Gambling on an appeal? Seeing Red over 32

The IPKat prefers the real thing to the online version

If you like gambling and 32 is your lucky number, or if you like betting on whether the decision of a non-specialist IP judge in a complex piece of litigation has a chance of surviving a vigorous appeal, here's a judgment that is sure to excite you: it comes from the Court of Appeal for England and Wales and it's WHG (International) Ltd., WHG Trading Ltd and William Hill Plc v 32Red Plc [2012] EWCA Civ 19 -- a whopper of a trade mark decision.

Gibraltar-based 32Red ran the 32Red online casino and secured registration of the word 32RED as a Community trade mark in May 2004. In January 2006 32Red secured registration of a figurative Community trade mark in the form of a logo showing the number 32 and the word Red in a distinctive red cursive script on a white background, with a broken red circle around the 32. Both of these registrations were for a range of goods and services in Classes 9, 16 and 41 (gaming and gambling software, betting and bookmaking services, casino services etc). 32Red also purchased "32" as a keyword for Google AdWord searches, with the consequence that any person using “32” as a search term would be presented with an advertisement for 32RED in the sponsored search results.

In December 2005 a company registered in Antigua registered the domain name '32vegas.com' and in 2006 opened an online casino under the name '32Vegas'. Initially the 32Vegas casino seemed to be a small-scale operation, posing only a limited threat to 32Red's business on account of its inability to operate in the United Kingdom. However, in October 2008 the William Hill Group (‘WHG’) entered into a joint venture which involved the purchase of an established online gaming business, the assets of which included the unregistered mark 32Vegas. As part of the joint venture arrangements, two companies within the WHG --WHG (International) Ltd and WHG Trading Ltd (the first and second defendants) -- were granted a licence to use the 32Vegas.com domain name together with any associated marks, whether registered or unregistered. As a result of the establishment of this joint venture, the 32Vegas online casino, formed part of WHG and was free to compete with 32Red on equal terms in its home market.

In January 2009, less than three weeks after the defendants began trading, 32Red sent a cease and desist letter to the defendants, who declined to back down.  32Red subsequently issued proceedings. By the time of issue of the proceedings 32Red had additionally obtained the registration as a trade mark in the United Kingdom of the number ‘32’, in respect of casino and betting services in Class 41.

At trial, 32Red alleged that, on account of the similarity of the respective marks and the high degree of similarity or identical nature of the services of the defendants to the goods and services covered by its registered trade mark, there existed a likelihood of confusion under Article 9(1)(b) of Council Regulation 207/2009 on the Community trade mark and section 10(2) of the Trade Marks Act 1994. It also alleged that the use by the defendants of their domain name and trade name constituted the taking of advantage, without due cause, of the distinctive character or repute of its trade marks under Article 9(1)(c) of Council Regulation 207/2009 on the Community trade mark and section 10(3) of the Trade Marks Act 1994.

The defendants denied liability for trade mark infringement under either head of claim. They maintained that  32Red had no reputation in any of the marks and averred that the 32vegas.com website had ceased to operate in August 2009, when it was replaced by a website bearing the name 21nova.com. This being so, the time during which the defendants had actively operated an online casino under the 32Vegas brand ran for a period of barely seven months. In their counterclaim, the defendants sought a declaration that both of the Community marks and the United Kingdom mark had been invalidly registered on the basis that they were devoid of distinctive character under Article 7(1)(b), descriptive under Article 7(1)(c) or customarily used in the trade under Article 7(1)(d) of Regulation 207/2009. The defendants also maintained that 32Red's United Kingdom mark should be revoked on the basis that its AdWord campaign would confuse and mislead the public as to the meaning and significance of “32”.

Before the court in these proceedings the judge had to consider, inter alia, the following issues: (i) were 32Red's three trade marks actually used? (ii) if they were use, did they enjoy a reputation? (iii) did the use by the defendants of the Vegas signs infringe 32Red's two Community marks under Article 9(1)(b) of the Regulation? (iv) did the use by the defendants of the Vegas signs infringe the two Community marks under Article 9(1)(c) of the Regulation? (v) were 32Red's Community marks and United Kingdom trade marks valid;? (vi) had the defendants had infringed the UK mark?

Mr Justice Henderson -- who is not a regular member of the Patents Court judicial squad --  allowed 32Red's claims in part and dismissed the counterclaims. In his view:

• With regard to proof of likelihood of confusion, the test laid down for infringement under Article 9(1)(b) did not require there to be evidence of actual confusion; if such evidence was available, it was likely to be of a confirmatory nature rather than an essential ingredient of the value judgment which the court had to draw from all the circumstances.
  
  
• When considering whether the similarity between the respective marks was likely to give rise to confusion on the part of the public, that question had to be looked at in this case through the eyes of the average consumer of online gaming services. On this basis, even though online gaming was essentially a recreational one for many consumers, and not all customers played for real money, allowance had to be made for the fact that the average online gambler would rarely have had the opportunity to make a direct comparison between the parties’ respective marks and would thus have had to rely on the imperfect picture of them which he retained in his mind. Consumers of online gambling services would also be faced with an online gambling market which was crowded and volatile, in which a large number of brands competed for their attention and where, in general, there were very low levels of customer loyalty and retention.
  
  
• It would be natural for consumers to draw the conclusion be that the respective casinos were under common ownership or control. Stables of thematically-linked online casinos were familiar within the market and there would have been nothing surprising in a family of "32" casinos. In contrast, it would have been surprising, given the highly specific nature of the number 32 and its lack of intrinsic gambling association, for two unconnected casino operators to have hit on such similar names independently.
  
  
• The goods and services covered by the defendants’ marks were actually or virtually identical to those covered by  32Red's Community trade marks and, while a lesser degree of similarity between the respective marks might establish a likelihood of confusion in such circumstances, the defendant’s marks were undeniably similar to the claimant’s Community trade marks. On the evidence in this case the combination of 32Red's marketing activities had given its business a significant visual presence in at least the United Kingdom online gambling market. In the circumstances, there was a likelihood of confusion on the part of the average online gambler in 2009 between the Vegas signs and the Community marks since the overall impression created by the two sets of signs would have been very similar. Accordingly the infringement claim under Article 9(1)(b) succeeded in relation to each of the Community marks, in relation to all of the Vegas signs.
  
  
• 32Red had succeeded in building up a reputation as one of the UK’s leading providers of high quality online gaming and it had always been an important part of the claimant's strategy both to develop and to maintain such a reputation.
  
  
• Where infringement had been proved under Article 9(1)(b), a secondary claim based on Article 9(1)(c) became comparatively unimportant because a finding of infringement under Article 9(1)(c) added nothing to a successful claim under Article 9(1)(b). Since the similarity between the parties’ respective marks was such as to give rise to a likelihood of confusion on the part of the relevant public,  32Red 's case of infringement under Article 9(1)(b) would be made out and the company would be entitled to the relief claimed and there was nothing to be gained by seeking to satisfy the much more specific and stringent requirements of Article 9(1)(c).
  
  
• Notwithstanding this, the Court of Justice of the European Union had held that Article 9(1)(c) also applies in situations in which the goods or services are identical or similar to those for which the mark was registered, with the result that overlapping claims are naturally advanced in order to cover all eventualities, and the cost and complexity of litigation, in what is already a complex and difficult area, has been correspondingly increased as a result.
  
  
• In this case the requirements of similarity between the marks and the existence of a link between the marks in the mind of the relevant public had been satisfied, and  32Red’s Community marks had an established reputation. This being so, the introduction and use of the defendant’s marks was detrimental to both the distinctive character and repute of 32Red’s Community trade marks. Accordingly the claim under Article 9(1)(c) succeeded.
  
  
• The challenge to the validity of  32Red's Community marks under Articles 7(1)(b) and 7(1)(c) of the Regulation could not succeed. While “32” could be characterised as the result of the roll of a roulette ball, a mark describing a roulette result did not designate a characteristic of roulette, let alone a characteristic of the whole range of goods and services provided by an online casino, and could not be described as being devoid of distinctive character.
  
  
• Since there was no evidence of customary usage in 2002 of either the number "32" or the word "red" to designate goods or services covered by the registration of  32Red’s marks, the registration could not be said to be invalid under Article 7(1)(d) of Regulation 207/2009.
  
  
• It could not be argued that  32Red’s AdWords campaign would cause confusion and mislead the public. Accordingly the 32Red marks were not vulnerable to revocation under Article 51(1)(c) of Regulation 207/2009.
  
  
• 32Red’s UK mark was valid. There was no reason in principle why a two-digit number could not be sufficiently distinctive to act as a badge of origin of a specific category of goods or services.
  
  
• There was no evidence of bad faith on  32Red's part in registering the mark. Even though that registration had been made with a view to strengthening its position in this litigation, and with a view to obtaining a monopoly for related services under the "32" mark, neither of those objectives necessarily indicated bad faith.
  
  
• The defendants had not infringed  32Red's UK trade mark since  32Red had not, at the relevant period, made any, or any significant, use of the 32 mark separately from the 32Red. On this basis it had not yet acquired any separate reputation in the 32 mark. The WHG companies appealed against this pretty comprehensive thrashing, while 32Red cross-appealed. The appeal was

"... a full-scale, wide-ranging attack on the Judge's analysis and conclusions on virtually every aspect of his judgment. It is said that the Judge has not only made errors of principle, but, even where he has correctly stated the law, he has misapplied it to the facts, and even some of his findings of fact were perverse" [para.49].

It's tempting to do this in a complex case where the judge is not a regular IP judge but, to Henderson J's credit, the Court of Appeal (Lords Justice Toulson, Etherton and Kitchin) dismissed the appeal from top to bottom and, adding insult to WHG's injury, allowed 32Red's cross-appeal on the UK infringement point. On that point the Court of Appeal correctly noted, at para.98, that

"The Judge appears to have assumed that it was not legally possible for there to be an infringement of the 32 number mark under section 10(2) in the absence of separate reputation established by use. That was incorrect. Having found inherent confusion and infringement of the 32Red mark by use of 32Vegas, and that the number 32 was the dominant feature of the Community marks and 32Vegas, he had no proper basis for saying there was no infringement of the 32 number mark under section 10(2)".

Merpel was quite impressed by the precision with which the Court of Appeal was able to address and dispatch so many issues in a judgment of a mere 99 paragraphs.

What is the meaning of 32? Click here to find out.