Dousing an old flame

22nd Apr 2021

Duncan Balloch reports on how the boundaries became blurred for competing fire-protection businesses. [2021] EWHC 11 (IPEC), Cormeton Fire Protection Ltd v Cormeton Electronics Ltd & Another, IPEC, 18th January 2021.

This case shows the importance of formalising arrangements when businesses with common origins agree to go their separate ways but plan to continue to use shared assets such as trade marks. Here, in the absence of such arrangements, the judge had to navigate conflicting evidence as to discussions that had taken place 17 years previously, but ultimately found that an oral trade mark licence existed between the parties, which was largely determinative of the issues.

The Claimant, Cormeton Fire Protection Ltd, had provided mechanical fire protection solutions (such as fire extinguishers) since 1967. In 1989, the Claimant teamed up with Mr John Aitchison (the Second Defendant) to provide electronic fire protection solutions, such as fire alarms, under the corporate entity Cormeton Electronics Ltd (the First Defendant). In 2003, the two businesses amicably separated, with the First Defendant moving out of the Claimant’s premises and the Second Defendant buying out the Claimant’s shareholding in the First Defendant. For many years, both undertakings continued to operate and use the Cormeton name, focusing upon their own areas of expertise and referring work to each other – until 2015 when they fell out.

Infringement proceedings

In 2016, the Claimant applied to register CORMETON as a trade mark. Around the same time, the Defendant had increasingly started to use the Cormeton name on its own, and in respect of mechanical as well as electronic protection. In 2019, the Claimant commenced infringement proceedings.

The proceedings claimed infringement of the UK word mark CORMETON in classes 6, 9, 37, 40, 41, 42 and 45, infringement of copyright said to subsist in the logo, and passing off. The Claimant also took issue with the First Defendant’s use of the sign CORMETON on its own, the domain name www.cormeton.co.uk, the logo and CORMETON ELECTRONICS in relation to the supply and sale of mechanical fire protection goods. The Claimant had no issue with the Defendant’s use of CORMETON ELECTRONICS in relation to electrical safety equipment.

The Defendants denied trade mark infringement, copyright infringement and passing off, on the basis that following the parties’ separation in 2003, the First Defendant operated under licence to use the name, domain name and logo and that the Claimant was estopped from denying a licence and/or had acquiesced in the First Defendant’s use. The Defendants also counter-claimed for invalidity of the Claimant’s mark under s3(3)(b) and/or revocation under s46(1)(d) of the Trade Marks Act 1994 (TMA), arguing that the public would be deceived or misled by the registration given that the Cormeton name had been associated with both businesses for many years.

Copyright in the logo

The judge was able to dismiss the claim based upon copyright very swiftly, as it was found that the version of the logo set out in the pleadings was not an artistic work

The logo at issue

created by the Claimant. The Claimant did not apply to amend its pleadings to substitute a version of the logo in which the Claimant did own copyright until the last half-hour of the trial, which was deemed too late.

Defendant’s defences

The existence and content of the agreement reached between the parties when they separated in 2003 was hotly disputed in the evidence given at the trial. In the absence of a written agreement, the judge preferred an analysis that accorded with common business practice and with how the parties had actually conducted themselves in the years after 2003. He thus concluded that an oral agreement had been reached, including a licence that allowed the First Defendant to trade under CORMETON ELECTRONICS and CORMETON ELECTRONICS LTD and to use the domain name in relation to the supply and sale of electrical safety equipment. These licensed uses therefore did not constitute infringement of the Claimant’s registered trade mark.

However, the First Defendant’s use of CORMETON on its own was outside the terms of the 2003 licence, as was any use of the above signs, including CORMETON ELECTRONICS, in relation to mechanical fire protection goods and services. These unlicensed uses of the CORMETON mark were thus prima facie infringing. 

The Defendant had also argued a number of defences alternatively or in addition to the existence of a licence. First, it argued honest concurrent use of the CORMETON mark, but the judge ruled that to the extent that its use was licensed, this argument was not available, while the unlicensed uses had not been for long enough, nor were they “honest”. Estoppel and acquiescence were also argued but were held not to be available as a defence to registered trade mark infringement.

The judge’s findings in relation to passing off were very much aligned with those in respect of trade mark infringement.

Invalidity/revocation

The Defendant’s counter-claim for invalidity of the Claimant’s mark under s3(3)(b) or revocation under s46(1)(d) TMA was found by the judge to be misconceived. Those sections aim to prevent the public from being deceived or misled in respect of matters such as the nature, quality or geographical origin of the goods or services themselves. As a matter of law, those sections could not be used to run “relative grounds” arguments regarding deception or confusion over who was using the mark. Moreover, as licensor of the Defendant’s trade mark use, the Claimant retained goodwill in the mark and the licensing of its use could not be deemed misleading.

Further comments

On the face of it, it may seem surprising that two businesses could operate alongside each other for so long in related fields, only for one to register a trade mark covering the other’s goods and services and (partially) succeed in a claim for infringement and passing off. This highlights two things: (1) the power held by the licensor to register the licensed mark and in turn control its use, and (2) the efficacy of a trade mark licence (even a verbal one) as a shield to defend the licensee’s right to use the mark to the extent permitted by the licence.

The First Defendant overstepped what it was licensed to do. Where it had once referred orders for mechanical goods to the Claimant, it had decided to start handling these orders itself. It may have been that the Defendant forgot the boundaries of the oral agreement, or perhaps this came about because the relationship had broken down. In any event, it is clear that the Claimant needed to file the trade mark in 2016 to reinforce its position.

Key points

  • Co-existence agreements should be recorded in writing to avoid future issues and unnecessary costs should the relationship between parties break down
  • Invalidation/revocation actions based on s3(3)(b) and 46(1)(d) TMA should only be based on absolute grounds, not relative grounds
  • A verbal trade mark licence can still be useful when asserting your rights to trade against a licensor with registered rights

Duncan Balloch is a Chartered Trade Mark Attorney at Lewis Silkin LLP

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