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Wednesday, 27 January 2016

Storm in a C Cup: Mr Justice Carr refuses injunction and account of profits in Stretchline v H&M spat

Without any underwires poking through, the AmeriKat
takes a quick nap in a very cosy location
Being 6,000 miles away, it is easy for the AmeriKat to miss the goings on in the English court. Indeed, she would have completely missed the recent unreported decision of Mr Justice Carr in the on-going Stretchline v H&M dispute  (see previous posts here) had it not been gratefully brought to her attention by an eagle eyed reader.  While the AmeriKat's head is inundated with UPC matters, the AmeriKat thanks Elettra Bietti (A&O) for summarizing the decision which serves as a warning for all those who draft IP settlement agreements in the event of future infringements.  Elettra reports:
"Stretchline Intellectual Properties, the claimant, is the proprietor of UK Patent GB 2 309 038.  The patent covers a method of manufacturing tubular fabric for use in the production of brassieres to prevent underwires from penetrating the fabric. Last November, Mr Justice Carr had earlier found that the defendant, much beloved by many a trendy kitten, H&M, had breached its settlement agreement with Stretchline (see decision dated 20 November 2015 ([2015] EWHC 3298 (Pat)). In an unreported decision on 21 January 2016 (also summarised here), Mr Justice Carr held that Stretchline was not entitled to an injunction against or to an account of profits from H&M.   But why? First some background.
In 2009, Stretchline suspected that H&M was selling brassieres incorporating fabric that infringed its patent.  In July 2010, it commenced infringement proceedings against H&M who promptly counterclaimed for revocation.  A year later, the parties entered into a global settlement agreement resolving, fully and finally, the validity and infringement actions.  Under the terms of that agreement, the parties agreed to mutually assist each another in investigating and reporting infringing products.  The peace didn't last long, as two years later Stretchline issued new proceedings alleging that H&M had infringed its patent in breach of the 2011 settlement agreement.  The dispute found its way to the Court of Appeal last May, where Lord Justice Kitchin held that the language of the settlement agreement precluded H&M from raising invalidity arguments in defence of the new claim.  The settlement agreement also prohibited Stretchline from pursuing an infringement claim in addition to their breach of contract claim.  Issues of validity and infringement had, the Court of Appeal held, been  definitively determined in the agreement (for more information see this post by PatLit).   As noted above, in November 2015, Mr Justice Carr held that H&M had breached the settlement agreement. 
In his decision last week, Carr J held that as long as the patent was in force and the settlement agreement was in place, any dealings by H&M that fell within the scope of the patent amounted to actionable breaches of contract.  This entitled Stretchline to contractual remedies. He further held that injunctions are available as a remedy for breaches of contract where the contract prohibits acts akin to infringement of an intellectual property right.  This was the case with respect to the 2011 settlement agreement which prohibits H&M from infringing Stretchline's patent and imposes policing duties on it.  Following Coflexip SA v Stolt Comex Seaway MS Ltd [2001] 1 All ER 952, Carr J held that the Court has discretion to impose an injunction where it is necessary and appropriate in the circumstances. In particular, a patentee must show an actual or implied threat of future infringement.  
In the circumstances there could be no presumption that infringement would recur. H&M’s infringements had been historic and had reduced over time.  Stretchline, who was likely continuing to test garments on an ongoing basis, had failed to present any new infringing products to the court.  By implication, the Court was of the view that there were no infringing garments. In addition, H&M had shown that their suppliers were instructed not to use any infringing products and none had been found in stores.  Mr Justice Carr stated that it would be disproportionate to impose a blanket injunction in circumstances where the policing of infringement was difficult, it was a mutual obligation of both parties under the settlement agreement to police and H&M could be held in contempt of court in respect of accidental breaches.  To respect the settlement terms, the requested relief should have been far more sophisticated than a simple undertaking not to infringe.  Accordingly, the court did not consider it necessary or appropriate to order an injunction.   Although an injunction was not granted, the Court made clear that Stretchline is still at liberty to return to court to seek injunctive relief in the event of future infringements.   
Mr Justice Carr also held that, in exceptional circumstances, an account of profits and Island Records Ltd v Tring International [1995] 3 All ER 444 disclosure would be available remedies for breaches of a settlement agreement prohibiting infringement of an IP right.  However, he declined to order them in this case.
The decision could have an important impact on settlement agreements in IP cases.  The English court appears more reluctant to grant standard IP remedies to patentees where the cause of action is actually a breach of contract.  Instead, the available remedies to a patentee may only be for breach of contract, collecting nominal as opposed to significant damages.  Further, patentees should be aware of the risks of including terms in settlement agreements which require broad mutual policing obligations.  The fact that Stretchline shared the responsibility for preventing infringement as a result of such a term was clearly a factor weighing against the granting of an injunction.   
In the meantime, while patentees check the terms of their settlement agreements, we are left wondering about the form that the sophisticated injunction alluded to by Mr Justice Carr would take.  Without any additional guidance from the court on this occasion, how would readers craft an injunction that would prevent the manufacturing of further infringing bras by H&M’s suppliers without being disproportionate?"

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