Lifestyle Equities v SportsDirect: can trade mark owners claim for sub-licensee damages?

Background

The case concerns a long-running dispute between Lifestyle Equities CV (the proprietor of the marks) and Lifestyle Licensing BV (the exclusive licensee) and SportsDirect. In 2018, the High Court found SportsDirect liable for both infringement and inducement to breach a licence agreement, paving the way for an inquiry into damages.

Summary Judgment Application 

SportsDirect brought a summary judgment application seeking to exclude from the damages inquiry any losses suffered by sub-licensees of the trade marks on the grounds that:

a) The sub-licensees were not joined as parties to the proceedings

SportsDirect relied on section 30(6A) Trade Marks Act 1994 (TMA) which provides that "where the proprietor of a registered trade mark brings infringement proceedings, a licensee who has suffered loss is entitled to intervene in the proceedings for the purpose of obtaining compensation for that loss.” SportsDirect interpreted this provision to mean that licensees (including sub-licensees) must either be joined or intervene in order for their losses to be recoverable.

b) The sub-licences had not been registered under the TMA

Specifically, under section 25(3)(b) TMA, a licensee who has not registered its licence does not benefit from the protections of sections 30 and 31 TMA. Section 30 provides various rights to licensees on infringement (including the right to call on the proprietor of the mark to take proceedings), while section 31 grants exclusive licensees (only) the same rights (to the extent provided in the licence) as if they were the proprietor of the trade mark following an assignment. SportsDirect did not rely on section 31 TMA. 

Under section 30(6) TMA, in infringement proceedings brought by the proprietor of a registered trade mark, any loss suffered or likely to be suffered by licensees "shall be taken into account". In this case, SportsDirect contended that even if this provision did apply, it did not mean that such losses could in fact be recovered, merely taken into account.

Findings

SportsDirect’s application for summary judgment was dismissed. The court confirmed that the loss of protection from non-registration of a licence under section 25(3)(b) TMA is personal to the licensee and does not prevent the proprietor from claiming those losses. The court emphasised the flexibility of section 30(6) TMA, allowing such losses to be “taken into account” in infringement proceedings, and confirmed that late registration of licences is permissible. In making its decision, the court considered four key questions:

1. Can a trade mark owner recover losses suffered by its sub-licensees?

Yes - The effect of section 30(6) TMA is that the court must “take into account” losses suffered by licensees in infringement proceedings brought by the proprietor. The court held that this "obviously extends to sub-licensees" and stressed the importance of the flexibility of that provision and that what "taking into account" means will depend on the circumstances of the case.

2. Must those licensees be joined to the proceedings?

No - The court rejected SportsDirect's interpretation of section 30(6A) TMA, clarifying that while it gives licensees a right to intervene, it does not require their joinder for their losses to be taken into account, provided the claim is brought by the proprietor or exclusive licensee. Indeed, sub-licensees cannot be joined as claimants – only exclusive licensees can (and sub-licensees cannot, by definition, be exclusive licensees). The Court therefore confirmed that joinder of licensees is not required for their losses to be considered.

3. Does the licence need to be registered for such losses to be recoverable?

No - The lack of registration of a sub-licence does not bar the proprietor from recovering damages that include sub-licensee losses. The loss of protection under section 25(3)(b) TMA is personal to the licensee, not the proprietor.  However, an application to register a licence must be made before a licensee can intervene in proceedings under section 30(6A) TMA (or avail themselves of any other protection under section 30 TMA).

4. Can late registration of a licence “cure” the issue?

Yes – Lifestyle Equities contended that if the lack of registration did cause an issue, this could be "cured" by registering the licences now, after the event. The court confirmed there is no statutory time limit for registering a licence to obtain the protection of section 30 TMA. Late registration can still allow the court to consider licensee losses and give directions under section 30(6) TMA. However, costs penalties may apply under section 25(4) TMA for late registration.  The court was clear that "[t]his answer is entirely without prejudice to the permissibility of any amendments to the proceedings that may be made in this case in the future. If an application to amend is made late and is prejudicial to the position of any defendant, then such amendments may not be permitted, even if an application to register a licence has been made.".

Comment

The decision reinforces the importance of maintaining clear and well-documented licensing structures, and is a reminder that proactive IP management can significantly reduce litigation risk and enhance recovery prospects. While the court confirmed that losses suffered by sub-licensees must be taken into account even if their licences are unregistered (and noting that they will not be joined to proceedings), that does not mean that such losses will inevitably be compensated. 

To strengthen enforceability of rights and avoid procedural hurdles in litigation, rights holders should ensure that all licences, particularly sub-licences, are properly documented and registered.  The court noted that full disclosure of the licences and licensing structure on which the claimants relied had not been made, which made its job difficult.  Where damages are sought for losses suffered by licensees, parties should be prepared to disclose the relevant agreements and explain the basis for recovery.