This month we report on the ECJ's decision in a case of breach of a licence agreement and free movement of goods in Copad v Christian Dior; and the AG opines on meaning of “reputation in the Community” in PAGO v Tirol Milch.  <top> 


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Ref no.  

ECJ
C‑17/08
MPDV Mikrolab GmbH v OHIM
(06.02.09)
(Decision not yet in English)

Application (and where applicable, earlier mark)  

MANUFACTURING SCORE CARD
- computer software, computer hardware (9)
- various business, management and recruitment services (35)
- technical advice, technical project planning, compilation of technical reports (42)

Comment  

The ECJ upheld the CFI’s finding that the mark was devoid of any distinctive character (Article 7(1)(b)) and was descriptive of the relevant goods and services (Article 7(1)(c)).


The ECJ held that, as the same ground for refusal existed for each class of goods and services, the CFI’s decision need not err by not including an analysis of each individual type of goods or services in its decision.


The CFI’s finding that the mark would be understood as meaning a score card on which production measurement and supervision data can be recorded, demonstrated that the CFI had correctly considered the descriptiveness of the mark as a whole and had not merely considered the descriptiveness of its individual elements.


The CFI had been correct in holding that it was not bound by the previous decisions of national trade mark authorities; the fact that the mark SCORE CARD had already been registered in an EU member state was therefore of no significance.

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Ref no.  

CFI
T-343/07
allsafe Jungfalk GmbH & Co. KG v OHIM
(25.03.09)
(Decision not yet in English)

Application (and where applicable, earlier mark)  

ALLSAFE
- metal building materials (6)
- vehicles and vehicle parts (12)
- sails, nets and textile belts (22) 
- marketing and administration in the area of vehicle, transport and structural design technology (35)
- transportation and vehicle equipping and testing (39)
- scientific and industrial research and development, particularly in the area of vehicle and transport technology (42)

Comment  

The CFI upheld the BoA’s decision to refuse the application under Articles 7(1)(b) and (c).


The CFI held that safety features were an important aspect of each of the types of goods applied for, including building materials.  In relation to each of the services applied for, these were clearly associated with transport by the wording of the application.  Safety would also be an important aspect of those services.  The relevant public would therefore view the mark as descriptive of the objective of the relevant goods and services; that is to ensure safety, particularly in relation to transport.  Furthermore, the ALLSAFE mark did not give a different overall impression to that of the sum of its parts (ALL and SAFE).


Having found the mark to be descriptive, its distinctive character was not examined by the CFI.

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Ref no.  

CFI
T-23/07
Borco-Marken-Import Matthiesen GmbH & Co. KG v OHIM
(
29.04.09)

Application (and where applicable, earlier mark)  



- alcoholic beverages (except beers), wines, sparkling wines and beverages containing wine (33)

Comment  

The CFI annulled the BoA’s decision to refuse the application under Article 7(1)(b).


The sign at issue was a figurative representation of the letter alpha, the Greek letter ‘a’. Since the goods were everyday consumer goods, the assessment of distinctiveness should be carried out by reference to the average Greek-speaking consumer.


The BoA had erred in taking the view that  single letters, of themselves, lacked the minimum degree of distinctive character.  It was clear from Article 4 and earlier case law (e.g. Immobilion (T-441/05)) that a mark must simply appear prima facie capable of enabling the relevant public to identify the origin of the goods in order to have the minimum degree of distinctive character under Article 7(1)(b).


The BoA’s conclusion that single letters, just like colours, must remain available to all was contrary to Article 4 and did not preclude the need for an examination as to whether the mark was capable of indicating origin.  The BoA’s finding that the public might view the mark as referring to quality (i.e, ‘A’ quality) was not a sufficient examination since no facts substantiating this finding were referred to.

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Ref no.  

CFI
T‑81/08
Enercon GmbH v OHIM
(29.04.09)
(Decision not yet in English)

Application (and where applicable, earlier mark)  

E-SHIP
- motors for boats, windlasses, generators, cranes, control modules for machines (7)
- nautical apparatus and instruments for high voltage current; computer programmes, computers, control units, measuring instruments, meteorological instruments, navigation systems (8)
- vessels for the carriage of people and goods on water; ship control systems (12)
- carriage of persons and goods by ship; loading/unloading of ships; ship rental, etc (39)

Comment  

The CFI upheld the BoA’s finding that the mark was descriptive of the relevant goods and services under Article 7(1)(c).


As all the goods and services fell under the category of shipping, a global analysis of the grounds for refusal for all goods and services was appropriate and the BoA was not required to have included an analysis in relation to each individual type of goods or services.


The CFI concluded that E-SHIP was descriptive as it could be understood both by the general public and the relevant trade circles as being descriptive of electric boats generally, services connected with electric boats, or carriage services booked electronically. The CFI rejected the Applicant’s submission that, because the ‘E’ in E-SHIP was intended to represent the first letter of the Applicant’s company name, the mark was not descriptive; a mark will be rejected even if a ground for refusal exists in relation to one interpretation only.


The Applicant submitted that if the E-SHIP mark was allowed to grant, it would be unable, by virtue of Article 12(b), to prevent its competitors from describing their products.  There was thus no need to keep the mark free for general use. This submission was rejected; Article 12 was intended to prevent holders of marks containing descriptive elements from asserting their marks to prevent competitors from describing their products.  The CFI added that, in any event, the provision could only be relied on as a defence in proceedings for trade mark infringement.

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Ref no.  

CFI
T-430/07
Bodegas Montebello, S.A.  v OHIM
(29.04.09)
(Decision not yet in English)

Application (and where applicable, earlier mark)  



- agricultural rum (33)
MONTEBELLO
- alcoholic beverages, except beers (33)
(Spanish national registration)

Comment  

The CFI upheld the BoA’s decision that there was no likelihood of confusion between the marks under Article 8(1)(b).


In respect of the similarity of the goods, the CFI upheld the BoA’s finding that the goods were not similar despite the fact that all goods were alcoholic drinks. The CFI agreed that the drinks were different in nature, origin, ingredients, methods of production, destination and use.


In respect of the marks, the BoA did not err in holding that the application consisted of a complex combination of figurative elements, which would not pass unnoticed by users. The combination of the figurative elements destroyed any likelihood of confusion that may have existed between the marks based on the presence of the term MONTEBELLO.

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General reasoning for a series of goods and services


Zuffa LLC v OHIM (CFI; joined cases T-379/05 and T-118/06; 02.04.09)


The CFI annulled two decisions of the BoA on the basis that the BoA failed to give adequate statements of reasons for those decisions.


Zuffa applied to register two word marks, ULTIMATE FIGHTING and ULTIMATE FIGHTING CHAMPIONSHIP, for a wide variety of goods and services spanning Classes 9, 16, 25, 28 and 41. OHIM rejected both applications under Articles 7(1)(b) and 7(1)(c). The BoA dismissed both appeals. In relation to the ULTIMATE FIGHTING mark, the BoA concluded that the mark denoted a type of combat and was devoid of any distinctive character with respect to all goods and services applied for, including those not related to that type of combat. In relation to the ULTIMATE FIGHTING CHAMPIONSHIP mark, the BoA concluded that the mark would be understood as meaning a competition organised in ultimate fighting and was descriptive of the services in Class 41 relating directly to the organisation of sporting events and devoid of distinctive character in relation to the other goods. The mark would not be perceived as an indicator of origin but as designating a sporting event in generic terms.


The CFI held that, where registration of a mark is sought for various goods and services, the BoA must determine that none of the Article 7(1) grounds for refusal applies in relation to each of the goods and services. The BoA may use general reasoning for a series of goods and services only to the extent that they all have a sufficiently direct and specific link such that they form a homogenous category. The mere fact that the goods and services are in the same class is not sufficient since those classes frequently contain a wide variety of goods and services which do not necessarily have a sufficiently direct and specific link to each other.


The applications in question covered more that 215 goods and 13 kinds of different services such as audio cassettes, cooking books, baby books, bows and arrows, and the provisions of information in the field of sport via computer networks. The differences between the goods and services were such that they could not constitute a homogenous category that would allow the BoA to adopt a general statement of reasons.


In relation to the ULITIMATE FIGHTING mark, the BoA had only distinguished between goods and services directly related to fighting and those which were not.  However, the BoA did not specifically identify the goods and services which directly related to fighting and therefore the connection between the goods and services was not apparent from the BoA’s decision. Furthermore, it was apparent that the goods and services displayed such heterogeneity that the statement of reasons was excessively general and abstract.


In relation to the ULTIMATE FIGHTING CHAMPIONSHIP mark, the services in Class 41 did not form a sufficiently homogenous category so as to enable the BoA to give a general statement of reasons. The diversity of the remaining goods and services was even more significant and again the BoA was not justified in only giving a general statement of reasons.


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Construction of the term ‘reputation in the Community’


PAGO International GmbH v Tirol Milch registrierte Genossenschaft mbH (Opinion of AG Sharpston for the ECJ; C-301/07; 30.04.09)


Pago owned a complex CTM for fruit drinks and fruit juices. The mark included a representation of a green glass bottle (used by Pago for a number of years) with a distinctive label and cap next to a full glass of fruit drink.



Tirol Milch marketed in Austria a fruit and whey drink called Lattella packaged in glass bottles whose design resembled that depicted in Pago’s CTM. In Tirol Milch’s advertising it used a bottle next to a full glass.


The parties agreed that there was no likelihood of confusion since the bottles were labelled ‘Pago’ and ‘La Tamiflutella’ respectively and both names were widely known in Austria.


Pago sought an injunction in Austria under Article 9(1)(c) of the Regulation (similar to Article 5(2) of the Directive). The first instance Court granted the injunction, but that decision was overturned on appeal. On a further appeal, the Oberster Gerichtshof sought guidance from the ECJ as to how to construe the phrase ‘[has] a reputation in the Community’.


By its first question, the referring Court asked whether a CTM is protected in the whole of the Community under Article 9(1)(c) if it has a reputation only in one Member State.


The AG applied General Motors (C-375/97) (which interpreted Article 5(2) of the Directive 89/04) and concluded that a CTM can be protected in the whole Community under Article 9(1)(c) if it has a reputation in a substantial part of the Community. What constitutes a substantial part was not dependent on national boundaries (this would be contrary to the premise that the CTM is unitary in character) but must be determined by an assessment of all the relevant circumstances taking into account, in particular (i) the public concerned and the proportion of that public which knows of the mark and (ii) the importance of the area in which the reputation exists, as defined by factors such as its geographical extent, population and economic significance. The AG indicated that she did not consider that a trade mark with reputation only in one member state would qualify.


By its second question, the Austrian Court asked essentially whether a CTM which has a reputation in an area that is not a substantial part of the Community is nonetheless protected in that area (which may coincide with the territory of one or more Member States), so that a prohibition against infringement limited to that area may be issued.  The AG suggested that this question should be answered in the negative. Since the protection afforded to a CTM was so extensive, the conditions laid down in Article 9(1)(c) should be satisfied in full before it was triggered. Where a mark has a reputation in a substantial part of a Member State but not in a substantial part of the Community, a national registration will be necessary to protect that reputation.

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Breach of licence agreement and free movement of goods


Copad SA v Christian Dior couture SA, Vincent Gladel as liquidator of Société industrielle lingerie and Société industrielle lingerie (ECJ (First Chamber); C-59/08; 23.04.09)


The ECJ has given guidance on Articles 7 and 8(2) of the Directive.


In 2000, Dior entered into a trade mark licence agreement with Société industrielle lingerie (SIL) in respect of the manufacture and distribution of luxury corsetry goods bearing the CHRISTIAN DIOR trade mark, which was owned by Dior.


Clause 8.2 of the agreement provided that, in order to maintain the repute and prestige of the CHRISTIAN DIOR trade mark, SIL agreed not to sell the licensed goods to inter alia wholesalers, discount stores, mail order companies and door-to-door companies, and to make all necessary provisions to ensure its distributors and retailers also complied with this requirement.


When SIL was faced with economic difficulties it asked Dior to waive this obligation and allow sales outside the selective distribution network. Dior refused this request.  Despite the refusal and in breach of the contractual obligation, SIL sold goods bearing the CHRISTIAN DIOR trade mark to Copad, a company operating a discount store business.


Dior brought an action for trade mark infringement against SIL and Copad in the French Courts. The Bobigny regional Court found that the licence breach was a contractual matter and did not constitute infringement. On appeal by Dior, the Cour d’appel de Paris agreed, finding that the sales by SIL did not constitute infringement as the Clause 8.2 conditions of the licence agreement fell outside the specific provisions of Article 8(2), which, if contravened, permit a proprietor to invoke the rights conferred by a trade mark against a licensee. However, the Court also found that the sales had not exhausted Dior’s trade marks rights under Article 7(1). Copad appealed and Dior cross-appealed to the Cour de Cassation, which referred a number of questions on the interpretation of Articles 7 and 8(2) to the ECJ.


The ECJ ruled that the grounds laid out in Article 8(2) were exhaustive. This was because they were not preceded by an adverb or expression such as ‘especially’ or ‘in particular’ which would allow a finding that the listed grounds were simply guidance.


One of the grounds in Article 8(2) which allows a proprietor to invoke its trade mark rights is the breach by a licensee of any provision regarding the ‘the quality of the goods manufactured…by the licensee’. The ECJ ruled that the quality of luxury goods, such as the ones at stake, was not just the result of their material characteristics, but also of the allure and prestigious image which bestowed upon them an aura of luxury.  Impairment of that aura of luxury would be likely to affect the actual quality of those goods. A selective distribution system ensures that the goods are displayed in sales outlets in a manner that enhances their value. It was conceivable that the sale of luxury goods to third parties not part of that selection distribution network might affect the quality of the goods. A contractual provision prohibiting such a sale would fall within Article 8(2) although it was a question of fact for the national Court whether the goods’ aura of luxury, and thus their quality, was affected.


In relation to the Article 7 questions, it was well-established case law that where a licensee puts goods bearing the mark onto the market he will, as a rule, be considered to be doing so with the consent of the trade mark proprietor for the purposes of Article 7(1). However, a licence agreement does not constitute the trade mark proprietor’s absolute and unconditional consent. Contravention of a provision in a licence agreement that is listed in Article 8(2) will mean that the licensee is putting the goods onto the market without the trade mark proprietor’s consent.


Article 7(2) provides that Article 7(1) does not apply if there exist legitimate reasons for the trade mark proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market. The ECJ held that the use of ‘especially’ meant that the situations following it were only examples of legitimate reasons, and that damage done to the reputation of the trade mark may, in principle, be a legitimate reason for Article 7(1) not to apply.


The ECJ stated that a balance had to be struck between the trade mark proprietor’s legitimate interest in ensuring that the mark’s reputation was not damaged, and the discount store’s legitimate interest in being able to resell the goods in question by using methods customary to its sector or trade. In particular, it was necessary to take into consideration the parties to whom the luxury goods were resold and the specific circumstances in which they were put on the market. A contractual provision preventing certain resale of the goods could form the basis of an Article 7(2) objection only if, in the particular circumstances of the case, such resale damaged the reputation of the trade mark.


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Late filing of evidence in support of a CTM opposition


K & L Ruppert Stiftung & Co. Handels-KG v OHIM; Natália Cristina Lopes de Almeida Cunha and others (ECJ (Eighth Chamber); C-90/08; 05.03.09) (Decision not yet in English)


K & L Ruppert Stiftung & Co. Handels-KG (“Ruppert”) lodged an opposition against the registration of a figurative mark by three Portuguese individuals under Article 8(1)(b) based on earlier German and international marks. OHIM granted Ruppert an 8 week period expiring on 9 July 2002 in which to provide evidence of use of the earlier marks. On 9 July 2002, Ruppert’s representative, on the basis of Rule 71(1) of Regulation 2868/95, submitted a fax at 16:56 pm requesting an 8 week extension giving the reason that they had not yet received documents from the opposing party but would remind them to make the documents quickly available. The relevant part of Rule 71(1) allows OHIM, where appropriate, to grant an extension provided the request is submitted before the original period expired.


OHIM refused to grant the extension because the request did not provide any unforeseen or exceptional circumstances as the reason for the delay. Despite OHIM’s refusal, on 6 September 2002 Ruppert submitted documents as proof of use of the earlier marks. At the opposition proceedings, the Opposition Division did not consider the evidence submitted after the time-limit and rejected Ruppert’s opposition based on its failure to provide proof of use. The BoA and the CFI rejected Ruppert’s appeal.


Ruppert appealed to the ECJ, alleging that the CFI had: 



(i)       Infringed Rule 71(1). In particular, Ruppert submitted that the CFI failed to have regard to the fact that Regulation 40/94 contains no rules on possible grounds for an extension of the period specified. This argument was rejected by the ECJ on the basis that the wording of Rule 71(1) was sufficiently clear. According to Ruppert, the CFI also failed to consider that, at the material time, the Rule had not been further defined by guidelines for oppositions or other instructions from OHIM, so that no possible interpretations of the permissible grounds for extensions of the period were available. This submission was also rejected by the ECJ on the basis that there was nothing to suggest that the CFI would have interpreted the Rule differently had the CFI taken this fact into account.


(ii)     Disregarded its duty to state reasons, as it did not investigate Ruppert submission that at the time of the application for an extension there were no legal rules and no basis for interpretation of the wording of requests for extensions. The ECJ held that the CFI was under no such duty. Legal rules were indeed available, i.e. Rule 71(1) itself. With regard to lack of basis for interpretation of the wording of requests for extensions, the ECJ held this submission to lack relevance, as it had already (in response to (i) above) established that there was nothing to suggest that the CFI would have interpreted Rule 71(1) differently had the CFI taken this fact into account. As reasons were attached to the request for an extension, Ruppert further submitted that the CFI should have explained the legal basis on which the reasons stated for the request for an extension were to be regarded as insufficient. However, the ECJ rejected this on the basis that the CFI was under no such duty.


(iii)    Infringed Article 74(2) of Regulation 40/94 by misinterpreting that provision as meaning that OHIM had no discretion to take account of evidence adduced late in the opposition proceedings. According to Ruppert, it had failed to have regard to the fact that the BoA has a general discretion which is not excluded by the provisions of Article 43 and the second sentence of Rule 22(2) of Regulation 2868/95. The ECJ dismissed this submission, holding that, pursuant to the judgment given in OHIM v Kaul (C-29/05), the CFI had been correct to hold that under Article 74(2) OHIM has a measure of discretion as regards evidence submitted after an expiry of a time-limit, although there is no unconditional obligation to exercise such discretion. 


On the basis of the above, the ECJ dismissed the appeal in its entirety.


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Suitability of the trial of a preliminary issue in a malicious falsehood action


Ajinomoto Sweeteners Europe SAS v Asda Stores Ltd* (Sir Charles Gray; [2009] EWHC 781 (QB); 08.04.09)


In this malicious falsehood action the Claimant, Ajinomoto, sought an order for the trial of a preliminary issue.


Ajinomoto is one of a number of companies which manufactures and supplies an artificial sweetener called aspartame. In May 2007, Asda commenced a campaign which was designed to ensure that, by the end of that year, none of its own-label food and soft drinks products would contain any artificial colours or flavours or any hydrogenated fat or flavour enhancers. Asda also committed to the replacement of aspartame in its low calorie products with an alternative sweetener made from sugar, namely sucralose. Asda’s press release and packaging contained the catch-phrase “no hidden nasties”. One of the statements used on packaging in conjunction with the catch-phrase was “no artificial colours or flavours, no aspartame and no hydrogenated fat”.


According to Ajinomoto, the natural and ordinary meaning of the words on the packaging was that aspartame is an especially harmful or unhealthy sweetener and was one which consumers concerned for their health would do well to avoid. Ajinomoto applied for the meaning of the words to be decided as a preliminary issue.


Sir Charles Gray noted that the major consideration on any application for the trial of a preliminary issue was whether the trial would save costs, subject always to the proviso that no order would be made if it would or might cause unfairness to the opposite party to hive off the issue in question.


The judge accepted that if Ajinomoto’s meaning was rejected, that would be an end to the case. If, on the other hand, Ajinomoto’s view of the natural and ordinary meaning was upheld, Asda would know what Ajinomoto had to establish in order to succeed on the issues of falsity and malice and this may assist the parties when they came to consider their respective positions. The judge readily acknowledged that any trial of the issue of the safety of aspartame would be prolonged and exceedingly costly to the parties, as it would require scientific and medical evidence by experts and a minute examination of the conclusions arrived at by various regulatory bodies.


Asda’s counsel expressed a concern that Ajinomoto may, if successful upon the trial of the preliminary issue, thereafter seek an order for the trial of falsity in advance of any trial in relation to malice. Asda’s counsel submitted that it was improper for Ajinomoto to slice up the issues in this way. However, since Ajinomoto’s counsel confirmed that it did not intend to seek a separate trial of the issue of falsity prior to the issue of malice, this concern was unfounded.


The judge concluded that the issue as to the meaning of the words complained of was suitable for trial as a separate preliminary issue. A preliminary determination would, whichever way it was decided, assist the parties to know where they stood and may well result in a considerable saving in costs.


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Injurious falsehood claim in relation to statements made in election campaign


Christopher John Quinton v (1) Robin Heys Peirce (2) James David Cooper* (Eady J; [2009] EWHC 912 (QB); 30.04.09)


Eady J rejected the claims of injurious falsehood and infringement of the Data Protection Act 1998 brought by the Claimant, Mr Quinton, against the Defendants, Mr Peirce and Mr Copper. Only the part of the judgment relating to injurious falsehood only is summarised below.


Mr Quinton was the Conservative district council candidate for Woodcote, Oxfordshire, in the elections of May 2007. He was defeated by the Liberal Democrat candidate, Mr Peirce. Four years earlier, in the elections of May 2003, the positions had been reversed and Mr Peirce was ousted by Mr Quinton. The Second Defendant, Mr Cooper, was Mr Peirce’s election agent.


Mr Quinton alleged that an election leaflet published by Mr Peirce contained a number of untrue factual statements and was published maliciously. The criticisms centred upon planning policy and its implications for potential housing developments in and around Woodcote.


The parties advanced different meanings in their pleading as to the statements made in the leaflet. Eady J noted that the general approach, supported by authority, was to focus upon the natural and ordinary meaning that would be conveyed to the ordinary reader of the election address (following Ajinomoto Sweeteners v Asda, reported above). Eady J further held that it was logical in the present context to adopt the “single meaning” rule since, unless the court made a finding on meaning, it would not be possible to decide whether the words were true or false.


Eady J rejected the Defendant’s submission that there should be blanket immunity for statements made in the course of election campaigning. There was no authority for this position and, in addition, there was no reason to apply a different principle here to that in defamation, where no specific privilege arose from the fact that statement was made in such a context.


Eady J concluded that the leaflet was not false or inaccurate, or at least did not significantly misrepresent the essential facts. Although Mr Pierce was partial, biased and hard-hitting, he was not dishonest in his representations in the leaflet. Mr Peirce may not have liked Mr Quinton personally, but that dislike was not to be equated with malice. Eady J noted that the hurdle of establishing malice was high (Spring v Guardian Assurance [1993] 2 All ER 273 referred to). In relation to Mr Cooper, it had not been demonstrated that his role was in any way infected by malice. Thus the claim based on injurious falsehood was dismissed.


Eady J went on to consider the question of pecuniary loss. He concluded that the words were calculated to cause Mr Quinton pecuniary loss, as they were likely to put his council allowances in jeopardy. However, in relation to actual financial loss, Mr Quinton had not discharged the burden of proving causation; although the leaflet may have played a significant part in swinging the election Mr Peirce’s way, there were other factors at work and it was not possible to say that the leaflet had caused Mr Quinton to lose his seat.


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Interpretation of a restrictive covenant in a franchise agreement


ChipsAway International Ltd v Kerr* (Dyson, Thomas and Richards LJJ; [2009] EWCA Civ 320; 11.03.09)


The Court of Appeal held that a former franchisee who carried on a car-care business following the termination of a franchise agreement was acting in breach of a restrictive covenant.


The Claimant, ChipsAway, owned rights and know-how in a system for restoring damage to the bodywork of cars, and also supplied products used in the system. It was a franchise business only. The Defendant, Kerr, was granted a franchise in the Banbury area. The franchise agreement contained various restrictive covenants, one of which provided that, for a period of 12 months following the termination of the agreement, Kerr could not without ChipsAway’s prior consent “be engaged in any capacity in any business which competes with the Business (as carried on at the date of termination or assignment) within the Territory”. “Business” was defined as the provision by Kerr of a service repairing damage to vehicle paintwork within the Territory using the ChipsAway system. At the end of the term of the agreement, Kerr did not renew the franchise. However he carried on a business at the same premises which included providing a service of repairing damage to vehicles, although not using ChipsAway’s products or name.


The trial judge interpreted the restrictive covenant as only preventing Kerr from competing if, during the twelve months after termination, there was a successor in the territory. As there was no other ChipsAway business in the territory, Kerr was not in breach.  ChipsAway appealed.


Dyson LJ held that the trial judge rightly recognised that, on a literal interpretation, the restrictive covenant made no sense. In effect it restrained Kerr from competing with himself. Therefore some rewriting of the clause was necessary. However, Dyson LJ rejected the judge’s interpretation. Dyson LJ’s fundamental objection was that the interpretation did not achieve a sensible commercial purpose. The purpose of the restrictive covenant was to prevent Kerr for a period of time from competing in his former territory in the same line of business, so as to allow ChipsAway breathing space in which to establish a replacement franchisee and to protect its goodwill. The fact that ChipsAway did not actually seek a replacement was not relevant as the meaning of the clause could not depend on what happened after the contract was made.


Lastly, Dyson LJ noted a practical problem with the judge’s interpretation: if the clause did not bite until the replacement franchisee was appointed then, unless Kerr monitored the situation regularly or ChipsAway informed him, Kerr would not know whether and when the clause started to bite and he should cease to trade.


The appeal was therefore allowed.


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COPYRIGHT


Falco Privatstiftung and Thomas Rabitsch v Gisela Weller-Lindhorst (ECJ (Fourth Chamber); C-533/07; 23.04.09)


The reference was made in proceedings between Falco Privatstiftung (“F”) a foundation established in Vienna and Mr Rabitsch (“R”) residing in Vienna and Ms Weller-Lindhorst (“ML”) domiciled in Munich.  F and R were responsible for administering the copyright of the late Austrian rap star Falco. F and R brought proceedings in Austria against ML for the payment of royalties, calculated by reference to, inter alia, video recordings and audio recordings. F and R’s claim in relation to the video recordings was based on the terms of a contract. The claim in relation to the audio recordings was based on copyright infringement.


At first instance, the Handelsgericht Wien (Commercial Court, Vienna), held that it had jurisdiction to rule on both claims. Since the audio recordings were sold in Austria the Court declared itself competent to hear the copyright infringement allegation.  Given the close connection between the copyright infringement action and the claim for royalties under the licence for the video recordings, the Court concluded that it also had jurisdiction to hear this part, pursuant to Article 5(3) of Regulation 44/2001. Article 5(3) provides that, in matters relating to tort, a person domiciled in one Member State may be sued in courts of another Member State if the harmful event occurred (or may occur) there. On appeal, the Oberlandesgericht Wien (Higher Regional Court, Vienna) confirmed jurisdiction of the copyright claim. However, it held that Article 5(3) was not applicable to contractual rights. The Court also held that the second indent of Article 5(1)(b) (which provides that, in contracts for the provision of services, a person domiciled in one Member State may be sued in the courts of another Member State where the services were, or should have been, provided) was not applicable, since the contract in question was not a contract for the provision of services within the meaning of that provision.


An appeal on a point of law was brought before the Oberster Gerichtshof (Supreme Court). The Court noted that the concept of ‘provision of services’ was not defined in Regulation 44/2001 and referred three questions to the ECJ. The second question fell away as a result of the answer to the first.



(1)   The ECJ, agreeing with the Advocate General and the observations of the German, Italian and UK governments, held that a contract under which the owner of an intellectual property right grants the other contracting party the right to use that right (a licence agreement) is not a contract regarding ‘the provision of services’ within the meaning of Article 5(1)(b). This was because Article 5(1)(b) was a rule of special jurisdiction (as opposed the general rule of domiciled-based jurisdiction). Accordingly, as an exception to the general rule, it should not be interpreted too broadly.


The concept of ‘service’ implied, as a minimum, that the party who provided the service carried out a particular activity in return for remuneration. It could not be inferred from a contract under which the owner of an intellectual property right grants the right to use that right in return for remuneration that such an activity was involved. The only obligation which the owner of the right undertook with regard to its contractual partner was not to challenge the use of that right by the latter.


(2)   In order to determine, under Article 5(1)(a), which Court has jurisdiction over an application for remuneration owed pursuant to a contract of the type described in (1) above, reference must continue to be made to the principles which result from the Court’s case law relating to Article 5(1) of the Brussels Convention.


This was because of the near-identical copy of the wording of the two pieces of legislation. Although Regulation 44/2001 was intended to update the Brussels Convention, it sought at the same time to retain its structure and basic principles and to ensure its continuity. Moreover, the continuity of interpretation was consistent with the requirements of legal certainty which dictated that the long-standing case law of the Court, which the Community legislature did not intend to alter, should not be called into question. 


Katharine Stephens, Zoe Fuller and Alice Sculthorpe


Note from the editors:Readers are reminded that Council Regulation 207/2009 (codifying and repealing Regulation 40/94) came into force on 13 April


Reporter’s note: We are grateful to our colleagues at Bird & Bird LLP for their assistance with the preparation of this report: Cristina Garrigues, Emilia Linde, Nick Aries, Nick Boydell, Oliver Stanley and Tim Harris


ECJ and CFI decisions can be found at http://curia.eu.int/en/content/juris/index_form.htm and the reported cases marked * can be found at http://www.bailii.org/databases.html#ew

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