Champagne Louis Roederer (CLR), owners of the world-famous champagne brand Cristal, recently received a substantial award in the UK High Court following an earlier successful trade mark infringement claim against Spanish wine producer J Garcia Carrion (JGC).
JGC, who had been marketing and selling cava in the UK under a CRISTILANO brand for several years, were found in 2015 to have infringed CLR’s UK and EU trade marks for the word CRISTAL. It is worth noting that JGC failed to participate in the proceedings from around 2014.
Following a finding of infringement, a successful claimant can claim either an account of profits (being what the defendant has gained from the infringing acts) or an enquiry as to damages (being what the claimant has lost as a result of the infringing activities).
To ensure that successful claimants can make an informed decision as to whether to elect for an account of profits or an inquiry as to damages by way of compensation, Courts typically order the defendant to provide some financial disclosure.
The Court did order financial disclosure and this would have detailed the number and value of bottles of Cristalino sold in the UK since the relevant date of March 2004 and also the sums which JGC had received from those sales.
Perhaps predictably, JGC, failed to comply with the disclosure order and so CLR had to gather its own evidence. CLR collected evidence from various sources including other court proceedings which JGC and CLR had been involved in at the Commercial Court in Brussels, the UK IPO and the US District Court of Minnesota; the latter two also relating to the use and registration of the CRISTALINO mark. In its bid to find information and evidence to support its case, CLR approach the retailers, supermarket chains Asda and Morrisons, Asda and Morrisons had been the second and third defendants in the proceedings though had already settled with CLR and they provided information relating to their sales of the infringing cava.
After reviewing the available evidence, CLR elected for an account of profits and submitted the evidence to the Court together with expert evidence from an accountant.
Determination of Profits
In assessing the profits received by JGC from the infringing sales, the Court was required to consider a number of key issues:
- Over what period of time should the sales of JGC's cava be considered for the purposes of the profits calculation? The date which the Court needed to assess sales from (under the relevant limitation period) was the six years prior to the issue of proceedings, being 19 March 2004. However, for a period in 2007 and 2008 JGC marketed its cava under the non-infringing brand “Arte Latino”. JGC reverted to the Cristalino brand once it realised it was losing sales but the Court needed to decide whether to make a deduction for the sales during this period. Based on the available evidence, the Court determined that sales under the non-infringing brand were likely to have continued until the first quarter of 2008. As such, the Court decided to deduct that volume of sales from its calculations. The total number of infringing bottles sold was determined to be in the region of 2.8 million.
- What figure should be used to determine the gross profit per bottle? Using figures from the Minnesota court proceedings, this was estimated at €0.4647 per bottle. The Court noted that JGC only had itself to blame if this figure was incorrect as it had not submitted any evidence to rebut this presumption.
- Should a deduction be made to take account of JGC’s operating costs and overheads? While these are typically key arguments relied on by a defendant to reduce its liability, JGC did not provide any evidence of such deductions. The Court held that the burden of proof for possible deductions lay with JGC and no automatic deduction should be made.
- Should the Court make a deduction from the profits to take into account that the infringement itself did not drive the infringing sales? Such other factors possibly driving the infringing sales could have included price, availability and quality of the product. However, it was determined in the infringement proceedings that the infringing label was likely to confuse consumers into believing that Cristalino was a product of CLR and, importantly, into buying the product on that basis. Again, JGC failed to adduce any evidence or arguments and the Court was of the view that without evidence to the contrary, it was not prepared to find that the sales were driven by any factors other than the infringement.
- Having answered these questions, JGC's profits arising from the infringement were then calculated at €1,332,844.64. It seems likely that with only limited additional work, JGC could have adduced evidence which would have significantly reduced the value of the award dramatically.
From a claimant's perspective, the key point of interest from this case is that the Court was able to determine an account of profits without evidence from the defendant. While the evidence was from unconventional sources, the Court took a pragmatic approach to assessing that which was available.