Handi-Craft Company & Anor v B Free World Ltd & Ors

Case No: A3/2007/2435(Z) A3/2007/2906(Z) Neutral Citation Number: [2008] EWCA Civ 1008 IN THE SUPREME COURT OF JUDICATURE COURT OF APPEAL (CIVIL DIVISION) ON APPEAL FROM THE HIGH COURT, CHANCERY DIVISION, PATENTS COURT (HIS HONOUR JUDGE FYSH QC) Royal Courts of Justice Strand, London, WC2A 2LL Date: Monday, 16 th June 2008 Before: LORD JUSTICE JACOB and LORD JUSTICE RIMER - - - - - - - - - - - - - - - - - - - - - Between: HANDI-CRAFT COMPANY & ANR Appellant - and - B FREE WORLD LTD & ORS Respondent - - - - - - - - - - - - - - - - - - - - - (DAR Transcript of WordWave International Limited A Merrill Communications Company 190 Fleet Street, London EC4A 2AG Tel No: 020 7404 1400 Fax No: 020 7831 8838 Official Shorthand Writers to the Court) - - - - - - - - - - - - - - - - - - - - - Mr D Hughes (instructed by Short Richardson & Forth LLP) appeared on behalf of the Appellant. Ms A Edwards-Stuart (instructed by Withers LLP) appeared on behalf of the Respondent. - - - - - - - - - - - - - - - - - - - - - Judgment Lord Justice Rimer: 1. This is a renewed application by five of the twelve defendants for permission to appeal against an order made by His Honour Judge Fysh QC on 14 December 2007, sitting as a judge of the High Court. The five were all jointly represented at the trial, by which time there were only two other active defendants: Mr Alberici, who represented himself; and another company that was also represented by the lawyers who represented the five. 2. The judge’s judgment had been handed down earlier on 6 September 2007. The claimants are Handi-Craft Company and New Vent Designs Incorporated. New Vent is the owner and Handi-Craft the exclusive worldwide licensee of the copyright of an artistic work referred to as “Dr Brown’s logo” and used in connection with Handi-Craft’s business of the manufacture of nursing bottles said to afford relief to babies suffering from colic. The moving spirits behind the business are two Americans, Bob Brown and his son Dr Craig Brown, and the bottles are known as “Dr Brown’s Natural Flow Bottles”. 3. The dispute is the fall-out from a 1997 distribution agreement under which Handi-Craft granted exclusive worldwide distribution rights and bottles to Action Trading SA, a Panamanian company, which is not a party to the proceedings but is, or was, controlled by Amikam Berkovitch (“Amikam”), who is the seventh defendant. 4. That distributorship agreement was terminated in July 2002, although SA did not acknowledge its termination and continued to sell the bottles as if the licence were still in force. The proceedings arose out of Amikam’s development and launch of a rival bottle to be manufactured in Israel by the tenth defendant, TTY General Trade Lines Limited (“TTY”), and to be sold under the name of “B FREE”. The rival bottles are known as “B FREE Bottles” and Amikam conceived the idea of launching them in about 2001 when the mark referred to as the B FREE mark was also coined. One issue raised by the proposed appeal is whether, as the judge held, that mark infringes the claimant’s copyright in Dr Brown’s logo. From early 2005 the bottles were traded in the UK by B Free World Limited (“BFW”), the first defendant. 5. The proceedings were commenced in April 2005 against just four defendants, including BFW but none of the present applicants, the further eight defendants being added later. In June 2005 Laddie J granted interim injunctive relief based mainly on trade mark infringement and passing off. A variety of claims was advanced against the various defendants in the claim as ultimately formulated. The judge described the pleadings as “convoluted, originally involving permutations upon five causes of action against twelve defendants and full measure of joint tortfeasance scattered in between.” 6. The five defendant applicants now before the court are D1, BFW; D7, Amikam; D10, TTY; D11, Dvora (Amikam’s wife); and D12, Tamir Tirosh. D8, Mr Alberici, against whom the claimants succeeded in part, is not an applicant. D5, Baby B Free Limited (“BBFW”), was originally an applicant for permission but is no longer. 7. The corporate defendants are all connected with the Berkovitch family. BFW’s issued capital was owned by Yasmin, Amikam’s daughter, until June 2005, and in June 2006 Amikam became the sole director. BBFW used to operate the sales website. Its share capital was also owned by the Berkovitch family. Amikam admitted that he ran BFW and BBFW and made all the decisions relating to their strategic directions and expenditure. TTY is an Israeli company of which Tamir Berkovitch, Amikam’s son (not an applicant), is a director and of which the shareholders are Dvora’s parents and a Mr Chaya Blattberg. TTY arranged for the manufacture of Dr Brown’s bottles before the split, and the main moving spirit behind TTY is or was Mr Tirosh, the twelfth defendant, one of the applicants. 8. The judge dealt first with the claim that the B FREE bottle infringed the claimants’ patent, to which there was a counterclaim for revocation on the grounds of anticipation, obviousness and insufficiency. That claim failed on the ground that the patent was invalid for obviousness. 9. The judge dealt last with the passing off claim and the trade mark infringement claim, the claims with which Laddie J was primarily concerned at the interim stage. The judge found these claims established against, amongst others, the applicants; and he granted appropriate injunctions and delivery up orders against them, including giving the claimants the option of an account of profits or an inquiry as to damages. 10. In between dealing with these matters, the judge dealt with the copyright infringement claim. The issue was whether the B FREE mark infringed Dr Brown’s logo, which the judge described in paragraph 156 of his judgment. The judge also annexed colour reproductions of both logos at appendix A. Copyright in Dr Brown’s logo was not in issue, nor was it disputed that some copying had taken place, but what was denied was that a substantial part had been copied. The B FREE logo was created by Mrs Geva, and the judge described the evidence relating to her input. The case for the defendants was that Dr Brown’s logo was a simple artistic work such that nothing less than virtually exact reproduction was sufficient to constitute an infringement. The judge dealt with the matter in paragraphs 168 to174 and found that the B FREE logo did infringe the copyright in Dr Brown’s logo. He referred to Lord Millett’s speech in Designers [2001] 1 WLR 2416, at 2425, to the effect that, once the defendant’s design is shown to incorporate features taken from the copyright work, it is a matter of impression whether what has been taken is a substantial part of that work. v Russell Williams Textiles Guild 11. Applying that test, the judge said his impression was that a substantial part had been taken. The B FREE logo made the same visual impression on him as Dr Brown’s logo. He described the substantially copied features as being an oval logo partly framed within a thin turquoise green surround, the interior being entirely Oxford blue; and the use of two groups of stylised lettering therein, the first group in the same turquoise green colour as the surround and the second group in see-through stencil, piercing the Oxford blue of the oval. He found that the claimant’s copyright had been infringed by various of the defendants, against whom he made appropriate orders. 12. Grounds 1 to 4 of the Notice of Appeal challenge the judge’s finding of copyright infringement. The essence of the argument is that whilst the B FREE logo was, as is obvious, inspired by the idea inherent in the design of Dr Brown’s logo, it cannot be said that the B FREE logo copied the expression of that idea. The applicants identify several differences of detail between the two logos as being differences that are obvious, and they criticise the judge for describing the apparent similarities between the two logos at such a high level of generality that he misdirected himself by blurring the distinction between ideas and their expression. It is said that he placed too little emphasis on the detail of the copyright work. 13. In support of that, Mr Hughes, for the applicants, relied on Lord Hoffmann’s at 2423, where he said: speech in Designers Guild, “Generally speaking, in cases of artistic copyright, the more abstract and simple the copied idea, the less likely it is to constitute a substantial part. Originality, in the sense of the contribution for the author's skill and labour, tends to lie in the detail with which the basic idea is presented. Copyright law protects foxes better than hedgehogs.” & Co 14. Mr Hughes relied also on Kenrick (1890) 25 QBD 99 as also supporting the proposition that, for simple artistic works, the taking of a substantial part requires a high degree of similarity between the copied works. He points out that the judge did not refer to Lord Hoffmann’s speech even though he was referred to it. It is said that the judge did not place sufficient regard to the guidance provided by Lord Hoffmann and by Kenrick. v Lawrence & Co 15. My Lord, Jacob LJ, whose experience in this field is second to no one’s, concluded on the papers that there was ample justification for the judge’s conclusion. With diffidence properly due from someone whose experience in the field is rather more modest, I do not myself regard the copyright issue as easy as it originally appeared to Jacob LJ. There is obviously no question that Dr Brown’s logo was the inspiration for the design of the B FREE logo But whether, having regard to the simplicity of the former, a substantial part of it has been copied is more difficult. All that has apparently been copied is the choice of an oval shape of the logo -- such a shape being a favourite for logo creators and an unoriginal one at that -- and the colour scheme. The heart of the logo, namely the written message within it and the style in which it is expressed, is obviously not copied but represents original skill and labour. It is not obvious to me that the copying of a commonplace shape and colour scheme and the incorporation into them of a different, all-important message created by the application of skill and labour can fairly be regarded as the copying of a substantial part of Dr Brown’s logo measured by reference to quality rather than quantity. Whilst I do not regard success on an appeal on this question as by any means gilt-edged, I do take the view that the applicants have at least a real prospect of success on this point. I would therefore give them permission to pursue grounds 1 to 4 of the grounds of appeal. 16. Paragraphs 5 and 6 of the grounds of appeal were refused on paper by Jacob LJ and are not now renewed. 17. Paragraphs 7 and 8 of the grounds of appeal raise nearly three pages of single- spaced criticism of the judge’s costs orders. The judge dealt with costs in a 93 page judgment delivered on 23 October 2007. He ordered the five applicants and BBFW jointly and severally to pay 63.33% of the claimants’ costs of the action and counterclaim, also ordering them to pay £300,000 on account in specified instalments by 2 March 2008. He ordered Mr Alberici to pay 3.33% of the costs, so making the seven active defendants bear two thirds of the claimants’ costs in all. 18. The judge said he had been invited by the parties to make a succinct and straightforward order. It appears that both counsel invited him to deal with costs on an issue-based approach although the judge said he preferred a broad- brush one, calling upon his recollections as the trial judge. He started by pointing out that the claimants were winners in the copyright infringement claim except against Mr Alberici (although my reading of his order is that the copyright infringement claim was successful against Mr Alberici); that they were winners in the passing off claim; were winners in the trade mark infringement claim; but losers in the patent claim. 19. In approaching his final decision on costs, the judge referred to the claimants’ discontinuance of parts of the case against all defendants, and of all of their case against two defendants, the discontinuances happening during the trial. The claimants discontinued a conspiracy claim against all defendants although the judge said the facts on which it was based would anyway have had to be raised on other issues. Although he recognised that the conspiracy claim had caused wasted costs to be incurred by the defendants, he decided to override the usual costs route that follows discontinuance. The costs of the discontinued claims were therefore merely dealt with as part of the overall costs of the claims. The judge also referred to a late application to discharge Laddie J’s interim order. He referred to an offer that had been made “without prejudice save as to costs”, and said he had been unable to use it in any useful way in adjudicating on the issues in relation to costs. 20. As I have said, the judge’s conclusion was that the seven active defendants should pay two thirds of the claimants’ costs, save where he made orders in respect of particular matters. He did, however, deal separately with the proportion of the overall costs that Mr Alberici should pay. He regarded it as unfair to make him jointly and severally liable with the Berkovitch defendants. 21. On this renewed application Mr Hughes makes two main points in his criticism of the costs order. The first was that the judge was wrong to proceed on the basis that because several defendants, namely the Berkovitch defendants, were found jointly liable for a tort, they should also be jointly and severally liable for the costs. What is said is that their liability for costs must depend on how liability should fairly be imposed on each defendant by reference to how the action had been conducted by each. It is said that the judge acted inconsistently in determining the percentage of the overall costs that Mr Alberici should pay, whilst simply making a joint and several order for costs against the Berkovitch defendants. 22. The judge dealt with this in paragraphs 56 to 60 of his costs judgment, where he pointed out that the Berkovitch defendants all had common representation by solicitors and counsel -- Mr Hughes -- at the trial and was told by Mr Hughes that he was unaware of any then internal dispute between them. [1903] 2 He referred to the Irish decision of Newry Ir R 454, which, to the extent explained by the judge, does not appear to me to be of great help; and declined Mr Hughes’ submission that he should make separate orders against each of the Berkovitch defendants imposing a liability on them in different proportions. He also said that any such exercise “would be a most difficult and artificial task anyway.” Salt Works v MacDonnell 23. In my judgment there is no real prospect of a successful re-opening of this question before this court on appeal. Whatever overall liability for costs the judge saw fit to impose upon the Berkovitch defendants, he was fully entitled to hold as a matter of discretion, and to order, that they should bear that liability jointly and severally; and the proposition that the single firm of solicitors and counsel representing them all were in a position to argue that the liability should, in some explained way, be split between them in different proportions appears to me to be surprising. Any such argument would necessarily involve an element of internal conflict between them, such that it could hardly be advanced on behalf of all by the same solicitors and counsel. Not surprisingly, Mr Hughes informed us this morning that he made no submissions to the judge as to the different proportions of which his various clients should bear the costs. His stance was that it should simply be down to the judge to fix it. 24. The judge declined to do so. Moreover, his knowledge of the case and of the role played by each defendant was such that he was, in my judgment, fully entitled to conclude, as he did, that any apportionment between the Berkovitch defendants would be difficult and artificial. I would refuse to re-open the judge’s costs order in this way. 25. The second costs point which is raised is that the judge is said to have dealt with costs in a way that was apparently inconsistent. The patent claim against the defendants failed and the judge said, at paragraph 16, that, had it been a free-standing claim, he would have awarded the successful defendants two thirds of their costs of the claim, the discount being because the defendants had lost on the issues about prior art and infringement. Yet the net result was that the judge’s order required the defendants to pay two thirds of the claimants’ costs of their failed patent claim, the judge apparently applying a different principle because the patent claim was not a free-standing one. That is said to be unfair because the patent claim was a material part of the overall claim, in particular involving the use of experts which necessarily added to its costs. I should note that, on the papers, my Lord, Jacob LJ, has already given permission to appeal against any recovery by the claimants of their costs in the failed patent claim. That permission was given on the basis that it is arguable that, contrary to the judge’s conclusion, the recovery of such costs is precluded by the Intellectual Property (Enforcement, etc) Regulations 2006. But success on that point, if that is what the applicants achieve, will not meet the entirety of their complaint. It will at most deprive the claimants of the recovery of costs under that head. It will not give the applicants their proper costs of the patent claim. 26. The judge considered this head of criticism at paragraphs 61 to 63 of his judgment, which was in effect in response to Mr Hughes’ complaint about his decision, already made, that he would order the seven active defendants to pay two thirds of the claimants’ costs. The judge said he had reconsidered his order but did not regard it as a simple matter of mathematics, and did not consider he had fallen into error. He also appears to have regarded Mr Hughes’ suggestion as posing a jurisdictional difficulty about recalling his as yet undrawn costs order, although that is something I do not understand. 27. This aspect of the applicants’ application in relation to the costs order causes me more difficulty than the other aspect. Despite its considerable length, the judge’s costs judgment gives no very clear explanation of how he ultimately arrived at his assessment that the defendants should pay two thirds of the claimants’ costs. Given that the claim involved a number of distinct heads of claim, it appears to me that it is, putting it at its lowest, strongly arguable that it was an error for the judge not to approach the question of costs on an issue basis. Had he done so, and the defendants having won on the patent claim, they should have had their proper costs of it, or at any rate a proper proportion of those costs, subject to any appropriate discounts that the judge thought fit to impose. The claimants, having won on the other claims, should have had their proper costs of those. There would then have been, on the detailed assessment, a set-off of costs against costs. 28. The judge nowhere, however, explains how his two thirds costs order was arrived at or how it achieved like justice. Whilst I am conscious that matters of costs are pre-eminently a matter of discretion, the judge’s failure to award the Berkovitch defendants their proper costs of their success on the patent claim appears to me, at least arguably, to have been unjust. If he had explained how his order for the payment by the Berkovitch defendants of two thirds of the claimants’ costs fairly reflected their success of the patent claim then the matter would probably be very different, but I cannot see that he did. 29. In the circumstances, whilst I would refuse permission to appeal on ground 7 of the grounds of appeal, I would give permission on ground 8, including the further grounds there set out, although those are not matters that Mr Hughes developed before us. Since that opens up the basis on which the judge’s costs decision was made, I would also give permission on ground 13, which raises short related costs points. 30. Ground 10 of the grounds of appeal relates to the matter upon which my Lord, Jacob LJ, has given permission on the papers and I need say no more about it. 31. Ground 11 raises a complaint that whereas BFW (and it alone) is entitled to an inquiry as to damages under the cross undertaking that the claimants gave to the court when Laddie J granted an interim injunction, the judge nevertheless refused to direct a set-off of any recovery under that inquiry against the costs order against BFW, and also made an interim costs order against BFW. 32. The judge dealt with this in paragraphs 78 to 91 of his costs judgment. In summary, he regarded any damages recovery by BFW in the future as uncertain, whereas BFW’s costs liability was a matter of present certainty; and I read his judgment as being to the effect that, in those circumstances, there should be no restriction on the present enforcement of the claimants’ right to recover costs, including any interim costs order. That appears to me to have been essentially in the nature of the exercise of a discretion and I do not regard BFW as having any real prospect of success on an appeal on this ground. Whilst Mr Hughes devoted some time this morning to developing the argument, I did not understand him at the end of the discussion to press it. 33. Ground 12 of the grounds of appeal is one that Mr Hughes abandoned before us this morning. I have already referred to ground 13 and Mr Hughes does not press ground 14. I would make an order along the lines that I have indicated. Lord Justice Jacob: 34. I agree. Order: Application granted in part