Employer vicariously liable for passing off through domain name registrations
In Vertical Leisure Limited v Poleplus Limited ( EWHC 841 (IPEC), March 27 2015), Hacon HHJ, sitting in the Intellectual Property Enterprise Court, has found an employer to be vicariously liable for passing off arising from its employee’s registration of a number of domains which infringed the IP rights of the claimant. It was held that registering the domain names was the kind of act the employee was employed to do and, in doing so, he was furthering his employer’s interest rather than his own. Hacon HHJ also attributed liability to the employer for the employee’s actions as agent.
Between April 12 and August 8 2013 Mr Bowley, the second defendant, registered a number of domain names incorporating the name of a product which had recently been launched by the claimant, Vertical Leisure Limited. Mr Bowley was an employee of the first defendant, Poleplus Limited, which is a competitor of the claimant in the market for poles used for dance and exercise. On June 2 2014 His Honour Judge Hacon gave summary judgment against Mr Bowley. He held that the registration of these domain names constituted passing off.
The claimant also sought to have Poleplus held liable for the acts of Mr Bowley. Hacon HHJ was unwilling to give summary judgment on this point. By the time of the present trial in the Intellectual Property Enterprise Court, the claimant relied on four grounds:
- the registrations were part of a common design by the defendants;
- Poleplus was vicariously liable for Mr Bowley’s actions as his employer;
- Mr Bowley acted as agent for Poleplus; and
- the acts were “adopted” by Poleplus.
In the defendants’ amended defence, it was admitted that Mr Bowley was an employee of Poleplus, which had been denied at the time of the summary judgment.
Poleplus was run by Mr Bowley along with his partner Ms Colebourne, the sole director of the company. It was common ground that knowledge attributable to Ms Colebourne was attributable to Poleplus. On balance Hacon HHJ was satisfied that Ms Colebourne did not know about any of the registrations before they were made. He did not accept her evidence, however, that Mr Bowley made the registrations in his own interest. In particular, key disclosure was missing on whether it was Mr Bowley or Poleplus which paid for the registrations. Hacon HHJ found that the registrations had been made for the benefit of Poleplus. The exact position at law as regards ownership of the domains was not relevant. Having reached this conclusion, Hacon HJJ turned to whether Poleplus should be held liable for Mr Bowley's actions, and in doing so provided an extensive review of the authorities on common design and vicarious liability in the context of IP infringements.
Citing SABAF SpA v Meneghetti SpA ( RPC 14), Hacon HHJ noted that, for Poleplus to be held liable as a joint tortfeasor through common design, Poleplus must have made the tortious act its own. In the context of IP rights, Hacon HHJ relied on L’Oréal SA v eBay International AG ( EWHC 1094) to conclude that this required the alleged joint tortfeasor to have done something more than having knowingly facilitated the infringements. As Ms Colebourne, hence Poleplus, had been found to be unaware of the registrations, Poleplus was not jointly liable due to any common design.
For Poleplus to be vicariously liable for Mr Bowley’s actions as his employer, Hacon HHJ stated that the rule in House of Lords case of Dubai Aluminium Co Ltd v Salaam ( 2 AC 366) required that the employee was doing acts of the kind he was employed to do and was also furthering his employer’s interest rather than his own. Mr Bowley was, according to the evidence, responsible for the technical and online aspects of Poleplus’ business. His activities therefore were of the kind he was employed to do. As Hacon HHJ had found that, as Mr Bowley was acting to protect Ms Colebourne’s interests (and thus Poleplus’ interests), Poleplus was vicariously liable for his actions. Hacon HHJ reached the same conclusion as regards agency. The domains were registered by Mr Bowley on behalf of Poleplus and for the benefit of Poleplus. Mr Bowley acted as agent of Poleplus, and consequently Poleplus was jointly liable for his acts.
Following his findings on vicarious liability and agency, Hacon HHJ did not consider it necessary to examine whether Mr Bowley’s acts had been “adopted” by Poleplus.
As registering domain names was part of his normal course of duties and the offending registrations were made to further the interests of his employer, Poleplus was held to be vicariously liable for Mr Bowley's actions. Hacon HHJ's analysis was not affected by whether the domains were held by Mr Bowley on trust for Poleplus or otherwise. He considered that the registrant of the domain names was no guide to the intended recipient.
The case provides a comprehensive review of the law of common design and vicarious liability as applied to intellectual property disputes. It also demonstrates the harm, both reputational and financial, that can be done if a misguided employee decides to register domains which infringe a competitor's rights.
Leigh Smith, Clifford Chance LLP, London
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