Champagne Louis Roederer - v - J Garcia Carrion S.A., Asda Stores Limited, WM Morrison Supermarkets PLC [2017] EWHC 289 (Ch)

Champagne

 

In 2015, a decision handed down by Mrs Justice Rose held that J Garcia Carrion (‘JGC’) had infringed Champagne Louis Roederer’s (‘CLR’) UK and Community Trade Marks (now European Trade Mark) and held that JGC’s UK and CTM registrations in the UK for CRISTIALINO JAUME SERRA were invalid. CLR’s flagship champagne CRISTAL is renowned for its exclusivity and being enjoyed by the wealthy. JGC launched a brand of cava named CRISTALINO JAUME SERRA, however prominence was given to the CRISTALINO element and Mrs Justice Rose considered CRISTALINO to be the sign in use by JGC.

Mrs Justice Rose ordered JGC to provide Island Records v Tring style disclosure to CLR to enable CLR to elect an account of profits or damages. Such disclosure should have detailed the number and value of CRISTALINO imported and sold in UK since 19 March 2004 and the sums received by JGC from those sales. JGC, who had neglected to engage in the trial since its early stages, failed to provide the disclosure. CLR were therefore forced to gather their own evidence, and, based on this evidence, they elected an account of profits.

CLR gathered evidence from various sources including court proceedings in Brussels and the United States District Court of Minnesota, from UK IPO proceedings and from Morrisons and Asda (the second and third defendants who had already settled the case). This evidence was provided to the court by way of witness statement from CLR’s legal representation and from the claimant’s expert Mr Geale, an accountant.

Mr Geale concluded that between 19 March 2004 and 31 December 2010 there was evidence to show sales of 2,417,829 bottles of CRISTALINO in the UK. This figure did not include sales made by Morrisons between 2008 and 2010, as Morrisons had been unable to produce evidence to document sales for this period.

Mr Geale’s calculations had taken into account that between July 2007 and December 2007 CRISTALINO was sold under the name non-infringing name Arte Latino. Mr Geale therefore made adjustments for this period by subtracting 197,400 bottles before reaching his total. The evidence available was not entirely clearly exactly on which date the name reverted back to CRISTALINO. JGC invoices between July 2007 and December 2007 showed that sales were made under the name Arte Latino, but there were no JGC invoices available after this date. In Mr Geale’s witness statement it was assumed that sales from the beginning of 2008 to 2010 were made under the CRISTALINO name. The court found that it was unlikely that the Arte Latina sales ceased on the date of the last invoice and that they were likely to have continued into the first quarter of 2008. Accordingly, adjustments were made to take this into account.

A 25% deduction was therefore made from the 2008 Asda sales figures provided. Asda had made 89,208 sales in 2008, therefore 22,302 were subtracted from the total to reflect the non-infringing sales made in the first quarter.

As already mentioned, no evidence was available in relation to Morrisons’ sales between 2008 and 2010. Mr Geale had suggested that such sales could either be estimated by increasing sales in a linear way in accordance with the previous yearly increases, or by indexing Morrisons’ sales to those sales made by Asda. The court favoured this second approach. In 2006 and 2007 Morrisons were the largest UK purchaser of CRISTALINO and the court thought it was likely that this would continue in 2008, 2009 and 2010. The court held that Morrisons’ purchases of CRISTALINO would remain in the same proportion to those made Asda, as this had been the case for the earlier years. Accordingly, the court estimated that between 2008 and 2010 Morrisons would have purchased 517, 260 bottles. Of this figure 178,416 would have been sold in 2008. The court then reduced the 2008 sales by 25% to take into account the non-infringing Arte Latino bottles from quarter one of 2008, meaning Morrisons’ sales between 2008 and 2010 totalled 472,656.

Taking into account the deductions for non-infringing sales and considering Morrisons’ 2008-2010 sales, the court calculated that the overall number of infringing bottles sold by JGC in the UK market was 2,868,183 (2,417,829 figure produced by Mr Geale - less 22,302 for Asda non-infringing sales + plus 472,656 for Morrisons’ infringing sales between 2008 and 2010)

The court then turned its attention to determination of profits. In this regard the court considered what the gross profits for each sale of a CRISTALINO bottle were, and, whether there should be any additional apportionment to take into account JGC’s general costs. In determining the gross profits, Mr Geale had relied on evidence from the Minnesota Court evidence in which JGC had estimated that the ‘contribution margin’ on a bottle of CRISTALINO was €0.4647. Mr Geale explained that the ‘contribution margin’ was a proxy for and denoted gross profits obtained by JGC for each bottle of CRISTALINO. The court accepted this approach to gross profits. The court noted that based on the evidence available they were forced to assume that between 2004 and 2010 that the gross profit per bottle stayed the same. JGC could of course have provided evidence on this, but in the absence of any engagement from JGC, the court said that JGC only had ‘itself to blame’ if the assumptions made were incorrect.

The court then turned its attention to general costs and additional apportionment to reflect non-infringing elements of the profits generated by sales of CRISTALINO. The court considered previous case law on this area including:

- Hollister v Medik where it was held that no automatic deduction from profits to reflect general overheads should be made. Instead it is for the defendant to 'show that the relevant overheads' are 'properly attributable to the infringing activity’.
- Abbott v Design and Display which said that courts should consider whether the defendant can show that the infringing activity has increased the general overheads, or, that those overheads would have been lower if the defendant had not engaged in infringing activity. If the overheads would have been incurred anyway then no deduction of general overheads should be made.
- Jack Wills v House of Fraser in which it was stated that where the infringement does not 'drive' the sale, it is wrong to attribute the whole of the profit to the infringement. If the court is satisfied that the full profits were not as a result of the infringement, it will, ‘on a 'broad brush basis’, work out what proportion of the profits are attributable to the infringement.

In this case the court noted that JGC had not attended, so had not applied to attribute profits as per Hollister, and, there was no evidence adduced to show that sales of CRISTALINO were driven by factors other than infringement, as per Abbott and Jack Wills.

Accordingly, it was calculated that JGC’s profits were €1,332,844.64 (2,868,183 sales x €0.4746 gross profit per bottle).

Link to Judgment

Judgment Date: 23 FEBRUARY 2017

The owners of CRISTAL champagne are awarded over a million Euros for sales of infringing CRISTALINO cava.

 

 

 

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