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Sunday, 12 August 2012

No coffee in sight, but Starbuck speeds to trial

A fascinating pair of cases came to court last month, both arising from the planned launch by Sky of its NOW TV service, the objections of owners of earlier trade marks containing the word "now", the assault on the validity of those registrations by Sky, the anxiety of the claimants to get the case tried with expedition and the concern of Sky to have those claims stayed.  IPKat team member Jeremy managed to get a note out on one of those cases fairly quickly, but he then got backlogged. He accordingly thanks his friend and Afro-IP blogger Kingsley Egbuonu for coming to his rescue with a rather fuller account of the second of the decisions than he would have managed himself. This is Kingsley's account of the decision in question:

A few days after the decision in EMI (IP) Ltd and others v British Sky Broadcasting Group plc and another [2012] EWHC 1644 (Ch), reported here by the IPKat, Mr Justice Arnold handed down this judgment in Starbucks (UK) Ltd v British Sky Broadcasting Group Plc & Others [2012] EWHC 1842 (Ch).This decision is also not a “big, precedent-packed blockbuster” --as seasoned and revered readers of the IPKat can tell.  However, it is comprehensive and contains important observations which are procedurally relevant and representative of the current state of the law in the area of trade mark litigation at issue. 
Background 
Having learned of Sky’s intention to launch NOW TV, Starbucks -- a subsidiary of Hong Kong-based PCCW -- sent a letter before action alleging that the proposed use of NOW TV would infringe its Community trade mark (CTM) No 4504891, depicted on the right. In the course of correspondence, Sky informed Starbucks that it had applied to OHIM on 11 April 2012 to invalidate this CTM. Starbucks accordingly sought an expedited trial of its claim for CTM infringement and passing off, while Sky counterclaimed and sought a stay of the CTM proceedings under Article 104(1) of the CTM Regulation. The court’s tasks were to interpret Article 104(1) in light of the application for stay and to decide whether the trial should be expedited. 
Were there serious issues to be tried? 
Sky’s contention was that there were no serious issues to be tried when invalidity, infringement and damage to goodwill came to be considered: the word NOW was devoid of distinctive character in relation to Class 38 services (broadcasting) and the registration was therefore invalid under Article 7(1)(b) and/or 7(1)(c) of the CTM Regulation (lack of distinctive character; descriptiveness). Sky also maintained that Starbucks’s CTM, even if valid, was narrow in scope and that the proposed use of its own mark would not create any likelihood of confusion. Finally, Sky argued that Starbucks had not shown substantial goodwill in the UK and that third party brands already used the word ‘NOW’; therefore there was no risk of confusion. 
On these points, Arnold J ruled that these were serious issues to be tried and that Starbucks had a real prospect of success as opposed to a fanciful one. 
Sky’s application for stay 
Was there any authoritative case law guidance on the interpretation and application of Article 104(1)? Arnold J acknowledged that this was scarce. However, he considered a number of cases, of which only a couple were of any assistance to him:
·         Samsung Electronics (UK) Ltd v Apple Inc [2012] EWCA Civ 729, noted by the IPKat here  - the dicta at para [49] were relevant and persuasive authority on when a stay may be refused on special grounds; and 
·         EMI (IP) Ltd v British Sky Broadcasting Group plc [2012] EWHC 1644 (Ch), a case which also referred to dicta in Samsung v Apple and Nokia v Wardell (Case C-316/05, noted by the IPKat here). 
At para [52] – [54], the court recognised and accepted the following points: 
·         Under Article 4(3) of the Consolidated Treaty on the European Union and the provisions of the CTM Regulation, OHIM’s status is equivalent to that of a national court; thus sincere co-operation must be respected -- even where there are overlapping jurisdictions (citing Ryanair Holdings plc v Office of Fair Trading [2012]EWCA 643 Civ at para [38]. 
·         OHIM knows its own competences and powers and that, save for exceptional circumstances, it is not for a national court in a Member State to treat an application before OHIM as abuse of process (Case C-159 Turner v Grovit [2004] ECR I-3565 at para [28]) 
·         It was illegitimate for a party resisting an application for a stay under Article 104(1) to argue that procedural differences between the national courts and OHIM constituted special grounds. [On this point, Arnold J added that a national court is entitled to take into account the circumstances in which the proceedings before OHIM were brought and when a final determination of such action would be expected.] 
·         If the court considers that invalidity proceedings should be stayed, infringement should likewise be stayed; and Article 104(1) does not apply to the passing off claim, at para [55] – [58]. 
Could Starbucks prove that there are special grounds under Article 104(1)? 
Starbucks raised three grounds as individually or cumulatively amounting to special grounds for the purposes of Article 104(1) at para [59] – [66]:
1.   Sky only commenced the proceedings before OHIM after receipt of the letter before action.
2.     A passing off claim exists.
3.    Both the CTM infringement and passing off claims, as well as Sky’s counterclaim, required urgent resolution by the national court which is capable of resolving them together and speedily. 
Conclusion of the court on stay 
Arnold J at para [67] – [70] was convinced that, at least when considered cumulatively, the grounds relied upon by Starbucks did constitute special grounds within Article 104(1) and refused to order a stay. He said: 
“…..The important question is the objective effect of what was done when it was done. The effect of Sky's application to OHIM, having regard to the length of time the proceedings in OHIM will take to resolve, would be substantially to delay the resolution of Starbucks' claims. In the circumstances of the present case, I consider that that does amount to special grounds, at least viewed in combination with the other factors.” 
Starbucks’ application for an expedited trial 
Arnold J first referred to the principles reviewed by Henderson J in JW Spear & Sons v Zynga Inc [2012] EWHC 1374 (Ch) at para [16]‑[25], but preferred the four factors identified by Lord Neuberger in WL Gore & Associates GmbH and Geox SPA [2008] EWHC Civ. 622 at para [25]. Taking these factors in turn: 
(a)    Did the applicant show good reason for expedition? 
Starbucks set out the following to persuade the court that
1.      Sky had committed substantial resources to marketing plans ready to launch NOW TV service and after launch, its goodwill will be engulfed by Sky’s.
2.      even if the CTM in dispute was later declared valid, it would become commercially worthless because it would become inherently associated with Sky’s.
3.      its parent company, PCCW Group, had commercial plans for expansion into the UK market with a rival service.[Arnold J considered this relevant even though those plans were not yet significant or delineated]
4.      it was in the interest of consumers to avoid confusion between the two services.
5.      it was in the interest of Sky to know where it stood now rather than later on infringement. 
Despite Sky’s arguments to the contrary – among others, that Starbucks made little use of the CTM, had no exclusivity at present and delayed in making their application to the court -- Arnold J concluded that Starbucks’ reasons merited expedition (see at para [71] – [78]). 
(b) Would an expedition interfere with the good administration of justice?
Arnold J was of the view that, although a trial period envisaged by Starbucks --in October 2012-- had a fairly rapid degree of expedition, it was not so rapid as to be unduly prejudicial to other court users, and moreover, he was satisfied with the first factor.(see paras [79] – [80]). 
(c) Would expedition cause prejudice to the other party?
The issue here was whether there would be inconvenience or harm to Sky’s case if expedition was granted. Arnold J accepted that Sky was a very large entity with significant resources and would be able to cope and get ready for trial in October 2012. 
(d) Were there are any other special factors?
No other special factors were identified as being relevant. 
Conclusion of the court on expedition 
Having refused a stay as sought by Sky, Arnold J accepted all reasons stated by Starbucks for ordering an expedited trial. 
Comment 
Although every case depends on its own peculiar facts, this decision generally makes clear what a party should be looking to adduce before a national court in order to merit an expedited trial and defeat an application for a stay of proceedings in CTM proceedings. In addition, the applicant should take note of the points accepted by the court at paras [52] – [54]. 
On the other hand, a party seeking for stay should be conscious that its actions –‘clearing the way’ and defence strategies - would be objectively scrutinised by the court and the resources at its disposal would be taken into account when considering expedition. 
The court’s approach in the application for stay is almost similar to that of Mr Justice Mann in Kitfix Swallow Group Ltd v Great Gizmos Ltd [2007] EWHC 2668 (Ch). Like Arnold J, Mann J also observed that there was a dearth of authoritative guidance in this area. 
Sky has now launched NOW TV under the domain name www.nowtv.com.

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