Facts:
Mr Kashif Ahmed and his sister, Ms Bushra Ahmed, were directors of Hornby Street Ltd, a company which arranged for the manufacture of clothing, footwear and headgear and sold it to retailers. They sold various items with the logos of polo players on horses and the words ‘SANTA MONICA POLO CLUB’. Lifestyle sued Hornby Street alleging that the use of the ‘SANTA MONICA POLO CLUB’ signs infringed Lifestyle’s trademarks. They also sued the two directors personally claiming that they are liable to Hornby Street for infringements.
The trial Judge agreed that Hornby Street infringed Lifestyle’s trademarks and that the directors were jointly liable as they procured the infringements of the trademarks. The Judge made no findings that the Ahmeds knew or ought to have known that there was a likelihood of confusion or infringement. However, in the Judge’s view of the law, the absence of such knowledge did not affect their liability. For the account for profits, the Judge held that Ahmeds were not liable. The decision was upheld by this decision. Both parties appealed to the Supreme Court.
Decision:
The Supreme Court unanimously dismissed Lifestyle Equities appeal, holding that the defendant company directors could not be liable either for procuring the infringements of Lifestyle’s trademarks or based on a common design, when they were not aware of the essential facts which made the use of the signs in question, by the company of which they were directors, wrongful.
The Court disagreed with the Court of Appeal’s view that for a tort of strict liability like trademark infringement, accessory liability does not depend on knowledge that the acts of the primary actor were or were likely to be infringements. The Supreme Court concluded that knowledge of the essential features of the tort is necessary to justify imposing joint liability on someone who has not actually committed the tort. Lord Leggatt noted that liability for infringing a trademark is strict although, in this case, the directors did not infringe the trademarks themselves.
The Supreme Court confirmed that the common law principle of accessory liability operates alongside any relevant statutory tort and can impose liability on someone who has not committed a relevant statutory wrong. Moreover, there is no logical support for the proposition that the mental element required for liability as an accessory should mirror that required for primary liability.
Lord Leggatt also made a distinction between procuring a tort and assisting another to commit a tort. When a case relates to procuring a tort, the relevant test is whether the person knew that the essential facts would result in a tort. Only if all the features of the act done which make it tortious are known to a defendant whose conduct has procured the infringement, will the defendant be jointly liable with the actual infringer. Indeed, it would be unjust to hold an individual whose act causes another person to commit a wrong jointly liable for the wrong as an accessory if the individual was acting in good faith and without knowledge of facts which made the act of the other person wrongful. This point is not particular to company directors and does not depend on any special feature of their role.
Regarding the profits, the Supreme Court confirmed that the only profits which a person can be required to pay are profits which they have made themselves and not profits which someone else has made from the infringement. Lord Leggatt explained that the purpose for redirecting profits, when an account of profits is ordered in an intellectual property rights case, is not to punish or deter wrongdoing, rather it is to enable the owner of the right to enjoy the fruits of its exploitation. In this way, the redirection of profit causes the infringer to be treated as if he had conducted the infringing business on behalf of the claimant.
Implications:
This judgement came as a surprise to some as it reverses the approach taken this far. The Supreme Court clarified the test for an accessory. This decision is good news for innocent accessories to a strict liability as directors cannot be held liable if they do not have the knowledge of the essential facts. It is also for the claimant to demonstrate that the directors had the required knowledge and state of mind.
This judgement leaves the door open for further litigation as the ‘essential facts’ were not fully explained in the judgement. The Court made it clear that the account of profit is only for the profit the person perceived from the infringement.