The Strength of a Settlement
3 June 2016
Stretchline Intellectual Properties Ltd v H&M Hennes & Mauritz UK Ltd  EWHC 162 (Pat), 21 January 2016
Following a long running dispute involving Stretchline’s patent for a tubular fabric composition, this recent High Court decision explores remedies that are available for alleged infringement following a settlement. This decision provides useful guidance on the finality of settlement agreements and the repercussions if breached.
In January 2016, the Hon. Mr Justice Carr made a decision in the case of Stretchline Intellectual Properties Limited v H&M Hennes & Mauritz UK Limited.
Stretchline Intellectual Properties Limited owned a UK patent (now expired GB2309038), granted in 1997, relating to a tubular fabric for bras made of an elastomeric yarn, a support yarn and a fusible yarn. One advantage of this combination of components was that the tubular fabric was strong enough to not be broken by an underwire, but still configured to prevent crumpling of the fabric.
Prior to this recent judgement, Stretchline had alleged that H&M was infringing their patent, and H&M had made a counterclaim to have the patent revoked. The issues of infringement and validity were never argued in court as Stretchline and H&M agreed to mediation and came to a settlement agreement.
Later, Stretchline believed that H&M was in breach of the settlement (by selling bras that fell within the scope claims of the patent) so they brought an action to enforce the settlement agreement. H&M countered with a defence of invalidity of the patent. It was decided at first instance that any issues raised in the first action were settled in the settlement agreement, so the validity of the patent could not be put in question (confirmed by a court of appeal decision in 2015).
Stretchline proceeded with the claim for breach of settlement based on those products sold by H&M which they considered fell within the scope of the patent, which was upheld by Justice Carr. Stretchline then applied for an injunction and either disclosure to enable an account of the profits, or a damages enquiry.
Justice Carr considered the effect on H&M if an injunction were granted, and determined that if accidental infringement occurred, the effect of the injunction and subsequent potential contempt of court proceedings would be disproportionate to the accidental infringement. Justice Carr determined that infringement by H&M was unlikely to occur again and refused to grant an injunction.
However Justice Carr added the caveat that if infringement did occur in future, there would be nothing to prevent Stretchline from returning to Court to request an injunction, and in that case it would likely be granted.
Regarding Stretchline’s claim for an account of profits or a damages enquiry, Justice Carr determined that given that this case is a breach of contract, and not infringement of a patent, that an account of profits or a damages enquiry was not applicable, even despite the settlement stating that the patent must not be infringed.
The decision provides useful guidance on the finality of settlement agreements and the repercussions if breached. Even if case law regarding infringement or validity changes following a settlement agreement, these issues may not be revisited again in court. Parties should think carefully before entering a settlement agreement if they have strong reasons to believe that a patent is invalid. Further, it is critical during any settlement discussions that any agreements are well drafted and anticipate future actions.
Advanced Engineering Group
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© Withers & Rogers LLP, June 2016