LONSDALE mark licensor hit by licensee's damages claim

In Leofelis SA v Lonsdale Sports Ltd, the High Court of England and Wales has upheld the plaintiff licensee's claim for damages against the licensor of the LONSDALE mark.

Leofelis SA, a Swiss company, licensed the distribution and sale of casual clothing, sports gear and other products that carried the LONSDALE trademark. Its subsidiary Leeside Srl, an Italian company, distributed and sold those products. The defendants in the case were Lonsdale Sports Ltd, the worldwide proprietor of the LONSDALE trademarks, Trademark Licensing Company Ltd (TLC), its worldwide licensee and also a sub-licensor to third parties, and Sports World International Ltd, also a licensee of Lonsdale-branded products. The right to exploit the LONSDALE trademark was vested in yet another company, Lord John, which was owned by an individual named Javid Alavi.

In February 2001 Lord John licensed the use of the LONSDALE trademarks to Alavi. The licence was a "non-exclusive royalty free licence to use the trademarks throughout the world". In November 2002 Lonsdale Sports and TLC granted Leofelis an exclusive licence to use the LONSDALE marks throughout the European Economic Area as well as in Switzerland, but excluding the United Kindom and Ireland. This licence was to run for six years from January 1 2002 at a fixed annual royalty, aggregating over the whole of the six-year period to €16 million. Under Clause 2.1 of that agreement Lonsdale Sports and TLC granted Leofelis

"the exclusive licence in the territory to use the trademarks in relation to the goods subject to the provisions of certain ... distribution agreements set out in Part 5 of the First Schedule."

Clause 2.2.1 provided:

"The licence granted pursuant to this agreement is subject to any existing licences or rights, whether written or not, which may have been granted in respect of the trademarks. The proprietor [the first defendant] and the licensor [the second defendant] are not aware of any other licences or rights having been granted in respect of any of the trademarks."

Leofelis and Leeside sued Lonsdale Sports and TLC for damages for misrepresentation, and breach of Clause 2.2.1 of the November 2002 licence, citing an alleged failure to disclose Alavi's continuing rights in the LONSDALE marks. Lonsdale Sports and TLC counterclaimed for termination of the November 2002 agreement (and by implication Leofelis's sub-licence under it), alleging various breaches.

The High Court allowed Leofelis's claim and dismissed the counterclaim. It ruled as follows:

• On a true construction of the agreements, the failure of Lonsdale Sports and TLC to disclose the rights conferred upon Alavi constituted a breach of Clause 2.2.1 of the November 2002 agreement.
  
  
• Neither Lonsdale Sports nor TLC had ever made any effort to show that they genuinely believed in the truth of the representations they made.
  
  
• Leofelis had established entitlement to receive damages for misrepresentation or damages for breach of contract.

Jeremy Phillips, IP Consultant to Slaughter and May, London