Court refuses order for disclosure of third party information despite infringement

In a recent Intellectual Property Enterprise Court (IPEC) decision the judge refused to grant an order for third party information disclosure, despite a finding of trade mark infringement. The ‘balance of irreparable harm’ was considered. 

A well-known UK retailer, Wilko Retail Ltd (Wilko) issued proceedings against Buyology Ltd (Buyology) after it learnt that Buyology had bought and re-sold goods bearing the Wilko branding which infringed upon Wilko’s trade mark.

After issuing proceedings the parties promptly agreed settlement which included an admission of trade mark infringement and passing off, along with a damages payment to Wilko. However, the agreement was silent on the issue of disclosure of third party suppliers of the infringing goods. As well as its application for summary judgment, Wilko requested the court to grant a Norwich Pharmacal Order (NPO) which would compel Buyology to disclose information about its suppliers of the infringing goods.

As with many IP infringement disputes the initial third party infringer will often claim to be an innocent third party which had no intention to infringe on IP and, in fact, bought the infringing material innocently from a third party supplier. It is normal in such circumstances for a claimant, seeking to enforce its IP rights, to insist on disclosure of information relating to the third party supplier. Should the infringer be unwilling to disclose any information relating to the supplier(s) then an application to the court for a NPO is a natural next step.

In this case a NPO had not been agreed as part of the settlement terms, therefore the court was left to consider the following:

  1. Did the binding settlement, agreed between the parties, prevent a party from seeking additional relief beyond what had been agreed;
  2. If Wilko was able to seek additional relief, in the form of an NPO, then should it be granted in this case?

With regard to the first question, whilst it was acknowledged that the settlement agreement settled the claim as set out in the pleadings, the dispute concerning third party supplier information was a separate issue and Wilko were able to request the court to grant a NPO.

It is generally accepted that a NPO will be granted if it is necessary and proportionate in the circumstances and that the essential remedy is to do justice. Given that Buyology had explained to Wilko that its third party supplier had represented to it that it had authority to supply such products, an NPO may have seemed appropriate in the circumstances. However, the court departed from the stated test and asked itself the following question:

  • Should “…on the balance of irreparable harm…” the NPO be granted?

The court reasoned that Buyology’s business may well suffer irreparable harm if disclosure of information relating to its suppliers was allowed. This reasoning was supported by the rationale that resentful suppliers could find themselves subject to investigations by Wilko to see if they had any involvement with the infringing products. Buyology’s defence to the disclosure application was that it would suffer irreparable reputational damage and a lack of trust amongst the retail community.

On the balance of irreparable harm, the burden lay with Buyology and the court refused to grant the NPO disclosure order. The decision may seem strange as it appears that the court has favoured Buyology’s fear of reputational collapse over Wilko’s desire and right to enforce its intellectual property rights against the ‘real’ infringer.

No doubt similar disputes will depend on their facts but reference to the court’s decision in this case is likely to form a barrier to an aggrieved rights holder enforcing its rights further up the supply chain. When engaging infringers, be sure to outline any settlement terms carefully and attempt to include a disclosure obligation on the infringer as part of any initial settlement agreement.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.