UK: Does The Ip Enforcement Directive Allow Re-Litigation?

Will the UK see an erosion of the 'rule in Henderson v Henderson' and the principle of res judicata in some intellectual property disputes as a result of the CJEU's interpretation of the IP Enforcement Directive? Following the CJEU's ruling in NEW WAVE v ALLTOYS, it is possible.

Should a post-Brexit UK be within the Unitary Patent Court system, as the Government has indicated will be the case, the IP Enforcement Directive will continue to impact disputes regarding patents covering the UK.

Background

The case of NEW WAVE CZ as. v. ALLTOYS, spol. sro. was referred to the CJEU from the Nejvyaaí soud (Supreme Court, Czech Republic). It concerns the infringement of NEW WAVE's trademark 'MegaBabe.'

In a first action, NEW WAVE brought an infringement proceeding, the result of which is reported by the CJEU as being:

"... the national court held in a final judgment that ALLTOYS had infringed NEW WAVE's rights in the MegaBabe mark, and ordered it to refrain from wrongful conduct in future and withdraw the products concerned that had already been placed on the market. The court did not, however, allow NEW WAVE to amend its application for the purpose of also requiring ALLTOYS to provide it with all information relating to the goods concerned."

The grounds on which the national court refused to allow the amendment are not stated.

After the conclusion of the first action, NEW WAVE commenced a second action against ALLTOYS seeking information about the origin and distribution networks of the infringing goods. It appears that ALLTOYS was the only defendant.

The court in which the new proceedings were originated, the Městský soud v Praze (City Court, Prague), dismissed NEW WAVE's application, on the basis that Czech law only allowed information to be obtained in an application to the court in proceedings concerning infringement of a right. The court considered that such proceedings had already been finally determined. The Vrchní soud v Praze (Court of Appeal, Prague, Czech Republic) reversed that decision on the basis of Article 8(1) of EU Directive 2004/48 ("the Directive").

ALLTOYS appealed to the Nejvyaaí soud (Supreme Court, Czech Republic). The court noted that the Czech law had to be construed consistently with the provisions of the Directive, but that those provisions themselves were not certain as the various language versions were different. The Supreme Court decided to refer to the CJEU the question of whether the Directive permits the commencement of separate proceedings to obtain information after the proceedings in which the right was held to be infringed have been finally concluded.

The Directive

The relevant part of Article 8(1) of the Directive reads:

'1.      Member States shall ensure that, in the context of proceedings concerning an infringement of an intellectual property right and in response to a justified and proportionate request of the claimant, the competent judicial authorities may order that information on the origin and distribution networks of the goods or services which infringe an intellectual property right be provided by the infringer and/or any other person... '

The decision of the CJEU

The CJEU started with the well-known principle that Directives must be construed in the light of their contexts and objectives. The context in this case is set out in Recital 10 and is:

'...to approximate legislative systems so as to ensure a high, equivalent and homogeneous level of protection in the internal market.'

The Court went on to consider the point about the different language versions of the Directive. The Court held that, although the French version in particular appeared more restrictive than the Czech or English version, the critical point was that none of the versions required the application for information to be made in the self-same proceedings in which the infringement of the right is established.

The Court also pointed out that the Directive also allows proceedings for the purpose of seeking information against 'any other person'. Such other persons may not have been parties to the original proceedings. While true, in the instant case this was not what was being sought by the right holder.

In the end, the Court was swayed by the objectives set out in Recital 10 and the need to protect the rights of property owners to effective remedies to protect their property guaranteed in Article 47 of the Charter of Fundamental Rights of the European Union. The Court ruled that:

Article 8(1)...  must be interpreted as applying to a situation . . . in which, after the definitive termination of proceedings in which it was held that an intellectual property right was infringed, the applicant in separate proceedings seeks information on the origin and distribution networks of the goods or services by which that intellectual property right is infringed.

The CJEU's decision in NEW WAVE v ALLTOYS (case C‑427/15) is available here.

What the decision means

The wording of the decision is open to interpretation. One view would be that the CJEU is merely saying that Article 8(1) does not preclude the seeking of information in proceedings other than the original proceedings in which infringement is established. This would hardly be controversial.

But Article 8(1) starts "Member States shall ensure . ..", so another interpretation of the judgement would be that the courts of Member States must allow the right holder to seek information even in new proceedings commenced after the final determination of the infringement proceedings. If the new proceedings were against new defendants that would not be so surprising, but if the new proceedings were against the same defendant that could well come up against existing rules in various jurisdictions designed to bring a conclusion to proceedings and prevent defendants from being vexed by re-litigation.

In the English Courts the so-called 'rule in Henderson v Henderson' and the principles behind res judicata are designed to bring finality to litigation.

At one time the rule in Henderson v Henderson, named after a case in the first half of the 19th Century, would have been expressed as preventing a litigant from raising in any new proceedings any claim which could or should have been raised in earlier proceedings. The House of Lords, in Johnson v. Gore Wood & Co. [2000] UKHL 65, considered that a more 'merits based' approach was needed so that the rule could be more appropriately expressed as whether, in all the circumstances, the litigant should have made the claim in the earlier proceedings.

If the CJEU's decision in NEW WAVE is merely that Article 8(1) does not bar re-litigation there is no conflict between it and the rule in Henderson v Henderson. If, on the other hand, the CJEU is saying that under Article 8(1) the courts of Member States shall permit re-litigation to allow a claim for information then there clearly is a conflict which the English Courts would probably have to resolve in favour of the decision of the CJEU.

An issue which was not explored by the CJEU was the fact that the court of first instance in the Czech Republic had refused to permit NEW WAVE to "amend its application for the purpose of also requiring ALLTOYS to provide it with all information relating to the goods concerned." No doubt the courts of the Czech Republic have their own rules about allowing applications to amend, but it looks as though this is not a case where the litigant should have raised the claim in earlier proceedings, but rather that it did raise the claim and it was turned down. Depending on the reasons why the court hearing the original proceedings refused to allow amendment, this could also raise questions of res judicata.

NEW WAVE may find that their win in the CJEU is a Pyrrhic victory. The Czech courts could accept the new litigation but refuse the request in the circumstances of the case.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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