1709 Blog: for all the copyright community

Monday, 12 March 2012

Assessment of damages: the need to keep a sense of proportion

The Magic Seeder Co Ltd v Hamble Distribution Ltd [2012] EWPCC 9 is an interesting and extremely short copyright damages decision of Judge Colin Birss QC in the Patents County Court, England and Wales, handed down on 29 February 2012.

The two parties both sold products which were used for planting seeds. Magic Seeder alleged that Hamble infringed the copyright in its product packaging. At trial the exact number of infringing sales was uncertain: Magic Seeder claimed that 620 of those sales had caused it to lose sales, in respect of which it claimed lost profits. Magic Seeder also claimed a notional royalty of £100 for the remaining infringing sales.

Magic Seeder submitted that there was one specific instance in which Hamble caused it to lose sales, since Hamble made a total of 192 infringing sales to a customer with whom Magic Seeder had hoped to secure a contract. According to Magic Seeder, its estimate of 620 lost sales was realistic because that figure comprised the 192 identified infringing sales, plus a further 428 sales which equated to 18 per cent of Hamble's remaining sales. Hamble argued that it was selling its products to a different market to Magic Seeder's, with the result that it would not have caused it to lose sales. What's more, said Hamble, there was a contradiction between Magic Seeder's figures of 428 and 620 for lost sales.

How did Judge Birss sort out this jumble of confusing figures and contrary assertions? He took the following approach.

First, he affirmed that the court's exercise in assessing damages had to be kept in proportion,bearing in mind the modest sums that were at stake in this litigation. Given the information about Hamble's sales, it was inherently likely that its infringement had caused Magic Seeder to lose sales; there was no reason not to accept that at least a sale of 192 units was lost.

Secondly he rejected the contention that there was any contradiction between the figures of 428 and 620: the explanation for the difference was that Magic Seeder said it could prove a loss of 192 sales, and an estimate of a further 428 lost sales was reasonable, giving a total of 620.

Thirdly, the fact that there was no contradiction between the two figures did not mean the court was obliged to accept the 620 estimate. That estimate was too high and was based on a flawed calculation, even though this could not be appreciated until after Magic Seeder had seen Hamble's actual figures. A figure of 500 lost sales represented a fair and reasonable estimate.

Fourthly, taking the same rate as Magic Seeder had originally claimed for 620 lost sales, the court would use that rate when assessing the quantum of damages payable for lost profits in respect of those 500 infringing sales. On this basis Magic Seeder was entitled to lost profits of £1,750.

Finally, the judge agreed that a fair royalty for those of Hamble's infringing sales which had not caused Magic Seeder to lose any sales was £100, just as Magic Seeder had originally sought. This was clearly a round number and, since it was not sensitive to the actual number of products which Hamble sold, the exact sales figure for infringing products did not matter.

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