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Trademark Infringement and ‘Hypothetical Licensing’

Friday, 24 May 2013

An on-going dispute between 32Red and William Hill regarding an issue of trademark infringement has seen 32Red awarded £150,000 damages on the basis of ‘hypothetical licensing’. The infringement concerned the name 32Vegas, an online casino platform offered by William Hill; 32Red successfully claimed that the use of this name was an infringement of its trademark.

The court ruled that a trademark breach had occurred because the name 32Vegas could create confusion among consumers and inadvertently undermine 32Red’s reputation. However, this case is more significant due to the court’s indication that the “user principle” could be extended to trademark infringement.

The “user principle”

The “user principle” is a mechanism used by the courts to calculate damages in patent law where there is no discernible direct loss of profits to the rights holder. It grants courts the power to assess the infringement before deciding what cost permission for the infringing acts could be reasonably held to be.

The High Court recently extended this principle to trademark infringement, which has created the notion of the hypothetical license.

32Red v William Hill [2012]

In the case concerning 32Red and William Hill, Mr Justice Newey highlighted that the assessment of infringement under hypothetical licensing should be made on objective factors and the financial position of the parties or any other specific characteristics were immaterial in establishing damages.

The parties were taken to bargain for the purposes of the hypothetical license agreement as they ordinarily would have done.

Calculating Damages

A key element in calculating damages under this development was consideration of the alternative avenues available to the infringer such as rebranding. The potential alternative avenues to the infringement in question could provide a benchmark in calculating damages. If a re-branding exercise, which would avoid infringement, were to cost £100,000, then it would be unlikely for damages for the actual infringement to exceed this amount.

Damages should be considered in accordance with context and the options available to both parties at the time. The court should also consider the convenience of alternatives in addition to financial viability – re-branding may not be advisable if the company has an established consumer base and reputation.

Additionally, there are various other measures used determine the amount of damages awarded. Firstly, the form of infringement - whether it is identical or similar enough to create confusion among consumers - will have a significant bearing on the award. Secondly, the need for exclusivity or restrictive clauses in the hypothetical licence would normally increase potential damages. Thirdly, the court stated a hypothetical licence should cover the entirety of infringement and, where appropriate, can include damages after use of the trademark has ceased.


Mr Justice Newey highlighted that the court should take a common-sense approach to hypothetical licence and indicated that the economic assessment would commonly have the strongest, but not the only, influence on the damages awarded. Nevertheless, the hypothetical licence mechanism for assessing damages for trademark infringement is a newly developed area of law. Many of its principles are therefore untested and theoretical.

For more information about this case or for help with intellectual property issues, please contact James Crichton via e-mail or by telephone on 0207 611 4848.