European Community – Infringement of trademark – Damages for infringement of trademark
32Red plc v WHG (International) Ltd and other companies: Chancery Division: 12 April 2013
The claimant was a Gibraltar-registered company operating an online casino under the brand '32Red' since 2002. By 2006, 32Red was the registered owner of two European Community trademarks: one for the word '32Red' and another for a device consisting of a stylisation of '32Red' in a roulette ball. In the same year, an online casino began to operate under the name '32Vegas'. That casino had no connection with 32Red.
A company (Crown Solutions) registered the domain name '32vegas.com'. In October 2008, the defendants (together the William Hill group) entered into a joint venture with Playtech, one of the leading providers of gaming software. As part of the arrangements, the domain name '32vegas.com' was transferred from Crown Solutions to a Playtech company called Genuity Services Limited (Genuity). On 30 December 2008, Genuity granted a licence to use the domain name together with any associated marks (whether registered or unregistered) to the first and second defendants. The claimant brought proceedings against the defendants for infringement of its trademark.
The claim was based on the 'user principle', namely that a person who had wrongfully used another's property could be liable to pay, as damages, a reasonable sum for such use. In earlier proceedings (see  All ER (D) 210 (Jan), judgment was given in which it was held that the claimant's community marks were valid and had been infringed. The instant judgment concerned the assessment of damages.
The issues for consideration were: (i) how important were the specific characteristics and circumstances of the parties to the assessment of user principle damages; and (ii) how far was it appropriate to have regard to alternative courses of action which would have been available to the parties at the date of the hypothetical negotiation. Consideration was given to Watson, Laidlaw & Co Ltd v Pott, Cassels and Williamson (Watson)  31 RPC 104.
The court ruled: (1) There were plainly limits to the extent to which the courts would have regard to the parties' actual attributes when assessing user principle damages. The parties were taken to have been willing to make a deal even if one or both of them would not in reality have been prepared to do so. It was also assumed that the parties would have acted reasonably, regardless of whether that would in fact have been the case. In addition, a defendant's financial circumstances were not material as such. Particular character traits of the parties also fell to be disregarded. The courts did have regard to the circumstances in which the individual parties were placed at the time of the hypothetical negotiation (see - of the judgment). Irvine v Talksport Ltd  2 All ER 881 considered; Stadium Capital Holdings (No 2) Ltd v St Marylebone Property Co plc  All ER (D) 88 (Nov) considered.
(2) It was not accepted that the availability of a non-infringing alternative was not a relevant factor in the calculation of a reasonable royalty in the instant context. If the parties could be expected to have taken such an alternative into account in their hypothetical negotiation, the court had to do so as well. An alternative did not need to have had all the attributes of the 32Vegas name to be relevant. Similarly, in the instant case, what mattered was what impact the possibility of re-branding would have had on the hypothetical negotiation, not whether a substitute mark would have shared the attributes of 32Vegas (see  of the judgment). Sinclair v Gavaghan  EWHC (Ch) considered.
(3) It was settled law that damages for patent infringement were assessed in three main ways. First, if the claimant exploited the invention by manufacturing and selling goods at a profit, and the effect of the infringement had been to divert sales to the defendant, the measure of damages would normally be the profit which would have been realised by the owner of the patent if the sales had been made by him. Secondly, if the claimant exploited his patent by granting licences in return for royalty payments, the measure of damages the defendant had to pay would be the sums which he would have paid by way of royalty if, instead of acting illegally, he had acted legally. Thirdly, where it was not possible to prove either that there was a normal rate of profit or a normal royalty, damages fell to be assessed by considering what price could reasonably have been charged for permission to carry out the infringing acts (see  of the judgment).
In Watson, which concerned the infringement of a patent, it was said that the assessment of damages sometimes involved the exercise of a sound imagination and the practice of the broad axe. Something of that approach was needed in the instant case. On the facts, a licence fee of £150,000 was likely to have been agreed.
In all the circumstances, damages of £150,000 would be awarded (see  of the judgment). General Tire and Rubber Co v Firestone Tyre and Rubber Co Ltd  2 All ER 173 applied; A-G v Blake (Jonathan Cape Ltd third party)  4 All ER 385 considered; Pell Frischmann Engineering Ltd v Bow Valley Iran Ltd  UKPC 45 considered; Force India Formula One Team Ltd v 1 Malaysia Racing Team SDN BHD  All ER (D) 198 (Mar) considered.
Michael Silverleaf QC and Tom Moody-Stuart (instructed by McDermott Will & Emery UK LLP) for the claimant; Henry Carr QC and Lindsay Lane (instructed by Linklaters LLP) for the defendants.