LATER
21This is the renewed hearing of an application by the claimants to strike out the defendants’ allegation of unclean hands which has been pleaded by the defendants as part of its case in response to the claimants’ claim for an account of profits. 22As presented today, the claimants’ case is that in this court parties are required to plead their case in full at the liability stage and should not be permitted to keep part of their case undisclosed until pleadings at the quantum stage. I am not sure that this argument complies with para.5(b) of my order of 13 October 2021. However, in deference to the argument presented by Dr Selmi, I will deal with it.23Dr Selmi referred to some case law on this of which the most relevant is a judgment I gave in Kohler Mira Ltd v Bristan Group Ltd [2014] EWHC 1931 (IPEC). This was the judgment in an inquiry as to damages following a finding that the marketing of certain of the defendants’ electric showers infringed the claimant’s UK unregistered design rights. In the inquiry, the defendant, Bristan, relied on s.233(1) of the Copyright, Designs and Patents Act 1988. This section provides that a claimant who succeeds in proving infringement of a design right is not entitled to damages if the defendant did not know and had no reason to believe that design rights subsisted in the relevant design. The claimant, Kohler, argued that reliance on s.233(1) should have been pleaded at the liability stage and that it was now too late to rely on it as a defence to the payment of damages for infringement. I said this:“[5] Bristan advanced the following reasons in support of its case that, notwithstanding its failure to plead or otherwise raise s.233(1) at the trial before Judge Birss, it could do so now.(i) Time was short at the trial.(ii) The trial was also concerned with RCDs, in relation to which Kohler did not succeed. But had it succeeded, Kohler would have obtained an injunction and damages such that there would be no reason to be concerned about the level of parallel damages for infringement of UDRs. Argument in relation to s.233(1) would have been a waste of time.(iii) Section 233(1) only bites on damages prior to 6 December 2011.(iv) Kohler relied on a number of UDRs of which 4 were held to attract design right protection and to be infringed. The innocence defence might have been sensitive to which UDRs were held to subsist and be infringed.[6] Kohler argued that it was too late now to take the point under s.233(1). Its reasons were:(i) It is too late as a matter of law, see the judgment of Warren J in Adobe Systems Inc v Netcom Online.co.uk Limited [2012] EWHC 446 (Ch).(ii) Kohler would have cross-examined the relevant witnesses at trial, whereas Bristan has not called the witnesses who know the relevant facts at the inquiry.[7] Taking Bristan’s points first, the issue being addressed in Adobe was not quite the same as that arising in these proceedings. In Adobe there was a consent order by which the defendants acknowledged that their importation of certain products had infringed the claimant’s registered trade mark. At the inquiry the defendants sought to raise three arguments which, if correct, would have established that in fact they had defences to the allegation of trade mark infringement. These three new arguments were:(a) the claimant’s trade mark rights had been exhausted by the time of the defendants’ importation since the products had been marketed with the consent of an undertaking economically linked with the claimant;(b) the claimant had abused its dominant position contrary to Art.102 of the Treaty on the Functioning of the European Union (‘TFEU’);(c) the claimant had entered into agreements restricting competition contrary to Art.101 of TFEU.Warren J assumed without going further that all three points were arguable. Regarding the first of them, Warren J had no hesitation in ruling that it was too late to raise the defence at the inquiry because of the public interest in the finality of litigation (see [37] - [39]). In relation to the second and third new arguments, Warren J took the view that the position was less straightforward since there was a countervailing policy consideration, namely that the courts should not enforce arrangements which are in breach of competition law (see [40]). Nonetheless the strong public interest in the finality of litigation should prevail and the fact of the order having been made meant there was no failure to meet the requirements of EU competition law (see [49]-[53]). It was also not open to the defendants to raise exactly the same defences under the guise of arguments in relation to the assessment of quantum of damages (see [83]-[84]).[8] The present case differs in that Bristan does not seek to impugn any part of the order of Judge Birss made following his judgment. His declaration that certain of Kohler’s UDRs were infringed is unchallenged. Bristan argues that s.233(1) is only engaged now because it is just about the availability of damages - it is not concerned with infringement.[9] That may be right, but seems to me to ignore policy issues which, although they are not identical to those considered by Warren J, are important for all that. Parties should know where they stand in relation to each side’s arguments by the time the pleadings are closed - not least in the IPEC. If it is a defendant’s case that damages to which the claimant would be entitled if he wins are never going to be available because of s.233(1), this should be made clear in the pleadings for the trial on liability. It may have a significant effect on the way the claimant pursues the proceedings and also the degree to which the claimant may be amenable to settlement. If the claimant succeeds at trial, knowledge of whether an argument is being advanced under s.233(1) might easily affect whether the claimant elects to go for an inquiry or an account of profits. Mr Cuddigan, who appeared for Bristan, argued that if Kohler made the wrong election in the present case, that was its own fault for not taking into account the possibility that Bristan might rely on s.233(1). I reject that. It was Bristan’s choice whether to rely on the subsection and Kohler’s right to know in good time what choice Bristan had made.[10] In this court cards should not be held behind the back of litigants after the case management conference, to be played as and when seems tactically best, or alternatively only when a party notices that a card might be put into play.[11] If Bristan had pleaded reliance on s.233(1), it would have been perfectly legitimate at the case management conference in the substantive proceedings for Bristan to have raised the question whether, as a matter of procedural economy, argument on the point might better be left to the inquiry, if there was to be one. The various arguments now raised by Bristan (summarised above) could have been advanced. The court might have decided they were telling and may have ruled that s.233(1) should be left to the inquiry. There would have been no question of either party concealing part of its case from the other and in particular Kohler would have approached the proceedings in full knowledge of all points being taken against it.[12] It seems to me that just as Warren J felt he had a discretion to allow defences to be raised for the first time at an inquiry (or so I infer from his judgment) and that such discretion should be exercised by reference to policy considerations, I should approach Bristan’s application to rely on s.233(1) in the same way. In my judgment Bristan is not entitled to rely on that subsection for the reasons of policy I have referred to. These are not outweighed by other considerations.”24There is no doubt that a party should plead its entire case at the liability stage, including arguments relating to relief. As I said in Kohler Mira, all cards should be on the table. If a party does not do this, it is at risk that it will be barred from advancing the unpleaded argument at the hearing on quantum. However, as I also said in Kohler Mira, this is a matter for the discretion of the court not an inflexible rule. The discretion must be exercised by reference to the policy requirement of finality and, as implied in Kohler Mira, by reference to the particular facts of the case, in particular, the balance of prejudice to the parties.25In Kohler Mira, the claimant had no notion that the defendant would rely on s.233(1) until after the claimant had elected for an inquiry as to damages. Witnesses who were aware of the defendant’s knowledge relevant to s.233(1) had, of course, not been cross-examined about it at the liability trial and had not been called to give evidence of the inquiry. Self-evidently, the claimant was prejudiced by the late reliance on s.233(1).26By contrast in the present case, the defendants raised their intention to rely on an allegation of unclean hands well before the claimants’ election for an account. As I discussed in my earlier judgment today, there is no question of the defendants having kept their cards close to their collective chest. The defendants even tried to raise the allegation of unclean hands at the liability trial but were, in effect, prevented from doing so by the claimants withdrawing certain evidence.27Also, in the present case, the witness who would deal with the defendants’ allegation of unclean hands is the second claimant, Mr Lodhia. It is entirely within the claimants’ control to call Mr Lodhia to give evidence to deal with this matter.28The prejudice to the defendants, if they are not permitted to advance an allegation of unclean hands, is self-evident. They will be shut out from arguing what they regard as an important part of their case.29In my view, on the facts of this case, I should not exercise the court’s discretion to strike out the defendants’ allegation of unclean hands. The claimants’ application to strike out that allegation is therefore dismissed.__________