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Monday, 11 February 2013

Innocents Abroad - Negative Equity for smoothie makers at OHIM

The IPKat is very grateful to an anonymous commentator who submitted a comment on a rather old post drawing attention to these two cancellation decisions from OHIM which, although not very new, do not seem to have been widely reported.

This particular Kat is not that keen to write on trade mark matters, and so, for the second time, he has called upon his trade mark colleague Simon Stanes, who has kindly written the majority of this piece.

Fruit smoothies do not usually form a major part of the feline diet (usually).
Nevertheless, they are popular amongst health conscious humans and the company Fresh Trading Limited has been highly successful with its INNOCENT smoothie brand.

This Kat was therefore surprised to learn that two CTM registrations for variations of the INNOCENT “halo” logo (details of the marks below) were successfully cancelled last year by the successors in title to Deepend London Limited, the design firm that created them for Fresh Trading back in 1999. Links to the (virtually identical) decisions are here and here.

In at the deep and – the story so far

According to Fresh Trading the “halo” logo was created in a eureka moment of “back of the envelope” genius by David Streek of Deepend, during a brainstorming session with the smoothie-maker’s three university friend founders.

Deepend and Fresh Trading had drawn up heads of terms in 1998 by which design services would be provided in return for shares in Fresh Trading. There is some dispute between the parties as to whether agreement was eventually reached on this basis or whether the specific heads of terms document was ever signed. In any event neither party was able to produce a signed agreement governing the relationship or assigning any of the fruits to Fresh Trading.

By the time Deepend went into liquidation in 2001 it had received no payment for the Fresh Trading design work, and no shares were ever issued.

Original design sketch
In 2007 the copyright in the “halo” logo was assigned from Deepend to a Mr Andrew Chappell, who in 2009 assigned the copyright to Deepend Fresh Recovery Limited [warning bells ringing?] who applied to cancel both of Fresh Trading’s CTM registrations for variations of the “halo” logo on the grounds that use of the marks could be prohibited in the UK on the basis of their copyright in the original “halo” design (reproduced right).


Rough with the Smoothies – OHIM’s decision

Ably assisted by submissions from Deepend, detailing the workings of UK copyright law, OHIM’s cancellation decision made short work of finding that copyright subsisted in the “halo” logo and that in a commission relationship, Deepend London Limited were the original owners of copyright in the work. Equally in the absence of any written assignment to Fresh Trading, it was clear that Deepend London remained the legal owners until the two written assignments to Chappell and then Deepend Fresh Recovery Limited. Both Fresh Trading’s marks infringed the “halo” design prima facie.

So far, so easy! As aficionados of Griggs v Ross Evans [convenient link here for non-aficionados], might expect, Fresh Trading’s defence was that whatever the legal ownership of the copyright, the principles of equity dictated that they owned a beneficial interest in the mark, either as owner or as a licensee. As a result, Deepend were not in a position to restrain use of the “halo” mark in the UK and Fresh Trading’s registrations remained valid. In the alternative Fresh Trading claimed that due to the passage of time, estoppel equally prevented Deepend from acting against use of the mark.

In Griggs, the Court of Appeal was “glad” to impose an implied term within the existing commissioning agreement, requiring assignment of the copyright in the DR MARTENS AIRWAIR logo from the designer to Griggs. This was necessary to give commercial effect to the original agreement to design a corporate logo for Griggs. Any other arrangement would not be sufficient to enable the free and unfettered use of the logo which would clearly be required in these circumstances.


CTM Reg 1815612
CTM Reg 4769832
However, this was not the approach followed by OHIM’s Cancellation Division in the case of the “halo”. Examining the facts and the submissions on beneficial ownership and the laws of equity provided by Fresh Trading, the Cancellation Division found that no evidence had been provided to substantiate any reputation in the “halo” mark and as such there was no “equity” in the brand. They doubted, in any case, that the legal owner of the copyright could be prevented from exercising those rights and finally, they threw out the estoppel point on the basis that the applicant for invalidity had only recently taken an assignment of the rights.

What might have been…

It is tempting to put this conclusion down to OHIM’s adjudicators’ lack of experience in UK common law concepts such as equity. However, matters of national law are to be decided as findings of fact by OHIM and so it is absolutely essential that parties make a thorough and convincing presentation of the relevant UK law points and their correct application, in their submissions.

However, the conclusion that a UK court would have treated this case rather differently is inescapable. That is not to say that Fresh Trading would necessarily have been home and dry. Unlike Griggs, in this case the court would need to infer an implied contract between the parties, including a term requiring assignment of the copyright to Fresh Trading. Even if this were found to reflect the commercial reality of the relationship between Fresh Trading and Deepend, there is still the fact that Deepend never received any remuneration for their work.

It was a factor emphasised by the Court of Appeal in Griggs that the designer, Ross Evans, had been paid value for his work on the logo. The court did consider that he would still not be free to assign the mark to Griggs’ competitors even if there was a dispute about the true value of the commission and Evans’ remuneration. However, it is more difficult to extend this logic to a situation where the designer has not received a penny in return.

Perhaps unsurprisingly, Fresh Trading have appealed both cancellation decisions and also reapplied for the “halo” mark to be on the safe side. We now eagerly await OHIM’s Appeal Division’s take on equitable ownership…


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