Playing by the Rules: or a tale of Fault and Default in infringement proceedings

We all need rules ...

After the momentous world-shaking blogposts of last week, it's great to get back to the nitty-gritty and to focus once again on the small picture. In this vein, this Kat considers Ahmet Erol v Global Fashion Links Ltd, another of those small, almost unnoticed and unreported decisions that form part of the fabric of intellectual property practice and procedure, a small addition to that great coral reef of law which, to the non-practitioner, often appears to be comprised by nothing but detail (including a body of largely arbitrary but essential rules such as the Civil Procedure Rules (CPR) in England and Wales), where there is often little in the way of principle to identify.

This decision of Judge Hacon in the Intellectual Property Enterprise Court, England and Wales, on 9 December 2014, picked up by subscription-only service Lawtel, addresses the topic of default judgments, which a court issues when one of the parties to a dispute fails to enter the litigation and the other side wins by a walk-over.  When is it appropriate to set such judgments aside? This issue is important not just in terms of considering the inconvenience inflicted on the "winning" party which, having got a court order in its favour, then might have to go back to court all over again. It's also important in terms of commercial certainty, since anyone who has a court order in their favour may be reluctant to act upon it by buying, selling or making goods if suddenly the cloud of further proceedings looms on the near horizon.

In these proceedings Erol was the owner of a United Kingdom Class 25 registered trade mark and design [on the overlap of trade marks and designs, see last week's INTA Katposts here and here], consisting of a distinctive combination of a half Union Jack and a crown design (the "half-crown design"). According to Erol, Global Fashion Links ("Global") had infringed its half-crown design by importing and selling a hoodie that replicated that design; design infringement and passing off proceedings were then commenced.

In issuing proceedings, Erol served a claim form and particulars of claim at Global's trading address, and service was deemed to have taken place on 6 May 2014, in default of any acknowledgement of service. However, no response pack was served along with the claim form and the particulars of claim. Global delayed three weeks before even seeking legal advice and then failed to respond to Erol's application for summary judgment which issued on 5 June. To Erol's delight, default judgment was entered in his favour on 4 July -- less than two calendar months after he served his claim and no doubt, in his eyes, a sign that justice was not only done but swiftly done too.

This was not the end of the story but, rather, its beginning.  Shortly after receipt of the default judgment, Global applied to have it set aside. Global sought to rely on, among other things, statements from other traders regarding sales in 2006 to 2007 that were said to establish a sufficiently arguable defence. Accordingly, said Global, it was only right and proper to set the default judgment aside since (i) it hadn't known of the proceedings until mid-May, when the relevant forms reached its trading address (ii) Erol had told Global by phone that, so long as settlement discussions were ongoing, he would take no further action; (iii) Erol had failed to serve a response pack and (iv) the half-crown design had actually been designed for Global's own use in 2005 and Global had sold garments using that design in 2005 to 2006 -- significantly earlier than Erol's claim to have created it in May 2007. This last point was intended to support an invalidity counterclaim which, Global argued, should be permitted to go to trial.

Judge Hacon allowed Global's application and set aside the default judgment.  As he explained:

* The factors that the court had to take into account when deciding whether to set the judgment aside were expressly stated in the CPR r.13.3. This rule provided two grounds for setting aside a default judgment: (i) did the defendant's proposed defence have a real prospect of success, or (ii) was there some other good reason to set aside the judgment in order to allow a defendant to defend the case?

* the test for establishing whether a default judgment was quite like the test for deciding whether to grant summary judgment, except that the burden of proof fell on the defendant. There were a number of aspects of Global's evidence on which it sought to rely at trial that were not clearly probative of its case and which, in some instances, were of so little probative value that the evidence arguably didn't even support that case. However, considering the evidence cumulatively, the threshold of establishing that Global had a real prospect of successfully defending the claim under r.13.3(1)(a) was satisfied.

* even if this were not the case, Erol's failure to serve the response pack could potentially constitute "some other good reason" under r.13.3 to set aside the default judgment -- subject to the question of delay. Here, Global's three-week delay in seeking legal advice was not excessive. Accordingly Erol's failure to serve a response pack could probably have been a good reason to set aside the default judgment.

* there was some documentary evidence, including an email from Erol to his solicitors on 9 June which implied that there were indeed some ongoing discussions between the parties. However, it was difficult to tell whether Global had been entitled to assume that nothing needed to be done until negotiations had concluded, in circumstances where Global had not responded to the service of the application notice for default judgment.

On the basis of the short note available on Lawtel this decision seems to be in order.  This Kat can't help feeling sympathy with any litigant who comes away from court with a default judgment and then has to go back to square one through no fault of his own; however, the inclusion of a response pack along with the claim form and particulars is a good way of reminding someone who is being sued that they jolly well ought to do something about it, and that wasn't the case here.

Merpel thinks that no-one should commence IP infringement proceedings in early May anyway.  So many of the world's IP practitioners are either clearing their desks ahead of travelling to the annual INTA Meeeting, attending it, recovering from it or covering for colleagues who are doing one or more of those things that must be difficult to get them to focus on the routine side of their work ...