Schutz (UK) Ltd & Anor v Delta Containers Ltd & Anor

This is an application to adjourn the trial of this action for trade mark infringement and passing off, which is currently fixed to be heard in the week commencing 13 June 2011.

Delta seeks the adjournment of the trial to a date to be fixed once the final outcome of parallel proceedings brought by Schutz against Werit in action number HC 08 C0 2241 is known.

The action has a somewhat complicated history. In summary, Delta has carried out various business activities in relation to rigid composite intermediate bulk containers (IBCs) which comprise a flat pallet, an inner container and a metal outer cage. Those activities broadly fall into two categories. The first involves taking a used IBC and replacing the used inner container with a new inner container and then selling the remanufactured or restored IBC to the market. If the new inner container is made by a different manufacturer to that of the original IBC, this activity is known as cross-bottling. The second involves Delta taking used IBCs from their existing customers, restoring them in the way that I have described and then returning them to the customers from which they were obtained.

Schutz is a manufacturer of IBCs and supplies them into the UK market and, until relatively recently, Delta has been carrying out the business activities to which I have referred in relation to Schutz IBCs. As a result, Schutz issued these proceedings for patent and trade mark infringement and passing off against Delta on 7 August 2008 and, on the same day, issued proceedings for patent infringement against Werit, which makes inner containers as separate items and sells them to companies such as Delta.

Both actions came before me on 23 January 2009. In my judgment, which I gave on that day, I recorded that the parties had originally assumed that the two sets of proceedings would progress in tandem. But, by letter dated 16 December 2008 and following a request by Delta, Schutz indicated it was prepared to agree to a stay of the patent claim in the Delta proceedings pending the outcome of the Werit proceedings on the basis that, in addition to dropping the counterclaim for revocation of the patents in issue, Delta agreed to be bound by the judgment on infringement and validity in the Werit action. Schutz was not, however, prepared to agree to a stay of the trade mark infringement and passing off claims.

The issue before me on that day was, therefore, how the actions should be progressed. Schutz proposed that the patent, trade mark and passing off claims of both actions should be heard together at a trial in February 2010. Werit and Delta proposed that the trade mark and passing off claims in the Delta proceedings should be stayed pending the outcome of the Werit action.

I observed that where all parties can afford to litigate actions of this kind, then they should generally be heard together because there will, inevitably, be a measure of overlap between them. But I went on to note that particular circumstances arose in these two actions. First, Delta is a relatively small company. Second, Delta recognised that it could not afford to fight the patent infringement allegations and did not wish to gamble the future of its business on their outcome and therefore sought, and I granted permission, for it to amend its pleadings to delete the counterclaim for revocation and its affirmative defence in relation to innocent infringement. It was in those circumstances that it agreed to be bound by the judgment on infringement and validity in the Werit proceedings. Third, and importantly so far as today's application is concerned, if the claim by Schutz for infringement of its patent rights succeeded, then it appeared that the claims it made in relation to infringement of trade mark and for passing off might well become redundant because Delta would not be in a position to continue with the business of which complaint is made. I considered that success by Schutz in the patent infringement actions might, for practical purposes, be sufficient to secure its commercial ends.

Further, Delta offered to me an undertaking that it would henceforth, pending further order or agreement, remove or obliterate the Schutz trade marks from the face and foot of the cages into which the IBC bottles were placed and from the metal pallet upon which they rest. That, it seemed to me, would provide Schutz with substantial protection against the risk of further losses being incurred as a result of the alleged infringement of its trade marks and passing off pending the final determination of the claims.

In all these circumstances, I reached the conclusion that the just and convenient course to adopt was to have the patent infringement proceedings and the trade mark infringement and passing off proceedings heard sequentially, with the patent infringement proceedings in the Werit action heard first in February 2010 and then, if necessary, the trade mark infringement and passing off claims in this action heard on a date some six months thereafter.

The events which have occurred since that hearing are explained in a witness statement of Mr. John Linneker, a partner in the firm of solicitors acting for Schutz, dated 27 April 2011.

The trial of the Werit action took place in March 2010 and judgment was handed down on 31 March 2010. Schutz was successful in defending the validity of its patents but the court held that those patents were not infringed. Schutz sought, and was given, permission to appeal to the Court of Appeal and, it seems, relatively soon thereafter, the hearing before the Court of Appeal was fixed for February 2011.

At that point, Schutz and Delta, through their respective solicitors, agreed that the trial of the trade mark and passing off proceedings, then listed for September 2010, should be adjourned to the date upon which they are now fixed to be heard, namely the week beginning 13 June 2011, by which time it was anticipated the Court of Appeal would have given judgment. This, as Mr. Linneker says, represented a delay of about nine months.

On 29 March 2011, the Court of Appeal handed down judgment. Schutz was successful; the Court of Appeal reversed the finding of the judge of non-infringement and held that Werit's activities did infringe Schutz's patent rights.

I understand that Werit now proposes to make an application to the Court of Appeal for permission to appeal to the Supreme Court. The hearing of that application is listed for 22 June 2011. Both Schutz and Delta recognise that if Werit is unsuccessful in its application to the Court of Appeal, then Werit is likely to apply directly to the Supreme Court for permission to appeal. That application is likely to take in the region of four months to determine. If Werit is granted permission to appeal, then it seems that the appeal hearing would be likely to take place some 12 months later. It could, therefore, as Mr. Linneker says, be approximately 21 months hence before the final outcome of the patent infringement proceedings is known.

The consequence of acceding to Delta's application to adjourn will, therefore, be that the trial of the trade mark and passing off proceedings will not be fixed until around October 2011 if the Supreme Court refuses permission to appeal, or until January 2013 if the Supreme Court gives permission to appeal and the appeal proceeds to a final determination. In that event, the trial of these proceedings is unlikely to take place until around January 2014.

In the result, the trial would not take place until, at the earliest, October 2012 or, at the latest, around January 2014; that is to say, between four and five and a half years after the commencement of these proceedings.

The application for the adjournment is supported by a witness statement of Mr. Timothy Gray, a partner in the firm of solicitors instructed in these proceedings on behalf of Delta, dated 13 April 2011. He explains that Delta has complied fully with the terms of the undertaking which it gave to the court and that since becoming aware of the decision of the Court of Appeal in the Werit action, Delta has ceased using Schutz cages altogether in any cross-bottling operations, that is to say, including the second category of business activities, to which I have referred, which involves placing bottles made by third party manufacturers into Schutz cages owned by Delta’s customers for those customers’ own use.

Against this background, Delta now invites me to grant the adjournment which it seeks for the following reasons. It says that it does not wish to expend its limited funds on trade mark and passing off proceedings if it is in any event to be prevented from rebottling Schutz IBCs because to do so would amount to infringement of Schutz's patent rights. Before deciding whether to risk the expense of fighting and losing the proceedings, it wants to know that in the event that it is successful it will then be free to continue with its business. Success for Schutz in the Werit action may well, it says, cause it to throw in the towel on the trade mark and passing off issues but does not wish to make a decision in that regard until it knows what the final result of the patent infringement claim is.

Schutz invites me to dismiss this application on the basis that the substantial delay in the trial of the proceedings that would result would be seriously prejudicial to it: first because of the adverse impact it would have on its ability to conduct its case; and, secondly, because it would cause substantial delay in the vindication of its rights and the securing of consequential relief.

In my judgment, there has been a material change in circumstances since the matter last came before me. On that occasion, as I have said, it appeared that if the patent infringement claim succeeded, then the claims for infringement of trade mark and passing off might well become redundant. As Mr. Craig, who has appeared before me on behalf of Delta this morning, frankly accepts, that is not the position today. If Werit is granted permission to appeal to the Supreme Court and ultimately prevails, then Delta will certainly wish to have these trade mark infringement and passing off proceedings resolved. However, if permission to appeal to the Supreme Court is not granted or if, permission having been granted, the decision of the Court of Appeal is affirmed, then Delta's position now is that it may well not submit to the trade mark infringement and passing off claims; it wishes, as Mr. Craig says, to put that decision off until a later date.

I believe that I must, therefore, consider this application upon the basis that there is a very real possibility that the final determination of the patent infringement claim will not be dispositive of the trade mark infringement and passing off claims.

Against that background, it seems to me that if I refuse Delta's application for an adjournment, the only prejudice that it will suffer is that it will have to pay earlier than might otherwise be the case the costs involved in defending the trade mark infringement and passing off proceedings at trial. Conversely, if I grant the adjournment it seeks, it will have the benefit, such as it is, of deferring the date upon which it must incur that expense.

On the other hand, if I accede to Delta's application, then I believe Schutz may suffer prejudice for both of the reasons it advances. First, it says that a key issue in the proceedings will be the likelihood of deception and confusion resulting from the use of its trade marks on cross-bottled IBCs. It wishes to adduce evidence from members of the public, in this case purchasers and users of IBCs, on this issue and has identified nine or ten witnesses it wishes to call. It points out, in my judgment with some justification, that there are inevitably difficulties with finding witnesses in a case of this kind because IBCs are not standard consumer items and, perhaps more importantly, as a result of the undertaking which Delta gave, Delta has ceased to sell cross-bottled IBCs bearing the Schutz trade marks. Accordingly, the prospect of and scope for finding further witnesses of confusion is limited.

Further, the witnesses Schutz has located will give evidence as to their experiences as long ago as mid-2008. If the trial is adjourned, then Schutz faces a serious risk that these witnesses will, first of all, forget the details of the evidence it is hoped they can give, or that their recollection will be dimmed, or, worse still, that they may no longer be able to attend the trial.

In that regard, Mr. Linneker explains that these witnesses have already been waiting to give evidence for over a year and have reserved time in their diaries for June 2011. If the trial is adjourned to September 2012 or, worse still, January 2014, there is a real possibility that they will no longer be in a position to attend. Indeed, already, it seems, one of them has left the company which employed him and Mr. Linneker is having difficulty getting in touch with him.

The second aspect of prejudice that it seems to me Schutz will suffer is the delay in securing the injunction to which it will be entitled if it prevails in the claims, and which, in important respects, extends beyond that which it will secure in the patent infringement action. First of all, that injunction will expire with the patent on 15 March 2016. Secondly, and more significantly, an injunction to restrain infringement of registered trade mark and passing off would prevent use of cages bearing the Schutz trade marks with any third party bottles. I understand from Ms. Lane, who appears today on behalf of Schutz, relief of this scope will not be available in the patent infringement proceedings which are limited to particular bottles which Schutz is in a position to assert amount to an infringement when combined with the Schutz cage.

Moreover, importantly, it seems to me, and despite my seeking clarification of this point from Mr. Craig at this hearing, Delta is not prepared to agree at this stage to submit to judgment in the proceedings for infringement of registered trade mark and passing off in the event Schutz ultimately prevails in the patent infringement proceedings.

Accordingly, for all of these reasons, I have reached the conclusion that this application must be dismissed.

I must now assess the costs of this application, there being no objection in principle to Schutz's application that it should have its costs. I have before me a statement of Schutz's costs in the total sum of £21,020. I also have a statement of Delta's costs, in the sum of £7,028. Mr. Craig submits that it is clear that the costs incurred by Schutz are both excessive and disproportionate.

In my judgment, bearing in mind the complexity of this application, the fact that it has taken less than two hours to hear, the limited evidence which each side has relied upon, all do suggest that the costs incurred by Schutz are unduly high. I am confirmed in that view by the much lower figure in the Delta costs schedule.

I have reached the conclusion, taking into account all these matters, that a fair and proportionate sum to allow by way of the costs of this application is £15,000.