The last few years have seen the emergence of the "non-practising entity" ("NPE"). An NPE treats intellectual property not as a shield to protect investment in research and development, design, marketing or other intellectual assets but as an investment in its own right. As often as not an NPE uses its IP to extract royalties, licence fees or damages from alleged infringers. NPE have been a largely American phenomenon but there have been examples on this side of the Atlantic such as Media CAT Ltd. which I covered extensively this year (see Media CAT v Adams and Others - The End on 28 April 2011). This case is about another.
In Future Publishing Ltd v The Edge Interactive Media Inc and Others  EWHC 1489 (Ch) (13 June 2011), the claimant ("Future") was a well-known publisher of computer gaming magazines with sales of approximately 3.6m magazines per month. Its publications include the magazine EDGE, which has been distributed in the United Kingdom since 1993. Its website is visited by over 400,000 visitors per month. Many jobs in the computer gaming industry are advertised in its pages. It has many corporate subscribers. It has won a number of awards over the years, including Games Magazine of the Year 2008. As the trial judge, Mr. Justice Proudman concluded, "it is plainly a substantial enterprise engendering a substantial following and substantial respect in the gaming industry."
The defendants were two companies registered in the United States, Edge Interactive Media Inc. ("EIM") and Edge Games Inc ("Games") and Dr. Langdell, an individual of British origin who now lives in Pasadena USA. The judge was satisfied that EIM and Games Inc were controlled exclusively by Dr Langdell. In the 1980s and early 1990s Dr Langdell had a business writing games software, under the name Softek and then Edge. Her ladyship noted that Dr, Langdell was "well-known" if not "notorious, for pursuing third parties using the name Edge for licence fees, failing which he pursues them for damages for trade mark infringement."
In Oct 1993 Dr. Langdell sued Future for passing off complaining of the publication of the magazine EDGE and also of Future's application to register that application as a trade mark. The action was compromised in 1996 by an agreement whereby
- Future paid EIM £20,000 to EIM,
- Future transferred its trade mark application and the goodwill in the EDGE sign to EIM,
- EIM granted a royalty free licence to use the EDGE sign in relation to EDGE magazine, and
- EIM agreed not to publish or license anyone else to publish a magazine substantially similar to EDGE magazine under the name EDGE or any colourably similar mark or claim any association or connection with EDGE magazine or with Future.
By a further agreement in 2004 Dr. Langdell and EIM assigned its trade mark in relation to goods in class 16 and its goodwill in relation to that mark in connection with those goods to Future for US$250,000 to EIM, and US$25,000 to Dr. Langdell. Mrs. Justice Proudman noted that both sums ended up in Dr. Langdell's bank account. The registration included:
"Printed matter and publications, namely magazines, newspapers, journals, columns and sections within such magazines, newspapers and journals, all in the field of business, entertainment and educations relating to computers, computer software, computer games, video games, hand-held games and other interactive media."
Both EIM and Dr. Langdell undertook not to "use or permit the use by any other person of any Trade marks in a way which is or could reasonably be confusing with Future's use of the same" in their respective agreements. For its part, Future agreed not to use the EDGE mark otherwise than for the publication and marketing of computer games magazines.
The Edge Masthead
As can be seen from the illustration to the right, the EDGE magazine and website have a very distinctive masthead. The letter "E" of the word "EDGE" has a cross bar protruding to the left with a corresponding shortening of the bar to the right. Each end of the cross bar is tapered to form what the judge described as "a sharp scalpel like point at the edge of the extension."
Both sides claimed to have created that sign. Dr. Langdell produced a 5 1/4 inch floppy disc from the early 1990s in support of his claim to have designed it in January 1991. Future's expert found that the file had been created by software running on Windows 95. In the absence of any satisfactory explanation from Dr. Langdell, the judge concluded that the disc had been concocted. Against Dr. Langdell's evidence, the judge had testimony from Future's creative director that he had created the masthead in the course of his employment without any reference to Dr. Landelle's work if indeed it had ever existed. The judge accepted the creative director's evidence. Despite a challenge from Dr. Langdell that it lacked originality over the Franklin Gothic typeface, her ladyship held that the masthead was an original artistic work in which copyright subsisted and that Future was the first owner of the copyright.
The judge observed that it was
"common ground that Dr Langdell and the defendant companies have used three versions of an EDGE logo, all based on a stretched version of the Franklin Gothic or Helvetica fonts. One of these versions is indistinguishable from the logo used by the claimant and was used on the defendants' letter heading in 2008 and 2009 and on EIM's website at various times. A second has a shorter bevelled trapezoid and was used on EIM's website from about 2003-4 until June 2009. A third has a much shorter trapezoid to the left of the vertical stanchion of the "E", amounting to no more than a triangle shape. I only have photocopies which Dr Langdell assures me accentuate the shadow produced by the bevelling. In all three cases, however, the slashed middle bar of the E was retained, as well as the stretching effect of the letters."
She had "no doubt that the defendants deliberately adopted a logo which is an obvious replica of the claimant's EDGE mark."
Causes of Action
Future sued Dr. Landell, EIM and Games for breach of contract, passing off and copyright infringement. It also applied for revocation of EIM's registrations under s.46 (1) (b) of the Trade Marks Act 1994 for non-use.
To use a gaming expression, Future hit the jackpot.
The judge held that the defendants' use of the EDGE logos breached the compromise agreement, constituted passing off and infringed Future's copyright. Furthermore, she held that the breaches were fundamental to the 1996 and 2004 compromise agreements and that those breaches had been accepted. Such acceptance freed Future from its obligation to use the EDGE mark only for games magazines.
Save for Future's use of the EDGE mark for the EDGE magazine and website, Dr. Langdell could point to no evidence of sales in the UK in the 5 years before the action. Mrs. Justice Proudman held that Future succeeded on that point also.
Rough justice for Dr. Langdell. Not only will he be clobbered for infringing Future's intellectual property but he has lost his own. Namely his TM registration dating form 1996 and the restrictions on Future's use of the EDGE mark in the 2004 agreement. But rather than feel sorry for him we should reflect that intellectual property is not a commodity but exists as an incentive to creativity, enterprise and inventiveness. Should anyone wish to discuss this case or intellectual property in general, he or she should call me on 0800 862 0055 or use my contact form.