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Monday, 10 July 2006

HAPPY DAYS FOR IP CLAIMANTS AS EURODEFENCE FAILS


Happy days for IP claimants as Eurodefence fails

The IPKat heard about this from Jim Davies first, via The Register, who got it from Out-Law. He's now read it on the LexisNexis Butterworths subscription-only service as well, so it must be true ...

The case is Microsoft Corporation v Ling and others [2006] EWHC 1619 (Ch), a case heard last Monday by Judge Richard Havery QC, sitting as a judge of the High Court, Chancery Division.

The claimant was, well, Microsoft. The numerous defendants included Digital Now! Limited, a company that was a lawful distributor of Microsoft software, as well as employees and directors of that company. Miocrosoft's licence agreement with its authorised distributors laid down strict limits for the use and replication of all software and the issue and provision of associated certificates of authenticity, (COA) and end-user licences. Under the terms of those agreements the defendants were forbidden to trade in COAs that did not form part of a defined software package and limits were imposed on the number of copies of software that could be made.

It turned out that the defendants were operating outside the terms of the licence and that they were dealing in counterfeit software. Microsoft sued for various IP rights infringements in relation to the distribution of computer software, maintaining that the defendants had traded in COAs that were not to be sold separately as well as fake COAs. Seeking summary judgment, Microsoft also claimed that the defendants had traded in genuine software without authorisation, as well as dealing in counterfeit software. The causes of action included passing off by trading in instruments of deception, trade mark infringement and copyright infringement, seeking (among other things) additional damages under section 97(2) of the Copyright, Designs and Patents Act 1998.

The defendants conceded that they were selling fakes and acting in breach of their licence, but maintained that the agreements were unlawfully restrictive and contravened European Union Law. In any event, Microsoft had exhausted its trade mark rights by putting its software on the market.

The deputy judge allowed Microsoft's application for summary judgment, holding that the defendants didn't have a hope in hell of succeeding at trial. In his view

* The granting of limited licences on agreed terms was not of itself a contravention of anti-competition laws.

* The defendants provided no evidence of restrictive trade practices.

* After conceding that they had counterfeit products in their possession and on the evidence itself, the defendants had no real prospect of success of defending the claim that they had knowingly traded in counterfeit products.

* As to passing off and trade mark infringement, all the defendants were involved in the commission of wrongs and none had a prospect of succeeding at trial.

* There was no real prospect of successfully defending the claim for additional damages.
To give readers a feel for this case, here's some dialogue between Kenneth Anderson (a test purchaser) and Edward Hill (one of the defendants) on 4 August 2005:
EH: Right, I've got Office 2003. Is he after a full licence?

KA: He's after one of them and he's after some stickers as well.

EH: You don't know if he wants full, as for the Office I need to know if he wants a full licence.

KA: What's the difference there cost-wise?

EH: Well, the price. I can do you an Office 2003 without a licence for eighty-five quid. The licensed version is one hundred and eighty-five quid. With the eighty-five quid one we're not lining Bill Gates's pocket. If he's installing it in a business or something he might want to do the licence. He might want to do it properly... If it's just for home then go for the unlicensed.

KA: Get me one of them then.

EH: OK.

KA: Them stickers, they're a good buy, aren't they?

EH: Yes, it's normally one hundred and eighty-five quid for that product. It's because they're copies there's just no licence with them.
The IPKat marvels that, so soon after the despair of IP owners following Sportswear (here) and Doncaster v Bolton (here) that summary judgment would never again be ordered against anyone raising a Eurodefence, that very thing has just happened. Merpel says, well it was an extreme case: the defendants seem an unusually crooked bunch: would the same result have occurred if they'd been good boys and girls? Both Kats note that the court was prepared to give summary judgment even on the additional damages point, which is difficult enough to persuade a trial judge of at the best of times - can this be anything to do with the fact that the judge was yet another non-IP person rather than a specialist judge?

Judgment in full on BAILII here

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