In a recent joint claim filed by luxury brands Fendi, Loewe, Dior, Celine, and Louis Vuitton, the Intellectual Property Enterprise Court (IPEC) ordered default judgment against the defendant, Rolo Fashion Limited, for trade mark infringement after Rolo Fashion was found to have been selling strikingly high-quality fake products adorned with the claimants’ registered trade marks.
Dubbed “superfakes”, Rolo Fashion’s counterfeit goods were deliberately made to a high standard to sell to consumers products of seemingly equivalent quality to the claimants’ goods but at a lower market price. Given liability had already been found in the claimants’ favour following the default judgment, attention therefore turned to the question of the quantum of damages arising from the infringement. Rolo Fashion posited that since the infringing goods were sold at a low market price, the damages should be calculated based on Rolo Fashion’s sales figures on the basis that a reasonable consumer would have inferred that the goods were not genuine due to the comparatively low prices so would not have purchased the claimants’ goods in any case.
HHJ Hacon rejected Rolo Fashion’s argument, commenting that this approach did not give the full picture as to how damages are calculated, and that the correct approach is to consider damages either by calculating the infringer’s profits, or the claimants’ lost sales. The claimants proposed switch sales rates of between 10 and 30 percent in their respective calculations, with HHJ Hacon settling on a rate of 15% having consideration for the claimants’ and defendant’s submissions. HHJ Hacon therefore concluded that the brands had lost approximately 713 sales as a result of the infringement which, on review of the defendant’s bank records, were worth around £200,000 in lost profit. The judge also awarded a notional royalty of 3% of the defendant’s selling price by way of compensation for the unfair advantage the defendant’s derived from its use of the claimants’ respective reputations, taking the claimants’ total award to £213,000.
This claim may well act as a useful precedent in respect of damages calculations in so called “superfake” infringement claims. It demonstrates that low retail prices for counterfeit goods relative to their genuine counterparts does not preclude rightsholders from successfully claiming lost profits, but shows that rightsholders may well be required to produce an increasingly substantial base of evidence to support that position the further it departs from a straightforward lost sales argument.
If you have any questions on the above, or if you need any advice or support in respect of your own intellectual property, please do not hesitate to contact the team at McDaniels Law on 0191 281 4000 or legal@mcdanielslaw.com.
