Case No. EWHC-2564-(IPEC)

3.The Claimants are members of the same group of companies. The First Claimant is incorporated in Canada and designs, makes and sells a range of acoustic damping and sound control products. It was founded in 2006 by Paul Downey who remains its CEO. It is the proprietor of the four registered trade marks (“the Marks”) relied upon in these proceedings: a. UKTM 3246779, registered as of 28 July 2017: GENIECLIP b. UKTM 3246778, registered as of 28 July 2017: GENIEMAT c. EUTM 7592892, registered as of 10 February 2009: GENIECLIP and d. EUTM 8501918, registered as of 20 August 2009: GENIEMAT. The Marks are all registered for a range of goods, in particular goods in Class 17. The GENIECLIP mark specifications include construction clips of various materials for fixing panels to walls, etc, and the GENIEMAT mark specifications include acoustic mats. 4.The Second Claimant was incorporated in March 2011 and became the First Claimant’s UK licensee, under an informal licence. A formal licence was executed in writing dated 10 April 2019, doubtless in contemplation of these proceedings. There was no dispute as to the nature of the goods sold by the Claimants under the Marks. They have two key product lines designed to reduce sound transmission in buildings. First, the Claimants sell clips and brackets under the GENIECLIP Marks. The clips are made of moulded rubber and steel and are used to attach plasterboard to either wall or floor-ceiling assemblies by means of a "furring" or "top-hat" channel clipped into them, which holds the plasterboard. They are used to dampen sound travelling through walls and floors/ceilings. The Claimant sells a number of products under the GENIEMAT Marks, broadly speaking, a rubber mat product with different acoustic characteristics. It is typically installed on top of or between hard surfaces such as concrete or wooden floors, again to dampen or prevent sound travelling in buildings.5.The Claimants started to market and sell both GENIECLIP and GENIEMAT products in the UK in around 2009 or 2010 (the exact date is unclear, but not of significance). After the Second Claimant was incorporated in March 2011, Simon Jones was employed as its managing director, but it seems that Mr Downey has been the sole registered director of the Second Claimant throughout. Mr Downey gave evidence about the marketing and distribution channels used by the Claimants, which was not disputed by the Defendants. He said that GENIECLIP and GENIEMAT products have been very successful, and that the Claimants have spent significant sums advertising and promoting them in the UK since 2011, in architectural, construction, hospitality, fitness and building trade publications. As a result, according to Mr Downey, the Marks have become well-known to professionals in the construction business, such as architects, engineers and noise consultants, so that GENIECLIP and GENIEMAT products are specified by name in the building specifications of commercial building projects. Mr Downey also said that the Claimants’ goods had been tested and certified, and from 2017 the test results were available to specifiers on Pliteq’s EchoOne web platform. I do not think that any of those facts was contested by the Defendants. Currently some 380 professionals have access to EchoOne in the UK. It seems to me that the target customers for the Claimant’s products are acoustic consultants and the other professionals mentioned above. Mr Downey accepted in cross-examination that such customers would specify use of a GENIEMAT or GENIECLIP product in the light of the technical reports on the products and a contractor would not normally substitute another product, or would do so only after checking its properties with care.6.In 2011 Mr Downey asked Mr Jones to seek out potential distributors in the UK. This led to a meeting with the Defendants in late October 2011. At that stage, the First Defendant, iKoustic Ltd, was a relatively new business, which had been incorporated on 14 October 2010. Mr Ricky Parsons, the Second Defendant, was and remains its sole director and shareholder. I think that it was common ground that at that early stage in iKoustic’s business it was mainly supplying acoustic products made by third parties to small businesses or domestic customers. Mr Parsons said that he sold a combination of goods for use in a novel arrangement which he had designed to improve acoustic performance. He also said that he dealt in products from different suppliers, and that iKoustic’s business model was to provide customers with free technical advice. Although at trial the Claimants expressed doubts about Mr Parsons’ technical expertise as an acoustic engineer, which he explained was self-taught, plainly they were sufficiently impressed by him and his company in 2011 to agree that iKoustic should become one of its distributors, and it traded successfully as such distributor from 2012 until 2018. Indeed, according to Mr Windle, now the managing director of the Second Claimant, iKoustic became a key distributor for Pliteq in the UK. Mr Parsons said that iKoustic marketed the Claimants’ products at its own cost.7.Mr Downey said that between 2012 and 2016 iKoustic placed regular orders with the Claimants for 19 different product lines, six GENIECLIP products and thirteen GENIEMAT products. The first order was placed in January 2012 and the last on 27 November 2018. In the last year of the distributorship, that is between September 2017 and November 2018, 93,932 products were supplied to iKoustic with a total order value of some £365,000. Mr Windle indicated that this represented a significant proportion of the Claimants’ UK sales. 8.After iKoustic became a distributor of the Claimants' goods, it began to supply larger customers than before, especially where GENIECLIP and GENIEMAT products were identified in building specifications. In some such cases at least, the customers were referred to iKoustic by the Claimants and Mr Parsons accepted that the Claimants’ advertising therefore benefited iKoustic indirectly, at least to some extent. No written terms were agreed between the parties. The Claimants relied at trial upon certain of their standard terms and conditions of sale, and I do not think that it was disputed that (in principle) those Ts & Cs applied, although it was also common ground that Mr Jones had agreed to supply goods to iKoustic at a significant discount from the Claimants’ standard prices.9.At no point was iKoustic an exclusive distributor for the Claimants' products, and at times the same goods were supplied in the UK directly by the Claimants, or by other distributors such as Travis Perkins. Equally, there was no express agreement between the parties that iKoustic should not stock products competing with the Claimants' products. Mr Downey contended that iKoustic was contractually obliged not to sell competing products, or that such exclusivity had been understood by the parties, but he conceded that this was not agreed with iKoustic, or even discussed with Mr Parsons. I find that there was no obligation of exclusivity imposed on iKoustic. Mr Parsons said that he had in fact sold competing products to the Claimants’ goods at various times. That statement was challenged in cross-examination, but I was not able to conclude from the evidence before me whether or not that was the case, nor do I think it a point of any real significance.10. The relationship between the parties appears to have started to break down at some point in 2017 and certainly there were problems (evidenced for example by the transcript of a telephone call between Mr Parsons and Mr Jones) in March 2018. The reasons why it broke down were hotly disputed between the parties and a fair amount of time was spent exploring this at trial. 11. Mr Parsons' evidence was that he felt that he was being unfairly treated by the Claimants in various ways. There were some problems with the quality of some GENIEMAT products. These seem to have been most acute in mid-2018 when some products had to be returned to the Second Claimant. A further significant problem related to the pricing of the goods supplied to iKoustic by the Second Claimant. As I have mentioned, Mr Parsons had negotiated discounts with Mr Jones from the Claimants' list prices. The Claimants suggested that Mr Parsons would have known that he was getting an exceptionally good deal, but I am not persuaded that there was any evidence that he did know it. That point arose from an unpleaded and unproved allegation that Mr Jones and Mr Parsons’ friendship had led him to give overfavourable treatment to Mr Parsons. Be that as it may, in about September 2018, the Claimants sought to require iKoustic to pay their standard list prices for new orders, doubtless so as to increase the Claimants’ profits on the goods. Although these included some discounts for larger orders, at least some of the new prices were higher than those paid previously. Mr Parsons objected to this, stating that this excluded iKoustic from bidding for key projects, despite the Claimants' attempt to persuade him that the Defendants would still be able to make a substantial profit on distributing the goods. According to Mr Parsons, there were then instances of the Claimants approaching existing iKoustic customers, and undercutting iKoustic’s prices, reinforcing his disenchantment with the Claimants. He complained about this in telephone conversations with Mr Jones. 12.Without carrying out a detailed analysis, I cannot decide whether iKoustic had reasonable grounds to complain about the Claimants’ activities in 2018. However, I do not consider that it is necessary for me to reach a concluded view on this unpleaded point. The Claimants said that the Defendants’ behaviour was driven by an unjustified sense of unfair treatment, which drove the manner in which they chose to launch iKoustic’s new products, but the Claimants accepted that this was ‘peripheral’ to the issues in dispute before me. In my view the Defendants were right to say that the reasons why the parties ceased trading together were immaterial to the allegations of trade mark infringement and passing off. 13.In about March or April 2018 (again, the exact date is not significant), iKoustic decided to begin making and selling its own alternative products to the GENIEMAT and GENIECLIP. It adopted the names MuteMat and MuteClip for those products, having sold some rather different acoustic products under the MuteMat name for some years. There is of course no suggestion that those names are confusingly similar to the Claimants’ Marks. 14.In about October 2018, iKoustic started to offer MuteMat products to existing customers. Mr Parsons’ evidence was that he recalled speaking to two of his existing customers about it, whilst the documents show that on 15 October 2018 he emailed a client, Mr Scott-Darling, informing him of the new products and comparing them favourably to the Claimants’ products. iKoustic’s sales manager, Mr Woodhouse, also contacted existing clients. iKoustic took its first order for MuteMat products on 19 October 2018. They were not then in stock and were not delivered until December 2018. In the meantime, in late November 2018, iKoustic had placed at least one further order with the Second Claimant and was holding fairly substantial numbers of GENIEMAT and GENIECLIP products. 15.It appears that Mr Parsons had told Mr Jones of his intention to source competing products to the GENIEMAT and GENIECLIP at some point in 2018. It seems likely that Mr Jones did not inform his colleagues of that intention, in light of a discussion between Mr Jones and Mr Parsons on 1 February 2019, a transcript of which was disclosed. There was insufficient evidence to satisfy me whether Mr Parsons knew or intended that Mr Jones would not pass the information about his intentions on to any other officer of the Claimants. Again, this seems to me an irrelevance.16.On 1 February 2019, Mr Parsons called Mr Jones and told him that he was launching the new products. He said that he would be happy still to co-market the Claimants’ products, but that was for the Claimants to decide. Mr Jones acknowledged that Mr Parsons had told him that he was intending to do that, and suggested that Mr Downey would object to iKoustic selling competing products. Mr Parsons said that he needed to continue marketing the Claimants’ products, so as to sell out the stock he was holding, which he thought was several months’ worth of goods. Mr Jones indicated that he would not have a problem with that, but thought that Mr Downey would do. 17.Mr Parsons followed up that call with an email dated 1 February to Mr Johnson (the Second Claimant's national sales director for the UK) copied to Mr Jones, saying that iKoustic was intending to sell its own range of products. He also wrote that he intended to "sell out" iKoustic's stock of the Claimants' products, alongside the Defendants' products. Mr Johnson's initial reaction by email on 1 February was that there was nothing objectionable in that proposal and that he saw no reason to cut the ties between the parties completely. 18.Some further discussions took place by email and at a meeting attended by Mr Parsons, Mr Johnson, and Mr Jones on 5 February. On 6 February, apparently following the intervention of Mr Downey, Mr Johnson emailed Mr Parsons and demanded that all use of the Marks be removed from the iKoustic website and all use of the Marks must cease. Mr Downey’s view was that iKoustic should not sell any competing products until it had sold all the Pliteq goods – that was contrary to the understanding he thought the Claimants had with iKoustic. At that point, the Claimants said that they would not take back iKoustic’s stock of the GENIEMAT and GENIECLIP products.19.On 8 February, Appleyard Lees LLP wrote on behalf of iKoustic to the Claimants complaining of groundless threats of trade mark infringement, and saying “Our client has in its possession GenieClip and GenieMat products manufactured by you and sold to our client in the UK. It is accordingly entitled to describe and sell those products using your trade marks. We respectfully refer you to sections 11(2)(b) and 12(1) of the Trade Marks Act 1994.” That is, in essence, the case which the Defendants continue to run.20.In Appleyard Lees’ letter of 8 February, the Defendants offered to sell back the GENIECLIP and GENIEMAT products to the Claimants. Mr Windle wrote back the same day offering (subject to payment of an outstanding invoice by iKoustic) to take back the products at 75% of the original price, a reduction stated to cover the Claimants’ restocking costs, and reflecting the provisions of the Claimants’ Ts & Cs for products returned at a customer’s request. 21.The MuteMat and MuteClip products were launched on the iKoustic website in early February 2019. The first sale of MuteClips was made on 13 February 2019.22.There was further correspondence between the parties. The Claimants’ then solicitors explained on 22 February that there was no objection to use of Google ads whilst iKoustic held “sufficient stock to fulfil an average order” but not otherwise. However, matters were not resolved, and the claim form was issued on 25 April 2019. Correspondence followed in which offers were made on each side, including an offer made on 1 May by the Defendants to give undertakings and to return the stock at cost price, but no agreement was reached. iKoustic therefore remained in possession of the goods and continued to sell the remaining stock. Mr Parsons accepted that had the stock gone back to the Claimants, this dispute might never have arisen, but it does not seem to me that this affects the issues I have to decide one way or another. Some of the emails disclosed by the Defendants show that an attempt was made to sell certain of the Claimants’ products in March 2019 “as an end of line” or excess stock, and then again as a small bundle of remaining stock, in November 2019. There was no evidence before me to explain why the whole of the stock was not disposed of at that time. iKoustic continued to offer Genie products for sale, and sold the last of the GENIECLIPs in November and the last of the GENIEMAT products in December 2019.23.There was, therefore, a period of around a year (from late 2018 to December 2019) when iKoustic was selling both parties’ products, and from February 2019 onwards such sales were made without the Claimants’ consent. The nub of the Claimant’s complaint is that during this period the Defendants used the Marks for the purpose of selling iKoustic’s rather than the Claimants’ products, using the Marks in various ways on pages of its website and also in keywords/sponsored adverts on Google to attract custom which was diverted to iKoustic’s own goods. Use of the Marks was a cover for sales of iKoustic’s competing goods and so was an infringement. 24.The earliest pleaded instance of infringement is from 20 February 2019. A lengthy schedule (“the Schedule”) was annexed to the Claimants' skeleton argument for trial, which was said to show occasions when the Defendants sought to supply Mute products to customers who had approached them for the Claimants’ goods. The Schedule also included references to numerous other matters and items of correspondence, and Mr Silverleaf QC accepted in opening that some of the early entries showed what he termed “proper conduct.” Although some of the matters listed in the Schedule go back to late 2018, and some of the transactions on which Mr Parsons was cross-examined go back to January 2019, in all the circumstances it does not seem to me that the Claimants were seriously suggesting that there was any infringement prior to February 2019. 25.The claim was amended in December 2019 to allege that Mr Parsons was jointly liable with iKoustic for having personally undertaken or authorised all of the acts of which the Claimants complain in these proceedings. Joint liability was admitted for the purposes of these proceedings. The witnesses 26. The Claimants called two witnesses. Robert Windle is the managing director of the Second Claimant. He joined the company only in July 2018, and worked alongside Simon Jones until Mr Jones left the company in May 2019. The Claimants’ second witness was Mr Downey, the founder of the Canadian business and CEO of the First Claimant. Both gentlemen gave evidence from their own homes. The Defendants made no criticism of their evidence. In my view, Mr Windle was a clear and straightforward witness. Mr Downey had a tendency to answer questions laterally, so as to make the points he thought were important, and took a rather partisan view of the various points, such as the attempts to settle the dispute, but in my view nothing turns on that evidence. I accept that he was a truthful witness. 27. The only witness for the Defendants was Mr Parsons. He gave his evidence from a room at his solicitors’ offices. Two members of his solicitors’ team were in the room with him, but the video showed them sitting behind Mr Parsons, and at right angles to him, in a manner which was not only compliant with social distancing requirements but showed that they were not in Mr Parsons’ sight. Quite rightly, in my view, no objection was raised to that arrangement. 28. By the time of the trial Mr Parsons had filed 4 witness statements and he was crossexamined at length (by IPEC standards) by Mr Silverleaf QC. Mr Silverleaf submitted that Mr Parsons was a thoroughly unreliable witness who made things up as he went along, and would not accept that his recollection was wrong even when it was contradicted by documentary evidence. He said that I could not rely on his uncorroborated evidence. I think that this criticism is rather unfair to Mr Parsons, who was cross-examined on a variety of topics. In my view, he was the kind of witness who would have benefited, had the trial been held in court, from help in finding his way around the bundles. Certainly, he struggled a good deal with the mechanics of using the e-bundle, which (as I also found) did not always operate as smoothly we might have wished, so that references frequently had to be repeated or amended before he could find the appropriate page. This was obviously stressful for him, and I formed the view that this affected his ability to concentrate upon the questions, and probably explained some of the answers which Mr Silverleaf submitted were evasive. 29. The Claimants expressed particular concerns about parts of Mr Parsons’ 2 nd witness statement, and I discuss this below. They also criticised Mr Parsons for not giving satisfactory answers to questions about transactions and provided me with a list of transcript references identifying some allegedly unreliable answers. In some instances Mr Parsons appeared to me to be trying to answer questions about matters which were not within his direct knowledge, but which he felt he should have been able to deal with, or which he was seeking to recall after some period of time, such as the Trobridge sale discussed below. In my view the criticism which can properly be made of his evidence is that he should have accepted that he did not know of or could not recall these matters. I take the view that for the most part he tried – with varying levels of success - to give correct answers to a large number of questions, many on topics which he had no reason to know would be raised by the Claimants. On other matters, such as iKoustic’s issues with access to the Claimants’ EchoOne system, he was less convincing and had a tendency to exaggerate the Defendants’ complaints about the Claimants, no doubt because he felt aggrieved by the Claimants’ approach to the dispute. 30. By contrast, I was struck by Mr Parsons’ willingness to admit that he was aware in around February 2019 that there were methods which iKoustic might have used to exclude specific web pages from the Google dynamic ads service, a matter which he cannot have failed to understand was an important plank of the Claimants’ case. All in all, I conclude that Mr Parsons was not the fundamentally dishonest witness claimed by the Claimants. However, Mr Parsons’ recollection of the dates of various events was unreliable. For instance, his evidence was that he first contacted the Claimants in September 2012 and placed the first order shortly afterwards but the documents showed that the contact was made in October 2011, and a late disclosed document showed that the first order was placed in January 2012. I do not consider that this casts doubt on his overall veracity, especially as Mr Downey too thought that the first order had been placed in late 2012, but I conclude that Mr Parson’s recollection of matters of that kind required corroboration where such details mattered.