June 2011 

 
Unjustified threats

Best Buy Co. Inc & Anr v Worldwide Sales Corporation Espana S.L.* (Lord Neuberger MR; Etherton and Patten LJJ; [2011] EWCA Civ 618; 24.05.11)

The CA (Lord Neuberger MR giving judgment) allowed the appeal from the decision of Floyd J ([2010] EWHC 1666 (Ch), reported in CIPA Journal, August 2010). The defendant’s letter threatening proceedings for CTM infringement was not protected by privilege despite the offer to discuss settlement and could therefore be used in court in Section 21 proceedings.

Best Buy had used the Best Buy name extensively in the US in relation to consumer electronics shops. It intended to expand into a number of European countries, including the UK, under the Best Buy name and applied for a CTM incorporating the words “Best Buy”, which Espana, a Spanish corporation, opposed. Espana’s opposition was based on two CTMs it owned which incorporated the words “Best Buy”.

Correspondence passed between the parties whereby Best Buy sought to negotiate a coexistence agreement.  However, the parties were unable to reach agreement. Best Buy issued proceedings for unlawful threats under Section 21 on the basis of a letter written to Best Buy by Espana’s Spanish solicitors during the course of the negotiations (the “Letter”). At first instance, Floyd J dismissed the action, ruling that when viewed as a whole, and in the context of what preceded it, the Letter was a comprehensive negotiating response to Best Buy’s proposal and so was entitled to “without prejudice” protection.

Lord Neuberger MR first considered as a point of principle the proper approach to the interpretation of the Letter. It was Lord Neuberger MR’s opinion that this was to be answered by reference to what a reasonable person, in the position of the recipient of the Letter, with its knowledge of all the relevant circumstances as at the date the Letter was written, would have understood the writer of the passage to have intended, when read in the context of the Letter as a whole.

Lord Neuberger MR identified five issues arising on the appeal:

1. Did the Letter contain a threat of infringement proceedings? Lord Neuberger MR, agreeing with Floyd J, considered that by sending the Letter Espana had made a threat of proceedings. Espana had stated that its marks were “reputed and distinctive”, that Best Buy’s actions were “causing irreparable and irreversible damage” to Espana, and that this would entitle Espana “to take appropriate legal action to defend its interests”. A reasonable recipient of the Letter would take those statements to indicate that Espana was not merely asserting its rights but that it was intending to enforce its rights against Best Buy.
2. Was the threat of proceedings in the UK?  The CA agreed with Floyd J that a CTM could found the basis of a claim under Section 21, but only if the proceedings threatened were UK proceedings. In Lord Neuberger MR’s opinion, a reasonable recipient in Best Buy’s position upon receiving the Letter would have understood it to threaten proceedings in the UK. The Letter made it clear that Espana’s concerns extended throughout Europe and were not limited to Spain. In addition, both parties were aware of Best Buy’s plans to launch in the UK.
3. Was the threat outside the exceptions in paragraphs (a) to (c) of Section 21(1)?  The CA accepted that, whilst the threat in the Letter related to the use of the Best Buy mark in connection with services, the complaint about the use of the mark “in advertising and in the media” brought the threat outside the ambit of paragraph (c) of Section 21(1).
4. As the Letter referred to settlement, could this preclude it from being a threat?  The question (incorporating the public policy issue) was whether the Letter would reasonably have been understood to have been intended to have privileged status.  Lord Neuberger MR considered that Floyd J reached the wrong conclusion on this issue by failing to consider the Letter as a whole, instead focusing on the last three paragraphs which, rather than amounting to a settlement proposal, merely underlined Espana’s belief in its case.  Lord Neuberger MR noted that even a letter which is bona fide marked “without prejudice” can be relied upon in court in some circumstances (see Re Daintrey [1893] 2 QB 116 where the “without prejudice” rule could not prevail over statutory bankruptcy principles). He therefore inclined to the view that Best Buy would still have been able to rely on the Letter in support of its unlawful threats claim as a matter of public policy.  Otherwise, by writing a genuine “without prejudice” letter, one could with impunity make threats which clearly fell within Section 21, rendering that Section a “dead letter”.
5. Are Best Buy “persons aggrieved” and therefore entitled to relief? As Best Buy were the direct recipients of the threat, the CA held that they did not need to show any damage in order to establish that they were “aggrieved”.

Construction of OMEGA trade mark co-existence agreement

Omega SA (“Swiss”) v Omega Engineering Incorporated (“Engineering”)* (Mummery & Black LJJ, Sir John Chadwick; [2001] EWHC Civ 645; 27.05.11)

The CA (Mummery LJ giving judgment) upheld Arnold J’s construction of a trade mark co-existence agreement ([2010] EWHC 1211 (Ch), reported in CIPA Journal, July 2010) and dismissed Swiss’s appeal.  Arnold J had been right to dismiss Swiss’s appeal from the decision of the Registrar of Trade Marks that Swiss was contractually bound not to oppose Engineering’s application to register OMEGA for the goods specified in its application.

Swiss’s wristwatches and other chronometers were known by names including OMEGA.  Engineering used OMEGA on products for the measurement and control of temperature.  Although Swiss’s core business was watches and clocks and that of Engineering was scientific instruments, there was some potential for confusion, in particular in relation to scientific instruments which included a time display. The parties therefore entered into a co-existence agreement in 1984 (the “1984 Agreement”).

Under the 1984 Agreement, Swiss agreed not to object to the use or registration by Engineering of trade marks consisting or comprising of the word OMEGA in respect of the “excluded goods”. The “excluded goods” included instruments and apparatus intended for a scientific or industrial application in measuring or recording heat or temperature (including those that could display the time of day). The 1984 Agreement did not mention classes of goods for which trade marks could be registered, but at that time these goods all fell within Class 9. Swiss therefore claimed that the definition of “excluded goods” did not include clocks (which fell within Class 14).

In 2007, Engineering applied to register the trade mark OMEGA in Class 14 in respect of goods which were all within the meaning of the “excluded goods”. Swiss objected to the application claiming that the registration applied for went beyond the “excluded goods” covered by Class 9 and was capable of covering clocks covered by Class 14. Both the hearing officer and Arnold J concluded that Engineering was correct in its contention that Swiss was bound by its contractual undertaking not to oppose Engineering’s application.

The CA agreed with Arnold J that the 1984 Agreement was concerned with demarcating the respective fields of goods marketed by the parties, rather than with the classification of goods for the purpose of registration of the marks. Mummery J held that the surrounding circumstances, including the object and subject matter of the 1984 Agreement, had to be taken into account. He considered that there were two critical points on construction: (i) the relevant provisions of the 1984 Agreement did not expressly refer to Classes 9 or 14; and (ii) it was not necessary for the purposes of business efficacy of the terms of the 1984 Agreement and therefore not justified to imply references to those Classes into the 1984 Agreement. Swiss had acted in breach of contract by objecting to the very goods accorded to Engineering by the 1984 Agreement.

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Separate goodwill in related fields

Group Lotus plc (“GL”) & Anr v 1Malaysia Racing Team SDN BHD & Ots* (Peter Smith J; [2011] EWHC 1366 (Ch); 27.05.11)

Peter Smith J dismissed all claims and counterclaims relating to trade mark infringement and passing off, except for a claim for revocation of the marks of one of the defendants (TLV), which succeeded on grounds of non-use. The Judge held that the two parties had both acquired separate goodwill in the LOTUS mark in related fields (motor racing and sale of sports cars) and that the relevant public was unlikely to experience any confusion between the two Lotus entities (one which raced motor cars and one which manufactured sports cars). 

GL brought a claim for trade mark infringement in respect of logos and roundels used on Formula 1 racing cars, as well as for breaches of a licensing agreement. Mr Colin Chapman (CC) had founded the F1 Team Lotus, which conducted racing operations, and later created a car manufacturing company which subsequently became GL. CC had always ensured that the motor-racing activity was excluded and separated from the operations of GL. In 1985 this separation was codified in an agreement between the two companies (the “1985 Agreement”), which specified that GL was engaged in the business of manufacturing and marketing motor vehicles, whilst F1 Team Lotus was engaged in the business of making racing vehicles and racing them. Under the 1985 Agreement, GL also surrendered the trade marks it had under the name “Team Lotus” and permitted F1 Team Lotus to re-register those same trade marks. F1 Team Lotus subsequently sold its goodwill and trade marks to the second defendant, Team Lotus Ventures Ltd (“TLV”).  The relationship between GL and the parties on the motor racing side broke down in 2009, shortly after GL had taken steps to enter F1 racing. At the date proceedings were brought, GL had registrations for the following roundel logo:

It also had registrations for the word mark LOTUS covering a number of classes, except motor racing. TLV had registrations for the word mark TEAM LOTUS and a roundel logo incorporating the words TEAM LOTUS.

Goodwill
The evidence highlighted the intention of GL and F1 Team Lotus to own separate goodwill in respect of the separate businesses and therefore the Judge held that the two parties each owned goodwill in the Lotus name and roundel in relation to their respective areas of activities, even though TLV’s goodwill was of benefit to GL and its reputation (the association with a successful racing car company). Furthermore, the Judge held that there was no abandonment of goodwill by TLV, despite the fact that it had not raced between 1996 and 2009, because the Lotus name still attracted considerable goodwill in relation to motor racing and the present litigation would not be taking place if there was not value attached to the right to use the Lotus name and the roundel logo.

Passing off
The Judge held that if GL and TLV were to both have teams participating in the 2011 F1 season using the “Lotus” name, there would be no likelihood of confusion in the eyes of the relevant public (viewers of F1 and prospective purchasers of sports cars) as to the business carried on by GL and TLV, because of the differing nature of the operations carried out by both parties (provided that TLV continued to restrict itself to motor-racing activities).  Therefore GL’s claim for passing off failed. Evidence was submitted which demonstrated that it was quite common for competing F1 teams to use names containing the same brand names, such as Renault, Red Bull and Ferrari.

Infringement under Sections 10(2) and (3)
The Judge held, for the reasons stated above, that there was no likelihood of confusion sufficient for a trade mark infringement action under Section 10(2). The Judge further dismissed GL’s claim for infringement under Section 10(3) because although GL’s marks had a reputation, it was for car manufacturing and not motor racing. As a result, TLV’s motor racing activities neither took advantage of those marks nor caused them detriment.

Revocation
The Judge accepted TLV’s argument that GL had acquiesced in TLV’s use of the marks and was therefore no longer entitled to oppose the use of those marks or apply for a declaration of invalidity. However, the Judge found no evidence of use between 2003 and 2008 and no evidence of a proper reason for non-use and therefore the two registrations of the roundel logo and the TEAM LOTUS word mark were revoked under Section 46.

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Passing off applied to small localised businesses

Redwood Tree Services Ltd (“RTSL”) v Warren Apsey T/A Redwood Tree Surgeons (“RTS”)* (Judge Birss; [2011] EWPCC 014; 13.05.11)

Applying the principles set out in Reckitt and Colman Products Ltd v Borden Inc [1990] RPC 341 Judge Birss held that Mr Apsey had passed off his business as the claimant’s.  However, RTSL’s goodwill only extended to its local area and consequently Mr Apsey only committed the act of passing off when he traded in that specific area.

RTSL was a small tree surgery and forestry business based in Bisley in Surrey and had been in existence in that area since 1986. RTS was also a tree surgery which had been started by Mr Apsey in 2004 and was based in Eversley in Hampshire, 10 miles from Bisley.  RTSL and RTS had traded in parallel for six and a half years. 

The Judge found that both businesses were highly localised, indicated by the fact that there were other businesses using the name “redwood” for a variety of things, including a tree surgery business called Redwood Tree Services in West Sussex and a company called Redwood UK selling forestry equipment 15 miles from where RTSL was based. Noting that small businesses were entitled to protection as much as anyone else, the Judge considered that the key to the case was the juxtaposition of the name and the location.  Although the name Redwood or Redwood Tree Services was not distinctive of RTSL when considering the public in London, that was not to say that it was not distinctive of anyone at all.  

The Judge found that RTSL had a goodwill in its local area around Guildford which broadly corresponded to the GU and SL postcodes. If Mr Apsey traded in RTSL’s home area then he made a misrepresentation, as this would lead or be likely to lead the public to believe that the goods or services offered by Mr Apsey were those of RTSL. However, although there was an overlap between the home areas of the two businesses, when Mr Apsey used the RTS name away from RTSL’s area no misrepresentation was made. 

Mr Apsey had committed acts of passing off, which included occasions on which he had traded in RTSL’s home area and when he had placed an advertisement in a Guilford area directory. The Judge explained why he thought there was little evidence of confusion: (i) Mr Apsey rarely traded in RTSL’s area; (ii) both businesses were very small and the numbers therefore proportionally smaller; and (iii) both were the kinds of businesses where confusion and deception simply would not come to light. Although there was no evidence of actual diversion of customers, Judge Birss was sure that if a misrepresentation was established it caused damage.

Given RTSL’s highly localised goodwill, it did not have the right to stop Mr Apsey trading under the RTS name in Eversley or anywhere within RTS’s home RG postcode. The only injunction which could be granted was therefore one specifically limited to the GU, SL and KT postcode areas. Nor did RTSL have the unfettered right to require that Mr Apsey take down RTS’s website. On a national level, RTSL had no better right to the website using a domain name with the words Redwood Trees than Mr Apsey. Following argument in relation to the form of order, Judge Birss decided that RTS’s website should include wording to the effect that RTS did not trade in the areas in question but should not include a reference to RTSL in the long term. A reference to the Court’s judgment would stay on the website for six months.

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Infringement of a CTM by oral use and the right of an oral licensee to bring infringement proceedings

Jean Christian Perfumes Ltd & Anr v Sanjay Thakrar (t/a BRAND DISTRIBUTOR and/or BRAND DISTRIBUTORS LIMITED)* (Mr John Baldwin QC; [2011] EWHC 1383 (Ch); 27.05.11)

Mr John Baldwin QC (sitting as a Deputy High Court Judge) held that an oral licensee of a CTM could bring proceedings for infringement if he had the consent of the proprietor of the mark. The Judge also found that oral use of a CTM could amount to infringement. 

The Judge noted that an oral licensee of a UK registered trade mark would have no locus to sue for infringement because Section 28(2) provided that a licence was not effective unless it was in writing and signed by or on behalf of the grantor. However, the CTM Regulation was of direct effect and although Article 17(2) provided for assignments of CTMs to be in writing, there were no formalities with respect to licences. Unless precluded by contract, a licensee could bring proceedings for infringement under Article 22(3) if he had the consent of the proprietor. Under Article 22(4) he was entitled to intervene in infringement proceedings brought by the proprietor for the purposes of obtaining compensation for any damages he may have sustained.

As regards infringement of a CTM by oral use, the Judge considered that it was implicit in the CJ’s decision in Holterhoff Case C-2/00 that oral use could be infringing.  Further, Article 9(2) gave examples of use which may amount to infringement and there was nothing to suggest that oral use excluded. It was also clear that sounds could be registered as CTMs (as long as they were capable of being represented graphically) and the Judge was therefore of the opinion that it would be peculiar if oral use of a mark could not amount to infringement.

 

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DESIGNS

Invalidity proceedings

PepsiCo Inc v Grupo Promer Mon Graphic SA (AG Mengozzi for the CJ; C-281/10; 12.05.11)

Grupo Promer Mon Graphic SA (‘Promer’) owned a Community Registered Design (CRD) in respect of metal plate[s] for games:

PepsiCo Inc (‘PepsiCo’) subsequently successfully registered a CRD in respect of promotional items for games:

Both designs related to children’s toys known as ‘pogs’, which are often given away as promotional items. Promer applied for a declaration of invalidity of PepsiCo’s CRD under Articles 52 and 25(1)(d) of the Community Designs Regulation, claiming a conflict with its own prior CRD. The Cancellation Division allowed the application on the basis that the two designs bore similarities likely to produce the same overall impression on the informed user and declared PepsiCo’s CRD to be invalid. PepsiCo appealed to the BoA.

Under the Community Designs Regulation, the degree of freedom available to the designer must be taken into account when assessing the overall impression produced on the informed user. The Cancellation Division had considered the degree of freedom available to the designer over all possible promotional items, whereas the BoA restricted its consideration to the more limited category of ‘pogs’. Since the degree of freedom was accordingly much more limited, the BoA annulled the Cancellation Division’s decision on the basis that the differences between the two designs were sufficient to produce different overall impressions on the informed user.

Promer appealed the BoA’s decision to the GC (T-9/07, reported in CIPA Journal, April 2010), which largely upheld the BoA’s legal assessments, in particular that the appropriate category of goods for the purposes of ascertaining the designer’s freedom was ‘pogs’. However, the GC held that even within this restricted category and the resultant restriction on design freedom, the differences between the designs were insufficient to produce a different overall impression on the informed user. PepsiCo appealed to the CJ.

Although it was not essential to rule on the point, the AG considered that the test for the degree of freedom was whether a constraint was essential from a functional perspective as technically necessary, rather than just a standard feature expected in the relevant market. 

In the AG’s opinion, the informed user was neither the average consumer, to whom reference must be made in order to apply the rules on trade marks, nor the expert who assesses a patent’s inventiveness. The informed user lies between these two constructs. In the present case, the AG found that the GC had correctly determined the relevant informed user to be either a 5 to 10 year old child or a marketing manager in a company that made goods promoted by giving away pogs. 

The AG also found that the GC had undertaken the correct type of comparison between the two CRDs. In theory, this comparison could be indirect based on recollection (as with trade marks) or a direct side-by-side comparison; the Regulation was silent on the point. The AG stated that both types of comparison could be considered to be legitimate for designs, dependant on the goods in question. Some goods would never be placed side by side (e.g. because they are too large or have to be placed far apart), or it would be unrealistic to do so, whilst in other circumstances the informed user would have good reason to make a direct comparison. Further, since the Regulation did not mandate one approach, OHIM should not be restricted to do something that was not specified. 

Once the informed user had been properly identified and the manner of comparison defined, the GC’s assessments and the impression that user gleaned from the designs fell fully within its jurisdiction to assess facts, which should not be disturbed by the CJ.

Before concluding, the AG also confirmed that OHIM is capable of assessing designs, rather than some other organisation with more specific technical expertise. Only the visual impression which a design produces on the informed user is to be taken into account and that person is not a ‘technician’ with special knowledge but just a user who is a little more attentive and interested than the average consumer. 

Accordingly, AG considered that there were no grounds for changing the GC’s decision and recommended that the CJ should dismiss PepsiCo’s appeal.

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COPYRIGHT

Jurisdiction and copyright in photographic works

Painer, a freelance photographer, produced portrait photos of the Austrian national Natascha K prior to her abduction in 1998. Painer sold copies of her work but did not grant third parties any rights to the photos or consent to their publication. After Natascha K’s abduction, a search appeal was launched in which the photos were used.

In 2006 Natascha K escaped her abductor and the defendants (all newspaper publishers) published the photos in their newspapers, magazines and websites without crediting Painer. In some reports a photo-fit, based on one of the photos, was used which was intended to show the presumed current appearance of Natascha K.

Painer initiated proceedings in Austria seeking an injunction and payment of remuneration and damages. The Austrian Court referred a number of questions on the interpretation of the Brussels Regulation and the Copyright Directive.

Article 6(1) of Regulation No 44/2001 (the Brussels Regulation)
Only one of the defendants to the action was based in Austria. The remaining four defendants were based in Germany. Two of these published newspapers in Austria and one sold newspapers in Austria. The final defendant published a newspaper which only appeared in Germany.

The referring court asked whether Article 6(1) of the Brussels Regulation (which provides that a person domiciled in a member state may also be sued, where he is a number of defendants, in the courts of the place where any one of them is domiciled, provided the claims are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings), gave it jurisdiction in respect of the newspapers which were published only in Germany.

The AG concluded that the notion of ‘close connection’ should be interpreted as requiring a single factual situation and a sufficient legal connection between the claim against the defendant who is domiciled in the place where the court is based (anchor claim) and the other claim. The AG considered that it was not necessary to examine or make a forecast as to whether there was a risk of contradiction between the two judgments. The AG noted, in particular, that a single factual situation could not be taken to exist where the contested conduct of the anchor defendant and of the other defendant appeared to be ‘unconcerted parallel conduct’ (such as in the present case where the conduct of the defendants occurred independently and without knowledge of one another). A sufficient legal connection may exist even where different national law which is not fully harmonised is applicable to the anchor claim and the other claim.

Copyright protection of portrait photos
The referring court asked whether photographic works, particularly portrait photos, are afforded ‘weaker’ or no copyright protection because, in view of their realistic image, the degree of formative freedom is too minor. The AG concluded that, under inter alia the Copyright Term Directive (2006/116/EC), a portrait photo is afforded copyright protection if it is an original intellectual creation of the photographer, which requires the photographer to have left his mark by using the available formative freedom. The photographer could determine, for example, the angle, position and facial expression of the person portrayed, the background, sharpness and lighting. A certain degree of artistic quality or novelty was not required.

The AG noted that the publication of a photo-fit based on a copyright portrait photo would constitute a reproduction under the Copyright Directive where the elements comprising the original intellectual creation of the photo were also embodied in the photo-fit. It was possible that those elements were largely removed when the photo-fit was produced. For example, if the portrait photo was only used to record a person’s biometric characteristics, a photo-fit produced on the basis of those characteristics would not constitute a reproduction.

Reproduction of photos by the media
The referring court asked whether Article 5(3)(e) of the Copyright Directive (which allows member states to provide for an exception to the author’s exclusive right of reproduction for the purpose of, inter alia, public security) requires that publication of the image must be officially ordered for such purposes and, if not, whether the media could rely on the provision of their own volition.

The AG concluded that Article 5(3)(e) should be interpreted to the effect that in the case of a search appeal which pursues a purpose of public security, a member state may permit the reproduction of copyright photos by the media without the author’s consent if the purposes pursued by the search have not been fulfilled and the reproduction is objectively capable of pursuing these purposes. However, the media was not entitled to rely directly on that provision. Article 5(3)(e) was not sufficiently precise and unconditional in that regard.

The referring court finally asked whether the application of Article 5(3)(d) of the Copyright Directive (which allows for an exception to the author’s exclusive right for quotations for purposes such as criticism or review) was not precluded where (i) a press report quoting a work was not a literary work; and/or (ii) the name of the author was not attached to the work. The AG concluded that (i) a member state has the power to permit the quotation even where the press report quoting the work was not protected by copyright; and (ii) the name of the author was required to be indicated, unless that turned out to be impossible. The impossibility factor suggested a fairly strict criterion and therefore a lack of reasonableness was not sufficient.

Katharine Stephens, Zoe Fuller and Hilary Atherton

Reporters’ note: We are grateful to our colleagues at Bird & Bird LLP for their assistance with the preparation of this report: Benjamin Woodfield, Chelsea Roche, Emma Drake, Nick Boydell, Tim Harris and Victoria Gardner.

The reported cases marked * can be found at http://www.bailii.org/databases.html#ew and the CJ’s decision can be found at http://curia.europa.eu/jcms/jcms/j_6/home