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| The Clock, Royal Courts of Justice Author Mike Quinn Licence CC BY-SA 2.0 Source Wikimedia Commons |
In The Battle of Revolax - Fox Group International Ltd v Teleta Pharma Ltd. (23 July 2021 NIPC Law) I discussed Her Honour Judge Melissa Clarke's judgment in Fox Group International Ltd v Teleta Pharma Ltd [2021] EWHC 1714 (IPEC) (23 June 2021),
"A Cautionary Tale"
Her Honour described that case as "a cautionary tale to potential claimants who are considering trade mark infringement proceedings against a potential defendant they suspect of trading in infringing goods." She said that had the claimant checked that suspect goods were in fact, infringing and not legitimate branded goods and had it checked that it had a legitimate right to register the trade mark that was alleged to have been infringed, it would not have had to discontinue a claim for trade mark infringement with the costs consequences that follow. Nor would it have found itself defending a counterclaim for trade mark invalidation on the grounds of bad faith, and damages for groundless threats pursuant to section 21A of The Trade Marks Act 1994."
Lessons for Business
As the claimant was a local company the purpose of this article is to alert other businesses in this region to the lessons to be drawn from that case.
Here is what went wrong:
- The claimant registered a trade mark to which it was not entitled;
- It threatened infringement proceedings against a distributor of lawfully acquired parallel imports;
- Such threat was actionable under s.21A; and
- It started infringement proceedings in the wrong court.
"Exclusive Distributor recognizes that trademarks, trade names, designs, copyright and other property rights included in the product possess are the unique property of Manufacturer ('ownership'). Exclusive Distributor do not have or acquire the rights, title and interest in this property. But Exclusive Distributor can mark 'Exclusive Distributor' consent with Manufacturer".
Despite that clause and advice from its trade mark attorneys that a distributor is not usually entitled to register the name of its supplier's product as a trade mark without the supplier's consent, the claimant applied to register REVOLAX as a British trade mark. It even tried to register REVOLAX as an EU trade mark even though it had distribution rights only for the UK. Moreover, Across had appointed other distributors in other EU member states.
The judge found that the claimant did not have Across's consent to apply for the trade mark and it was not reasonable for it to believe that it had such consent. It had applied for the UK trade mark to prevent other UK companies, including legitimate traders such as the defendant, from advertising for sale or selling Revolax in the UK, without consideration of the free movement of goods across the EU. In Her Honour's judgment, those actions were not consistent with good faith.
By obtaining the UK Trade Mark, the claimant has undermined and intended to undermine the purposes of the trade mark registration in that it
(i) took for itself rights which it knew belonged to Across; and
(ii) prevented consumers from identifying the true origin of Revolax products.
She was also satisfied that the claimant had sought to distort competition by intending to prevent even legitimate sales of Revolax in the UK by third-party sellers seeking to benefit from the free movement of goods across the EU.
She concluded that REVOLAX had been registered in bad faith within the meaning of s.3 (6) of the Trade Marks Act 1994 and that the registration should be declared invalid under s.47 (1) on the ground that the mark had been registered in breach of s.3.
The lesson here is that distributors should not attempt to register the name of their supplier's product as a trade mark without the express consent of the supplier.
Parallel Imports
The judge's finding that the claimant had sought to distort competition by preventing sales of Revolax from third-party sellers seeking to benefit from the free movement of goods across the EU requires further explanation.
The goods that the defendant marketed and distributed in the UK were "parallel imports". That is to say, they had been supplied by Across to its distributor in Poland, purchased from the Polish distributor and imported into the UK by one of the defendant's sister companies and resold to the defendant. When the claimant threatened proceedings, the UK was still a member of the EU. Art 36 of the Treaty on the Functioning of the European Union prohibited national intellectual property laws from being used to restrict trade imports into the UK from another EU member state That article would have provided a defence to an infringement claim even if the claimant's trade mark registration had been valid.
There is a related doctrine here called "exhaustion of rights". An intellectual property owner cannot prevent the movement of goods that he has placed or consented to be placed on the market of one EU member state into the market of another because he is entitled to asset his rights only once. It was expressed in
s.12 (1) of the Trade Marks Act 1994:
"A registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market in the European Economic Area under that trade mark by the proprietor or with his consent."
The doctrine did not apply in this case because nobody had a valid trade mark in the first place. But as a general rule, it is a good idea to check how the competing goods made their way to the market before accusing someone of trade mark infringement.
Threats Actions
In most areas of law, there is no legal sanction for threatening proceedings for wrongdoing if the accusation turns out to be groundless. In the case of patents, trade marks, registered, unregistered and supplementary unregistered designs, threatening infringement proceedings can be actionable unless the accusation is justified. S.21A of the Trade Marks Act 1994 provides:
"Subject to subsections (2) to (6), a threat of infringement proceedings made by any person is actionable by any person aggrieved by the threat."
The remedies for groundless threats include declarations that the threats are unjustified, injunctions against the continuance of the threat and damages in respect of any loss sustained by an aggrieved person by reason of such threats pursuant to s.21C (1).
The law used to be even more draconian in that almost any type of pre-action enquiry was actionable. Proceedings could be brought not only against the client on whose behalf the threat was made but also against the solicitor or trade mark attorney who conveyed the threat. An action against a solicitor and his client immediately gave rise to a conflict of interests obliging the client to change his representation at short notice. The law on threats actions has been reformed by the Intellectual Property (Unjustified Threats) Act 2017 which I discussed in The Intellectual Property (Unjustified Threats) Bill on 24 April 2021 in NIPC Law.
Despite the reform, the cause of action remains. Threats actions continue to snare the unwary as the Revolax case illustrates. It is now possible to enquire whether, or by whom, a registered trade mark has been infringed under s.21A (6), s.21B (1) (a) and s.21B (2) (b) of the Act. There are several more exceptions and defences. The law may be more complex than it was before the reform but it operates less unjustly. The third lesson for business owners is to familiarize themselves with the new provisions of the Trade Marks Act 1994 relating to threats (as well as the equivalent provisions in the patents and designs legislation) and make sure that their solicitors and patent and trade mark attorneys do the same.
Wrong Court
The infringement action was started in the Circuit Commercial Court and had to be transferred to the Intellectual Property Enterprise Court ("IPEC"). That is because the Circuit Commercial Court is part of the Queen's Bench Division and IPEC is part of the Chancery Division of the High Court of Justice. S.61 (1) and paragraph 1 of Schedule 1 of the Senior Courts Act 1981 allocate patents, trade marks, registered designs, copyright and design right cases to the Chancery Division. The action could have proceeded in the Liverpool District Registry because it is a chancery district registry within the meaning of para 16.2 of the Part 63 Practice Direction but it was sensible to transfer it to IPEC because the overall costs and the costs of each stage of the proceedings are capped in that court (see The New Patents County Court Rules 31 Oct 2010 NIPC Law).
Issuing proceedings in the Circuit Commercial Court is understandable because the same judge often sits in the Chancery Division and Circuit Commercial Court outside London. It is no big deal because transfer is generally straightforward but valuable time and costs can be saved by issuing proceedings in the right court in the first place.
Although IPEC is based in London para 1.6 of the IPEC Court Guide states:
"Particularly where it would save costs, IPEC trials will be heard outside London."
I am aware of only one case where that has actually happened (see Trade Marks: APT Training and Consultancy Ltd. and another v Birmingham & Solihull Mental Health NHS Trust 21 April 2019 NIPC Law). But I have obtained orders for IPEC trials to take place in the North. The usual problems have been finding a spare court rather than persuading an enterprise judge to take a train. So issuing an IP claim out of IPEC is the fourth lesson to be learnt from this case.
Further Infomation
Anyone wishing to discuss this article or any of the topics mentioned in it is welcome to call me on 020 7404 5252 during normal business hours or send me a message through my contact form at other times.
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