Brand Appeal

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Mercky business – claiming damages for UK registered trade mark infringement

Background

In the UK, a registered trade mark owner whose mark has been infringed is entitled to compensation. Typically, they elect either to claim damages, for the loss they have suffered because of the infringement, or for an account of the profits made by the infringer.

When claiming damages, often they assert they have lost sales, and thus profits, because of the infringer using the infringing mark to generate its own competing product or service sales.

However, sometimes the trade mark owner seeks damages based on a reasonable royalty, under a notional (fictional) licence (hypothetically) negotiated between the parties, permitting the infringer to perform the infringing acts. Such compensation is known as “negotiating damages” or “user damages”. The Court determines what sum would have been arrived at in negotiations between the parties, had each been making reasonable use of their respective bargaining positions, bearing in mind the information available to the parties and the commercial context at the time the notional (hypothetical) negotiation should have taken place. The negotiation is assumed to have resulted in a licence that would cover the infringer’s trade mark infringements.

One of two approaches can be used to calculate the notional licence fee:

1. A comparables approach, where the sum or royalty rate which would have been agreed under the notional and fictional licence is determined by the Court by reference to similar licences (if any) already in existence; and
2. An economic benefits approach, where the sum or royalty rate which would have been agreed under the notional and fictional licence is determined by reference to the incremental economic benefits expected to be obtained by the infringer through its use of the infringing trade mark in issue, and the costs to the trade mark owner because of granting the rights under the licence. The economic benefits (and avoided costs) of the infringer sets a ceiling. From the trade mark owner’s perspective, the grant of a licence to the infringer might harm the trade mark owner’s business. That loss establishes a floor. The usual approach is for the Court to establish where between the floor and ceiling the amount of the notional licence fee should fall.

MERCK KGaA v MERCK SHARP & DOHME LLC & Ors

In this recent case, the Court was asked to assess damages based on a reasonable royalty under a notional (fictional) licence (hypothetically) negotiated between the parties, permitting the infringer to perform the infringing acts.

Initially, the claimant asserted it was entitled to damages of approximately £50.5m, relying on its analysis of (allegedly) comparable licences already in existence. Alternatively, based on the economic benefits approach, it claimed damages of around £18.7m.

What did the Court decide?

The infringer’s expert asserted there was no evidence before the Court of a reliable comparable licence, and no adjustments to a non-comparable licence would lead to a reliable royalty. The Court agreed. There was no evidential support for the adoption by the Court of any sum pursuant to a comparables analysis: “Any attempt to do so would be nothing more than wild speculation.”

Thus, the Court determined the notional licence fee via an economic benefits approach, calculating it as just over 10% of the originally claimed sum of £50.5m.

Lessons learned

Whilst English law does permit a trade mark owner to obtain damages against an infringer, based on a reasonable royalty under a notional (fictional) licence (hypothetically) negotiated between the parties, credible evidence needs to be filed with the Court to support the figure sought. This is especially so where the sum or royalty rate claimed is by reference to allegedly similar licences already in existence.

Lost Mary, found rights: What brand owners should know

Key takeaways

• Evolving Doctrine: This decision marks a softening of strict Oki Data application. Panels may now accept broader indicators of distinction beyond disclaimers alone.
• Reseller Rights: Genuine resellers who play fair may own and use domain names incorporating brand owners registered trade marks.
• UDRP Limits: Designed to stop cybersquatting, not to police reseller relationships.
• Strategy for Brand Owners: Tighten distribution contracts and consider parallel enforcement (e.g., under national trade mark laws) rather than relying solely on UDRP to address unauthorised reseller domains.

Conclusion

Trade mark owners can (and should) pursue counterfeiters and cyber squatters using the UDRP but overreaching against bona fide resellers risks backfiring.

The Panel reminded complainants that the UDRP was designed to combat cybersquatting, not to police the entire reseller landscape. If brand owners want tighter control of 3rd party domain names registered by resellers of genuine branded goods, the remedy lies in enforcement via local registered trade mark infringement laws, not the UDRP.

The UDRP is not a substitute for courts.

Natasha Courtenay-Smith & Notting Hill Bag Company Ltd v The Notting Hill Shopping Bag Company Ltd & Ors [2025] EWHC 1793 (IPEC) – the importance of getting your ducks in a row!

This month we are considering an interesting case heard recently by the Intellectual Property Enterprise Court, which concerned the IP rights in a brand name and logo used on tote bags.

Facts of the case

In summary, the claimants issued legal proceedings against the defendants, alleging, amongst other things, that they had infringed the second claimant’s registered UK trade mark by using similar signs on identical goods, namely tote bags.

Details of the second claimant’s trade mark and the defendants’ (allegedly infringing) signs are set out below:

What did the Court decide?

The second claimant did not own a valid registered UK trade mark and therefore the defendants could not infringe it. The claim failed.

Originally, the registered UK trade mark was owned by another company (X’), which had been dissolved after the first claimant applied to have it voluntarily struck off. Its assets at the time of the dissolution, including the registered UK trade mark, automatically passed to and vested in the Crown. This is known as ‘bona vacantia’ and means that ownerless property (e.g. the assets of a dissolved company) passes by law to the Crown.

Subsequently, the first claimant applied to have X restored, to transfer the registered UK trade mark to the first claimant, who in turn would assign it to the second claimant. However, before X was restored the registered UK trade mark expired. The Crown did not renew it and nor had it authorised anyone else to renew it on its behalf. There was therefore no trade mark to be revested or restored to X when the restoration order was made.

Without authority or permission from the Crown, the sole director of the second claimant had purported to renew the trade mark before it expired. However, because he had no authority from the Crown, or other valid legal basis to do so, the purported renewal was void/a nullity. Only the Crown would have been able to renew the trade mark or give authority for someone else to do so. Thus, the registered trade mark had expired, and the second claimant had no standing to bring a claim of registered trade mark infringement against the defendants.

Lessons learned

Details matter! Before commencing infringement proceedings, a claimant and its legal advisers need to check and ensure it legally owns the IP rights it asserts have been infringed. Otherwise, its claim will fail. Not only will it have wasted money on its own legal fees, but it will also have to pay the defendants’ costs for successfully defending the claim.

The case also highlights the need to ensure that before a company is dissolved any assets it owns, including registered IP rights, such as trade marks, are assigned out to a third party, who can then own, manage and renew them. Failure to do so means they can be inadvertently lost for all time.

Need assistance?

This is for general information only and does not constitute legal advice. Should you require advice on this or any other topic then please contact hlk@hlk-ip.com or your usual HLK advisor.