In 2015 the Claimant, Champagne Louis Roederer (“CLR”), succeeded in its claim for trade mark infringement in the UK against the Defendant, J Garcia Carrion (“JGC”). JGC had marketed and sold a Cava product under the mark ‘Cristalino’. In her decision, Mrs Justice Rose found that JGC’s use of ‘Cristalino’ infringed CLR’s rights in its trade marks used in respect of its well-known ‘Cristal’ brand of champagne. Not only was there a likelihood of confusion between the ‘Cristal’ brand and JGC’s ‘Cristalino’ but Rose J also found that the use of ‘Cristalino’ had the effect of diluting and taking advantage of the well-known Cristal marks.

JGC’s Non-Participation

In many cases, a finding of liability for infringement, if not appealed, will be followed by the parties agreeing a settlement to avoid the expense and inconvenience of a further hearing on damages. In IP cases, where no settlement is reached, a successful claimant will often have the option to elect for either a damages enquiry or an account of the infringer’s profits. In the case under consideration Rose J awarded CLR disclosure of the number and value of JGC’s UK sales of Cristal, together with the sums received by JGC for those sales (commonly called Island Records v Tring disclosure), to assist CLR in making its decision between damages and an account of profits.

JGC failed not only to provide the disclosure ordered but also to participate in any way with the proceedings. JGC’s non-participation was not limited to the stage after it had been liable for infringement. From February 2013, JGC had refused to engage with the litigation process, despite having been initially represented by solicitors and counsel.

Despite the lack of cooperation from JGC, CLR decided to seek an account of profits from JGC.

Master Bowles Takes Control

As is standard practice, the case passed into the care of Master Bowles who provided direction for CLR to proceed with the taking of the account of profits on the basis that JGC may not participate in the process.

In November 2016 the Master heard CLR’s arguments and examined the evidence it had compiled without the Defendant’s input.

In order to secure a decision on the sum to which it was entitled in respect of JGC’s profits, CLR had to satisfy the judge on three points: a) the number of JGC’s sales of the infringing product in the UK; b) the gross profit on bottles sold; and c) what, if any, deductions from that figure should be made to produce the sum awarded to CLR?

On the first two points, the volume of UK sales and the gross profit, the lack of cooperation from the Defendant was managed with significant effort from the Claimant. The sales picture was pieced together from information previously provided by JGC before the UKIPO and a Minnesota Court as well as details obtained from Morrisons and ASDA Supermarkets (CLR had settled its secondary infringement claim against both parties on commercial terms early in proceedings) and Majestic Wine Warehouse.

For a period from 2008 to 2010 there were no figures from Morrisons and so the Master had to consider whether the sales would have continued on a ‘straight line’ trajectory. Although this option was available to him, Master Bowles considered that, though the Court was free to make reasonable assumptions in the absence of evidence or assistance from a party, this did not entitle him to act on assumptions that lie against the weight of evidence or are otherwise unlikely. Accordingly the Master found that the sales for Morrisons would likely have ‘tracked’ the pattern of those of ASDA during the relevant period (which declined due to the prevailing economic circumstances). All evidence considered, the Master determined that, for the Court’s purposes some 2,868,183 infringing bottles were sold in the UK by JGC.

A Question of Profit

The Master accepted the unchallenged evidence of CLR’s expert on the calculation of the gross profit margin for the infringing products and so it was left only to consider what, if any deductions the Court should make from the gross profit figure to calculate CLR’s award.

The law allows for the deduction of some overheads and other costs from the profit figure but only, as held in Hollister v Medik [2013], where those costs are directly attributable to the infringing activity and not general overheads of the business. Since JGC had offered no evidence to allow the Master to consider what, if any deductions would be appropriate, he held that the Court was unable to make any deduction – to do so would be mere speculation.

Finally the Master considered whether there should be any deduction based upon the extent to which the infringement drove the profits in the infringing products, i.e. to what extent did people buy the product because they believed there was an association between Cristal champagne and the Cristalino cava product. Again he found that, in the absence of any evidence to the contrary from JGC, to make a deduction he would merely be “picking a figure from the air”; this he was not prepared to do and therefore JGC’s entire profit from infringing UK sales (as calculated by the Court) should be paid to CLR.

An Expensive Lesson

As a result of its refusal to cooperate with the Court proceedings JGC may have saved some money in legal fees but it is now faced with an account of profits requiring it to pay CLR €1,332,844.64 (plus a legal costs bill that is likely to be eye-watering). Of course we can now look forward to the next stage in this saga as CLR looks to enforce this decision against the Defendant in Spain.