The Magic Seeder Co Ltd v Hamble Distribution Ltd [2012] EWPCC 9 (29 February 2012)

Neutral Citation Number: [2012] EWPCC 9 Case No: PAT 09009 IN THE PATENTS COUNTY COURT Rolls Buildings 7 Rolls Buildings London EC4A 1NL 29/02/2012 B e f o r e : HIS HONOUR JUDGE BIRSS QC ____________________ Between: THE MAGIC SEEDER CO. LIMITED Claimant - and - HAMBLE DISTRIBUTION LIMITED Defendant ____________________ Lorna Brazell of Bird & Bird LLP for the Claimant Ian Morris of Kuits Steinart Levy LLP for the Defendant On Paper ____________________ HTML VERSION OF JUDGMENT ____________________ Crown Copyright © His Honour Judge Birss QC : This action is for infringement of copyright in the packaging for a product for planting seeds. The proceedings have been dealt with in a highly cost-effective and proportionate manner by both sides. The sums at stake are modest. The trial on liability took one hour on 25 th November 2011 and I gave an oral judgment on liability then and there. The background of the case is set out in that judgment. The outstanding issues were the assessment of damages and the question of costs. I directed that the parties file written submissions on those issues. They did so and the matter was determined on paper. This is a brief judgment dealing with the outstanding issues. Damages The relevant legal principles are (1) for any infringement which caused a lost sale to the claimant, the correct measure of damages is the profit the claimant would have made on that sale; and (2) for any other infringing sale by the defendant, the correct measure of damages is a reasonable royalty. At trial the number of infringing sales of seeders made by the defendant was taken to be 2376. These sales were made in the period from February to June 2008. The claimant's case based on the witness statements of Derek Stride was that the defendant's infringement had caused the claimant to lose 620 sales of seeders. That represented lost profits of £2172. For the remaining infringing sales by the defendant (2376-620=1756) the claimant claimed a notional royalty of £100. Thus the claimant claimed damages of £2272. At the trial, the two relevant figures were (1) that the original settlement was on the basis of sales of 1464 seeders and (2) that after the original settlement the defendant sold a further 2376 seeders. The defendant's sales data provided on 13th December 2011 shows that in fact the total sales of all seeders was 3984. However 1464 + 2376 does not equal 3984. The explanation for the discrepancy is that in fact up to the settlement the defendant had actually sold 1608 seeders. So one can take the view that the infringing sales represent 2376 seeders, which is the number sold after the settlement. Alternatively one can take the view that the infringing sales are 2520 (=3984-1464), which is the number unaccounted for by the original settlement. The defendant's written submissions of 13th December 2011 made the following points: First, the defendant and the claimant were selling into different markets and therefore the defendant's sales would not have caused any lost sales to the claimant. Second, the lost sales figure of 620 was challenged. That figure had been derived by the claimant by noting a drop in turnover in 2007 and 2008, attributing it to the defendant's infringements and determining the volume of lost sales as a result. That estimate was made by estimating what the turnover in 2007 and 2008 should have been by interpolating between the turnover figures for 2006 and 2010 and then subtracting the actual turnover. The defendant pointed out that the claimant's abbreviated accounts available at Companies House did not accord with the claimant's turnover figures. Thus the defendant doubted the figure of 620 lost sales. Third, the original settlement had more than generously compensated the claimant. Fourth, as regards notional royalty, a rate of 5% would produce a figure of £126 for the totality of the defendant's sales. This was based on a figure for total sales by the defendant of 2520 rather than 2376. The claimant's written submissions of 12 January 2012 made the following points: First, the discrepancy between the accounts and the figures in Mr Stride's witness statements arose because the claimant has a sister company which makes export sales. Having seen the defendant's sales data the claimant accepted that the competition was in the UK only. Second, the information on its sales now presented in the 13th December letter shows that in fact the defendant and the claimant were selling to the same retailers and in the same general market (all over the country). Therefore it is more likely than not that some of the defendant's sales caused lost sales to the claimant. Third, a specific instance of lost sales can now be identified from the defendant's data. The customer was Proper Jobs Superstores Ltd in Spring 2008. The claimant expected to get that contract but instead the defendant sold 192 seeders to that customer in that period. Fourth, the estimate of 620 is still realistic since it represents 192 (see above) plus a further 428. 428 is about 18% of the defendant's remaining sales (using a figure of 2328 for that (=2520-192)) and is therefore a reasonable estimate. Fifth, alternatively, if the court thinks that a notional royalty on all sales is appropriate, an appropriate way to calculate a notional royalty would be to use the original settlement figure and determine a rate per product from that. That comes to £2.04 per product and produces a total of £1,890 damages on sales of 2520. The defendant's reply on 26th January 2012 made the following points: i) There is a contradiction between the figures of 428 and 620 for lost sales. They cannot both be right. ii) The assertion of a lost customer cannot be tested in a proportionate way and so the court should adopt the defendant's approach to the calculations. iii) The original settlement is not a sound basis to determine a reasonable royalty. This exercise needs to be kept in proportion with the sums at stake. Given the information about the defendant's sales, it seems to me to be inherently likely that some lost sales have indeed been caused by the defendant. There is no reason not to accept the claimant's point about Proper Jobs Superstores. That means that at least a sale of 192 units was lost. There is no contradiction between 428 and 620. The explanation for the difference is that the claimant argues it can prove a loss of 192 and an estimate of a further 428 lost sales is reasonable, giving a total of 620. The fact that there is no contradiction does not mean I should accept the estimate of 620 lost sales. In my judgment it is too high. It was based on a calculation which was flawed, albeit for reasons which the claimant could not have appreciated until it saw the defendant's figures. I think a figure of 500 lost sales represents a fair and reasonable estimate in this case. For 620 lost sales the claimant claimed £2172 in lost profit. That is about £3.50 per product. I will use that rate. It produces a lost profit figure of £1,750. I reject the claimant's argument that the royalty on sales which are not lost sales should be determined by reference to the original settlement. A fair royalty would be the sum originally sought by the claimant, i.e. £100. That was clearly a round number and was not sensitive to the actual number of products sold by the defendant. Accordingly it does matter whether the total number of units sold by the defendant is to be regarded as 2520 or 2376. Therefore the damages will be £1,850. I will order the sum to be paid within 21 days. Costs The claimant seeks an order for £271.95 in costs. These are disbursements for bringing the claim and attending trial. The claimant's solicitors acted pro bono. The defendant submits there should be no order as to costs. I reject that submission. In the circumstances of this case, no order as to costs would not be fair given that the claimant has been the successful party and had to come to trial to have its rights vindicated in court. In my judgment the claimant's actual level of costs is also relevant. I will award the claimant its costs and summarily assess them in the sum of £271.95. They should be paid in 21 days. BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII