No presumption of stay in favour of OHIM proceedings, says court

In Kitfix Swallow Group Ltd v Great Gizmos Ltd ([2007] EWHC 2668 (Ch), November 22 2007), the Chancery Division of the High Court of England and Wales has dismissed an application in a trademark infringement action for a stay in favour of proceedings before the Office for Harmonization in the Internal Market (OHIM). The court held that where English trademark proceedings in which there is a counterclaim for revocation are running concurrently with OHIM validity proceedings, there is no presumption that the English proceedings should be stayed.

Kitfix Swallow Group Ltd held a Community trademark registration for the word mark SEQUIN ART for "artistic materials, namely craft and hobby kits for making pictures". Great Gizmos Ltd was the English distributor of craft kits for making pictures out of coloured sequins and bearing the name 'Sequin Art'. Kitfix sued Great Gizmos for trademark infringement and passing off. Great Gizmos counterclaimed for a declaration that the mark was invalid on the grounds that it lacked any distinctive character and was descriptive.

4M Industrial Development Ltd, the Hong Kong manufacturer of the Great Gizmos kits, subsequently commenced proceedings before OHIM for a declaration that the mark was invalid. This prompted Great Gizmos to apply for a stay of the English proceedings pending a decision by OHIM.

Whereas the English action would come to trial at the latest in October 2008, it was common ground that there would not be a decision from OHIM until around January 2009. Additionally, the OHIM proceedings took what the court described as "a slightly odd turn". Initially, OHIM appeared to apply Article 100 of the Community Trademark Regulation (40/94) and stayed its proceedings. Article 100 requires that where national court proceedings are started before OHIM proceedings, OHIM should stay its proceedings unless there are special circumstances justifying a continuation. However, for reasons not entirely clear to the court, OHIM resumed its proceedings.

While there is a certain amount of jurisprudence on the interaction between English patent proceedings and proceedings before the European Patent Office (see Glaxo Group v Genentech [2007] EWHC 1416 (Pat)), the court did not consider that patent law provided a useful analogy. On the one hand, the operation of patent law and trademark law have in common the existence of EU institutions operated to some extent in parallel with national courts, such that the potential for concurrent actions and the need to consider staying proceedings is common to both. However, in the court's view, it did not follow that the answer for one was the same for the other. In the Glaxo Case, the court drew attention to the difference between the approach in patent cases and that in more general cases. In the present case, the court considered that it would have to be "very cautious before adopting the current patent practice by analogy".

Moreover, in the court's view, there was a further and more significant reason why patent cases did not provide a useful starting point. Specifically, Article 100 of the regulation was of direct application to the effect that where there is a counterclaim (as here) before the English Community trademark court raising the issue of validity of the mark, OHIM proceedings should be stayed unless there were "special grounds" for continuing. While Article 100 did not expressly deal with the factors to be applied in determining special grounds, it was plain that there was no presumption in favour of a stay of the English proceedings.

Therefore, the court had to arrive at a just decision, bearing in mind all the relevant factors, including the legitimate interest that the claimant would usually have in being able to pursue the proceedings in its chosen jurisdiction. This situation was much closer to the normal type of commercial cases referred to by the court in Glaxo.

Weighing the factors in favour of continuing the English proceedings against those relied on by Great Gizmos (which included the submission that the OHIM proceedings were cheaper), the court concluded that the interests of justice required that Kitfix be allowed to continue its proceedings in the United Kingdom notwithstanding the greater cost.

The court conceded that the greater cost was the principal downside, but did not consider that this factor had a sufficient impact, either by itself or together with the other factors on which Great Gizmos could rely to outweigh the factors in favour of Kitfix being allowed to proceed in its chosen jurisdiction. These included the following:

• a decision in the United Kingdom was likely to precede OHIM proceedings by between three to six months;
  
  
• there was a question mark over the viability of the OHIM proceedings; and
  
  
• this was not a case in which the claimant had deliberately sought out an advantage "in attacking a minnow and allowing the shark to swim free" - the manufacturer was not in the United Kingdom, so it was difficult to see who else Kitfix could have sued other than the English distributor.

A further factor (although admittedly not a particularly significant one) was that the passing off claim remained live. Even though the trademark proceedings might be resolved, which would make the passing off claim unnecessary or unviable, it remained a separate claim which Kitfix was entitled to maintain. Finally, the court gave some weight to the fact that it took the manufacturer seven or eight months after the dispute arose to commence its own proceedings before OHIM.

The main point of clarity from the case is that an application to stay English trademark proceedings will not be granted automatically in favour of proceedings before OHIM. Notwithstanding the fact that the English courts tend not to cede jurisdiction lightly, the factors upon which a court will base its decision on whether to stay proceedings have until now not been given a great deal of consideration. While the court's decision in the present case provides some valuable guidance, one can envisage circumstances where the court will have greater difficulty in drawing the line.

Chris McLeod, Hammonds, London