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.

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Thursday, 15 July 2010

All threats, no action ...

When is a threat not a threat? This was the question before the court in Best Buy Co Inc and another v Worldwide Sales Corporation Espana SL [2010] EWHC 1666 (Ch), in a case decided by Mr Justice Floyd in the Chancery Division (England Wales) last Thursday. At the heart of the question lies the meaning of the Trade Marks Act 1994, section 21: this is the very model of a statutory provision that you have to read carefully a couple of times so that you don't end up thinking it means the opposite of what it says. The section reads like this:

"(1) Where a person threatens another with proceedings for infringement of a registered trade mark other than— (a) the application of the mark to goods or their packaging, (b) the importation of goods to which, or to the packaging of which, the mark has been applied, or (c) the supply of services under the mark, any person aggrieved may bring proceedings for relief under this section.
(2) The relief which may be applied for is any of the following— (a) a declaration that the threats are unjustifiable, (b) an injunction against the continuance of the threats, (c) damages in respect of any loss he has sustained by the threats; and the plaintiff is entitled to such relief unless the defendant shows that the acts in respect of which proceedings were threatened constitute (or if done would constitute) an infringement of the registered trade mark concerned.
(3) If that is shown by the defendant, the plaintiff is nevertheless entitled to relief if he shows that the registration of the trade mark is invalid or liable to be revoked in a relevant respect.
(4) The mere notification that a trade mark is registered, or that an application for registration has been made, does not constitute a threat of proceedings for the purposes of this section".
The claimants (US corporation Best Buy and its UK subsidiary) intended to open a series of shops in the UK and elsewhere in Europe under the name 'Best Buy'. Worldwide, a Spanish corporation, held a number of national and Community registrations that contained, by sheer coincidence, the words 'Best Buy' in combination with devices and other graphics. The claimants applied to register as a Community trade mark a sign including the words 'Best Buy', which Worldwide opposed. Hoping to salvage something from the situation, the claimants' lawyers wrote to the Worldwide to sound the Spaniards out with regard to a possible coexistence agreement, only to receive a somewhat unwelcoming response in the form of a "without prejudice" letter from Worldwide's lawyers stating that their client was entitled to take appropriate legal action to defend its interests in the event that the claimants should start to expand into the European market. The claimants got really excited about this and commenced section 21 proceedings, alleging that this letter was an unwarranted threat to launch trade mark infringement proceedings against them.

Before Floyd J four issues fell to be determined: (i) did the letter threaten proceedings for infringement? (ii) was the threat made in relation to an infringement which fell within the "other than" bit of section 21 and was thus excluded from the operation of the section? (iii) if a real, live, actionable threat had been made, was the letter admissible as evidence, given that it was written "without preducice"? (iv) did section 21 apply just to threats to sue in respect of infringement of UK registered marks in the UK, or did its extension under the Community Trade Mark Regulations 2006, reg.6(1), to cover Community trade marks (CTMs) make unwarranted threats to sue for CTM infringements anywhere in the EU actionable too?

Floyd J dismissed the claimants' action. Why was this?

First, he agreed that any reasonable businessman in the position of the claimants would have understood from the letter in the clearest terms that proceedings for infringement of trade mark were threatened if negotiations failed and they decided to use trade as Best Buy. It didn't matter if the proceedings threatened infringement of a UK mark or a Community trade mark: what mattered was that the threatened proceedings had to be an infringement action in the UK.

Section 21 did not however concern itself with the harmful effects of proceedings threatened in jurisdictions other than the UK. If it did, then it would be a trap for the unwary in all the 26 other EU member states.

Putting himself in the position of the reasonable recipient of the letter, the judge considered that it showed that Worldwide had a range of options as to the forum in which they could bring proceedings, including both Spain and the UK, and that if the claimants opted to trade as 'Best Buy' in the UK, that jurisdiction would be a likely choice for proceedings. On this basis, section 21 applied even if it did not specifically threaten proceedings in England.

The reasonable recipient of Worldwide's letter would not have understood the threat of proceedings as being limited to the supply of services (which was excluded from liability under section 21(1)).

At this stage, things look quite good for the claimants. However, their case had a fatal flaw: since Worldwide's letter was written and sent in the context of correspondence between the parties which was part of a negotiating process, it fell firmly within the protection of the "without prejudice" rule -- and that was an end to the matter. Part of the letter was in response to earlier points, while other bits sought to underline the strength of Worldwide's position: you couldn't chop the letter up into those parts which were in response to the request to negotiate and those which were not. Taking a global view of the letter in its context, it was a response to the claimants' proposal and not a threat.

The IPKat wonders whether Parliament shouldn't do the honourable thing and introduce a new action which trade mark owners can bring against people who, without justification, launch proceedings against them for making unjustified threats to bring trade mark infringement proceedings. Merpel says, when businesses try to monopolise descriptive [if true] or deceptive [if false] terms like "best buy", I have little sympathy for them.

Some other Best Buy logos here, here and here
Threats here
Threatened cats here

7 comments:

Anonymous said...

What a daft action to bring. Good old FFW.

Anonymous said...

Indeed... the fact that they sent a letter BEFORE bringing the action saying that all this correspondence was without prejudice cannot have helped.

And yet magically they still seem to find their way onto the top of the Legal 500. Anyone else might think it was lazy journalism.

Anonymous said...

(a) Contrary to the impression given in the Ipkat account of the case, the letter was not marked "without prejudice" nor otherwise identified as being "without prejudice". Nor was it written in response to a letter marked in this way. The question was whether it nonetheless should be treated as protected by the WP privilege. Not an easy one, hence the Judge has given permission to appeal

(b)contrary to the statement by "Anonymous" in yesterday's posting, FFW did not send a letter before bringing the action saying the correspondence was without prejudice.

Anonymous said...

Apologies - I made a mistake in my post yesterday @1.50.

I do however maintain the view that it was a pathetically agressive move. What I would have been interested to see would have been a comment from the judge that litigation lawyers surely must be able to distinguish between the kinds of comments expressed to take a position and those intended to be a real threat. Surely that is part of the expertise of a lawyer?

Who knows, perhaps it will actually lead to FFW being a little more measured when it sends letters.

On the bright side, I guess the prominence of this will keep you in the top tier in the Leal 500.

Chris H said...

There was a recent patent case (FNM Corp v Drammock, reported in CIPA journal July 2009) in which the letter was ok, but a threat was still considered to have been made as the undertakings enclosed with the letter extended beyond what was allowable for it not to be a threat.

I appreciate that the new decision doesn't directly conflict with this case, but it does seem to be out of kilter with it.

Anonymous said...

Any litigator worth his salt knows that a letter does not have to be marked WP to be WP, and vice versa. It's a grey area, or can be.

What I find really extraordinary, therefore, is how anyone in their right mind could imagine that it made commercial sense for their client to take this case to trial. Perhaps our FFW apologist above would care to explain?

Anonymous said...

Decision now overturned by Court of Appeal: [2011] EWCA Civ 618. Held that the letter was a threat and was not without prejudice.

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