Legal developments

Court of Justice rules on the effect of community trademarks with a reputation

Registering a trademark is a key step in protecting it, but a business cannot register a trademark for particular goods and services if the public are likely to be confused because of the similarity between that trademark and an earlier trademark registered by someone else and the similarity between the goods and services which the two trademarks would cover.

The prohibition is even wider where the earlier trademark has a reputation. In these cases the goods and services covered by the two trademarks need not be similar: the fact that the use of the later trademark would take unfair advantage of the earlier trademark’s reputation, or would be detrimental to that reputation, may be enough to prevent it being registered.

Where the earlier trademark is a community trademark, its owner has to show that its reputation extends across a substantial part of the EU, but a reputation in just one member state might be sufficient.

Now the European Court of Justice has ruled that even if the later application is only for a national registration in just one member state, it could still be blocked by an earlier community trademark even if that earlier trademark does not have a reputation in that state: it is sufficient that a commercially significant part of the public in that state is familiar with the earlier trademark and makes a connection between the two trademarks.

This ruling increases the value of community trademarks, but businesses now need to be even more careful when choosing a trademark even if they only intend to register it in the UK.

Iron & Smith kft v Unilever NV

Notice periods may have to be exact

The High Court has ruled that a term in a contract requiring one party to give the other six months’ notice of termination meant just that, with the consequence that the notice served was invalid. This put the party serving the notice in breach of contract and entitled the recipient to claim damages.

In reaching this decision the court declined to follow the decision in Davstone (Holdings) Ltd v Al-Rifai (1976). In that case, where the judge was asked to decide that “three months’ notice” meant three months’ notice and not more, he said:  “… to my mind [that would be] inconsistent with the ordinary use of language. In universally accepted practice, a requirement of three months’ previous notice expiring on a specified date means notice of not less than three months expiring on that date …”

Instead the court relied on more recent decisions on the interpretation of contracts, and the serious consequences for the recipient of the notice if it could have been longer than six months, to conclude that the clause meant exactly what it said: six months, not a day less and not a day more.

This decision could have serious implications for many ordinary commercial contracts, and businesses should consider taking legal advice before serving any important notices.

Flanagan v Liontrust Investment Partners LLP

Instalment payments may be forfeited 

The High Court has ruled that the seller of certain items who had terminated the contract after the buyer defaulted on a payment instalment was entitled to keep the instalments which the buyer had already paid. This meant that the buyer had paid £5 million without getting anything in return.

This unfortunate outcome could have been avoided by using appropriate terms in the contract, so businesses should take legal advice before entering into contracts based on payment by instalments.

Any business could find itself having to make a payment instalment later than provided for in the contract, but it should review its legal position very carefully – it may prove much cheaper to borrow the money to pay on time than to forfeit the previous payments.

Cadogan Petroleum Holdings Ltd v Global Process Systems LLC

One-off incident was unlawful as an unfair trading practice

The Consumer Protection from Unfair Trading Regulations create five offences in the context of commercial practices. In a case involving the supply of a CCTV system and security equipment and services to a consumer, the Court of Appeal has ruled that a single act or incident can be a “commercial practice”: it need not involve repeated conduct.

This development makes it especially important that businesses which sell to consumers should review their staff training regularly.

R v X

Director held personally liable for company’s legal costs

In a case where a company had lost a case brought against it, and had subsequently gone into insolvent liquidation, the Court of Appeal has ruled that a director of the company should have to pay the claimant’s legal costs.

This is a useful reminder that directors are not always completely isolated from the consequences of their company’s actions. 

Threlfall  V ECD Insight Ltd

Agreement unenforceable because of lack of notice of right to cancel

The Court of Appeal has ruled that where a consumer contacted a company which hired out vehicles, the contract was not made over the telephone but when the consumer completed the paperwork when the vehicle was delivered to his home, and that as the paperwork did not inform him of his right to cancel the contract it was unenforceable against him.

On this occasion the company was suing its insurer, and as the customer was not bound by the contract it followed that the insurance company did not have to pay under the policy, but the decision means that the customer could have avoided paying for the vehicle.

The duty to include a notice of the customer’s right to cancel the contract arises in various situations, and this case shows that the consequences of failing to do so can be serious. Businesses which sell to consumers should review their existing contracts and their standard contract documentation.

Salat v Barutis 

The importance of marking designs

New regulations mean that the owner of a registered community design (i.e. a design covering the whole of the EU) will not be able to obtain damages from an infringer unless he is able to show that the infringer knew that the design had been registered, or had grounds for believing that it had been registered. The mere fact that the design has been marked “registered design” will not be sufficient unless the number of the registered design also appears.

This brings the law relating to registered community designs into line with the law relating to UK registered designs.

Owners of both kinds of registered design should ensure that adverts, packaging, leaflets etc all identify the registration number.

The Community Design (Amendment) Regulations 2014

Director personally bound by contract

The Court of Appeal has ruled that a director was personally party to a contract.

The director and owner of a company which traded under the name “Moon Furniture” owned some land on which he wanted to build a showroom for the company’s use. He engaged a contractor to provide certain engineering services. He recorded the pricing in a letter to the contractor. It was written under the heading “Moon Furniture”, and he signed his name above his typed name, which was above the name “Moon Furniture”. There was no indication that he was signing on behalf of the company.

The Court of Appeal ruled that he had not made it plain that it did not bind him personally, and the reference to Moon Furniture without any indication that it was the company’s trading name did not qualify his signature.

This case provides a useful reminder of the need for directors to use an appropriate signature clause on letters and emails if the company is supposed to be the party.

Hamid v Francis Bradshaw Partnership

Victoria’s Secret’s European expansion infringed PINK trademark

The High Court has ruled that the well-known retail outlet, Victoria’s Secret, infringed the EU and UK trademarks owned by the clothing retailer Thomas Pink, famous for its pink shirts.

Victoria’s Secret launched its PINK sub-brand in the US. Thomas Pink complained, but it would appear that it was not such a great commercial issue at that time and the two companies entered into a co-existence agreement. However, Thomas Pink did register its trademark for the UK and the EU.

Following the success of its PINK sub-brand in the US, Victoria’s Secret launched a project to roll-out the brand in Europe. This time Thomas Pink sued.

The court rejected Victoria’s Secret’s submission that there was no likelihood of confusion because of the nature of the clothes each company sold, and because it used the words VICTORIA’S SECRET alongside the PINK sub-brand. It ruled that the US co-existence agreement was irrelevant to its European activities and that although Victoria’s Secret had acted in good faith, that did not save it because it had failed to undertake a trademark search and had failed to understand the strength of Thomas Pink’s trademark rights in Europe.

The key point for businesses is the importance of the territorial nature of trademarks and legal systems. Although a business may have used a trademark in one country for many years without any problems, it is not safe to assume that it will be all right to start using it in another country or in connection with different products.

Thomas Pink Ltd v Victoria’s Secret UK Ltd

Court assesses value of unregistered design right

When a claimant’s design rights have been infringed, it can either claim compensation for its losses or it can claim the profit which the defendant has made from the infringement.

The defendant had infringed the claimant’s unregistered design right, which related to a small part of a contact lens cleaning device. The court ruled that its assessment should take account of the functional importance of the infringed design, but that it could not attribute a part of the total profit to the design simply by measuring its physical proportion to the whole device. Recognising that it was not in a position to determine the functional importance of the design, it adopted a broad-brush approach and allocated 2% of the total profit to the infringed design.

Owners of design rights can take some comfort from this case as it shows that the courts will strive to uphold their right to a share of an infringer’s profit even where the assessment is difficult and independent evidence is unavailable.

Ifejika v Lens Care Limited

High Court declines to order store selling infringing products to disclose its sources

The claimant was a large retailer with a range of own-brand goods. It had registered its brand as a trademark and complained when it learned that the defendant, an end-of-line retailer, was selling some of the claimant’s branded goods at reduced prices. The defendant quickly admitted liability and agreed to settle the claim, demonstrating the value of registered trademarks.

The case took an interesting twist when the claimant demanded to know who had supplied the goods in question to the defendant so that it could take action against them too. The defendant refused to provide this information, claiming that the retail market for end-of-line goods is a relatively small one, and that it might find itself blacklisted by its suppliers if it disclosed their identities. The claimant then asked the court to compel the defendant to disclose its suppliers’ identities.

The court ruled that the potential prejudice to the defendant outweighed the claimant’s need for the information. This might seem a little surprising, but the court gave great weight to the fact that the defendant had been so quick to admit liability and agree a settlement.

A court’s decision whether to grant these disclosure orders is very dependent on the particular facts of each case, but this decision does show that there can sometimes be advantages in admitting liability quickly rather than dragging matters out and litigating a hopeless case.

Wilko Retail Ltd v Buyology Ltd

Flagship Apple stores as trademarks

The European Court of Justice has ruled that in principle Apple could register the interior of one of its flagship stores as a trademark.

Apple Inc v Deutsches Patent und Markenamt

No limits on the exercise of contractual rights

The High Court had ruled that a party to a contract could not exercise a discretion he had under the contract in an arbitrary, capricious or irrational manner, but the Court of Appeal has ruled otherwise.

As a result of this decision, businesses should consider including an explicit term to this effect in their contracts.

Mid-Essex Hospital Services NHS Trust v Compass Group UK and Ireland Ltd

Links to material on a third party’s website may not infringe copyright

The European Court of Justice has ruled that a company which provided links to materials on a newspaper website did not infringe the copyright in those materials.

The claimant’s materials had appeared on its website, where they were freely available for viewing by anyone who wished to view them. The defendant had provided its customers with lists of links to certain categories of materials, according to their preferences, and these included links to the claimant’s materials. The claimant sought payment from the defendant for its use of those materials.

The court ruled that as the materials had already been made freely available to the general public, the defendant’s links did not communicate them to a new group and therefore did not infringe the defendant’s copyright. The claimant therefore lost out on the additional revenue which it believed it was entitled to.

To avoid the same fate, creators of copyright materials should review the terms on which they license their materials.

Svensson and others v Retriever Sverige AB

Informal software licence did not cover service contract extension

The High Court has ruled that an informal licence permitting the use of certain software in connection with the service received under a service contract did not automatically cover extensions to that contract.

The service contract gave the recipient of the service the right to extend the contract by successive 6-month periods up to a maximum of three years. The court ruled that the informal licence had automatically been extended too when the contract had been extended by 6 months, but that it came to an end when the parties subsequently agreed to extend the contract by more than six months. This meant that the recipient was infringing a third party’s copyright in the software.

Although this decision might seem surprising, the court’s reasoning was logical and the message is clear: whenever any copyright-protected work is an important component of a service, it is essential to include the user-licence – and its application to any extension periods – in the main contract.

Businesses which have already signed up to such an arrangement should take legal advice before extending the underlying service contract in order to avoid similar consequences.

Noemalife SpA v Infinitt UK Ltd

Bondage equipment design rights

The claimant sued the defendant for infringing its design rights in a metal frame and leather sling intended to be used in recreational bondage activities.

The claimant had commissioned the design of the frame, so it owned the design rights and the court ruled that the defendant had infringed them.

So far as the leather sling was concerned, the court ruled that the shapes of some parts were sufficiently original to be protected by design rights. Although that protection would have been lost if the shapes had been dictated by the need to fit the user – this is left to the reader’s imagination! – the court ruled that was not the case here. However, it also ruled that the claimant did not own those design rights as there was no evidence that it employed the designer at the time, or that he had assigned his rights to the company, so that part of its case failed.

This case is a reminder of the importance of documenting IP issues in a written contract whenever any design work is being undertaken, whether for bondage equipment or anything else.

Uwug Ltd v Derek Ball trading as RED

Trademark registration declared invalid because of owner’s bad faith

As a general rule, our trademark system gives the right to control the use of a trademark to whoever registers it first rather than the person who started using it first. This can cause problems for businesses which have failed to register their trademarks.

But there are some exceptions to this general rule, and in this case the court not only dismissed the claim but also ruled the registration invalid on the ground that it had been registered in bad faith. It reached this conclusion on the ground that the claimant’s managing director had looked at the defendant’s website regularly, and either knew of the defendant’s business under that name or deliberately turned a blind eye to it.

While this case provides a useful example of one of the ways in which a business with a valid interest in a trademark may be allowed to continue using it after someone else has registered it, it is also a reminder of the importance of registering trademarks – registration is so much cheaper, and more certain and less stressful, than litigation.

Frost Products Ltd v F C Frost Ltd

Fruit punnet infringed design right

The claimant’s fruit punnets included an unusual combination of a rounded corner on the top rim and a chamfered corner in the walls and the court ruled that the defendant’s punnet was made substantially to the same design and infringed the claimant’s UK unregistered design rights.

As this case shows, design rights can cover many aspects of a product. As the cost of losing an infringement case can be substantial, businesses should ensure that their design processes include a review to check that they do not take too much inspiration from other product designs.

Sealed Air Ltd v Sharp Interpack Ltd

Packaging as trade marks

The EU General Court has ruled that the shape of a bottle used for alcoholic drinks was not a sufficient departure from the industry norm to enable it to be registered as a trademark despite the court acknowledging that it was “somewhat original”.

The bottle was a clear straight cylinder, without a narrow neck, and was fitted with a cap which continued that shape.

The court ruled that the ordinary consumer of an alcoholic drink would only recognise the bottle’s shape as an indication of the source of the drink – which is the critical function of a trademark – if it was significantly different to the norm and the public had been exposed to it for a considerable time.

Although accepting that the shape of the bottle was “somewhat original”, the court was not satisfied that it was sufficiently different to an ordinary bottle – which also has a straight cylindrical section – to give it the distinctiveness required to support a trademark registration.

Nevertheless, businesses which use distinctively shaped packaging should give serious consideration to registering it as a trademark. This was a decision based on the particular facts of the case, and the lack of evidence to support certain aspects of the claimant’s case may have played an important part in that decision.

Voss of Norway ASA v OHIM

Multi-touch invention is patentable

The Court of Appeal has allowed a patent concerned with the use of multi-touch screens in mobile computing devices, and the use of “flags” to indicate whether a particular screen display would accept multi-touch inputs. This overcame the problem that having to monitor for multi-touch inputs could be a serious drain on the limited processing resources of such a device but is often unnecessary.

The High Court had ruled that the invention related to a computer program and could not therefore be patented in the UK, but the Court of Appeal disagreed. An invention which is inherently patentable is not excluded from patentability merely because it has been implemented using a computer program, and the Court of Appeal ruled that the invention had a technical effect on the operation of the device as a whole, and was independent of any particular application running on it.

This case is a useful illustration of how some ideas which might appear to be unpatentable as software inventions may actually be patentable. It also serves as a reminder that businesses which use such ideas should bear in mind the risk of patent infringement and should consider undertaking appropriate patent searches.

HTC Europe Ltd v Apple Inc

Patent invalid because of consumer testing

In order to obtain a patent for an invention it is essential to keep the invention secret until the patent application has been filed or the invention ceases to be “new” for patent purposes.

The invention in this case concerned a process for extracting coffee from a coffee filter machine and the company had issued a number of prototype machines to consumers for testing. Those machines had been secured with special tamper-proof screws in order to deter the consumers from opening them, and the company had collected all the machines at the end of the test. Critically, however, it did not get them to sign binding confidentiality agreements, and the court ruled that the testing had disclosed the invention and invalidated the patent.

It is perfectly possible to test an invention and still obtain a patent for it, but the exercise needs to be handled with care. While some people scorn confidentiality agreements as worthless, in this case they would have saved the day and would have made the company a great deal of money.

Nestec SA v Dualit Ltd

A trademark does not necessarily have to be used by itself

A registered trade mark gives its owner the right to prevent other businesses from using a similar one, but a registration can be cancelled if the owner does not use it. An important practical issue has been whether for these purposes a trademark has to have been used by itself, but now the European Court of Justice has ruled that its use as part of another trade mark can count.

This ruling will help companies which use a “base” trademark alongside images or other words but have only registered the “base” mark.

Colloseum Holding AG v Levi Strauss & Co

Browsing probably doesn’t infringe copyright

It might seem odd that such a basic activity might infringe the copyright in the materials on the websites visited, but the position has not been completely clear. Indeed, both the High Court and the Court of Appeal have ruled that it could infringe. However, the Supreme Court has now given its preliminary view that it doesn’t, although given the importance and European dimension of the issue it has asked the European Court of Justice to confirm this and we will have to wait some considerable time for its ruling.

This issue does not only affect surfers: the Supreme Court recognised that its conclusion that individual viewers of websites do not need a licence from the copyright owner may mean that some commercial services may have to pay higher licence fees to compensate.

Public Relations Consultants Association Limited v The Newspaper Licensing Agency Limited

Court rules that Greek yoghurt is special

The High Court has granted an injunction restraining the producer of a yoghurt made in the US from selling it as Greek yoghurt in the UK.

An industry-wide labelling convention meant that all yoghurt sold as Greek yoghurt had been made in Greece and had a thick and creamy texture resulting from straining. Consequently, a substantial proportion of purchasers thought that the label meant that the yoghurt came from Greece and was special in some way. The court ruled that the defendant’s use of the label would harm businesses which sold the real thing.

A decision like this – whether it concerns Greek yoghurt or anything else – can prove to be very expensive in terms of product recall, cancellation of advertising, claims for breach of contract, and of course legal costs, all of which can be avoided by spending a little time and money on investigating the legal position in advance.

Fage UK Ltd v Chobani UK Ltd

New test for when patented products may be repaired

The Supreme Court has ruled that the market’s commercial view of what constitutes a repair is an important factor in deciding whether a “repair” infringes a patent. Previously, the ruling in the leading case on this issue was that focusing on what is a repair could be misleading, and that what mattered was whether the defendant had made a product covered by the patent.

This case concerned the replacement of plastic bottles in specially designed wire frames. The Supreme Court ruled that the question whether someone has made a new product (which would infringe the patent) or has repaired an old product (which would not infringe the patent) is a matter of degree which has to be answered against a number of factors.

The court thought it important that a purchaser of the product would expect to have to replace the plastic bottle many times before the wire frame would need replacing, and ruled that replacing the bottle was repairing the product rather than making a new one.

This ruling is likely to make it harder for anyone who repairs products to know where they stand without specialist advice.

Schutz v Werit

Co-operation is not consent

This case highlights the risk involved in exploiting someone else’s intellectual property before all the necessary agreements had been signed.

The court ruled that the defendant company had infringed the rights of the singer, Jodie Aysha, in the hit song “Heartbroken” when it issued copies of her performance to the public. Although the singer had co-operated with the defendant by making a video, approving artwork, and performing the song in nightclubs, the court ruled that this did not mean that she had consented to the recording’s release. It ruled that the company had released the record at its own risk knowing that she had not yet signed a contract.

In commercial transactions it is not uncommon for the parties to start work while they are still negotiating a contract. This case is a timely reminder of the dangers they face, and how it is much better to allow time to complete the negotiations first whenever that is possible.

Distribution via the Internet infringes copyright

The European Court of Justice has ruled that the streaming of copyright material via the internet is a “communication to the public” – an activity covered by copyright – even where the material is being viewed by members of the public who are entitled to receive it directly from the original source.

The defendant received broadcast programmes, attached advertising material (which funded its service), and then re-transmitted them so that its viewers could watch them on their computers and mobile phones. Although it was not making the programmes available to anyone who would otherwise have had to pay to receive the original transmissions, the court ruled that this did not make any difference and that the re-transmission infringed the claimant’s copyright.

This decision firmly closes the door on an argument that is often put forward by internet businesses who re-use other people’s copyright material.

Use of own trading name might not be trade mark infringement

The owner of a registered trademark is entitled to stop anyone else using a similar trademark for similar goods and services, but there is a special defence for a business which uses its own name under certain conditions. The Court of Appeal has ruled that this defence could, in principle, cover a business’ trading name as well as its formal name, and the High Court has now applied this, ruling that a bank had been entitled to use its trading name.

BDO LLP v BDO Unibank

Foreign employees might find it easier to avoid legal action

The Court of Appeal has highlighted a difficulty which employers may face when bringing claims for breach of confidence and infringement of intellectual property rights against employees and former employees who have left the UK.

Under EU legislation a claim brought against an employee which relates to his employment contract has to be brought in the courts of the country where he is residing when the proceedings are started. Although the employer had based its claim on its rights under the general law, the Court of Appeal ruled that the principle extends to former employees and that it applied in this case because the alleged infringements would also have been a breach of the employment contract. As the former employee in question had moved to Poland before the proceedings had been started, the English courts could not try the case.

This ruling makes it more important than ever that employers take prompt action when they suspect that a current or former employee may have misused confidential information or intellectual property rights.

Alfa Laval Tumba AB v Separator Spares International Ltd

Delay in enforcing trademark rights could cost time and money

The courts’ summary judgment procedure saves the time and expense of a full trial where the situation is relatively straightforward, but this case shows how it may be lost in trademark infringement cases where there has been excessive delay in taking legal action.

The owner of the DYNO-ROD trademark sued the owner of the DIAL A ROD trademark where the defendant had been using its mark in a font that was very similar to the claimant’s. Normally this may have been suitable for summary judgment, but the court rejected the claimant’s application because the defendant had alleged that the claimant had acquiesced in the defendant’s use of the mark. If that was true it would have triggered a statutory defence under the Trade Marks Act, and the court ruled that a full trial was necessary in order to determine the position.

This shows the importance of taking prompt action to enforce trademark rights – it can work out much cheaper in the long run.

Dyno Holdings Ltd and another v Dial A Rod Homecover Ltd 

Owning a registered trademark is not necessarily a defence to an infringement claim

The owner of a registered trademark is entitled to prevent other businesses from using a similar trademark for similar goods and services, but until now there has been a special defence for anyone using their own registered trademark. This special defence has now come to an end.

The European Court of Justice has ruled that the owner of a registered trademark can sue the owner of another registered trademark without having to have the later mark declared invalid first.

This decision opens the door to claims which could not be brought before, and businesses should review their legal position and take appropriate action – whether that involves taking legal action against a competitor or taking steps to avoid being sued.

Fédération Cynologique Internationale v Federación Canina Internacional de Perros de Pura Raza

Company bound by licence granted by subsidiary

In a case involving the grant of a software licence, but which potentially affects any IP licence, the High Court has ruled that the subsidiary of the company which owned the software had not granted the customer a sub-licence but had granted a licence on behalf of the parent company. As a consequence the claim against the parent company was successful.

This ruling could affect many businesses – not just software companies – but it can be avoided by the use of appropriate contract terms, so companies which grant licences through a corporate group structure should review their practices and the terms of both their intra-group licences and their end-use licences.

VLM Holdings Ltd v Ravensworth Digital Services Ltd

Good faith implied in relationship contracts 

The High Court has identified some of the terms which are implied in long-term “relationship contracts”.

Although the courts are often reluctant to imply terms into commercial contracts, the court acknowledged that as they require a high degree of communication, co-operation, and predictable performance based on mutual trust and confidence, these arrangements involve high expectations of loyalty which are not spelt out in the contract.

Businesses which have any long-term relationship agreements – whether they be supply agreements, distribution agreements, franchise agreements or anything else – should review them and consider the implications of this judgment.

Yam Seng PTE Ltd v International Trade Corporation Ltd 

Employees’ own devices in the workplace

In a practice known as “bring your own device” (BYOD), many employers allow or even encourage their staff to use their own phones, tablets and other devices for work purposes, but a survey has shown that few staff are given adequate guidance about their use. This raises several data protection issues and may put the employer in breach of the Data Protection Act.

As the Information Commissioner has the power to impose penalties of up to £500,000, and routinely imposes penalties of £80,000 or more, any employer with a BYOD policy would be well advised to read the Information Commissioner’s new guidance on this practice, and then implement appropriate policies, procedures and training, before it is too late.