Airconco UK Limited v DC Air Condition and Refrigeration Limited

This is an appeal from the judgment of District Judge Johnson dated 9 October 2025 in the IPEC Small Claims Track (the ‘IPEC SCT’).  The claimant (‘Airconco’) claimed ownership of copyright in text appearing on its website which explained and promoted its services by way of the installation of domestic air conditioning (the ‘Copyright Text’).  Airconco alleged that the defendant (‘DC Air’) had infringed the copyright by copying the Copyright Text in substantial part for use on DC Air’s website to promote its rival services.

DJ Johnson found that there had been infringement of copyright as alleged and went on to assess damages on the basis of a notional licence fee.  She calculated the appropriate hypothetical fee to be £12,150 and, since the claim was limited to £10,000, she awarded damages in the sum of £10,000.

DC Air does not seek to disturb the finding of infringement but challenges the quantum of damages ordered. DC Air seeks permission to appeal and if permission is given, seeks an order for the payment of damages in the sum of £1,020.

Robert Whittock appeared on behalf of DC Air, Richard Salmon, director of Airconco, appeared for Airconco.

DC Air’s application for permission to appeal was filed 25 days after the expiry of the period allowed by CPR 52.12.  Airconco argues that permission to appeal should be refused on that ground alone.

DC Air admits that the application for permission to appeal was filed late and that it must seek relief from sanctions pursuant to CPR 3.9 and according to the guidelines set out by the Court of Appeal in Denton v White [2014] EWCA Civ 906.

These are the relevant rules that govern an appeal from the IPEC SCT:

Since appeals from IPEC SCT orders are heard by an Enterprise Judge, the appellant’s notice should be filed in this court. DJ Johnson’s decision was handed down on 9 October 2025. She refused permission to appeal. DC Air’s Appellant’s Notice, which included an application for permission to appeal, had to be filed by 30 October 2025 pursuant to CPR 52.12(1) and (2)(b).

DC Air did file its Appellant’s Notice, apparently in Liverpool, on 30 October 2025. A set of misunderstandings on the part of court staff led to the following sequence of events.

The late filing of an Appellant’s Notice cannot be dismissed as trivial or insignificant under the first limb of the Denton v White assessment. The second limb requires the court to consider why the failure occurred and under the third the court must take into account all relevant circumstances. It seems to me that when the first Appellant’s Notice was filed on 30 October 2025, within time, DC Air’s solicitors did exactly what they should have done save that the Notice should have been filed in this court. That is not in my view a blameworthy mistake. It would very likely have been rectified in 1 or 2 days instead of 25 days if DC Air’s solicitors had received the correct advice from the Manchester and then the London courts. I do not criticise the clerks in those courts, save to say that matters should probably have moved forward more briskly, because the procedure for an appeal from an IPEC SCT decision is unusual and such appeals are not within the familiar run of business.

The important point is that DC Air did nothing wrong at all and DC Air’s solicitors acted in a reasonable manner. I have no doubt that DC Air should be granted relief from any sanction due to the lateness of the filing of its Appellant’s Notice. Retrospective permission is given to DC Air to file the Appellant’s Notice 25 days out of time.

As noted above, this appeal is in the general Chancery Appeals list and the Appellant’s Notice is on the wrong form. Technically, I am sitting as a High Court Judge in the Chancery Appeals list rather than the IPEC list of the High Court, and at the same time as an Enterprise Judge in compliance with CPR 63.19(3). This is an unusual dual identity but I see no formal barrier to it and DC Air have had to put up with enough delay as it is without further delay only for form’s sake.

The District Judge noted that there was no dispute that the appropriate way to calculate damages was on the basis of a notional licence fee, being that which a willing licensee would pay a willing licensor. Airconco’s case was that this should be the rate at which it had commercially licensed the Copyright Text in the past. DC Air contended that the notional licence fee should be based on the market rate charged by a competent copywriter with experience in writing copy of the type in issue, or alternatively the market rate charged on the basis that DC Air would have exclusive use of the copy created. The District Judge observed that while (unidentified) authority had been provided for Airconco’s approach, none had been provided by DC Air to support its preferred method for calculating the notional royalty.

DC Air filed written evidence from two professional copywriters who had been asked how much they would charge for creating copy of the nature and length of the Copyright Text.  One estimated a figure of £465 to £540, the other £850 plus VAT.  Both explained how they arrived at those sums, including in one case detail about research into the appropriate keywords and how to place them in the text, headings and search engine optimisation tags to maximise the chances of a high internet ranking and ‘meaningful clicks’.  Neither witness attended the trial for cross-examination.

The District Judge rejected DC Air’s approach to the calculation of a notional licence fee. She stated that licensing an existing work is not the same thing as commissioning a new work and that an existing work may have generated goodwill and the licence. The licensed use would be made alongside others using the same work. In copying Airconco’s text DC Air had taken advantage of the work put into the creation of the Copyright Text in terms of hits and leads generated on Google and other search engines.

Airconco provided evidence of its advertised licence fees and of licences granted to parties which had agreed to pay the relevant fee for use of the Copyright Text. In cross-examination a director of Airconco estimated that Airconco had rendered over 100 invoices to third parties for licence fees generating around £250,000 in fees. He said that others using the same text as Airconco risked a drop in Airconco’s rankings on Google but Airconco was willing to take that risk because the licence income had become a profitable part of its business.

DC Air argued that none of these licensees had ever willingly paid because the licences had always been granted against a backdrop of threatened legal proceedings.  DC Air also submitted that Airconco’s invoices indicated that some licensees had paid twice.

The District Judge said that she was not persuaded that the amounts shown in Airconco’s invoices had only ever been paid when there was litigation or threatened litigation.  In assessing the notional licence fee she adopted Airconco’s advertised rate of £675 plus VAT per annum per paragraph per use, save that she found that some of the paragraphs of the Copyright Text in issue were extremely short and doubted that a willing licensee would pay the full sum for those paragraphs.  On that basis DC Air had copied the equivalent of five paragraphs and had made three years’ use of them.  3 x 5 x £675 came to £10,125, with VAT to £12,150.  The claim was limited to £10,000, so the sum of £10,000 was awarded in damages.

DC Air have advanced three grounds of appeal:

The second ground of appeal raises a mixed issue of fact and law. The first and third concern the District Judge’s evaluation of the evidence. In the latter regard, Arnold LJ said this in Thom Browne Inc v Adidas AG [2025] EWCA Civ 1340:

In General Tire & Rubber Co. v Firestone Tyre & Rubber Co. Ltd [1975] 1 WLR 819 Lord Wilberforce identified (at pp.824-827) three approaches to the calculation of damages for the infringement of a patent. They apply to the infringement of any intellectual property right.

The first is to calculate the loss of profit caused by the defendant’s acts of infringement.  The second, where the claimant grants licences under the IP right in suit, is to calculate the licensing income that would have been charged by the claimant had the defendant acted lawfully and taken a licence before carrying out the infringing acts.  The third also hypothesises a licence between the claimant and the defendant but in circumstances where the claimant has not in the past granted such licences so that there is no going royalty rate providing a firm guideline.  Irrespective of the willingness or otherwise of either party to have entered into a licence at the relevant time, the court hypothesises that both parties were willing, assesses the royalty rate that they would have agreed based on all the relevant evidence available and calculates the sum that would have been paid by the defendant to carry out the infringing acts.

Having outlined the first two approaches, Lord Wilberforce introduced the third in this way:

This indicates that approach 3 will normally be a fallback if the first two are not available approaches on the facts. It is easy to see why. The first two provide a firm basis for estimating the claimant’s loss. The third is both less certain and likely to be more expensive since it will require a more widespread gathering of any relevant evidence. It is true that Lord Wilberforce added that more general considerations can enter into an assessment under the second approach, but it will rarely be necessary and generally pointless to add the cost of further evidence when it can add little of relevance.

Lord Wilberforce considered a passage in the judgment of Fletcher Moulton LJ in Meters Ltd v Metropolitan Gas Meters Ltd (1911) 28 RPC 157 in which the calculation of damages by reference to the third approach and then summarised the third approach:

If a general point is being made by DC Air that there was a lack of evidence demonstrating Airconco’s licensing business, it is not correct. There was evidence that Airconco advertised its licence fees and provided copies of invoices showing royalties paid by third parties according to the advertised rate.

DC Air’s more specific argument is that the licences are tainted by having been granted under the pressure or threat of litigation. It relied on the following passage from the judgment of Lord Wilberforce in General Tire in his discussion of the second approach to the calculation of damages (at 825-6):

The finding at first instance that the royalties paid in the past by third parties had no evidential relevance was rejected by Lord Wilberforce, with whom the remainder of their Lordships agreed on this point, allowing the appeal. That is by the way. I accept as a matter of principle that the court should not accept previous licences as evidence of the going rate that the defendant would have paid if such licences materially differ from the hypothetical licence that the claimant and defendant would have entered into according to the second approach.

In the Peninsula case, referred to by DC Air in its Grounds of Appeal and written argument, the claimant’s primary case on damages was for loss of profits on lost sales. That case failed because the judge found that use of the infringing material had caused no loss of sales. The parties agreed that the claimant was entitled to run the alternative argument of claiming the cost that would have been incurred in producing or commissioning material that did not infringe. An award of damages was made under that head. I get no assistance from that case.

DC Air argued that much of Airconco’s evidence of earlier instances in which a licence was granted to a third party should be dismissed because many cases involved contractual claims. I disagree. Where a court has previously awarded Airconco damages based on a hypothetical licence, the fact that the claim was based in a contract does not of itself make the finding of the court irrelevant to the present case. Damages in a claim for breach of contract, where assessed by reference to a hypothetical licence, whether according to the second or third approaches outlined by Lord Wilberforce, are calculated in the same way as would be an award of damages using a similar approach in a claim for infringement of copyright, see for example Force India Formula One Team Limited v 1 Malaysia Racing Team Sdn Bhd [2012] EWHC 616, at [382]-[386].

The District Judge was apparently referred to five earlier judgments assessing damages to be awarded to Airconco in claims for copyright infringement. In these judgments the District Judge hearing the case relied on Airconco’s standard licence fee, levied at a rate per paragraph used. DC Air argued that these could not be relied on in the present case because each case turns on its own facts. While that is true in principle I disagree with the conclusion drawn. The five judgments support Airconco’s contention that third parties are willing to pay Airconco’s advertised rate for using its text. Provided there was reason to suppose that the payments were made willingly, they are plainly relevant to what DC Air would have paid as a hypothetically willing licensee.

With regard to the willingness of the third parties in their transactions with Airconco, DC Air argued that it was clear from the invoices presented in evidence that in many cases payment was made either in the course of settling litigation or under the threat of litigation. I do not accept that this makes the invoices and the licence payments to Airconco recorded in them irrelevant. It is reasonable to assume that the defendants or potential defendants were at some point disinclined to pay Airconco anything. However, having reconciled themselves to payment after litigation or the threat of it, there is no evidence that any of them challenged Airconco’s advertised rate of payment as being unfairly high. And as the District Judge noted, there were invoices not paid in circumstances of actual or threatened litigation.

It is true that the District Judge did not give reasons for rejecting DC Air’s argument that the licences relied on by Airconco were not a reliable guide to the sum that would have been paid under a licence granted to DC Air, beyond saying that she was not persuaded by the argument. Nonetheless, in my view this was a conclusion she was entitled to reach having heard and evaluated all the evidence, including the oral evidence. DC Air has not identified any aspect of it which indicates a failure of logic on the part of the District Judge, or a lack of consistency or which undermines the conclusion that the licences granted by Airconco provide the best available indication of the sum that would have been paid a willing DC Air to use the Copyright Text.

DC Air contended that the District Judge was wrong in law to use the second General Tire approach to damages. She should instead have used the third and based it on DC Air’s evidence from two copywriters about how much it would have paid a copywriter to create non-infringing text.

I have rejected DC Air’s reasons for rejecting the second General Tire approach and in my view it was the correct one.  As discussed above, the third approach will in the normal course be a fallback to be used only if the second is not available on the facts.  The second was available in the present case.

Even if the third approach had been taken, as the District Judge pointed out neither of the two copywriters attended the trial to be cross-examined. She would have been entitled to give little or no weight to that evidence even if it had been relevant.

The appeal is dismissed.

Airconco seeks its costs of the appeal. Although the appeal was heard in this court, I take the view that the rules on costs in the IPEC SCT should apply, as implied by CPR 27.14(i).

CPR 27.14 provides as follows so far as is relevant:

CPR PD27A.7 provides, so far as is relevant:

This guidance is provided in the IPEC SCT Guide (May 2025):

I do not accept Airconco’s contention that the appeal had no merit and that DC Air has behaved unreasonably.

Airconco has submitted a schedule of costs incurred by Richard Salmon, director of Airconco, who conducted the appeal on behalf of Airconco. The schedule set out the time spent by Mr Salmon at £212 per hour, with reasons given separately why Mr Salmon’s claimed rate per hour is appropriate.

On 17 March 2026 there was a hearing which lasted about half a day attended by video link. In accordance with CPR 2714, PD27A.7 and the IPEC SCT Guide, it seems to me that Airconco is entitled to £47.50 in costs in respect of half a day of Mr Salmon’s time in attending the hearing. No court fees were identified by Mr Salmon.