28 June 2006

Innovators Toolkit

A post from my public access blog "nipc invention" which may interest some of you is a seminar called the "Innovators Toolkit" which will take place at Lancaster University's InfoLab21 on 3 August 2006 between 09:15 and 12:30.

I am giving one of the talks but the main speaker will be Dr Ron Jones who has 25 years practcial experience as an inventor and innovator.

This will be one of the first initiatives in the UK of ip.com, a US company that offers a variety of services to inventors, innovators, entrepreneurs and other creative people. Further information on the UK services are available from the UK page of the ip.com website.

27 June 2006

Trade Marks and Domain Names: Ellerman Investments Ltd v Vanci

This is an interesting example of how the courts can still be useful in a domain name dispute.

The claimants included the Ritz Hotel, The Ritz Club, and the Ritz Club London Online. As one might imagine, they had registered a number of national and Community trade marks that included the word RITZ in class 21 including UK registered trade mark no. 1509163 for RITZ for "gaming services" and CTM no. 1703974 for RITZ for the "provision of gaming services accessed via local and world-wide computer networks". The defendants were had registered the domain name which was the URL for a website called RoyalPlaza.Net which contained information about gaming with links to third party sites such as Pacific Poker, Party Poker and Poker Room. The claimants complained of trade mark infringement to which complaint the defendants responded by registering 5 more sites containing the letters RITZ, namely , , , and .

The claimants sued for infringement of their trade marks under s.10 (1) and (2) of the Trade Marks Act 1994 and art 9 (1) (a) and (b) of the Community Trade Mark Regulation and applied for summary judgment under CPR Part 24 and the application came on before Judge Richard Havery QC.

The defendants' case was that they were simply concerned with supplying comprehensive and impartial information about poker and that they were not directly concerned with or linked to gaming sites. One of them gave evidence that the defendants were divorced from any gambling activity whatever. They did not allow any third party related advertising. They did not offer any downloads of gambling games other than for academic, fun or educational use. It is abundantly clear, however, on the evidence that Pacific Poker, Party Poker and Poker Room were portals with links to gaming sites.

The judge rejected the claimants' submission that the defendants were using an identical mark for identical services. Ingeniously, Helyn Mensah had referred to the following words in Lord Justice Jacob's judgment in Reed Executive Plc and others v Reed Business Information Ltd and others [2004] EWCA Civ 159 (3 March 2004):
"It was over "Reed Business Information" that battle was joined. The composite is not the same as, for instance, use of the word "Reed" in the sentence: "Get business information from Reed." In the latter case the only "trade-marky" bit would be "Reed". In the former, the name as a whole is "Reed Business Information." The use of capital letters is of some visual significance – it conveys to the average user that "Business Information" is part of the name. If the added words had been wholly and specifically descriptive – really adding nothing at all (e.g. "Palmolive Soap" compared with "Palmolive") the position might have been different. But "Business Information" is not so descriptive – it is too general for that."
Helyn argued that "poker" in "ritzpoker" was not really trade-marky. Not altogether surprisingly, his lordship did not buy that one. But he gave her judgment on the basis of similar mark and similar services. He considered that the provision of links to competing sites belied the defendants' argument that they were not providing gaming services.

By coincidence I have also been in front of the same judge in a Part 24 application. Mine is a somewhat heavier application and we should get judgment at 2 pm on Monday. It is an interesting case and quite an important one too, but as I am in the case I shall leave it to someone else to blog about it. All I shall say about it is that ring binders have taken over my room in chambers which is why I have not keeping up with my posts over the last few weeks. Rest assured, however, that normal service is just about to be restored.

15 June 2006

Patents - Damages Inquiry: Ultraframe (UK) Ltd v Eurocell Building Plastics Ltd

This is the latest episode in a marathon case that has already made a lot of interesting law. The claimant company, Ultraframe (UK) Ltd ("Ultraframe")., designs and makes modular conservatory roofing systems. One of its products, the Ultralite 500, is partly protected by UK patent no GB2300012 and partly by unregistered design right. The defendant, Eurocell Building Plastics Ltd. ("Eurocell"), makes and sells window and door systems, conservatory roof systems, PVCU profiles and rooflines. Until 2002 Eurocell distributed Ultraframe's Ultralite 500 system. In that year it started to make and sell its own system known as the "Pinnacle 500". Ultraframe alleged that the "Pinnacle 500" infringed its patent and design rights and sued Eurocell for the infringement of those design rights.

Mr Justice Lewison held in Ultraframe (UK) Ltd v Eurocell Building Plastics Ltd and another [2004] 1785 EWHC (Ch) (22 July 2004) that the design rights had been infringed but not the patent. In a supplemental judgment he limited the claimant's entitlement to damages by holding that the defendant could elect to take a licence of right under s.239 of the Copyright Designs and Patents Act 1988 after the design right had expired. That, of course, had the effect of limiting damages for design right infringement to twice the royalty that would have been agreed by a willing licensor and willing licensee negotiating at arms length. Ultraframe appealed both judgments and in a 2 to 1 decision (Lord Justices Jacob and Mummery v Lord Justice Neuberger) the Court of Appeal reversed the finding on patent infirngement (see Ultraframe (UK) Ltd. v Eurocell Building Plastics Ltd. and another [2005] EWCA Civ 761 (24 June 2005). That finding opened the way to an inquiry as to damages on patent infringement which came on before Mr Justice Kitchin (Ultraframe (UK) Ltd v Eurocell Building Plastics Ltd and another [2006] EWHC 1344 (Pat) (9 June 2006).

At the inquiry Ultratrame sought damages for loss of profits. Ultraframe sought damages for loss of profits, the issues in dispute being the number of infringing products sold, whether the claimant would have sold even more of its own product but for the infringement and the margin of the profit on each lost sale. The significance of the point was that Ultraframe contended that it had to reduce its prices to meet the threat to its market share presented by the infringement. The precise issue in dispute was what costs should be deducted from the net price to calculate that margin. As an alternative Ultraframe claimed a royalty on the sales of the infringing products - Ultraframe claiming 17.5% and Eurocell 5%.

After considering the decisions of Mr Justice Jacob (as he then was) and the Court of Appeal in Gerber Garment Technology v Lectra Systems [1995] RPC 383, [1997] RPC 443, Mr Justice Kitchin distilled the following principles:
"(i) Damages are compensatory. The general rule is that the measure of damages is to be, as far as possible, that sum of money that will put the claimant in the same position as he would have been in if he had not sustained the wrong.
(ii) The claimant can recover loss which was (i) foreseeable, (ii) caused by the wrong, and (iii) not excluded from recovery by public or social policy. It is not enough that the loss would not have occurred but for the tort. The tort must be, as a matter of common sense, a cause of the loss.
(iii) The burden of proof rests on the claimant. Damages are to be assessed liberally. But the object is to compensate the claimant and not to punish the defendant.
(iv) It is irrelevant that the defendant could have competed lawfully.
(v) Where a claimant has exploited his patent by manufacture and sale he can claim (a) lost profit on sales by the defendant that he would have made otherwise; (b) lost profit on his own sales to the extent that he was forced by the infringement to reduce his own price; and (c) a reasonable royalty on sales by the defendant which he would not have made.
(vi) As to lost sales, the court should form a general view as to what proportion of the defendant's sales the claimant would have made.
(vii) The assessment of damages for lost profits should take into account the fact that the lost sales are of "extra production" and that only certain specific extra costs marginal costs) have been incurred in making the additional sales. Nevertheless, in practice costs go up and so it may be appropriate to temper the approach somewhat in making the assessment.
(viii) The reasonable royalty is to be assessed as the royalty that a willing licensor and a willing licensee would have agreed. Where there are truly comparable licences in the relevant field these are the most useful guidance for the court as to the reasonable
royalty. Another approach is the profits available approach. This involves an assessment of the profits that would be available to the licensee, absent a licence, and apportioning them between the licensor and the licensee.
(ix) Where damages are difficult to assess with precision, the court should make the best estimate it can, having regard to all the circumstances of the case and dealing with the matter broadly, with common sense and fairness."

The bulk of the transcript is an analysis and evaluation of the evidence which concerns this case only. In the event his lordship held that Ultraframe was entitled to damages for lost profit on lost sales of Ultralite 500, a royalty of 8% on sales of Pinnacle 500 that do not represent lost sales, damages for price depression, damages for losses post infringement caused by price depression and disruption of the market and interest.

14 June 2006

Confidential Information - More Chinese Walls: Gus Consulting GmbH v Leboeuf Lamb Greene & Macrae

In Bolkiah v. KPMG [1998] UKHL 52, [1999] 2 AC 222, [1999] 1 All ER 517, [1999] 2 WLR 215 (16 Dec, 1998) the House of Lords considered for the first time some of the problems of confidentiality and conflict that have arisen with the development of multinational, multi-service professional firms. The question in that case was whether, and, if so how far, a firm of accountants that had acted in one capacity for one party to a law suit could properly act for that party's opponents in another. There was never any question of impropriety. The professionals involved were not part of the same team. Steps were taken to minimize the already small risk of misuse of confidential information, But despite all those measures, the House were not satisfied that the accountants had discharged the burden of showing that there was no risk of confidential information in their possession that they had obtained in the course of a former client relationship unwittingly or inadvertently coming to the notice of those working for the former client's opponents. It injuncted the accountants from acting further in the litigation.

The issue was considered again by the Court of Appeal in Koch Shipping Inc v Richard Butler [2002] EWCA Civ 1280 (22 July 2002). In that case, at paragraph [24] Lord Justice Clarke distilled the following principles:
"(1) The court's jurisdiction to intervene is founded on the right of the former client to the protection of his confidential information (per Lord Millett in Bolkiah at p.234).
(2) The only duty to the former client which survives the termination of the client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence (per Lord Millett ibid at p.235).
(3) The duty to preserve confidentiality is unqualified. It is a duty to keep the information confidential, not merely to take all reasonable steps to do so (per Lord Millett ibid at p.235).
(4) The former client cannot be protected completely from accidental or inadvertent disclosure, but he is entitled to prevent his former solicitor from exposing him to any avoidable risk. This includes the increased risk of the use of the information to his prejudice arising from the acceptance of instructions to act for another client with an adverse interest in a matter to which the information may be relevant (per Lord Millett ibid at pp.235-236).
(5) The former client must establish that the defendant solicitors possess confidential information which is or might be relevant to the matter and to the disclosure of which he has not consented (per Lord Millett ibid at pp.234-235).
(6) The burden then passes to the defendant solicitors to show that there is no risk of disclosure. The court should intervene unless it is satisfied that there is no risk of disclosure. The risk must be a real one, and not merely fanciful or theoretical, but it need not be substantial (per Lord Millett ibid at p.237).
(7) It is wrong in principle to conduct a balancing exercise. If the former client establishes the facts in (5) above, the former client is entitled to an injunction unless the defendant solicitors show that there is no risk of disclosure.
(8) In considering whether the solicitors have shown that there is no risk of disclosure, the starting point must be that, unless special measures are taken, information moves within a firm (per Lord Millett ibid at p.237). However, that is only the starting point. The Prince Jefri case does not establish a rule of law that special measures have to be taken to prevent the information passing within a firm: see also Young v Robson Rhodes [1999] 3 All ER 524, per Laddie J at p.538. On the other hand, the courts should restrain the solicitors from acting unless satisfied on the basis of clear and
convincing evidence that all effective measures have been taken to ensure that no disclosure will occur (per Lord Millett at pp.237-238, where he adapted the test identified by Sopinka J in MacDonald Estate v Martin (1991) 77 DLR (4th) 249 at p.269). This is a heavy burden (per Lord Millett at p.239)."

It may be anticipated that questions of this kind will arise with ever increased frequency should the draft Legal Services Bill published on 24 May 2006 by the Department of Constitutional Affairs (and in particular Part 5 which provides for "Alternative Business Structures" to offer legal services) ever see the light of day.

The latest case to address those issues is Gus Consulting GmbH v Leboeuf Lamb Greene & Macrae [2006] EWCA Civ 683 (26 May 2006). This was an appeal from Judge Mackie's refusal to injunct Le Boeuf, Lamb, Greene & MacRae from acting for, advising or otherwise assisting DCL-KF Corporation in relation to arbitration proceedings brought by that company against Gus and others in the London Court of International Arbitration which are due to be heard in October of this year. The application was made on the ground that Le Boeuf had previously advised or acted for Gus and related entities in respect of their business in Russia between 1996 and 1999 which involved transactions that were in issue to some extent in the arbitration. The advice was on such matters as the use of powers of attorney, guarantees and the formation of subsidiaries. Le Boeuf had offered a number of undertakings which when combined with the facts of the case persuaded the judge that all effective measures had been taken to ensure that there was no real risk of disclosure or misuse of confidential information within paragraph (8) of Lord Justice Clarke's distillation of principles.

Dismissing the appeal, the Court held that the judge had been entitled to reach the above conclusion. As Lord Justice Mummery put it at paragraph [30], the burden on a defendant law firm to show that there is no real risk of disclosure or misuse of the former client's confidential information is a heavy one, but it is not an impossible one to discharge. A "bright line" rule that a law firm can never act against a former client would be easier to apply, produce more predictable outcomes and give the former client comprehensive protection against the risk of unwitting disclosure or misuse of his confidential information but the law does not go as wide as a blanket rule of that kind. The law is that there is no need for a restraining order against acting or advising in an adverse interest, if the court is " satisfied on the basis of clear and convincing evidence that all effective measures have been taken to ensure that no disclosure will occur..." as Lord Justice Clarke observed in Koch at paragraph (8) of his principles. Each case turns on a careful judicial analysis and assessment of the quality of the evidence about the effectiveness of the precautions taken to protect the confidentiality of the former client's information from the risk of disclosure and misuse. If there is clear and convincing evidence that the precautions taken will provide effective protection, there will be no real risk to justify the grant of an injunction.

In this case detailed undertakings had been offered to the court to minimize the risk of disclosure or misuse of confidential information. There was every reason to believe that the undertakings would be observed in the spirit and in the letter. All those concerned appreciate the seriousness of undertakings to the court and that a breach of any of the undertakings would be an extremely grave matter. The combined effect of those undertakings, the conscientious and sophisticated ethical wall system erected by Le Boeuf in accordance with established procedures, the unchallenged evidence of the members of the arbitration team about their ignorance of and lack of access to the relevant information or access to the partners who had acted for Gus and the unquestioned professional integrity of all those involved in the law firm was sufficient to entitle the judge to conclude that the evidence established that the various precautions taken would effectively protect Gus from disclosure or misuse of their confidential information.

Though this decision is not unreasonable, I for one would still be concerned at the involvement against me of my former legal advisors notwithstanding the safeguards. A bright line rule would be easy to implement. It would in most cases require nothing more than a quick search of the client database. The Legal Services bill would be a lot more acceptable to folk like me were such a provision to be inserted.

Trade Marks - Parallel Imports and Summary Judgment: Doncaster Pharmaceuticals v Bolton Pharmaceutical Co.

This case was about the exercise of the judicial discretion to grant summary judgment under CPR Part 24. One of the principal changes brought about by the replacement of the Orders of the Supreme Court by the Civil Procedure Rules ("CPR") was the substitution of what we used to call the Saudi Eagle test for "triable issue" test for summary judgment.

The Saudi Eagle case (Alpine Bulk Transport Co Inc v Saudi Eagle Shipping Co Inc (1986) 2 Lloyd’s Report 221) was an application to set aside judgment under RSC O13 r 9. The rule enabled the court to set aside or vary any judgment entered on such terms as it thought just. One of the advantages of the old rules was that a simple statement of principle could spawn a judge-made code that tended to fit just about every circumstance in the same was as a fragment of grit produces a pearl. The pearl from this particular piece of grit was that the court's discretion under O19 r 9 would be exercised in favour of a defendant only if the defendant could show a meritorious defence.

By contrast, the hurdle to defeat a summary judgment application was much lower. All that a defendant had to show was that there was an issue that ought to be tried or some other reason for a trial (O14 r 3). CPR 24.2 permits the court to give summary judgment against a defendant if
it considers that the defendant has no real prospect of successfully defending the claim or issue; and there is no other compelling reason why the case or issue should be disposed of at a trial. Effectively, this is the meritorious defence requirement for setting aside a default judgment under RSC O13 r 9.

The case was an appeal from a decision of Mr Terence Mowschenson QC granting summary judgment to the proprietor of a UK trade mark against importers of parallel pharmaceutical products from Spain. The judge below had dismissed a defence of exhaustion of rights on the ground that the evidence was unlikely to succeed. The Court of Appeal allowed it on the basis that there was insufficient evidence to rule it in or out.

On the substantive issue the case does not break much new ground. What is interesting is Lord Justice Mummery's remarks on summary judgment. His lordship noted the difficulty of applying the "no real prospect of success" rule and concluded that "the outcome of a summary judgment application is more unpredictable than a trial."