The English Court of Appeal has clarified the law on Island Records orders in a long-running case concerning the infringement of a patent for electric plug sockets on aeroplanes.
In English IP proceedings, it is not possible to get financial compensation for both damages and an account of profits. A successful litigant has to choose. Island Records orders enable a successful claimant to make an informed choice between damages and account of profits because they require the unsuccessful litigant (usually the defendant) to provide sufficient financial information to enable the successful party to make an informed decision.
Applications for these orders can be made in cases concerning infringement of any IP right(s) - Island Records itself was a copyright case.
Island Records election
Following a trial in 2020, Lufthansa’s patent was found to be valid and infringed by Panasonic. The judge, Morgan J, made an Island Records order requiring Panasonic to provide financial information to enable Lufthansa to choose between damages and an account of profits.
Panasonic provided the information in time and in September 2022 (after the resolution of the appeal) Lufthansa elected to pursue an account of profits. However, shortly afterwards Panasonic provided new figures (the Takahashi information) – the effect of which was to reduce the profits by about $30 million.
Panasonic then invited Lufthansa to revisit its election, but Lufthansa declined to do so. When the matter came before the court, in April 2023, Mr Douglas Campbell KC considered that Panasonic was seeking relief from sanctions (for not complying fully with the court order) and assessed the matter on that basis. He concluded that, on the balance of the evidence, Panasonic’s application for relief from sanctions should be refused.
Overriding objective
On appeal, Panasonic argued that the matter should actually be governed by ordinary case management principles and was not an application for relief against sanctions.
In a Court of Appeal judgment with which the other two judges agreed, Birss LJ said that “Island Records orders have to be seen in the light of their purpose, which is only to facilitate the claimant's election between two forms of remedy.” This means the information has to be something that can be produced fairly quickly and at proportionate cost and it must be sufficiently reliable for the purpose of making the choice: “More detailed disclosure and analysis will follow. Approximate estimates are to be encouraged.”
He added that there is no tailor-made provision which applies to a sanction for non-compliance with an Island Records order and concluded that there is no automatic consequence provided for breach of an Island Records order:
“No relief from sanctions already in existence is required. Panasonic in particular does not have to persuade the court to disapply a sanction in place, whose prior imposition could not be said to have been disproportionate. The court has to apply the overriding objective.”
Based on the facts established at first instance, Birss LJ said the court had a free hand to make whatever order is appropriate in the circumstances and that the “obvious proportionate response” was that Lufthansa should have the chance to make its election again in light of the new information. He concluded:
“Taking the non-existent sanctions out of the picture, and provided Lufthansa has a chance to remake its election, I do not accept that Lufthansa would suffer any further prejudice aside from costs, by an order extending time for compliance with Morgan J's order. Despite the lamentable failure by Panasonic to approach this matter seriously over a period of nearly two years, the balance nevertheless comes firmly down in favour of refusing Lufthansa's application to prevent Panasonic from relying on the new Takahashi information.”
Allowing Panasonic’s appeal, he said that Morgan J’s order should be extended to the date when the Takahashi information was served and Lufthansa should be given 14 days to remake its election. If it elects for an inquiry, then Panasonic should pay the cost up to the end of January 2023, when Lufthansa was offered the chance to re-elect.
What does this mean?
While information provided under an Island Records order does not have to be comprehensive, it should be accurate and comply with the terms of the order. It appears that Panasonic’s initial statement fell short in both respects.
In this case, Birss LJ concluded that justice required that Panasonic should be able to rely on its revised (and more favourable) information, but that Lufthansa should be given the opportunity to review its election in the light of the new circumstances. Part of the reasoning behind this practical solution to the problem was that there is plenty of time before the trial is due to be heard. If the trial date was more imminent, the court may have reached a different conclusion.
To find out more about the issues raised in this blog contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - rosie.burbidge@gunnercooke.com