Taking the P - or just a passing Phase?

In his excitement to blog all things bright and beautiful last week, the IPKat overlooked Microsoft Corporation v P4 Com Ltd and another, a Chancery Division decision of Mr Justice Rimer last Wednesday. This case is not yet on BAILII but was picked up by LexisNexis Butterworths' subscription sevice.

Above right: infringing, or merely asleep?

Essentially, the second defendant was the sole shareholder in and director of a the first defendant company, P4 Com, until February 2004. Following litigation in which Microsoft sued various third parties for IP infringement, Microsoft alleged passing off, trade mark and copyright infringement against the defendants, basing its claims on invoices that had been unearthed during the third party litigation. According to those invoices, the third parties had supplied an entity called Phase 4 with what was described as Microsoft software, at prices that were "too good to be true", between April 2002 and June 2003. According to Microsoft the natural inference to be drawn was that the defendants had resold the offending software, thereby committing the alleged acts of infringement.

In pre-trial correspondence between the parties both sides appeared to assume that it was P4 Com who had been trading in the allegedly infringing software products. But after Microsoft served its particulars of claim alleging that at P4 Com had carried out the acts complained of, under the direction of the second defendant, the defendants said that, during the period in question, P4 Com was dormant, it being the second defendant who was operating as a sole trader under the name Phase 4.

Below: when sleep brings relief

Not content with this, the defendants served their defence and counterclaim, denying any allegation of infringement and seeking relief against Microsoft for making a groundless threat to sue a dormant company for trade mark infringement. In support of its contention P4 Com adduced evidence of its Companies House filing history and the fact that its accounts had been returned on the basis that it was a dormant company. Bank statements showing that the second defendant had traded as Phase 4 during the relevant period were also served.

Somewhat discomfited, Microsoft pointed out that the home address of the second defendant was the same as the registered address of P4 Com, as well as internet evidence that suggested that the defendants were trading as Phase 4 during the operative time. The first defendant subsequently sought summary judgment on its s 21 counterclaim. This did not deter the defendants from applying for summary judgment on their threats counterclaim on the ground that there was no reasonable prospect of Microsoft defending it. Microsoft disagreed: there was a clash of evidence here that demanded proper investigation, including disclosure and cross-examination.

Agreeing with Microsoft, Rimer J dismissed the application for summary judgment. Since the real evidence as to whether the defendants had traded as Phase 4 or not during the relevant period was largely in the hands of the defendants, the process of disclosure and cross-examination had the potential to reveal all. This was not therefore a case that was ripe for swift determination by summary judgment.

The IPKat thinks this was a bit of wishful thinking on P4 Com's part and a chance to grab the moral high-ground against which to withstand the tidal wave of Microsoft's infringement claims. But that's not to say that they won't succeed at trial if Microsoft can't pin Phase 4's trading on to the defendants on a balance of probabilities. Merpel says, I was just wondering .. if the defendants can be shown to have been infringing only outside the time P4 Com was dormant, what sort of view would the court take of damages?

More on threats provisions here
Dormant companies here
Nessun Dorma here (for those readers who never imagined that Pavarotti was slender enough to fit into a YouTube)