By Tegan Miller-McCormack
Both IP practitioners and fashion brands will be interested in the recent string of judgments in relation to the infringement of dresses designed and sold by House of CB and Mistress Rocks. Oh Polly brand was found to have 'flagrantly' infringed a number of the Claimant's UK and EU unregistered designs and was ordered by the court to pay substantial damages.
Original Beauty Technology under its brands House of CB and Mistress Rocks (the Claimant) and G4K Fashion (the Defendant) under its Oh Polly brand are competitors operating very similar businesses selling fashion items aimed at young women, particularly bandage and bodycon dresses, to be worn on a night out.
In February 2021, His Honour Judge David Stone considered the possible infringement by the Defendant of 20 selected garments out of 91 garments. He found that seven of the garments infringed the Claimant's UK unregistered design rights (UKUDR) and Community unregistered design rights (CUDR). It was found that the Defendant had been taking images of the Claimant's garments and sending them to its factories to be reproduced. A claim for passing off was dismissed.
The December 20, 2021 judgment on damages, which is the focus of this article, was the ninth judgment handed down in what has been a long-running dispute between the parties.
What Damages Were Awarded?
The parties and Stone agreed the law to be applied in respect of standard damages was as summarized in Ultraframe.i Stone said he had particularly kept in mind that that (i) damages are to be assessed liberally, (ii) with the object to compensate the claimant and not punish the defendant, and (iii) where damages are difficult to assess, the court should make the best decision it can, having regard to 'all the circumstances of the case and dealing with the matter broadly, with common sense and fairness.'
Stone broke down his calculation of the damages under the following three categories.
1. Lost profit damages
The Claimant put forward the following calculation for lost profit damages:
"Lost profit = number of lost sales of the Infringing Garment (Lost Sales) x total per-unit profit for the Claimant's garments incorporating the respective Infringed Design (Per Unit Profit)
Lost Sales = total number of Defendant's sales of Infringing Garment x P
P = the probability that a sale in fact made by the Defendant of an Infringing Garment was to a customer who would have purchased the respective Claimant's Garment had the Infringing Garment not been available."
The Claimant's pleadings valued P at 1, i.e. every infringing sale made by the Defendant was a sale lost by the Claimant, later changing its plea to P = 0.25.
While the Defendant agreed with the calculation, it disputed the value of P, maintaining P = 0.
Stone held there was 'no doubt' that at least one of the infringing sales was a sale lost by the Claimant. On the basis of the available evidence, he concluded that P = 0.2.
The Claimant was awarded £74,847.92 ($101,453.59) in lost profits.
2. Reasonable royalty
Damages based on reasonable royalty can apply only to any sales which have not been compensated for as lost sales. A reasonable royalty is to be assessed by considering what a willing licensor and a willing licensee would have agreed in a hypothetical negotiation.
It was taken into account (among other reasons): (i) the Defendant had no in-house designer at the time of the infringements, (ii) the Defendant had no other source of on-trend designs, which was required to maintain the success of the business, (iii) the parties were competitors, and (iv) the Claimant was not running a licensing business, so would therefore require an income worth the administrative effort for entering into a license agreement.
Stone estimated the Defendant would have been prepared to pay a royalty rate of 10 percent with a minimum royalty of £4,000 for each design, whether whole or part.
In total, the reasonable royalty was assessed at £75,276.64 ($102,034.85).
3. Additional damages
Stone held the Claimant was entitled to additional damages as a result of the flagrancy of the Defendant's infringement, particularly taking into account his finding that the Defendant's key witness was dishonest and untrustworthy. Further, despite being put on notice of the Claimant's rights in 2016 and after the Claim form was issued to the Defendant in 2020, the Defendant still continued to offer for sale the infringing items until December 2020.
Taking into account the serious, flagrant and large scale infringement of the Defendant (being the sale of 15,393 infringing garments), the conduct of the Defendant, and the need to deter both the Defendant and other future copyists, Stone awarded £300,000 ($406,639.50) in additional damages.
He noted this represents an uplift of 200 percent on the standard damages and amounts to £19.50 per garment. He finally noted the total award was more than the gross profit the Defendant made from the infringement (leaving the Defendant out of pocket), which was required to punish and deter from future infringement.
The total damages payable by the Defendant was £450,124.56 ($610,168.60).
Why is this judgment notable?
"Damages enquiries are rare in intellectual property cases" began Stone at the start of his ruling. There is no doubt therefore that this judgment will be referred to and relied on in cases of infringement of design rights going forward. For fashion brands that frequently see their designs ripped off by fast fashion companies, this case is likely to bring assurance that flagrant copying — of registered and unregistered designs — will be compensated appropriately by the UK courts.
To readKattison Avenue/Katten Kattwalk | Issue 1, please click here.