Nov 1
The defendant was found to have infringed a patent owned by the claimant relating to electric plug sockets used on aeroplanes to supply power to passengers. The judge made an Island Records order requiring a director of the defendant to provide its sales revenue for the infringing goods, together with information about the associated costs, to allow the claimant to make a rational election between seeking an enquiry as to damages or an account of profits. That order contained no express sanction for non-compliance. A witness statement was served on behalf of the defendant by a person who was not one of its directors setting out the revenue earned and costs in the relevant period. The claimant elected to pursue an account of profits and served points of claim in the account proceedings. Thereafter, the defendant served a second witness statement by a director which reduced the stated gross revenue from the infringement to a significantly lower net revenue figure. The claimant declined to revisit its election and applied for an order that the defendant not be allowed to rely upon the additional costs and deductions set out in the second statement which had not been addressed in the first statement. The defendant cross-applied for an extension of the deadline in the Island Records order so as to incorporate the date of the service of the second statement. It was common ground before the court that the issue was one of relief from sanctions pursuant to CPR r 3.9. The recorder considered the matter on that basis and found that the balance fell in not granting relief from sanctions. The defendant appealed, contending, inter alia, that its cross-application before the recorder ought not to have been treated as an application for relief from sanctions, but rather should have been resolved by reference to ordinary case management principles under CPR r 3.1 within the overriding objective.
On the appeal—
Held, appeal allowed. Although no rule or practice direction provided for the making of an Island Records order at the conclusion of a trial concluded in a claimant’s favour, it was a well-established approach in intellectual property cases to enable the successful party to make an informed choice on its choice between an enquiry as to damages or an account of profits after receiving the relevant information from a defendant. An Island Records order had to viewed in the light of its purpose to facilitate a claimant’s election between those two forms of remedy. The information had to be something capable of being produced fairly quickly and at proportionate cost since the election was made at the start of the remedy process and it had to be sufficiently reliable for the purpose of making the choice. More detailed disclosure and analysis would follow and approximate estimates were to be encouraged. There was no automatic consequence for breach of an Island Records order, either expressly or by implication, by any rule, practice direction or order. In particular, the provisions of CPR r 31.21 relating to failures in disclosure did not apply by analogy, nor was there any basis for implying a sanction on policy grounds. Accordingly, a breach of the order would not give rise to a sanction so as to require an application for relief from sanctions under CPR r 3.9. No relief from sanctions already in existence was required. In particular, the defendant did not have to persuade the court to disapply a sanction in place, whose prior imposition could not be said to have been disproportionate. Rather, in such a case, the court would have to apply the overriding objective withing the CPR to determine what the outcome should be. It followed in the present case that the approach to be taken to the rival applications was on a different basis from the approach below based on what had then been common ground. In the circumstances, the balance fell in favour of refusing the claimant’s application to prevent the defendant from relying on the information in its second witness statement and granting the defendant’s application to extend the deadline for the service of its second witness statement (paras 26, 27, 32–37, 47, 48, 49, 50, 51).
Iain Purvis KC, Miles Copeland and Alice Hart (instructed by Hogan Lovells) for the defendant.
Hugo Cuddigan KC and Mitchell Beebe (instructed by Jones Day) for the claimant.