Airconco UK Limited v DC Air Condition and Refrigeration Limited [2026] EWHC 998 (Ch)

[2026] EWHC 998 (Ch)Case No CH-2025-000326IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESINTELLECTUAL PROPERTY LISTVenue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 30 April 2026
Before
HIS HONOUR JUDGE HACON
Between
AIRCONCO UK LIMITEDClaimant/DC AIR CONDITIONING AND REFRIGERATION LIMITEDDefendant/
Robert Whittock (of counsel) for AppellantThe Respondent represented by Richard Salmon (director of the Respondent)Judgment on the Papers
Approved JudgmentThis judgment was handed down remotely at 10.30am on [date] by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................HIS HONOUR JUDGE HACON
[1]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.[2]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.[3]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.[4]Robert Whittock appeared on behalf of DC Air, Richard Salmon, director of Airconco, appeared for Airconco.

Application for permission to appeal filed out of time

[5]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.[6]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.[7]These are the relevant rules that govern an appeal from the IPEC SCT: ‘63.19(1) Subject to paragraph (2), proceedings in the Intellectual Property Enterprise Court will be dealt with by an enterprise judge.(2) Unless the court otherwise orders, the following matters will be dealt with by a District Judge— (a) allocation of claims to the small claims track or multi-track in accordance with rule 63.27(3); (b) claims allocated to the small claims track; and (c) all proceedings for the enforcement of any financial element of an Intellectual Property Enterprise Court judgment.’(3) For the purposes of the Practice Direction 52A – Appeals: General Provisions, a decision of a District Judge shall be treated as a decision by a District Judge hearing a claim in the County Court. An appeal from such a decision shall be heard by an enterprise judge.[8]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).[9]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. - DC Air’s solicitors filed the Appellant’s Notice on 30 October 2025 using form N164. This is the form for an appeal from the SCT and requires the appellant to identify the County Court from which the appeal is made. It seems to me that given the terms of CPR 63.19(3) this was the correct form. DJ Johnson’s judgment had been given in Liverpool, so for the purposes of the appeal she was deemed to have heard in the claim in the Liverpool County Court. - On 31 October 2025 the Liverpool court rejected the filing, informing DC Air’s solicitors that the correct form was N161. The clerk was wrong about this, see CPR 27PDA.8A, In fact, form N161 states expressly on its face that it is not the correct form for an SCT appeal. Nonetheless, on the same day DC Air’s solicitors filed the Appellant’s Notice in Manchester on form N161, now a day out of time, including a request for an extension of time. - On 5 November 2025 the clerk in the Manchester court rejected the filing, this time on the ground that the Appellant’s Notice should be filed in IPEC in London for my attention. - On 6 November 2025 the solicitors for DC Air spoke to a member of the Chancery listing team in London seeking advice, after which they sent the N161 Appellant’s Notice with associated documents, asking for confirmation of the correct method and court for filing the appeal. - On 10 November 2025 a Chancery listing officer in London replied to the email stating that I had confirmed that the appeal should be submitted as a High Court Chancery Appeal. I have no recollection of this but I would expect that a request for advice as to the correct procedure came to me via my clerk and was passed back to Chancery listing accordingly. It seems that somewhere another misunderstanding crept in. IPEC SCT appeals do indeed come to me in the first instance, to be heard by me or a Deputy Enterprise Judge, so they should be filed in this list of the High Court, in IPEC, rather than as a general Chancery appeal. However, in line with what they had been told, on the same day DC Air’s solicitors filed the Appellant’s Notice as a Chancery appeal on CE file. - On 12 November 2025 a clerk in London Chancery, presumably the issuing section, rejected the filing on the ground that it should have been filed in Liverpool. On the same day DC Air’s solicitors contacted Chancery listing in London again in an email which displays some exasperation. There seems then to have been a conversation by phone with one of the team at Chancery listing, apparently without any immediate result. - On 21 November 2025 DC Air’s solicitors sent an email to Chancery listing asking for an update. - On 24 November 2025 the Appellant’s Notice was accepted as having been filed. DC Air’s solicitors were informed in an email from Chancery listing.[10]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.[11]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.[12]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 judgment on damages

[13]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.[14]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.[15]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.[16]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.[17]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.[18]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.

The grounds of appeal

[19]DC Air have advanced three grounds of appeal:(1) The District Judge failed to give appropriate weight to the lack of evidence demonstrating the value of Airconco’s licensing business. Its licensing income appeared to come predominantly after Airconco had made a claim for infringement or after orders of the court awarding damages to Airconco, undermining the relevance of the licence fees charged.(2) The District Judge should have assessed damages according to the user principle which should have included the cost of commissioning a non-infringing version of the infringing material, an approach supported by Peninsular Business Services v Citation plc [2004] FSR 17.(3) The District Judge failed to give weight to the evidence of the two copywriters who provided relevant evidence as to the price that DC Air would have paid for equivalent non-infringing copy.

Standard of review

[20]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:
‘[68] It is common ground between the parties to this appeal that the judge's conclusions under appeal were evaluative assessments and thus this Court can only intervene if she erred in law or in principle, which includes a gap in logic, a lack of consistency or a failure to take into account a material factor that undermines the cogency of the conclusion. It is not enough that this Court might have reached a different conclusion: see Lifestyle Equities CV v Amazon UK Services Ltd [2024] UKSC 8; [2024] Bus. L.R. 532; [2024] F.S.R. 21 at [46]-[50] (Lord Briggs and Lord Kitchin) and Iconix Luxembourg Holdings SARL v Dream Pairs Europe Inc [2025] UKSC 25 at [94]-[95] (Lord Briggs and Lord Stephens).’

The law

[21]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.[22]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.[23]Having outlined the first two approaches, Lord Wilberforce introduced the third in this way: ‘3. In some cases it is not possible to prove either (as in 1 [loss of profit]) that there is a normal rate of profit, or (as in 2 [loss of licensing income]) that there is a normal, or established, licence royalty. Yet clearly damages must be assessed. In such cases it is for the plaintiff to adduce evidence which will guide the court. This evidence may consist of the practice, as regards royalty, in the relevant trade or in analogous trades; perhaps of expert opinion expressed in publications or in the witness box; possibly of the profitability of the invention; and of any other factor on which the judge can decide the measure of loss. Since evidence of this kind is in its nature general and also probably hypothetical, it is unlikely to be of relevance, or if relevant of weight, in the face of the more concrete and direct type of evidence referred to under 2. But there is no rule of law which prevents the court, even when it has evidence of licensing practice, from taking these more general considerations into account. The ultimate process is one of judicial estimation of the available indications.[24]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.[25]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:
‘A proper application of this passage, taken in its entirety, requires the judge assessing damages to take into account any licences actually granted and the rates of royalty fixed by them, to estimate their relevance and comparability, to apply them so far he can to the bargain hypothetically to be made between the patentee and the infringer and to the extent to which they do not provide a figure on which the damage can be measured to consider any other evidence, according to its relevance and weight, upon which he can fix a rate of royalty which would have been agreed.’

Ground 1

[26]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.[27]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):
‘Two classic cases under this heading are Penn v. Jack (1866) 14 L.T. 495; (1867) L.R. 5 Eq. 81 and Aktiengesellschaft für Autogene Aluminium Schweissung v. London Aluminium Co. Ltd. (No. 2) (1923) 40 R.P.C. 107 . In Penn v. Jack the patentee was shown to have approached all users of the invention and to have successfully required the vast majority to pay him a royalty of 2s 6d per horse power. The defendant was one of the few who refused and it was held that he should pay damages for infringement based on the accepted royalty rate on the basis that he might have expected to have got a licence at the same rate. The Aluminium case contains a clear statement by Sargant J., at pp. 113–114: “… what has to be ascertained is that which the infringer would have had to pay if, instead of infringing the patent, he had come to be licensed under the patent. I do not mean by that that the successful patentee can ascribe any fancy sum which he says he might have charged, but in those cases where he has dealt with his property merely by way of licence, and there have been licences at certain definite rates, there prima facie, apart from any reason to the contrary, the price or royalty which has been arrived at by means of a free bargain between the patentee and the person desiring to use the patented article has been taken as being the price or royalty that presumably would have to be paid by the infringer. In doing that, it seems to me that the court is certainly not treating the infringer unduly harshly; he should at least, in my judgment, have to pay as much as he would in all probability have had to pay had he to deal with the patentee by way of free bargain in the way in which other persons who took licences did in fact pay.” These are very useful guidelines, but the principle of them must not be misapplied. Before a ‘going rate’ of royalty can be taken as the basis on which an infringer should be held liable, it must be shown that the circumstances in which the going rat[e] was paid are the same as or at least comparable with those in which the patentee and the infringer are assumed to strike their bargain. To refer again to Boyd v. Tootal Broadhurst Lee Co. Ltd., 11 R.P.C. 175: when it was argued that because numerous other persons had agreed to pay at the rate of 4s. per spindle the infringer should also pay at the rate (rather than at 7s. per spindle, which represented the normal profit), it was relevant to show that the rate of 4s. was negotiated by way of settlement of litigation in which the validity of the patent was in doubt. This was not the equivalent of that which the court had to assume: for that purpose the patent must be assumed to be valid. This line of argument is very relevant in the present case, for, as I shall show, the appellants adduced a great deal of evidence as to the royalties actually agreed by various licensees, and this was discarded, totally, by the learned judge and the Court of Appeal. They had every right to discard it if the bargains which led to these royalties being agreed were reached in circumstances differing from those which must be assumed when the court is attempting to fix a bargain as between patentee and infringer.’
[28]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.[29]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.[30]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].[31]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.[32]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.[33]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.

Grounds 2 and 3

[34]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.[35]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.[36]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.

Conclusion on the appeal

[37]The appeal is dismissed.

Costs

[38]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).[39]CPR 27.14 provides as follows so far as is relevant:
‘Costs on the small claims track (1) This rule applies to any case which has been allocated to the small claims track unless paragraph (5) applies … (2) The court may not order a party to pay a sum to another party in respect of that other party’s costs, fees and expenses, including those relating to an appeal, except – (a) the fixed costs attributable to issuing the claim, calculated in accordance with Table 2 in Practice Direction 45; … (c) any court fees paid by that other party; (d) expenses which a party or witness has reasonably incurred in travelling to and from a hearing or in staying away from home for the purposes of attending a hearing; (e) a sum not exceeding the amount specified in Practice Direction 27A for any loss of earnings or loss of leave by a party or witness due to attending a hearing or to staying away from home for the purposes of attending a hearing; … (g) such further costs as the court may assess by the summary procedure and order to be paid by a party who has behaved unreasonably; and … (i) in an appeal, the cost of any approved transcript reasonably incurred.’
[40]CPR PD27A.7 provides, so far as is relevant:
‘Costs 7.1 Attention is drawn to Rule 27.14 which contains provisions about the costs which may be ordered to be paid by one party to another. … 7.3 The amounts which a party may be ordered to pay under rule 27.14(2)(e) (loss of earnings) … are: (1) for the loss of earnings or loss of leave of each party or witness due to attending a hearing or staying away from home for the purpose of attending a hearing, a sum not exceeding £95 per day for each person, … ’
[41]This guidance is provided in the IPEC SCT Guide (May 2025):
‘Costs recovery The general principle that an unsuccessful party will pay the legal costs of a successful party does not apply to IPEC SCT claims. Instead, the successful party will usually only be entitled to the costs set out below: ● fixed sums in relation to issuing the claim ● court fees, including the hearing fee ● reasonable travel or out-of-home accommodation expenses for a party or witness attending a hearing ● loss of earnings or annual leave of a party or witness for attending a court hearing, limited to £95 per day for each person (PD 27 paragraph 7.3) ● in proceedings that include a claim for an injunction, a sum for legal advice and assistance relating to that claim, not exceeding £260 (PD 27 paragraph 7.2) ● not more than £750 for the fees of any or each expert that the court has approved in advance Any further costs the court may decide after the hearing, may have to be paid by a party who has behaved unreasonably (CPR 27.14). A party’s rejection of an offer of settlement will not by itself constitute unreasonable behaviour but the court may take it into consideration (CPR 27.14 (3)).’
[42]I do not accept Airconco’s contention that the appeal had no merit and that DC Air has behaved unreasonably.[43]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.[44]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.

Cited in 1 later judgment