Trade Mark Infringement | Personal Liability of Directors
A Trade Mark infringement occurs when an unauthorised person or company uses a mark that is identical or similar to a registered Trade Mark, without the owner's consent, in relation to goods or services identical or similar to those protected by the Registered Trade Mark.
Protecting a brand by registration is essential given the potentially damaging effects of infringement such as:
the loss of custom by diverting established customers away,
- dilution of the value of the brand,
- confusing consumers into believing that inferior goods, supplied from the rogue source, derive from their normal supplier,
- substantial reputational damage.
Where a Registered Trade Mark proprietor discovers that a rogue company is unlawfully using their trade mark a court action may be brought against that company and its directors. Such action would probably include the directors as ‘joint tortfeasors’ given that, more often than not, they would be the ‘controlling minds’ of the company.
Liability of ‘joint tortfeasors’ arises where the parties, being the company on the one part and the directors on the other, take concerted action to a common end and, for example, breach a Trade Mark, in executing that purpose.
Effectively, any financial liability resulting from any recovery action would be the joint liability of such defendants having assets to repay the debt.
The attraction of including directors as ‘joint tortfeasors’ in proceedings is the likelihood that one or more of them will possess personal assets which they would not want to jeopardise becoming involved in a Trial which may prove unsuccessful, potentially exposing them to the loss of all such assets.
Without their personal involvement in the proceedings, the infringing company may well be abandoned and left to become insolvent and liquidated. Such a result would be of no benefit to the wronged Registered Trade Mark proprietor.
When considering the form of the recovery proceedings to be followed, the Registered Trade Mark owner will elect whether to seek an ‘Account of Profits’ i.e. a specific sum of money based on sales achieved through the unlawful use of the trade mark or an amount by way of ‘damages.’
Frequently, the choice would be to elect to seek an account of profits. However, there can never be a guarantee of success in civil litigation.
Stuart Southall of KANGS comments upon the case of Lifestyle Equities CV & Another -v-Santa Monica Polo Club Limited & Others [2017] EWHC 3313 (Ch) where the aggrieved trade marker owner sought an account of profits but failed for unforeseen circumstances.
Lifestyle Equities CV & Another -v-Santa Monica Polo Club Limited & Others [2017] EWHC 3313 (Ch)
- ‘Lifestyle’ claimed that ‘Santa Monica’ had infringed its registered trade mark and was deriving an unfair commercial benefit.
- Lifestyle sought an Account of Profits from Santa Monica which entered administration during the proceedings.
- Accordingly, Lifestyle asserted that the Account of Profits sought from Santa Monica automatically transferred to directors who were joint tortfeasors.
As the Court had found that Santa Monica had infringed Lifestyle’s trade marks and was entitled to an account of profits, Lifestyle maintained the directors of Santa Monica were personally liable as joint tortfeasors.
The Court ultimately rejected this argument and set aside Orders which had originally been made against the directors for an account of profits upon the basis:
- that to show they had participated in a common design [to the company], it would have been necessary to show their knowledge of, or they turned a blind eye to, the facts which surrounded the Trade Mark infringements, but no such case was advanced.
- the only profits for which the defendants could be liable to account for were those which they themselves, rather than the company, had made as a result of the Trade Mark infringements, and the facts did not conclude that any such profits were made.
Accordingly, this decision shows that the burden now rests with the party seeking an account of profits against directors alleged to be joint tortfeasors to prove that they knew, or ought to have reasonably known of deliberate Trade Mark infringements and that they personally benefitted from that infringement (as opposed to merely benefitting from an increased ability to claim a dividend).
How Can We Assist?
If you are concerned that a competitor may be breaching any Trade Mark you own, or indeed, that you may be breaching one that belongs to someone else, it is essential that you seek immediate expert advice.
The Team at KANGS Solicitors provides a wealth of experience gained from assisting clients involved in Trade Mark infringement and/or passing off actions and will be pleased to hear from you
If we can be of assistance, please do not hesitate to contact our Team using the details below:
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through live conferencing or telephone.
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