Breach of Settlement Agreement: High Court Denies Injunctive Relief to Prevent Further Infringement of Patent

Caitlin Heard

In Stretchline v H&M the High Court denied injunctive relief to prevent further infringement of a patent in a case relating to breach of a settlement agreement.

Background

The action was originally commenced as an action for breach of the settlement agreement and patent infringement.  The infringing products in question were undergarments, primarily bras, which contained fusible yarn to encase the underwire.  Following a judgment of the Court of Appeal, the action for patent infringement was discontinued because the terms of the settlement agreement were clear that any dealings by H&M in products falling within the scope of the Patent should be regulated by the Agreement.

Injunctive relief

Carr J found that where a party has settled litigation by promising not to infringe an intellectual property right, a Claimant should have no more difficulty in obtaining an injunction that in circumstances where a patent has been infringed.  Accordingly, (and unsurprisingly), the same principles apply to the grant of injunctive relief in the case of a breach of settlement agreement as would apply in an infringement action.

It is normal for an injunction to be granted where an infringement of intellectual property rights has been found, and where the infringement has not ceased at the time of trial.  However, injunctive relief is a discretionary remedy, and the Court must be satisfied that it is appropriate in the circumstances.  In particular, it is inappropriate to grant an injunction if it is unnecessary for a preventative purpose and further infringement is unlikely.

On the evidence, the Court was satisfied that the infringements complained of were historic and unlikely to ever occur again.  The evidence showed that:

  • the last infringing item identified in an H&M store was approximately two years ago, and the number of discovered garments has become less frequent over the years;
  • the undergarments initially identified as infringing products when the settlement agreement was signed were supplied by a company that no longer supplies undergarments to H&M;
  • the only undergarments that contained fusible yarn identified by Stretchine were supplied by one Chinese company in 2014. Since then, no further infringements have been identified;
  • H&M has obtained from all of its suppliers signed certificates affirming they will not use fusible yarn in garments supplied to H&M, and has undertaken to send a further reminder to all of its suppliers; and
  • After receiving the judgment on liability relating the breach of contract in November 2015, H&M issued a notice to all of its stores instructing them to search for and remove any remaining stock. No further stock was identified.

Accordingly, the Court declined to grant the injunction.

The Court also took into consideration the effect of an injunction on H&M.  The undergarments are manufactured by third parties.  H&M can only do so much to check that they do not infringe, and the Court was satisfied H&M had taken appropriate steps.  If the Court were to grant an injunction, an accidental infringement would result in H&M facing contempt proceedings, and the Court considered this to be disproportionate given the current information on the limited number of infringing items, and the measures H&M has taken to prevent recurrence.

Further, the settlement agreement included a mechanism to address circumstances in which a potential breach is identified.  The Court considered that it would be inconsistent with the Agreement for Stretchline to have an immediate right to bring contempt proceedings.  Although Carr J did acknowledge that there must be a point when that clause can no longer prevent an injunction, he stated that “I do not believe we have reached that point yet”.

The Court indicated that if further breaches of the settlement agreement did occur Stretchline could return to Court and, in that event, the Court’s attitude would be rather different.

Post By Caitlin Heard (6 Posts)

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