Trademark infringement damages

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Gannons resolved a case of trademark infringement, winning significant damages for our client.

Our client was a large computer software company. They claimed that a global software corporation infringed their community trade mark. The High Court heard the case.

However, our client did not use their 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 that our client should expect such profits in future.

Background to the trademark infringement

Our client provides computer software. We had first assisted our client in raising equity finance to market a new product. Our client created a novel and distinctive product name. As we advised, they registered the name 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 so our client considered licensing the product in other 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 different use.

Serving notice of trademark infringement

We put the global corporation on notice. The notice we served firstly outlined that there was a likelihood of confusion between our client’s product and the corporation’s product. Additionally, that the corporation’s product took unfair advantage of our client’s trademark.

The corporation accepted these points before we issued proceedings. However, the corporation countered by stating that our client had suffered no loss as a result of their actions.

Determining the scale of the trademark infringement

We argued the user principle. This principle is widely recognised in patent infringement claims, not in trademark infringements.

User principle

This is a means of quantifying damages. The quantity is based on the fee that an infringing party – in this case the global corporation – owed the owner of the trademark – our client – in order to legally use and exploit the trademark

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

The corporation accepted our client’s entitlement 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.

Licence

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.

Royalties

They also would have acted reasonably to fix royalty payments, or a method for calculating royalty payments.

Negotiation

They would not negotiate overly-aggressively, given the product’s UK value, and would 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. They firstly ruled that our client was entitled to substantial damages.

They also held that 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.

They also stated that it was not possible to prove there is a normal rate of profit or a normal royalty. Therefore, damages should be assessed by considering what price could have been charged for permission to carry out the infringing acts in the territory.

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.

  • We continue to be impressed by all the work that Gannons do, and look forward to continuing our partnership