the purpose of assessing damages or taking an account of profits, the scope of the invention is not necessarily co-terminous with the scope of the claims.  The late Mr Justice Laddie explained why that should be in Celanese International Corporation  v BP Chemicals Ltd [1999] RPC 203 at [51]:
"Someone invents a new form of tin whistle. With the aid of his patent agent he obtains a patent. Regrettably, but as is now common, the patent ends with claims of ever greater particularity and narrowness. … Claim 1 is for the tin whistle. Claim 10 is for a funnel to which the new tin whistle is connected. Claim 15 is for a battleship with a funnel to which the tin whistle is connected. No doubt none of the subsidiary claims are independently valid over Claim 1 but they are probably not per se invalid. Nor is there any doubt that an injunction or an order for delivery up would be directed to the tin whistle alone rather than the whole battleship. Similarly on an account substance not form counts. What the defendant has to account for is the profit made by exploitation of the invention, i.e. the whistle, not profits made by exploitation of material or activities which are not attributable to the plaintiff's ingenuity, i.e. the rest of the battleship."
Once the invention is identified the court has to consider the question of causation.  While assessment of damages for patent infringement and the taking of an account of profits proceed on a common principle of legal causation Lord Justice Lewison cautioned at para [14] "that the question whether an infringement has caused a loss (in the legal sense) and the question whether the infringer has derived a profit from the infringement are different questions."

The Court of Appeal held that Judge Hacon had correctly identified the invention but had erred on causation. Judge Hacon said at para [31] of his judgment:
"The customer will have specified panels with incorporated inserts (and also possibly that the panels were incorporated into a display, it doesn't matter). Design & Display was thus either going to make a sale of inserts and panels both, or no sale at all. The sales necessarily went hand in hand. Design & Display chose to sell infringing inserts. Because the sales went together, the sale of the inserts caused (in the relevant sense) the sale of the panels in which they were incorporated. It was also foreseeable that the sale of the panels would be a consequence of the sale of the inserts."
He added at para [32]:
"It goes further. As I have said, part of the inventive concept was embodied in the shape of a section of the panel. The fact that it was a modest section makes no difference. The sale of that section of the panel both caused the sale of the panel as whole and the latter sale was a foreseeable consequence of the former."
That led him to the conclusion mentioned above that the scope of the profit derived from the infringement extended to the profit made from sales of panels in which the infringing inserts were incorporated.

Referring to an example discussed in the Australian case Dart Industries Inc v Decor Corporation Pty Ltd[1993] HCA 54; (1993) 179 CLR 101; (1993) 116 ALR 385; (1993) 67 ALJR 821; (1993) AIPC 91-028 (29 Sept 1993) Lord Justice Lewison said at para [36]:
A manufacturer sells a car which includes a patented brake. If the car did not have brakes, the manufacturer could not have sold it, but it did not have to have that particular brake. In those circumstances the Full Court clearly thought that it would be unjust to charge the manufacturer with the whole profit made on the car; and I agree with them. In my judgment the legal error that the judge made was to ask whether the sale of the panel plus insert would have happened separately rather than to ask himself how much of the profit on the sale was derived from the infringement. In a case in which the infringement does not "drive" the sale it seems to me that it is wrong in principle to attribute the whole of the profit to the infringement. In particular it does not follow from the fact that the customer wanted a slat wall that incorporated an insert that the customer wanted a slat wall that incorporated the infringing insert. ............ In addition I do not consider that the judge was correct at [31] in saying that
'because the sales went together, the sale of inserts caused … the sale of the panels…' 
The mere fact that the two went together is not, in my judgment, sufficient to establish that the whole of the profit earned on the composite item was derived from the invention. One might just as well say that the sale of the panel caused the sale of the insert. As the judge himself recognised the customer specifies panels, and on the hypothesis that he was considering at [31] the customer is indifferent about the inserts (provided that some form of insert is included). On the judge's approach, because the sale of the patented brake went with the sale of the car, the whole of the profit on the car would be included in the account. If the judge had found on the facts that the infringing insert was "the essential ingredient in the creation of the defendant's whole product" (i.e. the incorporated panel), then he would have been justified, on the facts, in declining to apportion the profit. But I cannot see that he made that finding."
The Lord Justice concluded that in cases simply falling within the factual hypothesis discussed in para [31] of Judge Hacon's judgment, His Honoour should have apportioned the overall profit.


At para [38] of his judgment, Judge Hacon had directed himself that:
"(1) Costs associated solely with the defendant's acts of infringement are to be distinguished from general overheads which supported both the infringing business and the defendant's other businesses.
(2) The defendant is entitled to deduct the former costs from gross profits.
(3) A proportion of the general overheads may only be deducted from gross profits in two circumstances:
(a) if an overhead was increased by the acts of infringement (i.e. the increase would not have occurred but for the acts of infringement), that increase may be deducted;
(b) if the defendant was running to maximum capacity such that the infringing business displaced an alternative business which otherwise would have been conducted, the apportioned overheads incurred by the infringing business (and which would have been incurred by the displaced business) may be deducted.
(4) The evidential burden is on the defendant to establish any of the above."
 The judge found that Design & Display had failed to discharge that evidential burden.  Design & Display had offered evidence that might have placed it within the exception in paragraph (3) (b) but His Honour declined to consider it on the ground that it would not lead to the proffered conclusion. In Lord Justice Lewison's vew that was a mistake:
"I do not consider that the judge's reasoning at [46] led to the conclusion that he reached. What he appears to me to have found is that in effect the same overheads would have been incurred in the sale of non-infringing products. Whether those non-infringing products were slat boards or a different product completely does not seem to me to matter. What matters is that if it had not been selling infringing products Design & Display would have used the self-same overheads in generating profits by lawful trading. Accordingly in my judgment Design & Display's argument as summarised at [44] (1) was legally correct if the asserted facts were established. Because he rejected the argument on legal grounds the judge did not say whether or not he found those asserted facts to have been proved. Nor, in my judgment, does his reasoning at [47] support the conclusion he reached. What he appears to me to have held in that paragraph is that Design & Display would have increased its business (and hence its overheads) to meet expanding demands. But the logic of that finding is that if Design & Display had not been selling infringing products it would have been able to take on new work without any increase in overheads; or if it did not take on new work, would have reduced its overheads,"
At para [51] the Lord Justice explained that Judge Hacon's error was to think that running to maximum capacity was a threshold condition and that it had to have the consequence that alternative business would be displaced in order for the condition in para (3) (b) to take effect.


This is not an easy case to analyse. Lord Justice Lewison's judgment has to be read very carefully in conjunction with Mr Justice Birss's judgment in the Patents County Court and Judge Hacon's judgment on the issues that arose on the taking of the account to be understood properly. However, it does provide some clear principles for identifying the gross profits for which an infringer has to account and the overheads that he is entitled to deduct. This is likely to be useful for the taking of an account of profits generally and not just for patent cases.

Further Information

Should any of my readers wish to discuss this case or remedies for patent infringement generally they should not hesitate to call me during office hours in 020 7404 5252 or use my contact form.

01 March 2016

UPC Mediation Rules

Lisbon Bridge
Photo Matt Perich
Creative Commons Licence

Art 35 (1) of the Unified Patent Court Agreement establishes a patent mediation and arbitration centre with seats in Ljubljana and Lisbon. Its purpose is to provide facilities for mediation and arbitration of patent disputes falling within the scope of that Agreement. The Centre is required by art 35 (3) to establish Mediation and Arbitration Rules and by art 35 (4) to draw up a list of mediators and arbitrators to assist the parties in the settlement of their dispute.

On 15 Feb 2016 the Preparatory Committee published the latest draft Mediation Rules for the Centre. These Rules will be incorporated into every mediation agreement. Art 2 (1) of the draft Rules states that the mediation service of the Centre offers support in the settlement of disputes relating to European patents and European patents with unitary effects for which the Unified Patent Court  is exclusively competent. It will be open to the parties include any other disposable right or obligation factually or legally linked to the dispute into mediation by virtue of art 2 (3).

A mediation will be initiated by the parties (or one of them) lodging a request through a form on the Centre's website setting out the following information:
"a) the request that the dispute be referred to mediation under the Rules;
b) the names in full, addresses, telephone numbers, e-mail addresses or any other contact details of the parties and their representatives;
c) a succinct summary of the facts giving rise to the dispute including an indication of the intellectual property rights involved and the nature of any technology involved and if possible an assessment of its value;
d) a statement as to whether the parties have already agreed upon mediation and if so annexing a copy of the agreement;
e) any agreement as to the time limits for conducting the mediation, as to the language of the mediation, as to the location of any physical meetings or as to the joint nomination of a mediator or to the attribution to the Centre of the nomination of a mediator
f) any document or information which the applicant considers relevant to the dispute."
The possibility of settling a dispute by mediation or arbitration is one of the matters that a rapporteur must explore in the interim procedure under art 52 (2) of the Agreement. If the request is made by one side only the other parties will be allowed up to 15 days to the request.

The parties may choose whomsoever they wish to be their mediator (art 6 (1) of the draft Rules) but in the absence of an agreement the Centre may propose a list of not less than 5 names (art 6 (1) (a)). If the parties cannot agree one of those names the Centre will appoint a mediator after consulting  the parties and respecting their requirements or the specificities of the dispute (art 6 (1) (c)).

Art 7 (1) of the draft Rules provides:
"The mediator is a neutral, impartial and independent third person, devoid of powers of imposition upon the parties to the mediation, who assists the parties in their attempt to obtain a final settlement on the subject matter in dispute. In particular he may not legally or otherwise represent or consult the parties or third persons on legal issues, which are or have been the subject matter of the mediation proceedings. The mediator shall disclose to the parties and the Centre all possible conflicts of interests or other circumstances likely to give rise to doubts as to his independence or impartiality without undue delay."
Art 7 (4) requires mediators to adhere to the principles of the European Code of Conduct for Mediators.

Parties may be represented or assisted in their dealings with the mediator. Representatives must be mandated in writing. The names and addresses of mediators are to be communicated to the mediator and exchanged with the other parties immediately after the appointment of the mediator.

The parties may decide the place and the language in which the mediation shall take place. If they cannot agree the location it will be decided by the Centre. If they cannot agree on the language it will be in the language in which the patent was granted by the EPO. The mediation shall be conducted in the manner agreed by the parties or determined by the mediator. Each party shall cooperate in good faith with the mediator throughout the mediation proceedings. The mediator shall promote the settlement of the dispute in an orderly and appropriate manner having regard to the wishes of the parties. He shall listen and help the parties identify underlying causes of the conflict, the apparent interests and the consequences of an absence of settlement agreement. The mediator may make proposals for the resolution of the dispute but shall have no authority to impose a settlement on the parties. The agreement and outcome of the mediation are decided by the parties. The mediation shall continue until the parties reach an agreement or the time fixed for the mediation expires.

All proceedings will take place in secret. Art 15 (1) of the draft Rules requires every participant in the mediation to respect the confidentiality of the proceedings to be reinforced if necessary by confidentiality agreements. With a number of limited exceptions nothing that is discussed in the mediation may be used or disclosed in any other proceedings and nobody can be compelled to give evidence in any proceedings.

The Centre's registration fee and the mediator's fees and expenses will be shared equally by the parties unless they agree some other basis.

If anyone wants to discuss this article further or mediation or the Unified Patent Court in general, he or she should call me on 020 7404 5252 during office hours or get in touch through my contact form.