NEUTRAL CITATION NUMBER [2002] EWHC 539 (Ch)
IN THE SUPREME COURT OF JUDICATURE
CHANCERY DIVISION

Royal Court of Justice
25th March 2002

 

Before:

THE HONOURABLE MR JUSTICE LADDIE

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Between:

EDMUND IRVINE

and

TIDSWELL LTD

Claimants

 

-and-

 

TALKSPORT LTD

Defendants

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Lindsay Lane (instructed by Fladgate Fisher) for the claimants.
Michael Hicks (instructed by Olswang) for the defendants

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JUDGMENT

 

MR JUSTICE LADDIE

 

Introduction

1. I have before me an application which arises out of the judgment I gave in this action, in which I held that Mr Edmund Irvine and others succeeded in their claim for passing off against Talksport Limited. Talksport Limited had used a doctored image of Mr Irvine holding what appeared to be a radio to his ear. The radio carried the words "Talk Radio" on it. This photograph was used on a four-page brochure used as part of a limited campaign to interest potential advertisers into placing advertisements with Talk Radio, a commercial radio station.

2. At the end of the trial, Miss Lane, who appeared (and appears today) for the Claimants, asked for there to be an inquiry as to damages. Rather than engage in the expensive process of an inquiry to be held, possibly, before another judge, I gave directions so that the matter could come on before me, fairly rapidly, each side having the opportunity to serve evidence in support of their contentions on this issue.

3. Before me today there are really two major issues to determine. The first is one of principle, namely what approach is to be adopted by the Court in assessing damages in a case like this. The other is what is the quantum of damages once that principle has been established. Miss Lane's primary argument on the first point is that damages should be assessed on a reasonable royalty basis. In other words, on the basis that the Court tries to compensate the successful Claimants for the fact that an endorsement deal was missed for which they could have charged a reasonable fee.

4. Mr Hicks says that that is not the approach to be adopted. He says that a reasonable royalty approach may make perfectly good sense, for example, where the Court is considering the infringement of a patent or perhaps other registered rights. In those cases the Court has to compensate for the invasion of a statutory monopoly. He says here one must guard against the generation of a circular argument, whereby the Claimant can say that it is the entitlement to charge a fee which justifies the cause of action which then in itself justifies the charging of the fee.

5. In the course of the hearing before me, I have been taken to a number of authorities, including Stoke-on-Trent City Council v. Wass [1988] 1 WLR 1406, Shoshana Pty Ltd v. 10th Cantanae Pty Ltd [1988] 11 IPR 249, and in their very helpful skeleton arguments both Mr Hicks and Miss Lane have referred me to a number of other well-known cases, including Livingstone v. Rawyards Coal Co (1880) 5 App Cas 25, General Tire and Rubber Co v. Firestone Tyre and Rubber Co Ltd [1976] RPC 197, Meters Ltd v. Metropolitan Gas Meters Ltd (1911) 28 RPC 157, and The Mediana [1900] AC 113. I have also been referred to Henderson v. Radio Corporation [1969] RPC 218, and the decision of Knox J in Dormeuil Freres SA v. Feraglow Ltd [1990] RPC 449.

6. I should make it clear that I am only considering a case in which the Claimants are in the business of endorsing products. As I explained in my judgment, Mr Irvine was, at the time of the events of which complaint was made, probably the premier Formula One racing driver from Britain. He made a significant part of his income from endorsing products. He was, therefore, in a real sense in the business of giving endorsements. It is not suggested that he has ever given an endorsement for a radio station or done anything similar to that, but nevertheless in general terms he was in the business of using his fame as a basis for earning money through endorsements. Although that was an important source of income for him, it is not suggested that the activities of the defendant deterred anybody else from seeking Mr Irvine's endorsement, whether for a radio station or anything else.

7. In approaching this type of case, it seems to me that it is appropriate to adopt an approach which is similar to that adopted in many other areas including, but not limited to, the patent field. If it could be shown that Mr Irvine or the other Claimants had suffered direct loss, for example in the sense of endorsement deals which were cancelled as a result of the Defendant's activities then the losses incurred as a result may well have been recoverable by Mr Irvine. If, on the other hand, Mr Irvine had a habit of endorsing radio stations, then it may well be that the standard fee that he adopted would be the correct measure of the loss. In the absence of those types of circumstances, it seems to be that the approach the Court should adopt is that of a reasonable endorsement fee - which is the equivalent, of course, of a reasonable royalty in patent cases. It is that approach which I shall adopt in trying to assess what the correct figure for damages here.

8. In doing so, I reject Mr Hick's argument that granting a reasonable fee by way of damages is a circular. As I explained in the judgment on liability, Mr Irvine has property rights in the goodwill in his name and appearance. It is that property which is protected by an action in passing off. In deciding on the correct measure of damages in such a case, the court is entitled to approach the issue in the same way as it would try to assess the damage caused by the invasion of similar property rights. Where direct loss of sales is not provable, the reasonable royalty or fee approach is the standard way of compensating for such an invasion.

9. It should be borne in mind that when the Court assess a reasonable royalty, or its equivalent of a reasonable endorsement fee, what the Court has to try and do, as unreal as it may appear, is to work out the fee which would have been arrived at as between a willing endorser and a willing endorsee. That is to say, it must be assumed contrary to the fact that the Defendant had sought the Claimants' agreement to the endorsement and that they had sat down and had negotiated an arm's length but amicable deal between them.

10. In doing that, it seems to me that the Court has got to assume that each side would have had regard to the legitimate interest of the other side; that is to say the Defendant would have had regard to the Claimants' legitimate commercial interests and the Claimants would have regard to the Defendant' s legitimate interests. The purpose is to arrive at a figure which, so far as possible, met both of their requirements. That is important in this case because it is quite apparent that there is more or less no fee which Mr Irvine would have charged which the Defendants would have agreed to pay because they take the not unreasonable stance that anything of any significance could have been avoided by them using a different photograph on the front of their brochure. This, however, is not a factor which can be taken into account in trying to work out what a reasonable fee would have been.

11. Similarly, Mr Irvine being, by 1999, at the peak of his career and used to signing very large endorsement deals for large scale products being sold on to the general public, would not have been interested in anything small, as this promotion clearly was. Indeed, Miss Lane makes it clear in her submissions, and it is supported by Mr Irvine's evidence served on this application, that Mr Irvine (to use her words) wouldn't have got out of bed for less than 25,000. That is to say, he would not have entered into any endorsement deal for less than that sum. I am not sure in fact that it is true that Mr Irvine would have refused to do an endorsement deal for less than 25,000, for reasons I will touch upon in a moment, but it is appears that in the relevant year of 1999 he did not in fact sign any endorsement deals of less than 25,000. Once again, that is not a factor which can be taken into account. The fact that Mr Irvine only signed large endorsement deals, as I will explain below, does not mean that on an assessment of a reasonable fee for a very small endorsement deal the court should assume that only a large fee would be acceptable. When the court tries to assess what a reasonable fee would be it must proceed on the basis of what the parties would have done had they been willing to enter into a reasonable arrangement for the acts which have been held to breach the Claimants' rights. Neither side has a power of veto.

12. In approaching the question of what is the right fee, it seems to me that one has to have in mind the nature of the promotion and the nature of Mr Irvine's reputation. As far as the promotion itself is concerned, as set out in the judgment on liability, what was contemplated by the Defendant and put into practice was a one-off distribution of a box containing the offending brochure to just under 1,000 people, those people being individuals or companies, or employees of companies, who were thought to be possible candidates for placing advertising material on the Defendant's radio channel.

13. It was not suggested that there was ever likely to be a repeat, and there was no serious dispute as to the nature of the audience to whom these boxes containing the brochure were to be sent. They were to be sent to a group which consisted of fairly hard-nosed advertising personnel. There was no suggestion being made to them that Mr Irvine would be portrayed as endorsing Talksport to the general public; this was a method of catching the eye of the target 900-odd addressees on a one-off basis. It was also, as I understood it, not seriously disputed that even at the design stage it would have been anticipated that a very large proportion of the addressees to whom this promotion was sent would jettison it almost without stopping to look at it, along with a vast amount of similar promotional material which, no doubt, each addressee would receive every day of the week.

14. So it was in all senses a small promotion, expected to have, and planned on the basis that it would have, only a comparatively small impact, small readership, amongst the less than 1,000 to whom it was sent. On the other hand, for reasons I set out in my judgment, it was clearly thought to be of benefit to the Defendant to have what looked like the support of Mr Irvine at a crucial time, not just in his career but in the racing calendar. It will be recalled from the judgment that the Defendants described this particular promotion as "time critical" because it was due to land on the in-trays of the addressees a very few days before the British Grand Prix, which it could be anticipated would generate even more publicity from Mr Irvine.

15. The position adopted by the parties could not be more different. Mr Hicks, for the Defendant, says that his client was making a serious loss at the time of this promotion. This was a cheap promotion, costing in total some 11,000 to design, produce and distribute. Any significant endorsement fee would have been out of the question. He suggests that the absolute maximum that could have been charged was in the region of 50p per brochure, leading to a sum of under 500 by way of damages. He says in fact this was excessive; even 500 was unlikely to have attracted his client.

16. I should make it clear that in my view the question of his client's financial position is irrelevant. The question is not whether the Defendant could afford to pay the right fee but what is the right fee. There is no question, it seems to me, of the sum being assessed on the basis that the person seeking permission has no money and therefore cannot pay.

17. On the other hand, Miss Lane asks for a sum in the region of 50,000. She has, to support this, four pieces of evidence which show a pleasing uniformity in the figures which are suggested. There are two witnesses produced by the Claimants, one Mr Buckley and the other Mr Phillips, both of whom independently say that the reasonable fee would be 50,000. There are two other witness statements, one from Mr Byfield and one from Mr Irvine, both of which say $50,000.

18. Quite how these significant figures came to be arrived at by the witnesses other than Mr Irvine is not explained. It is by no means clear that any of them really were aware of the limited nature of the promotion or, more significantly, Mr Irvine's past track record in securing endorsement deals. The fees that, say, might be achieved by Mr Michael Schumacher for endorsing Rolex watches on a very large scale gives no indication of what might be the appropriate fee here and none of the three witnesses other than Mr Irvine explain how they come to their estimates of the fees they would ask for.

19. It seems to me that the proper course to adopt is to look at Mr Irvine's evidence (because he makes it clear that he would have exercised a veto over the sums charged) and the history of his own licensing or endorsing activities. His witness statement sets out in very brief terms the sums that he has received for various forms of endorsement, particularly in the years 1996 to 1999. Mr Irvine's two most important years are 1998 and 1999, as I have said, the latter being so far the peak of his career.

20. What strikes one immediately about the figures given - and I will, in a moment, deal with the nature of the endorsements - is that they vary enormously from case to case. What is apparent on the face of the evidence is that each deal is worked out at a price which suits the particular type of endorsement being contemplated and the type of exposure which Mr Irvine's name or image will be given. The type of products which have been the subject of endorsement also vary enormously. For example, Oakley, who are manufacturers of sunglasses, in 1998 paid Mr Irvine about 15,000 and gave him about 10,000-worth of free products for use of his picture in advertisements which were to go to the general public to support sales of their sunglasses. In 1999 the figure for endorsement for Oakley had risen to $40,000 (that is 25,200), once again with free products worth 10,000. It seems to me virtually inevitable that that company anticipated that its increased sales and profits would far outstrip the costs which they were incurring in getting Mr Irvine to endorse their products, and this gives some feel for the scale of the product endorsement which must have been in mind. It is likely that many hundreds of thousands of pounds-worth of products would have been supported or intended to be supported by this campaign.

21. Similarly, in 1998 Mr Irvine was paid $100,000 and given free products worth $50,000 for what are described as several of his images for print advertising for a company called Tommy Hillfiger, a very well-known fashion house. That endorsement was to be used in support of sales of clothing. Once again, figures for the scale of distribution of the advertisements is not given, nor is any figure given for the anticipated sales which were to be supported by the advertising campaign using Mr Irvine's photographs. But Tommy Hillfiger is an extremely well-known fashion house and was so in 1998. The sales which would be underpinned by this endorsement must have been very substantial indeed. It would not surprise me - although, as I say, there are no figures - if it did not reach into the millions of pounds-worth.

22. In 1999, once again, taking into account Mr Irvine's increased repute and fame, the figures for Tommy Hillfiger had risen to $150,000 for the endorsement, once again with the same figure of $50,000 for free products.

23. Other endorsement figures are given in Mr Irvine's evidence. In the case of racing car helmets, the figure of $70,000 was paid to him by way of an endorsement in 1998 by a company called Briefe Helmets, together with 100,000-worth of products, which he could then sell if he wished. In 1999 the figure dropped to $35,000 for the endorsement, although the same amount of product was to be supplied.

24. There are three other uses of Mr Irvine's name or picture which I should refer to, which are of some significance. First, there was a promotion or endorsement undertaken by Gillette in respect of a new man's wet razor called the "Mach 3". In 1998 Mr Irvine entered into an agreement with Gillette under which he was to be paid $15,000 for what is referred to as under-the-line publicity and $45,000 for above-the-line publicity; that is to say, the smaller sum was to be used for subliminal support using Mr Irvine's picture and name, but $45,000 was to be paid for open endorsement of the Gillette product. Once again, I do not have figures for the anticipated sales of Gillette razors which were to be supported by that endorsement, although I think I can take judicial notice of the fact that Gillette products sell on a vast scale.

25. On the other hand, some indication of what was in mind can be gathered from the following documents. First of all, there is a memorandum of 31st August 1998 to Mr Zanarini, that is Mr Irvine's agent, which refers to the fees which I have just mentioned, and also goes on to state as follows:

For our purposes we will require Eddie Irvine is available for up to three interviews, one daily newspaper, one weekend newspaper or magazine, one radio/television interview. Eddie will also be required to hold the product in some of the photos. If asked by the media, Eddie will be expected to say that he has used the product and will not mention any competing brand. There will be one or two female models included in some of the photos for variety.

26. Attached to that memorandum is a document headed "Target Media", which indicates the circulations which were in contemplation in the newspapers and magazines and radio stations which Gillette anticipated using for this endorsement. For example, The Irish Independent had a circulation of 160,000; The Star 860,660, The Examiner 55,000, The Sun 72,000, The Evening Herald 110,000. As far as weekly newspapers were concerned, those in contemplation were the Independent Weekender with a circulation of 162,000, Sunday Business Post at 45,000, Ireland on Sunday 67,000 and Sunday World with a circulation of 330,000. There were also other radio stations and weekly newspapers, circulation figures for which are not given.

27. The second and third promotions involved The Daily Mail and The Express . These contracts were not strictly endorsements in the same sense. In each case, Mr Irvine was to be paid to put his name to articles (in fact written by others) which would be published during the motor racing season. As far as The Daily Mail was concerned, 10 articles were to be published under his name and using his photograph in 1998 for a total of 10,000; that is 1,000 per article. In 1999 The Express contracted to have 18 articles, once again using Mr Irvine's name, and perhaps his photograph, for a total sum of 22,000.

28. These examples of real contracts entered into by Mr Irvine gives a feel for the spread of fees which Mr Irvine managed to secure for what were very substantial endorsements.

29. Mr Irvine makes it clear that he would not have been interested in advertising or giving endorsements to Talk Radio. I am sure that this was a very small endorsement and I accept Miss Lane's categorisation that Mr Irvine would not have been bothered to get out of bed for this one. This was much too small to interest the likes of Mr Irvine at the time when he was at the peak of his career.

30. Likewise, it seems to me very likely that the other witnesses who have given substantial figures of what they think would have been a reasonable fee to ask for are no doubt used to asking for very large sums for very large campaigns supporting sales of products, for example, in the hundreds of thousands, if not millions of pounds. None of that, in my view, throws any real light on what the figure would have been for what, in my view, is such a small and limited campaign. I think that Mr Hicks goes too far when he says that 50p per brochure was enough. As I said, this was a time-critical promotion. I think the suggestion which is inherent in Miss Lane's submissions, that a reasonable company in the Defendant's position would have been prepared to spend by agreement 50 per brochure is quite unrealistic and I do not accept it. In my view, erring, as it appears to me, on the generous side, I would have thought a reasonable figure is 2,000 and I will so order.