The High Court has awarded an unprecedented sum of £300,000 in additional damages following its finding of a flagrant infringement of unregistered design rights in seven garment designs (Original Beauty v G4K).
In reaching this decision, the Court emphasised the scale of the infringement, with 15,393 infringing garments being sold by the Defendants over four years. The evidence showed the Defendant had taken an image of certain of the garments and sent them to a factory to be reproduced, but the Defendant continuously denied copying the designs throughout the liability trial. The Court was of the view that only an award of this magnitude would be sufficient and proportionate to punish the Defendants for their actions and also deter them from infringing again.
Whilst this was a clearly egregious infringement, the decision sets a new standard for damages that can be awarded in respect of unregistered design (and potentially copyright) infringement, as the overall award amounted to greater than the Defendants' gross profit from its infringement (which was c.£192,000). The Court highlighted that removing profit alone would not be an appropriate deterrent or punishment for infringers, as it would only put them back into the position they would have been in had they not infringed, iterating that "To be punished and deterred, the Defendants must be left out of pocket."
The Claimants design and sell bandage and bodycon dresses and other garments under the brands House of CB and Mistress Rocks. The Defendants also sell bandage and bodycon dresses and other garments, under the brand Oh Polly. In February 2021, the Court concluded that the Defendants had infringed EU and UK unregistered designs owned by the Claimants in respect of seven Oh Polly garments. We wrote about the infringement decision.
The Claimants sought damages under three heads:
- Their lost profits on garments which, but for the Defendants' sales, they would have made;
- A reasonable royalty on the Defendants' sales not covered by (a) above; and
- Additional damages in respect of the flagrant infringement.
In respect of (a) and (b) above, the Court followed the usual approach to calculating standard damages, comprising both lost profit damages and a reasonable royalty. In total, the Court awarded around £150,000 to the Claimants in respect of standard damages. For context, the Claimants had submitted that they should receive approximately £275,000, whilst the Defendants submitted that an appropriate sum for standard damages would be £15,000.
The Court's approach to additional damages is what makes this case of particular interest. The Defendants accepted that additional damages were payable as a result of the flagrant infringement, but suggested £3,000 was (i) proportionate; (ii) punitive; and (iii) a sufficient deterrent against future infringement. The Claimants sought a figure which would 'top-up' the standard damages so that they would receive an overall award reflecting either the amount that they would have made if they had sold the infringing garments, or the total revenue received by the Defendants for those sales.
The Court considered the principles set out in the leading case on awards of additional damages (Phonographic Performance Limited v Ellis (trading as Bla Bla Bar)). In particular, the Court noted that an award of additional damages must be "effective, proportionate and dissuasive". However, the Court went on to note that existing guidance was less clear in relation to the actual quantum of additional damages.
In coming to a conclusion, the Court emphasised the flagrancy of the infringement, with 15,393 infringing garments being sold by the Defendants over a four-year period, as well as the Defendants' continuous denial of copying throughout the liability trial. So as to punish the Defendants in a way that was effective, proportionate and dissuasive, the Court issued an award of £300,000 in additional damages. The Court was of the view that no lesser amount would be sufficient to punish the Defendants for their actions whilst also deterring them from infringing again.
To add context to the Court's decision, the award was an uplift of 200% on the standard damages and amounted to £19.50 per garment This was greater than the Defendants' gross profit from its infringement, however, it was less than 1% of the Defendants' audited turnover in 2020, and was within the maximum fine (£450,000) that could be ordered in criminal anti-counterfeiting proceedings against a corporation,