UK IPO issues £112,000 costs award warning

United Kingdom

In a decision involving invalidity and opposition actions brought by Target Brands Inc against registrations and applications by Music Choice Limited, the UK Intellectual Property Office (IPO) has made a cost award that was significantly higher than the usual awards (between £1,000 and £3,000 per action) associated with these types of actions.

The decision on costs covered two merged opposition actions and two merged invalidity actions brought by Target against Music Choice. The core of Target's complaint concerned the roundel design applied for by Music Choice, alone and as part of a word and device mark. Target relied on its Community registration for the trademark TARGET (and roundel design) and alleged rights in well-known marks under the Paris Convention for the Protection of Industrial Property. Target also argued that Music Choice's marks had been filed in bad faith.

The opposition and invalidity actions started in 2003 and came to be heard on July 16 and 17 2007. The actions were hard fought, as their history shows evidence of interlocutory decisions and a case management conference for strike out. However, when it came to a final decision, Target was found to have failed to substantiate any of its grounds and was penalized for having been vexatious and/or unreasonable.

Notably, the hearing officer held as follows:

  • "When a party pleads a ground which from the outset has no foundation, or where in the light of the available evidence it becomes clear that the ground is untenable, yet it pursues the ground up to and/or including the hearing, such behaviour can be regarded as unreasonable."

  • "Sections 3(6) (appropriation), 5(3) and 5(4)(a) and Article 6bis were so poorly founded as to make the running of these grounds vexatious, even though they were dropped just prior to the main hearing. Section 3(6) (no intention to use), whilst not vexatious at the outset, should have been dropped following the filing of the prospectus."

  • "I regard Target as having commenced the case under grounds which were unreasonable and maintaining such grounds despite clear evidence to the contrary."

Therefore, the hearing officer ordered that Target pay Music Choice the sum of £112,000. Music Choice was not completely recompensed, however, as it had sought £168,358 in actual costs. The 33% cost differential was substantiated by the hearing officer on the basis that it reflected costs incurred on work in relation to grounds which were not vexatious when pleaded.

The award should make brand owners and their advisors think carefully when pleading cases before the IPO: grounds which are untenable or become untenable during the course of the action should be dropped as soon as possible. Nonetheless, does this large award really assist the successful party which has had the uncertainty of fighting the case since 2003? The case also begs the question of whether, given the standard of representation (the brand owners were represented by solicitors and the hearing was argued by Queen's Counsel), more could have been done to settle this case earlier.

The decision has reportedly not been appealed.

Darren Olivier, Bowman Gilfillan Inc, Sandton Johannesburg

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