High Court ruling on remedies leaves Fox with little glee

Following its ruling that Twentieth Century Fox had infringed the “GLEE” trade mark owned by Comic Enterprises, the High Court has granted all the remedies sought by Comic Enterprises.¹ These included a publicity order, delivery-up, an option to elect an account of profits, an interim payment and an injunction, although this was stayed pending the hearing of Fox’s appeal.

Background

Comic Enterprises Limited operates live entertainment venues in the UK for stand-up comedy and live music. It has two UK trade marks incorporating the words “The Glee Club”, in classes 25 (clothing) and 41 (which includes entertainment, comedy and night-club services, and provision of music).

Twentieth Century Fox Film Corporation, the film studio, produced an American television series called “Glee”, which was originally broadcast in the US but later came to the UK and has been very successful.  Comic Enterprises brought trade-mark infringement proceedings against Fox under sections 10(2) and 10(3) of the Trade Marks Act 1994 and a claim for passing-off.

Ruling on liability

In February 2014, the High Court found that Fox had infringed Comic Enterprises’ trade marks under both sections.  The claim for passing-off was rejected.

Deputy Judge Roger Wyand QC found that objectively there was some similarity between the marks and, based on the evidence provided, it seemed possible that the “average consumer” would be confused as to the origins of those marks.  He found that this was due to “wrong way round” confusion, i.e. that members of the public who had heard of Fox’s television show would assume Comic Enterprises’ business was connected.  He considered that it was not necessary for there to be “right way round” confusion in order for there to have been infringement: all that was required was a likelihood of confusion.

He concluded that there was sufficient objective evidence to show a change in the economic behaviour of Comic Enterprises’ customers, and that change did not need to be quantified.  Evidence demonstrated that potential customers were put off from attending Comic Enterprises’ clubs due to a misplaced belief that they were connected to Fox’s television show.  Fox’s use of the mark was, therefore, causing detriment to the distinctive character of Comic Enterprises’ mark.

Fox sought permission to appeal the decision, which Mr Wyand QC granted.  In the meantime Comic Enterprises sought six remedies:

1. a final injunction against further trade-mark infringement;
2. delivery-up of infringing copies of the television show (physical and digital);
3. an account of profits;
4. disclosure of documents to enable Comic Enterprises to decide whether to opt for an account of profits or damages;
5. a publicity order; and
6. an interim payment on account of damages or profits.

Fox disputed each remedy and requested that the disclosure, damages/account of profits inquiry, injunction (if granted), publicity order and interim payment be stayed pending the appeal decision.

Ruling on remedies

Injunction

Fox opposed the grant of a final injunction, relying on Article 3 of the IP Enforcement Directive (2004/48/EC), which provides that measures applied to ensure the enforcement of intellectual property rights should be “fair and equitable”, not “unnecessarily complicated or costly” and should not entail “unreasonable time-limits or unwarranted delays”.  The measures should also be “effective, proportionate and dissuasive” and should be applied in a way that avoids creating barriers to legitimate trade and safeguards against their abuse.

Mr Wyand QC noted that the granting of an injunction required a “multifactorial” balancing exercise.  It required the balancing of the right of protection of intellectual property under Article 17(2) of the Charter of Fundamental Rights of the EU (2010/C83/02) against the right to freedom of expression under Article 11 and freedom from constraint for the arts under Article 13.  He noted that there should be no presumption, when applying a balancing test, that one fundamental right automatically trumps the other.

Fox raised four arguments against the grant of an injunction.

1. Fox believed that an injunction would not be fair or equitable, nor effective at dealing with the harm identified in the liability judgment, and it would be costly, complex and disproportionate.  Fox also argued that an injunction would not be dissuasive to third parties and would create unwarranted barriers to trade in the EU (as the show is exploited throughout).  Mr Wyand QC disagreed that granting an injunction would be unfair or inequitable.  He did not accept that retitling the show would be expensive or difficult.  He did not see that communicating a new name to the public, relied on as the main cost and problem, would be such an insurmountable problem, particularly as the show was so popular and successful: the cost of renaming the show would not be prohibitive compared with the value of the series.
2. Fox contended that the balance between protecting Comic Enterprises’ intellectual property and Fox’s freedom of expression weighed heavily against an injunction.  Mr Wyand QC found that retitling the show would not amount to a substantial infringement of Fox’s right to freedom of expression, and the infringement was causing (and continues to cause) erosion of the distinctive character of Comic Enterprises’ trade mark, which could not be made good by a monetary award.
3. Fox maintained that Comic Enterprises were only seeking money. Mr Wyand QC found that based on witness evidence given and the cross-examination of Comic Enterprises’ owner, this did not seem to be the case.
4. Fox concluded that an injunction would be futile and disproportionate and a disclaimer of association would be less unfair, less disproportionate and less likely to strike an unfair balance between the competing rights.  My Wyand QC admitted that although an injunction would be a “substantial blow” to Fox, it was necessary to protect Comic Enterprises’ intellectual property and a disclaimer of association would not, on its own, be effective in helping Comic Enterprises to re-establish the exclusivity of its trade mark.

Mr Wyand QC granted the injunction, but noted that Fox should be allowed to refer to the fact that the programme was previously known as “Glee”.

Delivery-up

Fox argued that it would be difficult and costly to withdraw both digital and physical copies of the programmes that were already with third parties.  Mr Wyand QC held that it would be proportionate to order delivery-up, or alternatively relabelling where appropriate, of those copies (digital and physical) still within Fox’s possession, power or control.

Account of profits

Fox argued that Comic Enterprises should be confined to damages, believing that an account of profits was inappropriate as Fox was an innocent infringer and Comic Enterprises delayed in bringing proceedings.  Fox also argued that it would be too difficult for Fox to establish the necessary causal connection between the profits earned and the infringement, as opposed to other factors contributing to the success of the show.

Interestingly, Mr Wyand QC said that, although it would have been desirable for Fox to have carried out trade-mark searches in the UK, it could not be criticised for not doing so.  He accepted that Fox was an innocent infringer.  He noted, however, that Fox had continued to infringe Comic Enterprises’ rights even once it had been informed of their existence, and still continued to do so.

My Wyand QC found that Comic Enterprises’ delay in bringing proceedings in order to wait and see whether the series was successful enough to impact the business was “entirely reasonable and justified”, particularly as Comic Enterprises is considerably smaller than Fox.

It was accepted by Mr Wyand QC that the show’s title was only one factor in the success, which would make quantifying its contribution very difficult.  A percentage contribution would have to be estimated and then applied to the total profit available. Unless, however, that contribution could be said to be de minimis, it was not a reason to prohibit Comic Enterprises from opting for an account of profits.

Disclosure

In order to decide between an inquiry as to damages or an account of profits, Comic Enterprises sought extensive disclosure from Fox.  Mr Wyand QC had sympathy for Fox’s argument that the cost of collecting the necessary information might well exceed the quantum that would eventually be awarded.  He did not order disclosure to the extent sought, but expected that Fox should be able to give a rough assessment of the total profit made by the series and make a rough apportionment of the total profit contributed by the UK market based, for instance, on viewing figures.  He also required Fox to provide an explanation for the basis of such calculations.

Publicity order

Mr Wyand QC referred to Article 15 of the IP Enforcement Directive, which provides that the dual intention of a publicity order is to act as a deterrent to future infringers and to contribute to public awareness.  Fox argued that Comic Enterprises had generated a huge amount of publicity about the case, but Mr Wyand QC agreed with Comic Enterprises that the publicity had not been expressly directed at viewers of the show, and it was important viewers had their attention drawn to the judgment.

Interim payment

Comic Enterprises sought an interim payment of £1.25 million.  Mr Wyand QC disagreed with Fox’s arguments that the findings in the liability judgment suggested that Comic Enterprises had suffered little or no actual damage, and that the profits it had made in the UK attributable to the trade mark were minimal.  He accepted it would be difficult to assess the quantum of damages or account of profit that would be awarded, but that did not prevent him in awarding what he considered to be “an extremely conservative figure” of £100,000.

Ruling on the stay requests

Mr Wyand QC found that the damage and disruption that would be caused by the imposition of an injunction that was subsequently overturned by the Court or Appeal would be very substantial and could not be made good by a monetary award, and Comic Enterprises would be unlikely to be able to recompense Fox.  He weighed those factors against the fact that Comic Enterprises would continue to suffer damage to its trade mark.  He noted that the major part of such damage had already been caused, and further damage could be limited if he did not stay the publicity order.  He also found that, on the evidence, Fox would be well able to meet any payment it may be ordered to make.  He concluded that it was right to stay the injunction, but not the publicity order.

In relation to the interim payment, My Wyand QC did not think that Comic Enterprises should be deprived of it, despite there being a real prospect of success on appeal (which, he noted, was due to the fact the case was “unusual” and involved “difficult points of law”, not that his decision was wrong). He commented that it was a very conservative sum, and that Comic Enterprises ought to be able to repay it if it lost on appeal.

Mr Wyand QC also considered it inappropriate to stay the disclosure order, as Comic Enterprises should be at liberty to proceed with deciding whether to seek damages or an account of profits.

Comment

After the liability decision, it was expected that Fox would appeal, not least because it had indicated that renaming the show could be a real blow to its popularity and success, as well as a costly exercise, although the High Court considered otherwise.  Mr Wyand QC has, in his judgment, indicated that the damages or account of profits could be substantial, giving Fox even further incentive to appeal.

It will be interesting to see how the Court of Appeal addresses the issue of “wrong way round” confusion, as relied on as the basis of the infringement of the mark under section 10(2) of the Trade Marks Act 1994 in the liability judgment.

A publicity order is a relatively new remedy that has only been available since the IP Enforcement Directive came into force.  This case is one of the first instances in the UK since then where a publicity order has been of central importance, as the decision to grant a stay of the injunction was influenced by its availability.

Nicola McCormick, Partner, Michael Simkins LLP

Beth Lawson, Trainee Solicitor, Michael Simkins LLP