Franchisor wins trade mark appeal but is given "little hope" of damages

Franchise-related disputes rarely get before the courts, since franchisors have a penchant for discreetly arbitrating any fall-out between them and their franchisees -- but Gary Fearns (trading as Autopaint International) v Anglo-Dutch Paint & Chemical Co and others [2008] EWCA Civ 99 (here on BAILII, decided yesterday) is an exception, since it involved the relationship between a franchisor and his franchisee's suppliers.

Fearns, who sold paint and associated products for use on cars, held UK registered trade marks for the words AUTOPAINT INTERNATIONAL and for a device mark which included them. Fearns had his own paint shops and licensed his own Autopaint franchisees, sourcing his paint from various defendants for which Anglo-Dutch was the UK distributor. In 2004 Anglo-Dutch started to sell paint, under the Autopaint brand, directly to Fearns' Autopaint franchisees. Fearns sued for trade mark infringement, passing off, malicious falsehood and infringement of copyright and breach of contract relating to a "paint tin agreement". He further alleged that the defendants had acted together or individually intentionally to inflict economic harm on him by unlawful means. Ango-Dutch said they were entitled to sell the products directly to the franchisees and that Fearns had agreed to this as a means of reducing his endebtedness to them.
Deputy Judge Christopher Floyd (see IPKat note here) considered that, on the evidence, it had indeed been agreed that Anglo-Dutch could sell direct to franchisees if Fearns couldn't supply them himself - but that they could not just sell any products that the franchisees could get from them. There had accordingly been some infringement going on. There was however no infringement of copyright in Fearns' design and logo: these were not printed matter of a 'primarily literary or artistic character' and thus had only had a limited period of copyright protection under section 52 of the Act. On the facts there was also some passing off and a bit of breach of contract too.

Fearns appealed both regarding the judge's decision on the consent agreement and on the question of causation arising from Anglo-Dutch's alleged wrongful acts; the Court of Appeal (Lord Justice Waller, Lady Justice Arden and Lord Justice Toulson) allowed his appeal in part.
* The Deputy Judge had to make up his mind as to whether to prefe the evidence of Anglo-Dutch to that of Fearns. He recognised the points that could be taken on behalf of Fearns but, having weighed up the competing points, he was entitled to hold in favour of Anglo-Dutch.

* Fearns' position at the time was very difficult, since he had ordered products which he needed for his franchisees but which he could not obtain unless he paid. He offered to make payments in order to obtain more deliveries. If that did not enable him to satisfy his franchisees, he had the choice between losing their goodwill and possibly his business, or keeping their goodwill by letting Anglo-Dutch deliver paint and retain the proceeds in part to pay off the debt. It was understandable for Fearns to have taken the option which the judge found he did.

* Until the extent of any infringements of the trade marks and the extent of any breaches of the consent agreement were known, the court could not rule on their effect.

* It appeared unlikely that Fearns would be able to establish that, if Anglo-Dutch had stuck to the consent agreement, he would have been able to maintain his franchise business. However, until the extent of the breaches were clear, he should not be prevented from seeking to establish that, if the consent agreement had been respected, he would have been able to survive with his network of franchisees intact. Accordingly the appeal was allowed to the extent that Fearns was not to be prevented from establishing, if he could, loss of his business flowing from breaches of the consent agreement.
The IPKat notes that this is another of those appeals that spends a lot more time focusing on the facts than on the law, on account of the need to treat with great care the evidence submitted on both sides. Sometimes parties to IP ligitation are accused of rewriting the past to suit their ends -- but if they wrote down their agreements with sufficient clarity in the first place there would be no need to do this since there would be nothing to rewrite [Merpel adds, if there's nothing written down in the first place, what's written down later isn't re-writing anyway...].

Henry Ford on car paint
Paint it Black here
Franchisor wins trade mark appeal but is given "little hope" of damages Franchisor wins trade mark appeal but is given "little hope" of damages Reviewed by Jeremy on Wednesday, February 20, 2008 Rating: 5

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