Trademark infringement damages

We argued "user principle" to win substantial damages

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Trademark infringement damages

Our client, a large computer software company, claimed a global software corporation infringed its community trade mark. The case was heard in the High Court.

However, our client did not use its trademark throughout the European Union, but only in the United Kingdom. Nevertheless, we successfully argued our client’s damages award should be based on granting the corporation a hypothetical licence to use the mark within the European Union.  This licence would include hypothetical royalties.

Consequently, our client claimed a large sum of damages, based on hypothetical royalties. This was despite our client being unable to show a loss of current profits. Nevertheless the court recognised such profits were expected in future.

The facts of the trademark infringement case

Our client provides computer software. We first assisted our client raise equity finance to market a new product. Our client created a novel and distinctive product name. As we advised, the name was registered as a community trade mark. Then our client test-marketed their product in the United Kingdom.

The product gained a good reputation in the United Kingdom. Next our client considered licensing the product in community territories. However, the global corporation had launched a product in the European Union, that used our client’s product name. However, the global corporation’s product had a slightly differen use.

We put the global corporation on notice that:

  • There was a likelihood of confusion between our client’s product and the corporation’s product;
  • That the corporation’s product took unfair advantage of our client’s trademark.

The corporation accepted this point before proceedings were issued. However, the corporation stated our client had suffered no loss.

Determining the quantum for the trademark infringement

We argued the user principle. This principle is widely recognised in patent infringement claims. However, it is not widely recognised trademark infringements. The  user principle quantifies damages on the basis of:

  • What the IP right owner would have been entitled to,  had the infringer paid a fee to use and exploit the right.

At this point, we issued proceedings in the High Court to ascertain if our client was entitled to any damages for the corporation’s infringement of our client’s mark.

The corporation accepted that our client was entitled to damages. However, the corporation argued damages should be nominal as our client’s product had neither a community presence nor reputation.

How we won the trademark infringement damages

We argued the user principle applied. Essentially this principle’s whole purpose is to protect businesses that show an infringement, but lack a direct connection to a loss in profits. We asserted the parties would:

  • Have negotiated a licence: even if one or both of them would not in reality have signed a formal document;
  • Have acted reasonably to fix royalty payments, or a method for calculating royalty payments;
  • Not negotiate overly-aggressively: given the product’s UK value; and
  • Have negotiated on the basis of a willing licensor and a willing licensee.

The High Court’s decision

The High Court agreed with our assertions. The High Court held that

  1. The user principle was a legitimate basis on which to assess damages, even though the case was about trademark infringement, not patent infringement. Hence, the user principle applied.
  2. It is not possible to prove there is a normal rate of profit or a normal royalty. So damages should be assessed by considering what price could reasonably have been charged for permission to carry out the infringing acts in the territory.
  3. Our client was entitled to substantial damages.

Conclusion and next steps

Our creative approach, our commercial and financial knowledge, won our client substantial damages. The damages amounted to what profits our client could have obtained,  had the global corporation secured an intellectual property licence from our client.

Next we prepared licence agreements for use of our client’s product throughout the EU. This agreement also prevents any future need for similar litigation.