Directors personally liable for infringing another company’s IP?

April 23, 2012

Having a limited liability company is often seen by Company Directors as the best way of avoiding being sued in a personal capacity. However, it doesn’t always work that way and the idea that Directors can always escape personal liability for their acts is something of an urban myth.

Whilst many Directors are aware of potential personal claims where they have been reckless or negligent (such as failing to ensure dangerous machinery is properly maintained), they are often NOT aware of other situations which can arise giving personal liability for wrong doing. The most common one in my practice is where Directors are sued in their personal capacity for infringements of someone else’s intellectual property.

The law recognises that Company Directors roles vary hugely depending on the size of the business and the type of work it undertakes. In large companies the role of a Director is generally speaking nothing like as hands on as it is in smaller businesses. In small businesses, the Director is often the leading light and guiding spirit behind most of the decisions that are made. It is for this reason, that the law in certain circumstances will hold them personally liable for infringing someone else’s trade mark, copyright or patent rights.

So in simple terms, if you have deliberately set about to make, import and / or sell a copy product, you may be personally liable as a Director of a small business. At the end of the day, it is a question of evidence. The law recognises a continuum of roles under the title Company Director. However, it also recognises that in some instances, Company Directors are not entitled to hide behind the veil of corporation in respect of their deeds. Each case is decided on its merits but on the grounds of public policy, Courts are increasingly willing to look into the circumstances that arise in cases of IP infringement.

Elizabeth M Ward

Virtuoso Legal (c) 2012 0113 237 9901