Does The Winner Take It All?…

Why It Pays To Understand Just What Your Brand Is Worth…

One of the most frequently asked questions in any dispute is ‘what damages will I recover’? In the first instance for most IP matters, the Court makes a decision on liability, i.e. has the brand been copied and have the trade marks been infringed? The amount due in damages is usually saved for a second and subsequent hearing. There’s very good reason for this and that is that damages calculations in IP matters can be very complicated.

In most disputes the general rule is that the winner is restored to their pre-action position. So if there is a contract claim for £5,000, and the Claimant wins, they will recover £5,000 plus some interest and a proportion of their legal costs. Similarly in personal injuries, there are generally agreed scales for loss of limbs or amenities. In these cases the damages are much easier to calculate from the start of an action, thereby making a cost benefit analysis much more straight forward.

Where a trade mark has been infringed, or goods and services have been passed off, and other types of IP disputes, the winner can normally choose one of two options when it comes to the damages they can recover. These are either an inquiry as to damages or an account of profits. An inquiry as to damages will lead to a figure which restores the winner to their pre-action basis. So if the brand is licensed out at 5% of net cost of the product, then damages are relatively easy to calculate, and will be awarded according to accepted industry rates.

Problems arise when the brand is not available to third parties under licence or where the infringer has affected the brand value by devaluing it. For example, this could arise where a branded item is sold off in a discount store, and the perceived brand value from a consumer perspective is damaged. However, the opportunity to ask the losing party for an account of profits is not automatic. The Court won’t allow the winner to opt for an account of profits instead of an inquiry in certain circumstances such as where the claimant has delayed taking proceedings or where there has been “innocent infringement.”  So the vexed question is…

What Is an Account of Profits and How Do I Recover it For My Brand?

Well what it is not is an account of the profits the winner would have made if the trade mark had not been copied. The principle behind an account of profits is that the infringer is deprived of profits he made BECAUSE of his infringing activities. In simple terms, it has nothing to do with what the winner could have made if infringing goods were not on the market. Many people find that confusing, but the difference in financial terms is significant. However, in any calculation of the profit the loser IS allowed to seek a reduction of what they pay the winner in profits. For example, the loser is allowed to deduct various costs from the profit figure and include things such as a proportion of their overheads and manufacturing costs in making the copied items.

The important issue to bear in mind with most IP cases is that damages are often intangible and difficult to assess. For example, where an infringer enters the market, a rights owner may be deprived of the right to access a key market or client. Also their perceived brand value in the minds of the public may be considerably diminished. In the worst case scenario a competitor may inadvertently be spring boarded ahead of the rights owner by using copied technology for which they’ve invested no R&D or effort. This is why IP disputes require expertise, early resolution and why it pays to take the issue seriously as soon as it comes to your attention.

If you would like any advice about branding or disputes, give one of our team a call for a no obligation chat on 0113 4032102 or email us!

Innocent Until Proven Guilty?…

One of the biggest problems we see as IP Specialists is disputes over ownership. These rarely go all the way to Court, but in the case of Innocent Drinks and the “dude” logo, the stakes were high and the matter did!

Intellectual property is often termed a monopoly right by lawyers. In practice this means winner takes all! You either own it and control it or you don’t. In between ownership and use, there is a raft of commercial possibilities – and elephant traps. One of which Innocent and their brand creators Deepend fell into.

Back in 1999, a design agency called Deepend created the well known “dude” logo for the then start up Innocent Drinks company – now known as Fresh Trading Limited.

Deepend and Innocent did a deal – without lawyers. They agreed in unsigned heads of terms that Deepend would create the branding and design for Innocent, and Innocent would allot them shares in the start up company. Deepend created the brilliant bottle logo design we’re all so familiar with…

Innocent never gave them shares. No contract was signed.

Let’s fast forward here 15 years, and Innocent drinks have of course become outstandingly successful – no doubt in part measure because of their branding. Deepend would have liked some kind of shares or payment but none has been forth-coming. And thanks to a recent High Court decision, Innocent now own the copyright to the logo, but Deepend haven’t and won’t be paid. (Subject to an appeal of course!).

A Lesson To Be Learnt?

The lesson is this – mere promises ARE NOT enforceable! Harsh but true. The directors or employees you are now in business with may not always see things as you do. People fall out and move on. If you are a supplier, make sure you will get paid by using a properly drafted contract. If you are a director or shareholder make sure the company has control over its intangible assets. There are few certainties in life but one that we see regularly is that if it is of value then people will fall out about it and getting clear contracts in place is often money invested against future disputes.

If you have any concerns about disputes over ownership, give one of our team a call for a no obligation chat on 0113 4032102 or email us!

‘e’ by gum I’m confused!… Brand owners beware!

Of all the phone calls we receive, the unhappy ones are usually from brand owners who’ve been copied…

Sometimes the offender is a “looky likey” product but often an entire brand name or logo has been copied, if not slavishly, then in a way that is very confusing for the consumer. So it was of interest this week when I read about Enterprise Holdings Inc slogging it out against Europcar Group UK Limited over the use of ‘e’ as part of their car hire brand, and the obvious confusion that followed.

I won’t go into the legal details of this case, suffice to observe that both sides appeared to run every allegation and defence with great vigour. It is worth mentioning that his Honour Justice Arnold noted that both parties treated the dispute “as if it were a state trial.”

The vehicle hire market in the UK is big. Indeed the UK is the second largest hire market after Germany. The market is dominated by Enterprise, Europcar, Avis, Hertz and Sixt. Most bookings are made in advance via websites and intermediaries. The rest are done on the spot or by telephone. A highly relevant factor in this case in relation to customer confusion, was the transnational character of customers. In simple terms, many customers spoke limited or no English. Bear with me on this point; it is important, especially at airport car hire desks!

Jack Taylor the founder of Enterprise in the USA started using an ‘e’ logo in 1967. This has since morphed into the stylised ‘e’ seen below.

From 2006, green was also used with black and white as part of their livery.
Enterprise started in the UK in 1994, and quickly spread through Europe. It now has extensive presence throughout and franchise arrangements in 14 EU states. The ‘e’ logo has been extensively used by them on signage and also on airport buses, car rear bumpers and the homepage of their website. Naturally the ‘e’ is a registered trade mark. As are a number of variations of it.

Europcar started in Paris in 1949 and used a simple ‘e’ type logo from 1965. It then moved to Europcar as a word mark and in 1988 developed a green and white colour scheme, which it now uses extensively. Europcar has extensive Worldwide coverage, but has little market share in the USA. The two now compete for #1 slot of market share. In 2012, after a consumer studies and a brand re-vamp, Europcar became:

The digital age had arrived and was encapsulated by Europcar’s moving ‘e’ logo which was then used on the website, as signage on vehicles and as a phone application etc.

The problem that arose was that from its introduction in 2012, passengers queued in droves for the wrong car hire buses at airports! Europcar customers queued at the Enterprise car desks for car hire and vice versa. The nub of the problem here is that infact consumers have imperfect recollection of any trade mark!

In order for a brand to be truly distinctive, it needs to set one business apart from another. Imitating someone else’s mark, either knowingly or unknowingly does NOT make commercial sense for either party, and can lead to significant reputational damage. Whilst we understand that both companies had a history of using a prominent ‘e’ as part of their mark it doesn’t take a genius to work out that the public were likely to be confused by Europcar’s new identity, especially if they didn’t speak the local language.

This matter also illustrates the importance of getting specialist legal advice when re-branding and getting proper trade mark clearance searches done BEFORE launching a new brand.

Also beware of the digital space – this kind of short hand brand look needs careful thought!

We are totally baffled by Europcar’s stance on this.  Apart from any consideration of trade mark infringement, making a brand distinctive is of paramount importance.  This is often done with distinctive logos which then transcend language barriers.

Enterprise won the High Court battle – at great cost – but common sense should have prevailed well before then!

If this is something that concerns you, or you need any intellectual property legal assistance, give one of our team a call for a no obligation chat on 0113 4032102 or email us!

Even The Big Boys Get It Wrong In China…

Things regularly go wrong at trade shows. The usual phone call we get is either just before or just as the first day of the trade show opens and lo and behold some copy product is launched to an unsuspecting public!

If you are doing this then do be aware that in some European countries, the law will CLOSE YOU DOWN and ask the questions later…France springs to mind. Two directors I know of spent an uncomfortable 2 nights in a German prison at the start of one trade show. Even in the UK it isn’t unheard of for lawyers to serve Court Orders at trade shows, and then have goods seized or removed from sale. However, in the UK we normally reserve prison only in the case of contempt of Court if you don’t comply with a Court Order.

Chinese Car Manufacturer Copies Range Rover Evoque…

Pity poor old Land Rover this week in China at the Guangzhou Motor Show, when a local car manufacturer launched a £14,000 copy of their prestigious Range Rover Evoque. The Evoque is sold in China at around £40,000 and is made by a Chinese Joint Venture company comprised of Jaguar Land Rover and Chinese company Chery. What is sad about this situation is that such copying can actually destroy jobs in China and this behaviour makes even the big companies think twice about expensive JV’s with local companies and serious investment in an emerging economy.

Whilst no doubt Jaguar Land Rover’s IP experts are now crawling over the details of the design of the car and will undertake serious analysis of what is an identical component and what is simply over borrowed, this isn’t the first time the manufacturers LandWind have copied a European car. A few years ago LandWind launched a copy Vauxhall Frontera. This model was briefly sold in Europe until crash test failures forced its withdrawal from sale in European countries.

In order to succeed in China and through the local Courts, Land Rover will have to prove slavish copying of their design. This may deter them from taking action in China. Where there has been slavish copying the Chinese will close a factory down. However, I suspect LandWind have been too clever to get caught by that trap and have designed around any direct copy but have used the “look” of the Evoque to capture the bottom end of the car market in the Far East.

All of which goes to show that even the big names with all their resources can be copied in China. It’s a crying shame. It is far easier to copy than to innovate.

However, one thing the big companies will have in their favour is that they will have registered their brand as a trade mark. At the end of the day the LandWind car won’t ever have the Land Rover brand name on it, and its sales will be limited simply by virtue of the lack of brand awareness.

There’s a lesson here. If you want to export ALWAYS register your trade mark first!

What Will the Proposed New Cyber-Directive Cost You?

 

With fines of up to 100 million Euros it isn’t difficult to see why the passing of the proposed Network & Information Security (“NIS”) Directive (commonly known as the “Cyber security Directive”) by the European Parliament has got businesses sweating. The recent high profile breach of Morrison’s employee payment data demonstrates that there is need for tighter and more effective data regulation. However at what price does the cost of data protection become unacceptable and who should bear these costs?

The Directive’s aim is to strengthen the European Unions resistance to cyber-security threats and to promote reporting of data breaches. The passing of the Directive legitimises the view that the EU perceives data protection as a fundamental right. The full details of the Directive can be found here. It must be stressed that this new directive will not affect all businesses; its remit covers any business deemed to be a part of the critical supply chain, or a major technology service provider. This though is just the starting point, as data collection and transfer becomes more commonplace, it will not be long before stringent regulations are extended further.

Those businesses that will come under the Directive will face a number of concerns. Chief among them is cost, though equally concerning is the proposal to impose a duty to report significant breaches to a national authority. They fear that by being forced to disclose a breach they will open themselves up to investigation by a regulator and/or ridicule by the press. One only needs to assess the media’s reaction to the aforementioned Morrisons data leak for an example of the media frenzy it can cause.

The cost of fully implementing the new Directive though will be high, and this will be shouldered primarily by businesses. As Stephen Wares, Marsh’s Cyber Liability Practice Leader for Europe, the Middle East and Africa (EMEA), explains ‘The cost to business of implementing the changes required to comply with this piece of regulation may be significant, but the cost of failing to comply could be far greater.’ By imposing an increased duty upon companies to upgrade and enhance their data protection and data management procedures companies will now have to invest a great deal or face the consequences.

The high costs referred to are the fines of up to 100 million Euros or 5% of a company’s global turnover, whichever is the greater. As such insurance companies are rapidly assessing the risks involved were they to offer cover that could potentially be affected by the new Directive. It is clear that there is a strong will from the EU to give national regulators increased powers, with the suggested fining structure acting as an effective deterrent for non-compliance.

Regardless of the cost this move highlights the importance that data storage and management has acquired in recent years. With the value of many recently formed online companies, most notably Facebook, residing in its vast servers of user data; should we be surprised that legislation seeking to protect it is now being brought into place?

In conclusion though it could be suggested that businesses are still yet to appreciate the importance of data and the central role it is soon to play in modern business. As more and more of our details and personal information are collected and stored, the effort to steal and abuse that information will also increase. Again a recent example of this being the recent hacking and devaluing of the Bitcoin currency, that at is heart was a data currency. Hackers saw the high value and sought to take advantage. Businesses may want to therefore, for once, get ahead of the curve and begin protecting and managing their data in a way that shows deference to its potential future value.

Though they will have a little while to consider their options as even if the Directive is successfully passed, it will not be implemented until 2016 at the earliest.

If you are concerned about what these new provisions may mean for you or your business please don’t hesitate to contact Virtuoso Legal on 0844 800 8871 or email liz@virtuosolegal.com

Virtuoso Legal

21.03.14