Spin Master Ltd v PMS International Group [2017] EWHC 1477 (Pat) (09 May 2017)

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
COMMUNITY DESIGN COURT

MR. JUSTICE HENRY CARR:

Introduction

1. This is a case management conference in respect of a claim for infringement of a Community Registered Design by the claimant and a counterclaim by the defendant for unjustified threats of infringement of three different species of intellectual property rights. There is clear guidance from the Court of Appeal that in respect of registered design claims, admissible evidence is limited and hearings should be short. This case management conference has raised an issue which is not confined to the facts of this case, namely how to achieve short, cost-effective hearings where one or perhaps both parties are preparing for a much longer trial. For this reason, I have set out in more detail the reasons for my Order, which were initially given in an unreserved judgment.
   
2. The defendant’s product the subject of this action is a construction toy called “Clingabeez”. It consists of individual balls with hook projections, which can be stuck together and used to build larger structures. The claimant alleges that its product, “Bunchems” has been extremely successful and has started a craze for this type of toy. It was “Activity Toy of the Year” in 2016. It is the claimant’s case that its product, which is said to be illustrated in the Registered Design, was a substantial departure from the design corpus and, as such, makes a significant visual impact on the informed user.
   
3. It appears to me that that counterclaim will stand or fall depending on whether the Community Design in issue has been infringed. If it has been infringed, then the defendant will be injuncted. If it is injuncted, it is extremely unlikely that the defendant will be granted any kind of relief in respect of threats concerning the other species of intellectual property rights, given that it should not have been selling these products in the first place.
   
4. This claim and counterclaim raise straightforward disputes, typical in cases of this nature. As one would expect, the claimant contends that the alleged infringement creates the same overall impression as the registered design and has pleaded certain similarities upon which it relies. The defendant has pleaded that the overall impression of the Clingabeez product on an informed user is different and it claims that certain features are dictated by function and in respect of others, design freedom is restricted. On the counterclaim, the claimant’s key defence is that the threats it has made are justified, which follows if its claim for infringement succeeds.
   
5. In the light of this, I was very surprised to see that the costs budget for the defendant is approximately £360,000 – that is bad enough – but the budget for the claimant is some £776,000, which, from what I have seen, is far too much given the simplicity of the issues.
   

Legal principles

6. I am concerned in this case that the guidance of the Court of Appeal concerning registered design cases has not been fully taken on board. The guidance that I have in mind was given in Procter & Gamble Co v Reckitt Benckiser (UK) Limited [2007] EWCA Civ 936; [2008] Bus LR 801 and repeated and expanded by the Court of Appeal Dyson Ltd v Vax Ltd [2011] EWCA Civ 1206; [2013] Bus LR 328. In particular:

(i) Registered design cases are concerned with the overall impression of the registered design, the alleged infringement and the design corpus. It is easier to see this than to describe it in words.

(ii) Admissible evidence in such cases is very limited, and is most likely to comprise technical evidence about design constraints. Such evidence is unlikely to require substantial cross-examination. It should be possible to decide a registered design case in a few hours.

(iii) If permission for expert evidence is to be given, then the precise ambit of that evidence should be defined. The expert should be told what question to address and the evidence should be confined to those questions.

(iv) It is clear law that whether the defendant has copied is irrelevant. It is equally irrelevant for the defendant to prove or to give disclosure about how his design was arrived at.

7. I will add a few observations of my own. First, there are occasions when neither side will consider that it has had an adequate hearing if the time allotted for the trial is limited to a few hours. Each party wishes to have their say, particularly in commercially important cases. However, the interests of other users of these courts need to be considered. Stepping back, there is no reason why registered design cases should last for days, when one understands what really matters. That message is clear from the judgments to which I have referred.
   
8. Secondly, it is very tempting for claimants to seek to introduce allegations of copying. Mr St Ville suggested that copying could be relevant in that it would refute the suggestion that features were similar due to lack of design freedom. I disagree. Limitations on design freedom were in issue in both of the cases to which I have referred, and in both cases, it was held by the Court of Appeal that copying was irrelevant. Whether design freedom is limited in any case is an objective, technical question. In a case of copying, features will have been reproduced where design freedom is unlimited and where it is limited. The fact of copying does not answer the question of limitation on design freedom. Proof of copying in a registered design claim may be considered by claimants to be useful prejudice, but it is no more than that. The appropriate causes of action in civil proceedings for such allegations are infringement of unregistered design and infringement of copyright. An advantage of a registered design is that, as with patents, copying does not have to be proved, and is not relevant.
   
9. I agree with the parties that this case will take a few days to decide, as evidence of fact will be relevant to the counterclaim and it appears that several witnesses may be cross-examined. The parties’ estimates in this case, even taking account of the counterclaim for groundless threats, are too long. The claimant’s estimate of six days for the trial, including reading time for the court, is far too long. The defendant’s estimate of four days, including reading time, is also too long and can be shortened, as I discuss further below.
   

Request for further information

10. I now turn to the matters in dispute at the case management conference. Throughout, I should make it clear that I have been looking to reduce the complexity of the trial and to ensure that it can be heard in a reasonable time to enable the relatively simple issues in dispute to be resolved.
    
11. There are no less than ten areas of dispute at this case management conference, and the parties produced a joint authorities bundle containing no less than thirty-one entries. In particular (1) the claimant sought an order for provision by the defendant of further information; (2) the claimant sought to amend the Particulars of Claim to claim bonus damages under the Enforcement Directive; (3) the claimant sought to make amendments to the Reply and Defence to Counterclaim; (4) the claimant sought to make further amendments to the defence to the Counterclaim, most significantly in relation to an ex turpi causa plea; (5) more expansive disclosure was requested by the claimant; (6) the claimant sought provision in the directions for alternative dispute resolution; (7) the scope of expert evidence and the areas of expertise were in dispute; (8) there was some argument about whether there should be provision for notice of models, which disappeared; (9) the trial estimate was disputed; and (10) the costs budgets were in issue, although by the end of the hearing, both parties accepted that they will now be reduced, and there was no point is considering them at this stage.
    

Requests for further information

12. The claimant requests further information about the features which are relied upon by the defendant in support of its defence that, overall, its product creates a different impression from the registered design. Both sides have set out in words their respective cases, the claimant specifying certain alleged similarities and the defendant specifying certain alleged differences. I do not consider that further verbal descriptions are at all helpful. At my suggestion, the parties accepted that a more productive course would be for an exchange of enlarged photographs of the products alleged to infringe. The claimant can show in those photographs the similarities that it relies upon and the defendant can show the differences. I do not intend to make that process sequential, given that the defendant has already particularised what it says the differences are. I will not grant any order for further information.
    
13. Next, there is a request by the claimant for particulars of the design corpus which the defendant relies upon. The defendant claims that, because of the preponderance of designs of balls with multiple projections in the design corpus, the scope of protection of the registered design is narrow. In my judgment, the defendant should disclose at this stage those prior designs that it knows it is going to rely upon, without prejudice to its right to supplement that disclosure in evidence.
    
14. Requests 6, 7, 10 and 12 relate to the nature and magnitude of the claim for financial relief in the counterclaim. The defendant, through its company solicitor, Sarah Lawrence, has already volunteered a confidential witness statement which sets out the defendant’s monthly revenue from its Clingabeez products. That may promote settlement. Whether it does or not, I do not intend to order any further information which seems to me to be a matter for the inquiry on the threats counterclaim, if it is successful.
    

Disclosure

15. Turning to disclosure, the defendant has annexed to its Defence and Counterclaim notifications received by its customers from Amazon. According to the defendant, the claimant complained to Amazon that the defendant’s products were infringements of various of its intellectual property rights. There have been certain redactions in relation to those documents. The claimant seeks unredacted copies. The defendant’s solicitor, Mr. Hussey, explains that the redactions were made on the basis that the redacted parts were not relevant. However, it is suggested that the names in the emails of the senders and recipients need to be disclosed so that the claimant can interview those individuals as potential witnesses.
    
16. It seems to me that the only issue of controversy in this area relates to whether the claimant complained about the products being sold by a seller known as JTF on Amazon. The claimant says that it did not. In my view, it is unnecessary to decide that issue at trial given that there are three other instances in respect of which the claimant admits that it sent complaints to Amazon. Therefore, the defendant’s case will stand or fall based upon those complaints. If the court decides that those complaints to Amazon were unjustified then there will be an inquiry as to damages, at which point the issue in relation to JTF and any other customers may be further investigated. The primary questions at trial are whether, objectively, the relevant communications were threats of infringement, and whether they were justified.
    

Amendments to pleadings

17. In relation to the amendments to the Particulars of Claim, the claimant seeks bonus damages under regulation 3 of the Intellectual Property (Enforcement etc.) Regulations SI 2006/1028. If I allow this amendment, it will bring in several complex issues, including whether the alleged similarities between the Clingabeez balls and the Registered Design resulted from copying (an allegation which the claimant seems very keen to introduce) as well as issues of unfair advantage and other aspects which may, if proven, lead to an award of additional damages.
    
18. I am not going to shut the claimant out from making these amendments, but nor am I going to allow them at this stage. It seems to me that the question of bonus damages, with all of its complexities, only arises if the claimant is successful in its claim for infringement. If that stage is reached, and if the claimant chooses, it can apply to make these amendments. I am not going to allow them into the action at this stage, nor am I going to grant disclosure in respect of allegations of copying which, as I said, are not relevant to liability.
    
19. The amendments to the Reply and Defence to Counterclaim relate to whether the defendant is a person aggrieved by the alleged threats; and to a defence of ex turpi causa. If allowed in, they are very wide in scope. The expansion of the ex turpi causa defence would introduce an allegation that the defendant has committed a criminal offence by copying the registered design which, despite Mr. St. Ville’s submission to the contrary, I consider would involve the court in deciding, beyond reasonable doubt, that the criminal offence had been committed.
    
20. That issue is said to arise because of the defendant’s rather unpromising claim that even if it loses on the registered design issue, still it can have some relief on the counterclaim. I am not in a position at this hearing to decide whether this is the cause of the proposed amendment, or whether it is another excuse to explore copying. However, since this only arises if the defendant loses at trial because the threats of infringement of the registered design were justified, I am not going to allow the amendments in at this stage. I will give permission to the claimant to apply to make those amendments if it is successful at trial.
    
21. I am not going to order any disclosure concerning design history or copying as I do not regard it as relevant to liability for infringement. In relation to the effect of the alleged threats, I consider that there should be mutual disclosure. The claimant accepts that it must give disclosure; the defendant does not. It may be that because of communication from Amazon, one or other of the defendant’s customers reverted to the defendant asking for an explanation as to why the product was alleged to infringe. That may or may not be helpful to the defendant in establishing concern on behalf of the customer that the communication from Amazon (and therefore the communication of the complaint from the claimant) was regarded as a threat. I do not have in mind that it will be necessary to disclose many documents; a few pages should suffice.
    

Alternative dispute resolution

22. In respect of alternative dispute resolution, I do not intend to order it at this stage. I consider that once the evidence has been exchanged, it would be appropriate to mediate this case. If either side refuses to mediate, it may need to explain why at the end of the trial.
    

Admissible evidence

23. There are very limited issues upon which expert evidence is admissible. The issues on which I intend to allow expert evidence are as follows. First, are any of the features listed in subparagraphs (1) to (9) of paragraph 6.5 of the Amended Particulars of Claim features of appearance of a construction toy such as Bunchems which are solely dictated by its technical function? Second, to what extent, if any, is the degree of freedom of design limited by the functional nature, if any, of the features of subparagraphs (1) to (9) of paragraph 6.5 of the Amended Particulars of Claim?
    
24. I am also prepared to allow a very limited amount of further evidence in relation to the claim for infringement. Mr. St. Ville suggested (and I agree with him) that there should be no more than two pages on the question of design corpus (not including exhibits). The claimant intends to prove this by way of expert evidence, and the defendant by way of evidence of fact. In principle, both are admissible. I am not prepared to allow in any expert evidence as to whether the Clingabeez product produces on the informed user a different overall impression to the Registered Community Design. The cases have already made clear that that is a matter for the court. It can perfectly well be decided in this case, which concerns the overall impression made by consumer products, without expert evidence about similarities and differences.
    
25. In addition, I intend to impose a limit on the length of the expert evidence. Mr. St. Ville was content with ten pages. Mr. Aikens, who wishes to rely on functional similarities and limitation on design freedom, suggested that the evidence should be limited to 20 pages, but that cross-examination should not be permitted without permission. I intend, perhaps predictably, to adopt a middle course and order that the evidence should be limited to 15 pages, and that there should be no cross-examination without permission. On the question of permission, the party wishing to cross-examine will need to justify and explain why it will be useful.
    

Length of trial

26. As to trial length, I consider that, given the threats counterclaim, three days, including reading time, should be ample, which is less than either of the parties’ estimates. I have in mind that this case should be simple enough for counsel to proceed to closing speeches without requiring an adjournment for written closings. However, that is a matter that can be revisited at the pre-trial review. At the pre-trial review, I would expect each side to have a detailed timetable and it may well be that the estimate can be shortened further.
    

Lessons for the future

27. In order to achieve shorter trials in registered design cases in the future, in my view the following steps should be considered:
    

(i) The parties should, in appropriate cases, produce images at an early stage to show the differences or similarities upon which they rely, and in the case of the defendant, those features which are wholly functional or in which design freedom is said to be limited. Requests for further information are unlikely to be helpful.

(ii) Claimants should not try to introduce or seek disclosure in relation to copying. The parties should carefully consider why, if at all, disclosure is necessary, rather than agreeing to standard or even issue based disclosure.

(iii) Expert evidence as to whether the alleged infringement produces on the informed user the same or a different overall impression as the registered design should not be included in cases concerning consumer products.

(iv) The parties should try to limit the length of expert evidence to an agreed number of pages.

(v) If any evidence of fact is to be introduced, the court will need to be satisfied of its relevance.

(vi) The parties should be prepared at the pre-trial review to identify issues on which cross-examination is necessary, and to explain why.

(vii) Where multiple designs, or multiple infringements, are alleged, the parties should each select a limited number of samples on which the issues can be tested.

(viii) The parties should give careful thought to those issues which can be postponed to a damages enquiry, which will only need to be considered if liability is established.

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