Court of Appeal of England and Wales refers to SkyKick - in a design dispute on res judicata

In a recent decision, the Court of Appeal of England & Wales (the Court) referred to the Supreme Court's landmark judgment in Sky v SkyKick (see IPKat here) in finding that a party was barred from seeking a declaration of invalidity in respect of a UK Design Right, having already unsuccessfully sought such a declaration in respect of its pre-Brexit EU equivalent. 

Background

The first appellant, Praesidiad Holding BVBA (Praesidiad), a designer and manufacturer of high security fencing and perimeter systems, is the owner of a Registered Community Design (RCD) which protects the design of its "Bekasecure" fence posts.

In 2018, Praesidiad issued proceedings in the UK against the respondent, Zaun Limited (Zaun), alleging that Zaun was infringing the RCD (the Infringement Action). Zaun responded by seeking a declaration of invalidity (the Invalidity Action) in respect of the RCD at the EU Intellectual Property Office (EUIPO), on the basis that the RCD lacked novelty and/or individual character over a number of prior designs and/or was solely dictated by its technical function.

The Infringement Action was stayed in October 2018 by order of the High Court (as a Community design court) pending final determination of the Invalidity Action. 

The agreement on the withdrawal of the UK from the EU (the Withdrawal Agreement) was concluded on 17 October 2019, but did not come into force until 1 February 2020. IP Completion Day (the end of the Brexit implementation period) was 31 December 2020.

In June 2023, following various appeals, the Board of Appeal of the EUIPO finally issued a confirmatory decision, upholding the validity of the RCD, and disposing of all of Zaun's invalidity challenges.

The stay of the Infringement Action therefore fell away, and Praesidiad proceeded to serve an amended particulars of claim.  However, in Zaun's defence and counterclaim, it sought to once again seek a declaration of invalidity in respect of both the RCD and the equivalent re-registered UK Design which had automatically come into existence following IP Completion Day. 

Had Brexit not happened (sigh), Zaun would have been precluded from challenging the validity of the RCD by the doctrine of res judicata. The question for the High Court was, essentially, whether Brexit affected this position. The High Court found that it did not, and struck out Zaun's counterclaim. Zaun appealed to the Court (the Appeal).

The Court's Decision

The main legislative provisions relevant to the Appeal are Article 86(5) of the Community Design Regulation (CDR) and Article 67(1) of the Withdrawal Agreement. 

Article 86(5) CDR, which falls within Title IX CDR, provides that: "No counterclaim for a declaration of invalidity of a registered Community design may be made if an application relating to the same subject matter and cause of action, and involving the same parties, has already been determined by the Office in a decision which has become final."

Article 67(1) of the Withdrawal Agreement effectively provides that the "provisions regarding jurisdiction" of the CDR will apply to legal proceedings instituted before the end of the transition period as well as proceedings/actions related to such proceedings. 

As for res judicata and abuse of process, the Court referred to the principles set out in Virgin Atlantic v Zodiac [2013] UKSC 46.

Zaun's appeal was based on three grounds: 

1. That the High Court was wrong to hold that Article 86(5) CDR is a provision "regarding jurisdiction" within the meaning of Article 67(1) the Withdrawal Agreement; 
2. The the High Court was wrong to hold that Article 86(5) continued to apply to these proceedings; and
3. The High Court was wrong to hold that Zaun is precluded from bringing its counterclaim by res judicata or abuse of process, and the common law principles to not apply to the UK Design, because the UK Design's validity was never considered by the EUIPO. 

Kat making sure the fence is as secure as they say... 

Ground 1

Zaun argued that the High Court was wrong to hold that Title IX CDR as a whole constitutes "the provisions regarding jurisdiction of" the CDR and, in any event, Article 86(5) is not a provision regarding jurisdiction, but instead relates to procedure or substantive law. 

The Court disagreed, finding that Article 86(5) plainly does not provide for a substantive defence: it is located in Title IX dealing with "jurisdiction and procedure", and does not provide that the defendant to a counterclaim has a defence, but simply that "[n]o counterclaim … may be made". It therefore goes to the subject matter jurisdiction of Community design courts. 

The Court found that this reasoning was supported by a line of authority, including in particular the Supreme Court's recent decision in SkyKick, where the Supreme Court held, in proceedings concerning the infringement and validity of EU trade marks which were pending in the UK on 31 December 2020, that the EU trade mark courts in the UK retained full jurisdiction to deal with those issues thereafter. 

The Court cited the concurring judgments of both Lord Kitchin and Lord Reed, the latter of which stating "It is a basic principle of legal certainty, and an aspect of the rule of law, that the legal consequences of events are, in general, determined in accordance with the law in force at the time of those events, rather than a different law introduced at a later date."

Ground 2

Zaun had accepted that its second ground of appeal would stand or fall with its first, and therefore the Court did not find it necessary to address it. 

Ground 3

In respect of Ground 3, the Court did agree with Zaun that the High Court was wrong to find its counterclaim for a declaration of invalidity of the UK Design was barred by Article 86(5) of the CDR, because this would only apply in respect of Community designs.

However, the fact remained that the UK Design was subject to the same substantive conditions for validity as the RCD and conferred the same substantive rights. It "derives from" the RCD, and its parasitic nature empowered the High Court to declare it invalid if it declares the parent registered Community design invalid. 

Therefore the Court agreed with the High Court that the principles of res judicata and abuse of process (and, specifically, issue estoppel) applied to preclude Zaun re-litigating the validity of the UK Design. 

Comment

Although perhaps more interesting for academic reasons than broad applicability, the Court in this case does provide an answer to a fairly thorny question, and effectively closes the door to opportunistic defendants in IP infringement proceedings, seeking to take advantage of Brexit in order to have a "second bite of the cherry".