Where a retailer sells an infringing product, that is rarely the end of the trail. The product normally comes from somewhere else, and that source may be supplying others as well. Squashing a single retailer, or even multiple retailers, may not stifle the problem. How best, though, to get at the ultimate source when all one has to go on is the seller at the end of the chain?
The issues surrounding disclosure of sources by a retailer were considered recently in the IPEC in Wilko v Buyology. The judgment tells a cautionary tale to those seeking such relief, and heeding it may improve the odds of success.
Wilko Says “No”
Wilko is a retail chain with a registered trademark for WILKO with effect in the UK. It discovered that Buyology, another retailer, was distributing unauthorised WILKO branded goods in its (Buyology’s) shops.
Following an exchange of correspondence, Wilko issued proceedings for trademark infringement. Buyology filed a defence admitting infringement and undertaking to cease sales of the infringing goods. However, Buyology refused to divulge the identity of its trade sources, despite admitting having been offered the infringing goods since the proceedings were issued.
But So Does the Court
Wilko went to Court, asking the IPEC to make a Norwich Pharmacal order requiring Buyology to disclose its trade sources. The Court, however, refused.
The Court accepted that it could make orders requiring retailers such as Buyology to disclose trade sources of infringing goods under Norwich Pharmacal principles. The Court also accepted that the fact that the original infringement claim did not seek such (Norwich Pharmacal) relief did not, on its own, prevent the Court from granting it later on following Wilko’s further application.
Instead, what sank Wilko was the fact that it did not adequately particularise its request for Norwich Pharmacal disclosure in its later application. In particular, it did not satisfy the Court that if the order were not granted, Wilko would suffer irreparable harm arising from infringing goods still making their way to the marketplace.
On the other hand, the Court was persuaded that granting the order could do irreparable harm to Buyology. The retail community was small and close-knit, and if Buyology disclosed the names of its suppliers those companies might resent being investigated to establish whether they were mixed up in the commission of a tort. This was likely to have long-term commercial repercussions on Buyology.
Essentially, the Court sought to balance the competing interests of the parties: that of Wilko in vindicating its rights and preventing the establishment of a secondary market in its goods, and that of Buyology in protecting its relationships with its suppliers. Had Wilko demonstrated that there were no, or limited, alternative supply chains for the infringing goods, the Court might have accepted that there was a serious likelihood that the infringing goods would continue to surface and cause irreparable harm to Wilko despite the sales through Buyology having stopped. However, there was no evidence that the goods might still make it to the marketplace and the Court was not prepared to act on an inference of irreparable harm to Wilko based on these facts, as opposed to the clear likelihood of irreparable harm to Buyology if the order were granted.
Buyology had promptly given the undertakings required to settle the proceedings as issued in the original claim form, conduct which the Court approved. It was clear that no further sales of the infringing goods would be made through Buyology. There was no evidence of the nature and extent of likely continued sales of the infringing goods through other channels if the disclosure were not given, and the Court declined to draw inferences in Wilko’s favour.
In general, defendants who admit the sale of infringing goods should not expect the sympathy of the Court where orders to disclose their suppliers might damage commercial relationships. The defendants in such cases typically have only themselves to blame, and the need to ensure that IP right holders can enforce their rights is an important factor.
Yet, it is clear from this judgment that there are cases where judicial sympathies might be stirred by other factors such as a defendant’s admissions and preparedness to give prompt undertakings, particularly where these are combined with a lack of evidence that the absence of an order would do irreparable harm to a claimant.
Having said that, though, this is in some ways an odd decision, and it might just as easily have gone the other way. Although Wilko gave no evidence that the suppliers to Buyology would find another outlet to the market now that Buyology had undertaken to cease use, that result might reasonably be inferred. If a supplier can no longer sell to one customer, it will look to sell to another. Infringing goods within the supply chain were likely to be unloaded somewhere, and the Court might just as reasonably have inferred that such a natural result supported a finding that Wilko should get its order on the basis that without it, it would not be able to vindicate its rights.
The importance of this decision lies in its reminder that Norwich Pharmacal orders are a form of equitable relief, and that, as with other forms of injunction, the Court will seek to balance the interests of the parties to secure a just result. It may not be enough, therefore, simply to argue that a brand owner should be told the identity of suppliers so that it can enforce its rights. It may be necessary to go further and to satisfy the Court that failure to make the order will result in irreparable harm because those goods will in fact find another market outlet if the order is not made.
Evidence that there are in fact other retailers who would sell the goods, and that the quantities involved are sufficient that the harm caused by their distribution would be substantial, are likely to be relevant factors. The extent to which this can be proved will inevitably vary, however, since a claimant will not always have much information about the goods and the extent of the harm they would do if they made it to the marketplace unless and until the order for disclosure is made. It is, essentially, a chicken and egg situation, but a claimant must do its best to satisfy the Court that the order is just based on the information to which it does have access. This applies as much in the IPEC, where recoverable costs are limited, as it does in the rest of the High Court, although the limited costs recovery (before IPEC) may temper the extent of the evidence that it is necessary to compile.
In this case, the Court considered that the claimant could have tried harder. The outcome is a salient reminder that brand owners seeking equitable relief must do their homework, and do it diligently, before coming to Court.