Last month the Supreme Court handed down a landmark judgment in the case of Lifestyle Equities C.V. and Anor v Ahmed & Anor [2024] UKSC 17.
The case addresses the question of the nature and extent of the liability of a director, or other senior executive, for causing a company to commit registered trade mark infringement.
In particular, what is the test for finding them liable and, if found liable, can they be ordered to pay the profits made by the company as a result of the infringement?
Liability for infringing a trade mark is strict. To establish infringement, there is no need to prove that the infringer knew they were infringing - only that the person concerned, without the consent of the owner of the registered trade mark, used a sign identical with or similar to the trade mark in circumstances which amount to infringement.
For many years it had been thought to be settled law in this country that if a director, or other senior executive, of a company induced or procured (but not merely ‘facilitated’) the acts of registered trade mark infringement by their company and/or acted pursuant to and in furtherance of a common design to secure that such acts took place (in other words, the individual "intends and procures and shares a common design that the infringement takes place”) then they could be held liable as a joint tortfeasor with the company. In other words, they were liable as an accessory.
It mattered not that the director did not appreciate that the act which he induced, procured, or assisted with pursuant to a common design, constituted, or gave rise to, registered trade mark infringement, or that he intended that the registered trade mark owner be harmed.
A director was not to be treated as liable with the company as a joint tortfeasor if he did no more than carry out his constitutional role in the governance of the company—i.e. by voting at board meetings. But, if his participation or involvement was in ways which went beyond the mere exercise of constitutional control of the company, then he could be found liable.
It is also settled law that if someone infringes another’s intellectual property rights, for example a registered trade mark, then a successful claimant may seek either an award of damages or an account of the profits made by the infringer. The purpose of an account is to deprive the infringer of the profits they have made by the infringement. The infringer is treated as if it has conducted the infringing business on behalf of the claimant. The losses the claimant has suffered by reason of the infringement are not relevant. But can such profits be claimed from a director of a company as an accessory and, if so, what profits?
The Supreme Court held that an accessory to registered trade mark infringement, such as a director of a company, can only be held liable if they have knowledge of (or turn a blind eye to) the essential facts which make the acts in question wrongful.
Further, the Supreme Court held that when an account of profits is to be given where an accessory (e.g. a director, or other senior executive of a company) is jointly and severally liable with a principal (e.g. the company for whom the accessory is a director) as joint tortfeasor, the accessory is liable only for the profits they have made for themselves and they are not liable for the profits made by the principal (e.g. the company).
Being able to bring an infringement claim against a director, in addition to their company, is a useful enforcement tool for a brand owner, especially if the company may have few assets to enforce a successful judgment against. When directors realise their own personal assets are at risk, it often leads to the infringing conduct ceasing promptly after service of a cease-and-desist letter.
The decision of the Supreme Court represents a major change in the law and will make it harder to succeed with claims against directors of companies for liability as an accessory to the company’s acts of registered trade mark infringement.
For more information please contact Carl Steele.
