Online gambling operator hits jackpot with ‘32’ marks

United Kingdom

In WHG (International) Ltd v 32Red Plc ([2012] EWCA Civ 19, January 24 2012), the Court of Appeal has upheld the validity of all three of 32Red Plc’s trademarks and the trial judge's finding that the marks were infringed by rival online casino operator 32Vegas. 32Red’s cross-appeal that its UK mark was infringed by 32Vegas was also successful. 

This case was an appeal from the decision of Mr Justice Henderson in the Chancery Division. The grounds of appeal were so wide and comprehensive that the Court of Appeal characterised the proceeding as "a full scale, wide-ranging attack on the judge's analysis and conclusions on virtually every aspect of his judgment".

The case involved a trademark dispute between two online casino operators in the UK market. The respondent, 32Red, is a Gibraltar company that operates an online casino under the same name and has the following registered trademarks: the Community trademark (CTM) 32RED, a CTM for a device containing ‘32Red’ and a UK trademark for the number 32. The marks are all registered for gaming, gambling and betting services. The company was described as being a substantial online gaming business which has operated under the 32Red brand since 2002 and has a recognised reputation in the United Kingdom.

In 2008 the William Hill Group purchased a similar online gaming business from an Antiguan company for operation in the United Kingdom. That online gaming business was called 32Vegas and had not previously been advertised or operated in the United Kingdom. The appellants, WHG (International) Ltd and WHG Trading Limited WHG (hereinafter WHG), operated the business and were granted licences to use the unregistered mark 32VEGAS and the domain name ‘32Vegas.com’.

32Red brought proceedings against WHG shortly after the 32Vegas business commenced operation in the United Kingdom, alleging that use of the 32Vegas brand was infringing its trademarks.

At first instance, it was ruled that WHG's use of the 32Vegas brand infringed 32Red’s CTMs; WHG's counterclaim that the 32RED marks were invalid was rejected. Further, 32Red's claim that its UK trademark had also been infringed was rejected.

WHG appealed the trial judge's findings that 32Red's CTMs had been infringed by the use of the 32Vegas brand and that the 32RED trademarks were valid. 32Red cross-appealed the finding that its UK trademark for the number 32 had not been infringed.

The Court of Appeal carefully set out all the key aspects of the judgment and made repeated reference to the detailed reasons of Justice Henderson. The Court of Appeal systematically dismissed each of the appellants' grounds of appeal and the reasons of Justice Henderson were affirmed on every point, save for the cross-appeal made by the respondents in respect of UK mark 32, which was allowed.

The Court of Appeal agreed with the findings made on infringement of 32Red's CTM rights at first instance. In addressing the respondent's claims made in the court below under Community Trademark Regulation (207/2009), Justice Henderson had found under Article 9(1)(b) that 32Vegas was undeniably similar to 32Red’s CTMs and would give rise to the likelihood of confusion by the public (from the perspective of the average online gambler) that the competing gaming businesses were somehow linked or were the same entity.

It followed that the arguments for infringement under Article 9(1)(c) were also determined in favour of 32Red. All the elements were satisfied:

• there was a clear similarity between 32Vegas and 32Red’s CTMs;
• 32Red had an established reputation in the United Kingdom; and
• the operation of 32Vegas was determined to be detrimental to 32Red's distinctive character and reputation.

Further, the Court of Appeal agreed with Justice Henderson's findings on the grounds argued for invalidity of 32Red’s CTMs under Articles 7(1)(b), (c) and (d) and Article 52. The findings made as regards revocation under Article 51(1)(c) were also affirmed.

The challenges to validity under Articles 7(1)(b) and (c) did not succeed, as it could not be shown that 32Red’s marks designated the character of the online gaming offered, nor was it found to be devoid of distinctive character. At its highest it was accepted that the number 32 with the word ‘Red’ could possibly describe a particular result in roulette, but that was not enough to designate a characteristic of roulette, let alone the suite of services provided by the online gaming business.

The argument for invalidity under Article 7(1)(d) was dismissed as being "equally hopeless". There was nothing in the evidence that could establish a customary usage of either ‘32’ or ‘Red’ that had any connection to the designated goods and services.

Revocation of the marks was argued under Article 51(1)(c) by reference to 32Red's use of the number 32 as a Google AdWord sponsored search term. This argument also failed and it was noted that the Adwords feature is well known to the public and, although possibly irritating to some people, the use of 32 as a sponsored link would not serve to confuse or mislead the public.

In addition, 32Red's UK mark was challenged on the same grounds of invalidity that were relied upon for the CTMs, using the equivalent Sections 3(1)(b), (c) and (d) of the Trademarks Act 1994. Again, the Court of Appeal could not find fault with the reasons of Justice Henderson. The challenge to the UK mark on each of these grounds (ie, lack of distinctiveness; designations or indications of characteristics; and use of customary signs or indications) failed and was dismissed for the same reasons as set out for the CTMs above.

Further, it was argued that the UK mark was applied for by the respondent in bad faith in contravention of Section 3(6) of the act. WHG claimed that:

• the registration of 32 was solely intended to prevent other traders from using the number 32 and therefore prevent them from entering the online casino and gaming market;
• the registration was made without a genuine belief that it was a proper trademark; and
• 32Red had no genuine intention to use the mark 32.

This ground also failed and the Court of Appeal affirmed the findings at first instance that 32Red had acted in good faith by registering 32 in the United Kingdom. In following the guidance applied to the equivalent provision in Article 52(1)(b) of the regulation by Arnold J in Cipriani and by the Court of Justice of the European Union in Lindt (C-529/07), the court noted that it does not constitute bad faith for a party to:

• file an application for a mark merely because they are aware that a third party intends to use the same mark for identical goods or where similar marks are already being used;
• file a registration simply in order to strengthen their position in forthcoming litigation; or
• register only the distinctive part of a trademark rather than the actual mark itself.

It was found that 32Red filed the application for 32 in the United Kingdom for good tactical reasons. It was also found that no significant commercial use had been made of the 32 mark in isolation within that market and there was evidence that 32Red had genuine uses for the 32 mark.

The court again cited Cipriani, noting that "an allegation of bad faith is a serious one which must be distinctly proved, and that a person is presumed to have acted in good faith unless the contrary is established." Accordingly, the ground of bad faith for invalidity was not made out and it was ruled that the respondent had indeed acted in good faith.

All grounds of invalidity were rejected by the trial judge who concluded that the UK trademark was validly registered.

In making his ruling at first instance on the alleged infringement of 32Red's UK mark, Justice Henderson had ruled that there was no significant use of the mark in isolation and, as such, he ruled that 32Red had not yet acquired a sufficient reputation in that mark. On that basis alone, the claim of infringement under Section 10(2) of the act was rejected.

The Court of Appeal disagreed with this point:

"In my judgment, the cross-appeal succeeds. The judge appears to have assumed that it was not legally possible for there to be an infringement of the 32 number mark under Section 10(2) in the absence of separate reputation established by use. That was incorrect. Having found inherent confusion and infringement of the 32Red mark by use of 32Vegas, and that the number 32 was the dominant feature of the Community marks and 32Vegas, he had no proper basis for saying there was no infringement of the 32 number mark under Section 10(2)."

The Court of Appeal ruling on the ground of bad faith provides a useful reminder to brand owners that careful pre-emptive filing for a CTM or UK mark may be used to strengthen their position in the market and also to legitimately reinforce their position ahead of upcoming litigation. The decision also shows that a number on its own may be registered validly as a trademark and be distinctive of goods and services.

Finally, the decision highlights that applying to register a dominant or distinctive feature of a mark may be critical in protecting an established brand from attacks that seek to manipulate and exploit such a key recognisable feature. In this case, the distinctive feature was the number 32. The Court of Appeal has confirmed that such registrations are not necessarily made in bad faith and are capable of being infringed by rival brands seeking to exploit the distinctive feature.

Joel Smith, Ash von Schwan and Rachel Montagnon, Herbert Smith LLP, London

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