Damages assessed on 'user' principle available

United Kingdom
In National Guild of Removers & Storers Ltd v Silveria ([2010] EWPCC 15, November 12 2010), his Honour Judge Birss QC, sitting in the Patents County Court, has found that damages assessed on the 'user' principle are available in cases of trademark infringement and passing off in the same way as in patent infringement cases. In other words, there is no need for any lost sales to have occurred: damages can be assessed by reference to the amount the infringer would have had to pay in fees to the trademark proprietor had he/she acquired the rights to use the name or trademark in question lawfully (ie, a reasonable royalty basis). 

This case is also noteworthy as the judge made clear the jurisdiction of the Patents County Court in passing-off and trademark actions.

The National Guild of Removers and Storers Ltd, the regulatory trade association body for members of the removals and storage industry, issued proceedings in the Patents County Court against four separate traders in the removals industry for trademark infringement and passing off arising from their use of the Guild's name and/or registered trademarks in their advertising literature and/or websites when either their membership of the Guild had expired, or, as in the case of defendant Christopher Silveria, they had never been a member of the Guild in the first place.

The rules of membership of the Guild included a licence of the Guild's trademarks so that the members could use the marks in their advertising to boost their image and reputation. The rules also included provisions dealing with termination and for a licence fee to be payable for continued use of the marks post-termination, for example where an annual publication such as the Yellow Pages Directory remained current during a year in which membership had terminated.

Judgment in default of acknowledgment of service and/or defence was given in each of the four cases and, in each case, an inquiry as to damages was ordered with directions for disclosure and service of evidence. None of the defendants complied with the directions, nor did they play any part in the inquiry as to damages. Further, none of them appeared or were represented at the hearing before the judge.

The question before the judge was whether damages on the 'user' principle were recoverable in cases of passing off and trademark infringement and, in the event that they were, what such damages should amount to for each defendant.
 
After clarifying the Patents County Court’s jurisdiction in matters of trademark and passing off, the judge noted that the damage suffered by the Guild was not as a result of sales lost to the Guild in consequence of the defendants' actions, but was, in financial terms, the loss of the royalty the Guild should have been paid in return for use of its name and/or trademarks by the defendants. 

The judge decided that such damages were recoverable for passing off and trademark infringement, but because "the matter is not free from doubt", he set out his reasoning for that conclusion.

He noted first that, in patent cases, there was no doubt that such damages, assessed on a 'user' principle (ie, as a reasonable royalty for the unlawful use of the claimant's property), were recoverable. However, there were trademark cases where the court had decided that damages calculated on that basis were not available (see Dormeuil Frères v Feraglow ([1990] RPC 449), which is cited in Kerly's Law of Trademarks and Trade Names (14th Ed), in support of the proposition that it has been doubted that the 'user' principle is applicable to trademarks).

However, the judge said that, in the copyright case of Blayney v Clogau St Davis Gold Mines ([2002] EWCA Civ 1007), the court had rejected the submission that damages on the 'user' principle could not extend from patents to other forms of intellectual property. Finally, in Irvine v Talksport ([2003] EWCA Civ 423), the Court of Appeal had held that the 'user' principle was also applicable in passing-off cases, and awarded damages that represented a reasonable fee assessed by asking what was the fee the defendant would have had to pay in order to obtain lawfully that which in fact it had obtained unlawfully. In the judge's view, this should, logically, be extended to registered trademark infringement cases.   
   
In the judge's words:

"In my judgment, as a matter of principle, where a defendant uses a mark without permission and thereby infringes a registered trademark or commits an act of passing off, that act is capable of damaging the claimant's property in the mark… or property in the goodwill attaching to his business. That is so whether or not a lost sale has taken place. It is the same kind of damage as the damage to a patent monopoly caused by an infringing sale which is not a lost sale to the patentee and for which a reasonable royalty is payable… Thus there is no reason in principle why damages should not be available, calculated on a 'user' basis for trademark infringement and for passing off."
 
Put simply, the decision is a useful and reasoned clarification of this point.

Robert Lundie Smith, McDermott Will & Emery UK LLP, London

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