Trade marks: validity and infringement in cases of localised use

03 February 2016

Audrey Horton

The Intellectual Property Enterprise Court has considered infringement and the validity of word and device marks in the case of prior earlier rights based on localised goodwill, and held that both marks were not infringed and the word mark was invalid.

Background

Article 6(2) of the Trade Marks Directive (2008/95/EC) (the Directive), which is implemented in the UK by section 11(3) of the Trade Marks Act 1994 (TMA) (section 11(3)), provides that a trade mark owner cannot prohibit a third party from using, in the course of trade, an earlier right which only applies in a particular locality if that right is recognised by the laws of the EU member state and within the limits of the territory in which it is recognised. Section 11(3), implementing Article 6(2) of the Directive, expands on its wording.

Article 4(4)(b) of the Directive, which is implemented by section 5(4)(a) of the TMA (section 5(4)(a)), provides that a trade mark will not be registered if, or to the extent that, its use in the UK is liable to be prevented by any rule of law protecting an unregistered mark, in particular the law of passing off.

In SWORDERS Trade Mark, the Registrar of Trade Marks upheld an opposition to a trade mark application under section 5(4)(a) on the ground that the use by the trade mark applicant, which conducted a business in a different part of the country to the opponent, of SWORDERS in the locality of the opponent’s goodwill, would have given rise to a claim by the opponent for passing off (O-212-06). He concluded that, in the absence of a voluntary restriction on the geographical scope of the registration, the opposition succeeded.

In Redd Solicitors LLP v Red Legal Ltd, the Patents County Court considered a claim for infringement of the registered trade mark RED, registered for legal services, by a firm of licensed conveyancers trading under the name Red Legal ([2012] EWPCC 54). The court found that the defendant had sufficient local goodwill to rely on an action for passing off to prevent another party offering services under the name “Red Legal”, so that it had a defence to infringement of the RED mark under section 11(3). However, this did not afford a ground for invalidity of the RED mark under section 5(4)(a) because of the small scale of Red Legal’s trade up to the relevant date and the fact that it was focused on a particular locality.

Facts

C owned a chain of pizza restaurants located in and around Birmingham, having opened the first restaurant in 1991. C alleged that S, which opened a restaurant called the same name in Worcester in 2002, had infringed C’s word mark CASPIAN, registered in July 2005 for restaurants and related services, and a device mark comprising the words CASPIAN PIZZA and an image, registered for foodstuffs. C contended that the trade mark infringement commenced in December 2013, when a franchise agreement between C and S terminated.

C asserted that its goodwill associated with CASPIAN extended throughout the UK. S argued that it is in the nature of small pizza outlets that customers are local and the goodwill is correspondingly very limited in geographical scope. S’s evidence was that the Worcester restaurant was too far from Birmingham (about 30 miles) to compete with C’s restaurant.

Decision

S was not liable for trade mark infringement having had no material involvement in the pizza restaurant in Worcester after November 2013. S was not jointly liable because merely leasing the premises used for the restaurant to a third party that ran the restaurant could not qualify as active co-operation in the acts conducted by that party. The court went on to consider whether there had been any trade mark infringement.

Neither of the trade marks had been infringed because S could rely on a defence under section 11(3). Due to the drafting of section 11(3), in particular section 11(3)(a), section 11(3) could be read as meaning that, since C had started its pizza business in 1991, predating any earlier right of S, S had no defence. However, the court held that section 11(3) must be interpreted consistently with Article 6(2), and therefore section 11(3) does not enable a registered trade mark owner to claim priority dating from the first use anywhere of the mark before registration.

Since 2002, S’s pizza business in Worcester would have generated sufficient local goodwill to restrain the use by others of the CASPIAN name for a pizza business in Worcester. Therefore, Article 6(2) would prevent C from enforcing its CASPIAN marks in Worcester, despite the local goodwill it had generated since 1991 in Birmingham. As there was no evidence from C to the contrary, the court found C’s localised goodwill associated with the trading name CASPIAN had never reached Worcester.

The court also held the CASPIAN word mark invalid under Article 4(4)(b) of the Directive, implemented by section 5(4)(a). S was entitled to invoke section 5(4)(a) because on the dates on which C had registered the trade marks in 2005 and 2010, S was entitled to prevent another party trading in the sale of pizzas in Worcester under the CASPIAN name. In this regard, the court followed SWORDERS, rather than Redd Solicitors.

The device mark was not invalid because S had only used a similar logo since 2007, and so this use could not generate any earlier right on which S could rely. However, there was no infringement of either the word or the device mark.

The claim for passing off failed because C had not established that its goodwill extended as far as Worcester.

Comment

The decision is interesting because of the court’s comments on the operation of sections 11(3) and 5(4)(a) in cases involving parties using the same trade marks in different localities in the UK. The court declined to follow Redd Solicitors in relation to the application of section 5(4)(a) in these cases.

The court noted that the approach to section 5(4)(a) taken in Redd Solicitors was that the resolution of the conflicting rights of parties using the same trade mark in different localities would depend arbitrarily on which party first makes an application to register the mark. A may have the more geographically widespread business and a greater legitimate expectation of expanding further. B, using the same trade name in another part of the UK, may be satisfied with a business limited to a relatively small locality. But if B applies for a trade mark first, following Redd there would be nothing that A could do about it, except rely on its earlier right to provide a defence to infringement under section 11(3), a defence strictly limited in geographical scope. The approach in SWORDERS, allowing section 5(4)(a) to be relied on, was more likely to allow the court to set a fair territorial limit to the trade mark rights granted.

Case: Caspian Pizza Ltd and others v Shah and another [2015] EWHC 3567 (IPEC).

First published in the January/February 2016 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.

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