High Court rejects post-judgment application to stay remainder of Betty Boop proceedings

In Hearst Holdings Inc v AVELA Inc ([2014] EWHC 1553 (Ch), May 19 2014), the High Court for England and Wales, which was the court second seized in trademark infringement proceedings, was not required to decline jurisdiction under Council Regulation 44/2001 (the Brussels Regulation) in favour of the first seized Italian court. This was on the basis that, although the two proceedings involved the same parties and trademark infringement, they did not have the same “cause of action” and same “end in view” as required by Articles 27 and 28 of the Brussels Regulation. The court emphasised the purpose of declining jurisdiction is to avoid the risk of irreconcilable judgments and that this risk could no longer be avoided as the application was made after judgment in the English courts had already been handed down.

The case related to previous proceedings between the claimants, Hearst Holdings, and the defendants, AVELA, in respect of claims for trademark infringement, passing off and copyright infringement, and counterclaims for invalidity of marks on the grounds of bad-faith applications.

The dispute concerned Betty Boop merchandise and the ownership of the marks in the words 'Betty Boop' and the device of a cartoon character. In February 2014 the English court found the defendants liable for trademark infringement and passing off. The claimants’ related claim for copyright infringement and the defendants’ counterclaim for invalidity were hived off until January 2015.

Following judgment, AVELA claimed that Hearst had already commenced proceedings in Italy in relation to the same trademarks against Italian licensees of Betty Boop imagery prior to bringing its claims in England in April 2012.

AVELA advanced that the English Court should decline jurisdiction on the remainder on part of the proceedings and stay the remainder on the following three grounds:

• Article 109 of the Community Trademark Regulation (207/2009);
• Article 104 of the Community Trademark Regulation; and
• Article 28 of the Brussels Regulation.

Under Article 109 of the Community Trademark Regulation, where proceedings are brought in two member states and involve the same cause of action and same parties, if one is seized on the basis of a Community trademark (CTM) and the other a national mark, the court second seized must decline jurisdiction if the marks are identical and for the same goods and services. Where the jurisdiction of the first seized is in dispute, the court second seized may exercise discretion to stay proceedings.

Under Article 104, a CTM court must stay proceedings where the validity of the relevant mark is in question in another CTM court on account of a counterclaim, or where an application for revocation or declaration of invalidity is already filed, unless there are special grounds for continuing the hearing.

Under Articles 27 and 28 of the Brussels Regulation, where proceedings involve the same cause of action and the same parties, the court second seized must stay proceedings. If the jurisdiction of the first seized is already established, the second must decline jurisdictions. In the case of related actions, the second seized may exercise its discretion to stay the proceedings.

The court found that "cause of action" in Article 109 of the Community Trademark Regulation had the same meaning as in Article 27 of the Brussels Regulation. Under Articles 27 and 28, the purpose of declining jurisdiction where proceedings have the same cause of action and same parties is to “reduce or avoid the risk of irreconcilable judgments.” This rationale applies equally to the Community Trademark Regulation.

Birss J held that for proceedings to have the same cause of action, they must have the same 'cause' and same 'objet'. To have the same 'cause', proceedings must have the same facts and same rule of law as the basis for the action. To have the same 'objet', proceedings must have the same “end in view”.

On the facts, the judge found that the devices, goods and the defendants in the English and Italian proceedings were not the same. Although the judge acknowledged that the acts of the licensees in Italy and England were similar, they could not be the same as they involved different individuals, different relationships and different transactions. Although the relevant law regarding trademark infringement was the same, this did not suffice to fulfil the requirement of Article 27.

When considering “end in view”, the court found that, although there was overlap in the relief sought, the specific relief claimed was different. In Italy, the relief focused on the acts of the Italian defendants, whereas in England, on the acts of the English defendants.

When considering whether special grounds existed to overcome the presumption to stay the hearing, Birss J affirmed the purpose of Article 104 was to avoid inconsistent decisions between member states in relation to community trademarks. The burden of proving special grounds is high and the related passing-off claim was found not to constitute special grounds.

The court once again criticised the parties for the delay in raising these jurisdictional issues after judgment on the main proceedings had already been handed down. The judge found no sense in staying the proceedings as the risk of irreconcilable judgments could no longer be avoided and, as such, should bear no weight.

Further, the court granted Hearst’s application for summary judgment in respect of AVELA’s counterclaim that the marks were registered in bad faith.

Birss J noted that AVELA’s claim involved proving Hearst did not have prior rights in the character. However, in the main proceedings the court found that Hearst had established goodwill and reputation through its activities and that the marks were distinctive by 2009. On this basis, the argument that Hearst had no rights in the character had no real prospect of success and summary judgment was granted.

This case provides useful guidance of the factors to consider when assessing whether the jurisdiction should be declined.

It is also worth bearing in mind the importance laid by the courts on the purpose of the policy which was being used a tactical tool. Both parties were heavily criticised for allowing jurisdictional issues only to be raised after judgment was given, given that they had sufficient prior knowledge of the parallel proceedings. Considering the court’s stricter approach to case management, parties run the risk of being penalised for not raising issues at the appropriate time, such as during case management conferences.

Kavita Mehta, McDermott Will & Emery UK LLP, London