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A recent Intellectual Property Enterprise Court decision highlights the potential for joint liability of both a company and its directors to arise in cases of a breach of intellectual property rights.

In this case, which related to branded sports energy drinks, the offending company had already admitted to trade mark infringement by unauthorised use of the claimant’s two EU registrations. However, the judge went further and ruled that, not only was the company liable for trade mark infringement and passing off, but the sole director and shareholder of the company was also jointly liable for the acts committed by the company.

Intellectual Property

Intellectual Property (IP) is a term describing a range of legal rights attached to certain information/ideas and forms of expression.

Rights attaching to IP fall into two categories – registered and unregistered – with the main difference being that whereas registered rights (such as a trade mark) must be applied for by application to an official body (for example, the Intellectual Property Office in the UK), unregistered rights arise automatically.

What is a Trade Mark?

  • A trade mark is a registered right granted in respect of a sign or symbol used by a trader to distinguish its goods or services from the marketplace.
  • Common examples of a trade mark are brand names, logos or certain packaging (including shapes, colours and slogans).
  • Infringement of a trade mark occurs when it is used in the course of trade without the consent of the owner.
  • Owners can apply for UK, EU and International recognition of a trade mark. Registrations of UK and EU trade marks last for 10 years each.
  • A trade mark must be,
  1. Capable of being represented graphically
  2. Distinctive
  3. Capable of distinguishing goods or services
  4. Not excluded by law, to be capable of registration.
  • Goodwill is an unregistered trade mark that can be protected by an action for passing off.

What is Passing Off?

  • Passing off occurs when a trader attempts to sell goods or services under the pretence that they are the goods or services of another.
  • It requires,
  1.         Proof of a reputation in the trade mark
  2.         A misrepresentation that could mislead the public and
  3.         Proof of damage (either financial loss or damage to goodwill).
  • An action for passing off can be difficult to prove, but succeeded here. 

Why is this decision significant?

The judge’s decision is significant in relation to the joint liability of the individual defendant (being the sole director and shareholder of the company). It was held that the individual defendant’s status raised an evidential presumption that the company’s acts were committed at his instigation. As the judge could not identify anyone else within the company who could have been responsible for the breach of the intellectual property rights held by the claimant, it necessarily followed that the individual defendant actively co-operated with the company to commit the acts of passing off and infringement and was jointly liable.

Following on from our recent articles on Corporate Manslaughter and directors being imprisonment for Health and Safety breaches, this decision should serve as yet another warning to company directors that acts/omissions committed in the name of a company are still likely to lead to personal liability.

Expert Advice on Intellectual Property and/or Companies

Our team of specialist commercial and corporate lawyers are here for you, and your business, should you require any help or advice in relation to the above. Bray & Bray have three main offices across Leicestershire, feel free to phone or pop in to talk to our solicitors.