Letter held to constitute a response, not a threat of infringement proceedings

United Kingdom
When is a threat not a threat? This was the question before the Chancery Division of the High Court of England and Wales in Best Buy Co Inc v Worldwide Sales Corporation Espana SL ([2010] EWHC 1666 (Ch), July 8 2010). At the heart of the case lay the meaning of Section 21 of the Trademarks Act 1994, which reads as follows:
 
"(1) Where a person threatens another with proceedings for infringement of a registered trademark other than -
 
(a) the application of the mark to goods or their packaging;
(b) the importation of goods to which, or to the packaging of which, the mark has been applied; or
(c) the supply of services under the mark;
 
any person aggrieved may bring proceedings for relief under this section.
 
(2) The relief which may be applied for is any of the following -
 
(a) a declaration that the threats are unjustifiable;
(b) an injunction against the continuance of the threats; and
(c) damages in respect of any loss he has sustained by the threats;
 
and the plaintiff is entitled to such relief unless the defendant shows that the acts in respect of which proceedings were threatened constitute (or, if done, would constitute) an infringement of the registered trademark concerned.
 
(3) If that is shown by the defendant, the plaintiff is nevertheless entitled to relief if he shows that the registration of the trademark is invalid or liable to be revoked in a relevant respect.
 
(4) The mere notification that a trademark is registered, or that an application for registration has been made, does not constitute a threat of proceedings for the purposes of this section."
 
The claimants, US corporation Best Buy Co Inc and its UK subsidiary, intended to open a series of shops in the United Kingdom and elsewhere in Europe under the name Best Buy. Worldwide Sales Corporation Espana SL, a Spanish corporation, held a number of national and Community registrations that contained the words 'Best Buy' in combination with devices and other graphics. The claimants applied to register as a Community trademark (CTM) a sign including the words 'Best Buy', which Worldwide opposed.
 
Hoping to salvage something from the situation, the claimants' lawyers wrote 'without prejudice' to Worldwide with regard to a possible coexistence agreement, only to receive a somewhat unwelcoming response in the form of a letter from Worldwide's lawyers stating that their client was entitled to take appropriate legal action to defend its interests in the event that the claimants should start to expand into the European market. The claimants commenced Section 21 proceedings, alleging that this letter was an unwarranted threat to launch trademark infringement proceedings against them.
 
Four issues fell to be determined by the court:
  • Did the letter threaten proceedings for infringement?
  • Was the threat made in relation to an infringement which fell within the meaning of "other than" under Section 21 and was thus excluded from the operation of the section?
  • If a real, live, actionable threat had been made, was the letter admissible as evidence, given that it was written in response to a 'without prejudice' letter and was arguably part of the negotiating process?
  • Did Section 21 apply only to threats to sue in respect of infringement of UK registered marks in the United Kingdom, or did its extension under Regulation 6(1) of the Community Trademark Regulations 2006 to cover CTMs make unwarranted threats to sue for CTM infringements anywhere in the European Union actionable too?
The court dismissed the claimants' action. First, it held that any reasonable businessman in the position of the claimants would have understood from the letter in the clearest terms that proceedings for trademark infringement were being threatened. It was irrelevant whether the proceedings threatened infringement of a UK mark or a CTM: what mattered was that the threatened proceeding was an infringement action in the United Kingdom. However, Section 21 does not concern itself with the harmful effects of proceedings threatened in jurisdictions other than the United Kingdom. If it did, it would be a trap for the unwary in all the other EU member states.
 
Putting itself in the position of the reasonable recipient of the letter, the court considered that it showed that Worldwide had a range of options as to the forum in which it could bring proceedings, including both Spain and the United Kingdom. If the claimants opted to trade as Best Buy in the United Kingdom, that jurisdiction would be a likely choice for proceedings. On this basis, Section 21 applied, even if it did not specifically threaten proceedings in the United Kingdom.  
 
Therefore, the reasonable recipient of Worldwide's letter would not have understood the threat of proceedings as being limited to the supply of services (which is excluded from liability under Section 21(1)).
 
However, the claimants' case had a fatal flaw: since Worldwide's letter was written and sent in the context of correspondence between the parties as part of a negotiating process, it fell firmly within the protection of the 'without prejudice' rule. Part of the letter was in response to earlier points, while other parts sought to underline the strength of Worldwide's position. Taking a global view of the letter in its context, the court found that it was a response to the claimants' proposal, and not a threat.

Arguably, Parliament should introduce a new action that trademark owners could bring against parties which, without justification, launch proceedings against them for making unjustified threats to bring trademark infringement proceedings - especially when the latter try to monopolise descriptive or deceptive terms like 'best buy'.
 
Jeremy Phillips, IP consultant to Olswang LLP, London

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