ITMA 322 APRIL 2005

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FEATURE tion related to brand performance and reach, both within the brand’s own sector and its cross-market appeal. Through such effective management, valuation and market positioning, brands as concepts have developed their own corporate history, with companies keen to share information with the consumer, who then buys into this history. For example, Cadbury- Schweppes (www.cadburyschweppes.com) proudly tell the browser of their website: “Millions of you enjoy our brands around the world and we would love to tell you more about them. You can find out how a brand was born, famous slogans, momentous milestones and take an amusing, amazing or alternative look at what makes it so special.” The brand management team, which must include the trade mark professional at its very heart, can take advantage of market and economic use information to add value to the brand by targeting brand development, based on useable data generated through careful analysis of market positioning, consumer perception and awareness, sales trends by market and by core values that consumers associate with the brand. The brand history is developed accordingly. A strong brand permits a premium price to be charged and (hopefully) generates high sales levels. Advertising and promotional strategies, market expansion (both regional and sector cross-over) and development of brand potential are much more feasible when the brand management team actively manages its brand. The keystone of brand management and its protective tool is the trade mark portfolio. The result Development of a brand utilises the overall brand perception and the intangible assets it represents. Goodwill is the “attractive force which brings in custom” to quote Lord MacNaghten. While Lord MacNaghten spoke of the common law concept of goodwill, he could just as easily have been referring to the ethereal concept of the brand. It is an invisible force because it is an intangible asset, but its worth is precisely that attractive force which persuades a consumer to part with their money for that brand of goods or services rather than any other. Putting a value on it allows the brand management team to develop and protect it effectively. Neil Coulson, Jones Day, ncoulson@jonesday.com, www.jonesday.com 1 “Valuing IP and determining the cost of capital”; John Rugman and Tony Hadjiloucas in “Building and Enforcing Intellectual Property Value”, PricewaterhouseCoopers, 2005. ITMA needs you! The Review tries to cover as much case law as possible to keep members informed of changes. We already have a trusty band of volunteers who supply case reports. However, we are sure that there are budding writers out there who would like to see their names in print. If you would like to be on the monthly circulation list for cases intended for publication in the Review so that you can offer your services, please contact Chris McLeod, chris.mcleod@hammonds.com. 10 ITMA Review December 2005
Design & Copyright The Costs of Copying Precedents London General Holdings Ltd & Ors v USP PLC & Anor [2005] EWCA Civ 931 This was an appeal regarding the level and basis of damages and royalty awarded in respect of a precedent document that had been copied by a competitor. The defendants offered a wide range of financial services including extended warranties for electrical goods. These extended warranties were classified as a form of insurance and consequently attracted insurance tax. In the 1997 budget, the insurance tax payable on premiums was raised from 2.5 % to 17.5%. In 1998 a series of draft documents was developed by the second claimant, Unicorn, to provide an extended warranties scheme which would not be liable for insurance tax (the New Scheme). One of the documents was the Collections Account Agreement (CAA). This was not a finished document as it required alteration and development to be effective, but it contained the ideas on which the New Scheme was based. These included the implementation of a trust which was a necessary component if the New Scheme were to avoid insurance tax liability. In 1999 Unicorn assigned all of its intellectual property rights, including the copyright in the New Scheme including the CAA and other documents, to the First Claimant, USP. Scottish Power In 1997/1998 Scottish Power, one of the first defendant’s (LGH) customers, was interested in setting up an extended warranty scheme which avoided the insurance tax premiums. Both LGH and Unicorn made presentations to Scottish Power, who favoured Unicorn’s scheme. However, the new Scottish Power scheme was to be administered by LGH. During negotiations to determine the exact wording of the documents required for the Scottish Power scheme, LGH and Unicorn signed a mutual confidentiality agreement. The CAA was then sent to LGH. This draft was subsequently reworked to create an effective document, but in essence remained faithful to the substance of the draft CAA. LGH saved an electronic version of the redraft. It was this electronic version of the redrafted CAA, and clones of this redraft, which made up the infringing copies and on 8 November 2002 the High Court held that LGH had infringed USP’s copyright and was entitled to damages. The Apollo contract In April and early May 1999 LGH used the saved electronic version of the redrafted CAA to prepare a document as part of a trust-based scheme for Apollo 2000 Limited (Apollo). LGH also sent the redrafted CAA to a firm of solicitors for advice. At the trial for liability only, Judge Weeks held that the use of the redrafted CAA infringed the copyright in the original draft CAA. At the damages inquiry LGH was found to be liable for the infringements relating to Apollo. However, there were two other incidents of the redrafted CAA being used in similar ways to the Apollo contract. In the damages inquiry Master Price held, in relation to Apollo, that “the right way to proceed to assess these damages is by way of notional royalty”. He then awarded £15,000 by way of compensation for the labour and skill involved in producing the template CAA as a notional royalty, but did not comment on the other times LGH used the redrafted CAA to provide extended warranty schemes which were based on the New Scheme. The Powerhouse contract The main issue in the appeal related to a claim for damages in respect of a contract to provide this trustbased extended warranty scheme with another company, Powerhouse. LGH and USP were in competition with each other for this contract. LGH used the electronic version of the redrafted CAA to prepare documents for a trust-based extended warranty scheme. LGH disclosed the existence, but not the actual text, of the redrafted CAA to Powerhouse as the basis for LGH’s scheme. Powerhouse was initially concerned about the robustness of LGH’s scheme although it was “keener on price” than the scheme offered by USP. Accordingly, LGH took advice and after further discussions, Powerhouse was persuaded that LGH’s scheme was sufficiently robust. It was not suggested by either of the parties that Powerhouse had actually seen a copy of the redrafted CAA. Powerhouse then told USP about the alternative LGH scheme. As a result, USP subsequently reduced its price, to the effect that USP would make £111,720 less profit over the lifetime of the scheme. USP was awarded the contract and sought to claim the loss of profit from LGH for infringement of copyright. At the damages inquiry Master Price awarded USP damages of £126,720 consisting of £111,720 for loss of profit in relation to the Powerhouse contract and a notional royalty of £15,000 in relation to the Apollo contract. Appeal At the appeal LGH argued that there had been double recovery because USP had been awarded both damages and notional royalty in respect of the contract with Powerhouse. However, the Court of Appeal said that this argument was “misconceived”, as an infringing copy could be put to several uses, each of which could give rise to a separate damages claim. The Court of Appeal also dismissed LGH’s arguments that a lack of foreseeability and lack of causation meant that the loss of profit in the Powerhouse contract was not attributable to the breach of copyright in respect of the draft CAA. The court dismissed this argument, but said that the damages award for the loss of profit should be struck off in any event, Continued on page 12 December 2005 ITMA Review 11
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Page 9: Features What’s in a Brand? Brand
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Page 15 and 16: Case comments On Your Bikes In the
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ITMA 322 APRIL 2005

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