Forget snakes on a plane – the UK IP Court deals with Cobras on cars

In a recent judgment, the Intellectual Property Enterprise Court of the High Court of England and Wales (the Court), rejected AC Cars’ counterclaim against Clive Sutton (CSL) for a declaration of invalidity and revocation for non-use of the UK registered mark AC COBRA, highlighting some of the difficulties in running a defence and a counterclaim simultaneously in IP litigation. 

Background

This case relates to the “Cobra” sports car (pictured below) which came into being in 1962 when the American racing driver Caroll Shelby (famously depicted by Matt Damon in the film Ford vs Ferrari) requested that a Ford engine be installed into the modified chassis of a car produced by a firm called AC Cars, at its factory in Surrey.

Cars with the AC Cars chassis and a Ford engine subsequently went into production under the name "Cobra", as chosen by Mr Shelby. Although most of the cars were produced for Mr Shelby's company, Shelby American, Inc, and sold in the US as "Shelby Cobras", some were fitted with engines in England and were sold in Europe by AC Cars as "AC Cobras" (and trouble predictably ensued).

Acedes, which acquired some of the assets of AC Cars in 1996, including the IP rights and goodwill relating to the mark “AC Cobra", registered the mark in the UK in 2007 (the AC Cobra Mark).

In 2021, CSL began importing and selling in the UK cars made by an American company, Superformance LLC, which are replicas of the Shelby Cobra cars of the 1960s and have been sold under the sign "Shelby Cobra".

In 2022 AC Cars and Acedes (the AC Parties) issued a claim against CSL alleging infringement of the AC Cobra Mark. CSL denied infringement and counterclaimed for a declaration that the AC Cobra Mark was invalidly registered and an order for revocation of the AC Cobra Mark for non-use.

However, shortly before trial the AC Parties discontinued their claim, meaning that the trial was only concerned with issues arising from CSL’s counterclaim, namely:

1. whether the AC Cobra Mark was invalidly registered pursuant to section 5(2) and/or 5(3) of the Trade Marks Act 1994 (the 1994 Act), in light of two earlier registered trade marks owned by Ford in the word mark COBRA, registered for motor vehicles in 1966 and 2001 respectively (the Ford Cobra Marks); and
2. whether the registration of the AC Cobra Mark stood to be revoked for non-use pursuant to section 46(1) of the 1994 Act.

The Court’s judgment

Standing

The Court began by noting that, under section 5 of the Trade Marks (Relative Grounds) Order 2007 (the 2007 Order), only the proprietor or licensee of an earlier mark is entitled to make an application for a declaration of invalidity on the basis of an earlier right.

Whether or not CSL was a valid licensee of the Ford Cobra Marks depended on the construction of a licence agreement between Ford and Shelby American in 1997, which referred to the grant by Ford of an “exclusive worldwide royalty-free licence to use Ford’s federally registered marks”. The only exception to the exclusive licence was said to be “Ford’s existing non-exclusive licence in the United Kingdom”.

CSL argued that the express carve-out for the United Kingdom could only make sense if the 1997 licence was being granted worldwide, and that the reference to “federal” marks was simply loose language. The Court, however, applying the principles of construction established in Arnold v Britton, Wood v Capita and Rainy Sky, found that on a correct construction, the 1997 licence only licensed Ford’s US federal trade marks, and not any others.

This was because a non-exclusive licence agreement between Ford and AC Cars in 1996 stated that it was limited to vehicles manufactures in the UK, but was “without limit” as to sales and marketing territory, meaning that AC Cars could sell cars into the US, provided it carried appropriate insurance. The Court therefore considered that the loose language in the 1997 licence was more likely to be in the use of "worldwide" rather than "federal".

The Court also addressed the agreement which CSL entered into with Ford in December 2022, after the proceedings had been issued, which sought to retrospectively correct the position. The Court found that CSL's lack of locus standi to apply for the declaration when it did, could not be cured by acquiring locus standi later. A fresh claim for a declaration of invalidity would have to be made.

 

                                                                This Kat prefers to be on cars than in them...

Likelihood of confusion / reputation

For the section 5(2) element, the key issue was whether AC COBRA was sufficiently similar to COBRA to give rise to a likelihood of confusion on the part of the average consumer, applying Specsavers v ASDA.

CSL’s downfall here was that, before the AC Parties had dropped their infringement claim, CSL had put in extensive evidence with the aim of fighting that claim. Such evidence included a number of statements by CSL witnesses to the effect that the use of the word “Cobra” was entirely generic to describe the type and shape of car.

A highlight from the evidence of a senior Ford employee was that: "The clue is in the name. A Shelby Cobra is produced by Shelby, an AC Cobra is produced by AC and a third party replica is produced by that third party."

The Court noted that it had to be guided by the evidence, regardless of the motive driving such evidence, and held that on CSL’s own evidence AC Cars' use of the sign “Cobra” could not have affected the essential function of either of the Ford Cobra Marks as a guarantee of origin (see Arsenal v Reed). There could not therefore have been any likelihood of confusion as to origin.

CSL’s arguments in respect of section 5(3) also failed, as it had sought to rely on the use of “Cobra” by AC Cars as establishing a reputation for the earlier Ford Cobra Marks.

Acquiescence / genuine use / non-use

In respect of use, the Court was prepared to find that the sales by Superformance (under licence by Ford) of 8 or so cars in the EU and 3 or so sales in the UK were sufficient to qualify as “genuine use” of the Ford Cobra Marks for the purposes of section 47(2B), given the cost of the goods being sold and the potential to make significant profits even from a small number of sales (applying Walton v Verweij).

Given that the period nominated for the assessment of the revocation for non-use was the same as that for assessing “genuine use” for the purposes of section 47(2B), it meant that both would succeed or fail together – CSL admitting that only if there was insufficient use of the Ford Cobra Marks, would there have been non-use of the AC Cobra Mark.

Finally, the Court found that two letters sent by CSL’s solicitors to AC Cars in 2017 and 2020 alleging infringement, ostensibly with permission from Ford, were effectively enough to show that Ford had acquiesced to AC Cars’ use of the AC Cobra Mark during that period.

Both counterclaims therefore failed.

Comment

This judgment highlights that serious thought should be given before taking what has become almost an automatic strategic step in IP litigation, namely responding to allegations of IP infringement with various counterclaims for invalidation/cancellation. As this judgment shows, simultaneously defending a claim and arguing a counterclaim can create competing interests which are difficult to reconcile, and the merits of maintaining a counterclaim after the main claim has been abandoned are questionable.

It is also a very helpful reminder as to the importance of chain of title, and parties should always double-check when initiating any form of claim/counterclaim that they have the right to do so (and all the paperwork to show it), as any defect may be impossible to cure after the event.