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  • Writer's pictureRosie Burbidge

When is a director jointly liable for trade mark infringement?

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The UK Supreme Court has reversed the Court of Appeal in a case concerning liability for trade mark infringement. The Court’s unanimous judgment was written by Lord Leggatt and handed down on 15 May 2024.


The case arose from a finding that the use of SANTA MONICA POLO CLUB signs by a business called Hornby Street (trading as Juice Corporation) infringed Lifestyle Equities’ BEVERLY HILLS POLO CLUB trade marks. At first instance, Recorder Douglas Campbell KC found that there was a likelihood of confusion on the part of the public under section 10(2) of the Trade Marks Act and that the use of the signs took unfair advantage of, and was detrimental to, the distinctive character and reputation of Lifestyle’s marks under section 10(3).


In a subsequent judgment by which time Hornby Street had been dissolved, Douglas Campbell KC found that Mr Kashif Ahmed and Ms Bushra Ahmed, who were directors of the company, were jointly liable. However, he made no findings that they knew or ought to have known that there was a likelihood of confusion or infringement. He also found that the Ahmeds were liable to account for profits which they had made from the infringements, specifically 10% of their salaries and a loan to Mr Ahmed.


The Court of Appeal upheld all aspects of the decision, except that it held the loan was not a profit.


Can a director be jointly liable for infringement?

Allowing the Ahmeds’ appeal, the Supreme Court said that the infringing acts were done by Hornby Street in the course of its trade. It stated:


“it is unjust to hold a director personally liable for acts done in the ordinary course of performing the director's role which cause the company to commit a tort, if the director has not acted wilfully or knowingly.”

It further said that knowledge that an act is unlawful means having knowledge about “the essential facts which make the act unlawful”.


While in a simple counterfeiting case, it may be obvious that a director must have known the facts that led to trade mark infringement, in this case “there was room for argument and honest difference of opinion about the extent of the similarity and whether it gave rise to a likelihood of confusion or otherwise resulted in infringement”.


For example, the judge had not found that the Ahmeds were aware of Lifestyle’s brands before March 2014 nor had he found that they knew, or should have appreciated, that there was a likelihood of confusion. It was not argued that they deliberately intended to take advantage of the distinctive character or the repute of Lifestyle’s marks and the judge made no finding about whether they knew or should have appreciated that its reputation would be adversely affected nor regarding due cause. The Court concluded:


“Although on the facts found, the Ahmeds procured acts attributable to the company to be done which amounted to infringements, neither of them was found to have had the knowledge required to make them jointly liable for the infringements on either principle of accessory liability.”

Account of profits

The Court agreed with the Court of Appeal that the loan by Hornby Street to Mr Ahmed was not a profit, saying: “A person does not make a profit just by borrowing a sum of money.”


But it found that the lower courts were wrong to treat part of the Ahmeds’ salaries as profits as there was no allegation, evidence or finding that the salaries were anything but ordinary remuneration for their services, saying that “an employee who receives in return for their services a sum no greater than the fair market value of those services does not make a profit”. In this respect, it distinguished between a sole trader and an employee.


Lord Leggatt added the profit a trade makes from infringement is not necessarily the difference between the proceeds and the costs:


“In estimating the profits for which Hornby Street was liable to account, the question should therefore have been asked whether it is likely that any, and if so what proportion, of the sales of goods bearing the offending signs which were in fact made would have been made if the signs had not been used. The appropriate inference might have been that no sales would have been made but the question was not considered.”

What does this mean?

The judgment may make it slightly harder to seek remedies from company directors in cases, such as this, where it is not possible to do so from the company itself. As such, it will be welcomed more by potential defendants than claimants.


In particular, the Court distinguished between situations (such as clear counterfeits) where directors can be expected to have knowledge and more nuanced cases where this knowledge will have to be proven. Parties bringing trade mark infringement or passing off claims should therefore argue and submit appropriate evidence to demonstrate joint liability in such cases.


If you would like to discuss more about the impact of this judgment and its significance for trade mark law, please contact us!


To find out more about the issues raised in this blog contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - rosie.burbidge@gunnercooke.com


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