Round one to claimant in boxing brand dispute
In Boxing Brands Limited v Sports Direct International Plc ( EWHC 3588 (Ch)), the High Court of England and Wales has dealt with three applications made in the context of a dispute between the parties as to the rightful owner of the brand QUEENSBURY, to be used in relation to the marketing of sportswear goods.
The first application was by the claimant for an interim injunction to prevent the defendants from the sale and marketing of products bearing the brand name pending determination of the issues at trial. The second application was for directions that the trial be expedited. The third application was by the defendants seeking a stay of proceedings pending the determination by OHIM of the validity of a Community trademark (CTM) held by the claimant for QUEENSBURY.
The claimant and predecessors to the defendants have been in dispute over the entitlement to use the brand since 2008. The claimant holds a number of national and Community trademarks for QUEENSBURY, the validity of which was also in dispute. In February 2012 the defendants purchased rights from those in opposition to the claimant and applied to register a number of national trademarks. When this came to the attention of the claimant, the claimant's solicitors wrote to the defendants requesting undertakings that they would not exploit the brand.
The defendants' solicitors in reply, on April 5 2012, asserted that their rights pre-dated those of the claimant and declined to provide undertakings, but explained that the defendants had no current plans to use a QUEENSBURY device mark applied for, as it was considering a new iteration of the brand. On this basis, the claimant took no further action. On November 16 2012 the claimant became aware that the defendants had started to advertise the brand for sale. Undertakings were not forthcoming from the defendants and infringement proceedings of the claimant's national and CTM rights were commenced.
The claimant sought interim injunctive relief until trial. Mr Justice Sale noted that the principles to be applied to the application were those set out in American Cyanamid. As the parties agreed that there was a serious issue between the parties to be tried, it was left for the judge to consider the balance of convenience between the parties.
The judge began by exploring whether, if injunctive relief was not granted, the claimant may suffer harm which cannot be adequately compensated through damages. Two potential heads of harm were persuasive to the judge on the evidence. First, the claimant had demonstrated that it was in the process of preparing its own launch of the brand. The judge considered that the claimant was at risk of losing the profits from launching its own products as the defendants had reached the market first. The claimant was willing to undertake not to launch its own products pending trial. Second, the judge cited the loss of control the claimant would have over the trademarks it claimed to own, which would jeopardise the claimant's ability to build its own brand. On this point, the claimant produced evidence that the defendants had entered into an endorsement arrangement with a boxer recently suspended from competition due to failing a test for banned substances. The judge was concerned that the claimant would have no control over how the trademarks were promoted prior to trial if the injunction was not granted.
The judge then looked at the defendants' position. He assessed the difficulty of assessing the defendants' lost profits as carrying equal weight in determining the balance of convenience as that accorded to the claimant. However, as the claimant had agreed to stay out of the market pending trial, he considered that the issue of losing control of the brand did not apply to the defendants. On this basis, the judge was in favour of granting injunctive relief. A further influencing factor was the defendants' conduct. The judge was not convinced by the defendants' submission that the claimant's failure to commence proceedings after the April letter gave the defendants' comfort that the claimant would raise no objection to the defendants' launch. The defendants ought to have known that the claimant would object to the launch.
The defendants' objections to the granting of interim relief on the grounds that the claimant's cross-undertaking as to damages was of no significant value were also rejected. The judge had no reason to doubt the evidence of the claimant that it could satisfy the cross-undertaking that the court would impose as a condition to granting the injunction.
Having found in favour of granting an injunction against the defendants' use of the QUEENSBURY marks, the judge also granted the claimant's application for a speedy trial. The judge considered that the case was one that was clearly suitable for such an order in light of the relief granted.
The final application left to be determined by the judge was the defendants' application that the claimant's infringement claim based on the claimant's CTM be stayed. In support, the defendants cited Article 104(1) of the Community Trademark Regulation (207/2009), which requires a CTM court hearing an infringement action to stay proceedings, unless there are special grounds to do otherwise, where the validity of the CTM is already in issue before another CTM court. In this instance, the defendants had already challenged the validity of the claimant's CTM before OHIM. This, the judge noted, created a strong presumption in favour of a stay, subject to his analysis as to whether, or not, special grounds to grant the stay existed.
Four factors persuaded the judge that the exception in Article 104(1) of the regulation applied in this case. Firstly, the claimant's case in respect of its national and CTM rights significantly overlapped. A stay in respect of the CTM created the risk of incompatible decisions. Secondly, the defendants' case as to the invalidity of the defendants' marks was based on the allegation that they were applied for in bad faith. He considered this better tested in court where they would be subject to disclosure and cross-examination, rather than OHIM's paper-based determination of the issues. Thirdly, dealing with all the issues at the same time would provide the parties with certainty much more quickly, especially in light of the speedy trial ordered. Finally, the impact on the parties of the injunction granted was also taken into consideration by the judge. Accordingly, the application for a stay was refused.
Two points of interest arise from this decision: the impact of the defendants' conduct on the decision to grant the injunction - in particular, the wording of the defendants' response to the initial letter from the claimant - and the court's interpretation of Article 104.
The defendants sought to argue that they had proceeded on the basis that the claimant, having threatened action against the defendants, had not taken any further steps after the initial cease and desist letter. On the facts, the judge was not convinced by this for a number of reasons. First, and perhaps key, the wording of the defendants' April 5 2012 letter indicated that no imminent steps would be taken by the defendants to begin to commercialise the brand. When the brand was launched, the judge noted that it had been done without a large marketing expenditure and the claimant had not been notified. Had the defendants' initial letter not created this suggestion, and had the defendants' notified the claimant of its intent, the outcome of the injunction application could well have been different.
The judge's approach to Article 104 is also of interest. The presence of national marks and the parties' willingness to progress to an expedited trial were instrumental in persuading the judge that a stay was not appropriate. The suggestion is, where both national and CTM rights are in issue in infringement proceedings, the English courts will not shy away from invoking the exception in Article 104(1) to seize jurisdiction over the validity of a CTM from OHIM.
Leigh Smith, McDermott Will & Emery UK LLP, London
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