The higher cost of proceeding to trial

Our litigation & dispute resolution partner outlines some of the commercial risks involved in proceeding to trial in an intellectual property infringement case.

In trademark infringement and passing off cases, we often find that claimants are prepared to enter into a settlement if the defendant agrees to a rebrand of some kind, in order to achieve a quick resolution.

The reason for this tends to be because the claimant wants the infringing products and services out of the marketplace as soon as possible. It also helps to limit legal costs, as taking a case through the courts can sometimes lead to their own registered intellectual property (IP) being challenged.

Often, there is tension in the settlement negotiations on certain issues, such as:

• whether the defendant should disclose its sales. This is so that the claimant can assess if a payment should be made, either as damages or account of profits
• whether the defendant should pay a contribution towards legal fees, which can frequently escalate if the case is not dealt with quickly
• whether the claimant is prepared to contribute to the cost of the defendant’s rebranding, depending on the circumstances of the case
• whether the defendant is allowed to sell through stock (which has the alleged infringing branding) and the terms relating to that process
• the timing of the rebrand.

This last point is often the most significant as it relates to other terms of the settlement.

The claimant will usually want the rebrand to take place immediately on the basis that the defendant is not allowed to continue gaining an unfair advantage and benefit from infringing the claimant’s IP. A defendant on the other hand, will often seek to buy time to sell products, deescalate the dispute and negotiate its way out of it.

In the recent case of Combe International LLC v Dr August Wolff GmbH and Co KG Arzneimittle [2022], the court found a trademark infringement had taken place and refused the defendant’s application for a 21 week stay to the injunction, which they requested so as to enable them to rebrand. This case highlights the risks of proceeding to trial and that unlike the staged period they would be afforded in a settlement, the defendant will not necessarily have an opportunity to rebrand if an injunction is made for infringement. Proceeding to trial means the defendant will have to immediately stop trading in the infringing products and services.

As well as the risks associated with litigation costs and compensation, a defendant should assess the likely commercial loss in having to take their products and/or services off the market immediately. In all cases, they should be aware of lost turnover, goodwill and market presence.

Our dispute resolution team assists clients to both enforce and defend IP claims, and we take time to understand our clients’ businesses to achieve the best possible outcome. If we can help, please get in touch.

Paul is the lead partner in our litigation & dispute resolution team. Noted by leading directory The Legal 500 for his “strong technical knowledge”, he is experienced in handling complex commercial proceedings through the High Court and County Court. His expertise includes shareholders’, directors’ and partnership dispute and intellectual property matters.