Clients often enquire, when seeking to resolve an IP infringement case, how they can ensure that a defendant complies with the settlement terms. In some cases the claimant will not trust the defendant to do so especially if there has been some form of concealment or deceit.
One such way is to ensure that the defendant enters into a Court order which can easily be done if proceedings are on foot. If not, it is possible once settlement has been reached in principle, for the claimant to issue proceedings and then resolve them shortly after by way of a Court order and settlement agreement.
The advantage of having a Court order is that if the order is breached it may be possible to bring criminal proceedings against the defendant if it does not comply with the terms of the order.
In a recent case before the Patents Court, the Court handed down a sentence of imprisonment for a director who only "half-heartedly" complied with the terms of a Court order. This case illustrates that obtaining a Court order can be very important in ensuring that the defendant complies with the terms of settlement.
The case concerned a committal application by three joint claimants ('the Claimants') in relation to breaching an injunction granted in an application for summary judgment. The relief granted included an injunction restraining the first, second and fourth defendants ('the Defendants') from infringing the Claimants' designs for timber-framed building systems. The Defendants were ordered to cease infringing the Claimants' patents and copyrights. The Defendants were also ordered to destroy any existing products which infringed the copyrights and patents, as well as removing copies of the works from their website, and brochure.
The Claimants alleged that, irrespective of the injunction, the Defendants had carried on essentially the same acts since the judgment and therefore brought committal proceedings against the fourth defendant; a director who was deemed the 'controlling mind' of the first and second defendants. The Claimants relied on evidence relating to eight breaches of the order, including continued infringement of the patents and copyright and failure to destroy all existing infringing works.
Accordingly, the judge found eight instances of contempt (i.e. breaches of the Court order) by the fourth defendant; including that the old brochure had not been replaced until September 2019, and the website images had not been removed until after July 2019. In light of the fourth defendant's conduct following the order for summary judgment, the Court concluded that the fourth defendant had not taken the Court order seriously.
Contempt is a criminal offence, and as such the criminal standard of proof was applied by the judge. The judge found that the fourth defendant had been "casual" and "half-hearted" in his compliance with the Court order. It followed that the judge was satisfied that the custody threshold had been passed, and committal was necessary. The fourth defendant was therefore sentenced to two months imprisonment, (suspended for six months). A copy of the full judgment can be found here.
It can be incredibly frustrating for successful claimants to witness defendants breaching the terms of Court orders. However, this case demonstrates that the Court has in its armoury processes and procedures through which it can ensure strict compliance with the terms of its orders. The case also serves as a useful reminder to parties that "half-hearted" compliance with a Court order can be subject to the same sanctions as deliberate disobedience of a Court order.
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