For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Tuesday, 17 November 2009

Taking umbrage with Umbro, or a strange way to license a sports brand

It's amazing how you can go for ages without coming across a good case involving brand licensing issues, then suddenly two come along in quick succession. Having only recently reviewed the logo sponsorship deal in Force India v Etihad (see earlier post here), the IPKat finds himself perusing Hudson Bay Apparel Brands LLC v Umbro International Ltd [2009] EWHC B28 (Ch), a Chancery Division (England and Wales) decision of Deputy Judge Mark Herbert QC, dating back to 4 November 2009.

Umbro, an English company [owned by Nike] which enjoyed the fruits of an international licensing business based principally on football products, owned the UMBRO and 'double diamond' brands (see illustration, above right). Umbro's Delaware-based subsidiary handled its business in the United States. Hudson Bay, a small US company, made and sold branded apparel. In 2006-7 Umbro granted two separate licences, one to Dick's Sporting Goods -- a major retail company -- and the other to Hudson Bay. These licences permitted the licensees to sell soccer-based clothes. Hudson Bay was licensed to sell 'off-field' leisurewear for spectators, while Dick's was licensed to sell 'on-field' clothing for use by fans on the field of play. Neither Hudson Bay nor Dick's was licensed to sell 'teamwear' for use by actual teams in competitive matches, since Umbro handled teamwear itself, without the intervention of licensees. The licensees apparently enjoyed a large degree of freedom in terms of being able to design their own products, which were then submitted to Umbro for its approval.

In these proceedings Hudson Bay sued Umbro for specific performance, alleging that Umbro was in breach of the terms of an exclusive licence granted to it by by permitting Dick's to market certain 'off-field' items and had hindered it from exploiting its 'off-field' licence in breach of an implied duty of co-operation which, Hudson Bay claimed, Umbro owed it. Umbro said it had acted within its rights under the licensing contract and that the material marketed by Dick's had only been 'on-field' wear. Umbro also counterclaimed that it was actually Hudson Bay that was in breach by marketing 'on-field' wear in the form of 'pocketless soccer basics' -- shirts and shorts made without pockets but which resembled items used on the field of play as 'teamwear'.

The Deputy Judge ruled as follows:

* Rather than ask what the parties intended, the proper approach was to try to identify objectively what a reasonable person, having regard to all the background knowledge which the parties had, would have understood them to have intended when using the language of the licence itself.

* In the licence, 'field of play' meant the actual field of play in a game of soccer, including informal and practice games. On this basis, clothes specifically intended for that sort of use were the clothes excluded from Hudson Bay's licence.

* On the evidence, by letting Dick's market certain garments that fell within the scope of 'off-field' wear, Umbro was in breach of the exclusive licence. However, the 'pocketless soccer basics' (which crossed the line between off-field and on-field wear) were not 'off-field' wear per se and the parties' agreement did not authorise Hudson Bay to market them. Any permission to sell the 'pocketless soccer basics' would have required rewriting the licence.

* Umbro might have inadvertently granted exclusive licences to Hudson Bay and Dick's which covered the same descriptions of goods; if that was so, since Umbro did not have authority to grant an exclusive licence for overlapping products and would be in breach of the warranty under the agreement.

* There was an implied term of cooperation to the effect that Umbro could not refuse to consider products submitted for approval and Umbro were in breach of that term by refusing, albeit temporarily, to approve Hudson Bay's new range.

* Umbro was not expressly required under the licence to provide guidance and direction to Hudson Bay for the purposes of product development, however sensible it would be in business terms to do so; Umbro's actions or inertia couldn't stop Hudson Bay submitting designs and materials for approval did not therefore constitute breaches of any implied term.

* It was difficult to understand why Hudson Bay sought specific performance of the agreement when it already had an exclusive licence to sell goods bearing the Umbro brands. A more specific order relating to the breach of the agreement is what was actually needed. Accordingly (i) declaratory relief was granted to the effect that Umbro was in breach of the agreement and (ii) an order was made for damages to be assessed.
The IPKat hates to sound repetitive, but in the cold light of day and with the benefit of hindsight there surely must have been a better way for Umbro to exploit the power of its brand without generating enmity between itself and a licensee in this manner.

Cats playing football here
The greatest footballing cat here
Soccer cat commercial here

3 comments:

Mark Schweizer said...

I don't think brand licensing disputes are so rare - but they will in most cases be covered by an arbitration clause and therefore never become public.

Guesstimate said...

How different from the home life of our own, dear Queen!

I am so glad I don't do soft IP!

Anonymous said...

A quick note for your readers - approval was given by the US President of Umbro for H Bay to sell the pocketless product (and tracks/warm ups).

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