How much will a court award in additional damages for flagrant IP infringement?
Updated: Jan 29, 2022
There was not a lot of excitement in 2021 but one IP highlight concerned the ongoing Original Beauty v G4K saga. We first wrote about this dispute here. The 122 page judgment went into detail on the design process and inner workings of the two businesses - better known as House of CB and Oh Polly.
Some other businesses might have decided to focus on identifying an appropriate settlement solution but instead we have had eight further judgments since the first High Court decision. They primarily focused on procedural issues such as case amendments, additional evidence and costs. Eventually, in December 2021, we got to the question of what damages would be reasonable.
House of CB sought damages from Oh Polly under three heads:
reasonable royalty on sales where lost profits did not apply; and
additional damages based on the judge's earlier finding that Oh Polly's infringement was flagrant.
House of CB argued that Oh Polly should pay approximately £275,000 in lost profits/reasonable royalty, to be “topped up” to approximately £500,000 with additional damages.
Total requested: £775,000
Oh Polly accepted that:
a reasonable royalty was payable, but valued that royalty at approximately £15,000, or £1 per infringing Oh Polly garment.
additional damages were payable, but said that should be no more than a 20% uplift on the reasonable royalty, namely £3,000, or 20p per infringing Oh Polly garment.
Total offered: £18,000
The judgment goes into a lot of helpful detail regarding the correct approach toward calculating loss of profits, reasonable royalty and additional damages.
The numbers awarded by the judge were:
£74,847.92 in lost profits.
£75,276.64 as a reasonable royalty.
£300,000 in additional damages due to the flagrancy of the infringement.
In the context of English IP litigation for fashion products, these are relatively high numbers and reflect the long period of sale for the infringing products. The most interesting analysis comes from the approach taken toward additional damages. The judgment includes at para  a helpful table of additional damages awards in the UK. A simplified version is below.
Nottinghamshire Healthcare NHS Trust v News Group Newspapers  RPC 49
Cavalcade Records v HHO Multimedia  EWPCC 41
Pendle Metalwares v Walter Page  EWHC 1140 (Ch)
PPL v Miller  EWHC 3738 (Ch)
Absolute Lofts v Artisan  ECDR 6
How was the additional damages award calculated?
The judge took the following circumstances into account:
the 15,393 infringing garments sold by the Defendants: this was serious infringement on a large scale.
The fact that the Defendants sales were a flagrant infringement, carried out over four years.
The Defendants’ approach to their infringement, including continuing to deny copying (other than in relation to C35) through the liability trial.
The need to punish the Defendants in a way that is effective, proportionate and dissuasive.
This is what the justice of the case requires.
The £300,000 award is, in the judge's view, proportionate and not egregious or an abuse of rights.
Whilst the judge did not take the following into account he observed that:
The award represents an uplift of 200% on the standard damages. This is nowhere near the uplifts of 500% or 2,100% awarded in two prior cases;
There was no evidence before me that the Defendants would be unable to pay such an amount;
The award amounts to £19.50 per garment.
The award is more than the gross profit the Defendants made from the infringement - £192,208.
Simply removing the profit altogether does not act as a deterrent or a punishment, as the Defendants would be left in the same position as if they had not infringed. To be punished and deterred, the Defendants must be left out of pocket;
The award is less than 1% of the Defendants’ audited turnover for the 2020 financial year.
The award is within the maximum fine for counterfeiting by a corporation, which is £450,000.
What does this mean?
Because IP trials in the UK are usually split between the trial on liability and a separate trial on quantum, most damages disputes are settled before a judgment is handed down. This case offers useful guidance for future litigants and a warning for infringers. The UK has historically not taken the punitive approaches to damages that are common in other parts of the world. Whether this case will be a watershed moment in that regard remains to be seen.
To find out more about the issues raised in this blog contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - email@example.com