Pizza the action
Justin Bukspan explains why a rival business was able to cash in. [2017] EWCA Civ 1874, Caspian Pizza Ltd and Others v Maskeen Shah and Malvern Hills Estates Ltd, Court of Appeal, 23rd November 2017.
[2017] EWCA Civ 1874, Caspian Pizza Ltd and Others v Maskeen Shah and Malvern Hills Estates Ltd, Court of Appeal, 23rd November 2017
Key points
- The geographical extent of the local rights necessary for a defence against trade mark infringement under s11(3) may also be sufficient to prevent a trade mark registration under s5(4)
- A declaration of partial invalidity under s47 applies only to the specification of a registered trade mark: a court cannot carve out some of its geographical applicability
This was an appeal from a decision by HH Judge Hacon in the IPEC, in which he dismissed a claim for trade mark infringement and passing off, and declared one of the Claimants’ trade marks invalidly registered.
The Claimants were the founders of a chain of restaurants, whose branding featured a distinctive moustachioed chef leaping over the CASPIAN PIZZA name, and their subsequent licensees. The business was started in 1991 in Birmingham and has since expanded around the city. Trade marks were registered for CASPIAN and the above-mentioned device mark, with respective filing dates of 8th July 2005 and 21st September 2010.
The Defendants had operated restaurants also bearing the name CASPIAN PIZZA since 2002 around the city of Worcester.
The Claimants filed an action for trade mark infringement and passing off. The Defendants counterclaimed for a declaration of invalidity of the Claimants’ two registered trade marks.
First instance
The similarity of the signs used by the Defendants with the registered trade marks was conceded.
The Claimants alleged that an oral franchise agreement had been made with one of the Defendants in 2008, after years of discussion, under which monthly royalty payments would be made, and any goodwill generated by the use of the mark would be vested in or assigned to one of the Claimants. They claimed that the Defendants had refused to regularise their position by entering into a written agreement, and had failed to pay the royalties due.
The agreement was therefore terminated by the grantor of the franchise (one of the Claimants), but the Defendants nevertheless continued to trade under the CASPIAN PIZZA name, thus allegedly infringing the Claimants’ registered trade marks.
The Defendants relied on three defences against the claim of trade mark infringement:
- s11(3) allowing holders of an earlier right in a locality to carry on using the mark legitimately;
- use of the device mark with the consent of the Claimant; and
- acquiescence.
The Defendants stated that they had acquired goodwill in Worcester as a result of running their restaurant since 2002. On that basis, they counterclaimed for a declaration that both registered trade marks were invalid under s5(4)(a) of the Trade Marks Act 1994, which provides that a trade mark cannot be registered when it conflicts with prior rights, such as those that would qualify for passing off.
HH Judge Hacon dismissed the Claimants’ evidence about the franchise agreement, but also rejected the defences based on consent and acquiescence.
Nevertheless, he found that the Defendants had established goodwill in the CASPIAN name in Worcester under the requirements of the law of passing off for any claim in that area. Thus, not only did the claim of trade mark infringement fail under s11(3), but the word mark could not be registered according to s5(4). On the other hand, the Defendants’ evidence of use was insufficient to prove goodwill in relation to the device mark, which was therefore not invalidated.
The appeal
The Claimants appealed against the judge’s decision, and the Defendants cross-appealed against the refusal to declare the logo mark invalid.
At the core of the decision was whether the geographical extent of the goodwill necessary to fulfil a defence against infringement under s11(3) was the same as that for a declaration of invalidity under s5(4), or whether the latter required a greater geographical spread.
The cases of Redd Solicitors LLP v Red Legal Ltd and SWORDERS , examined by HH Judge Hacon and further reviewed by the Court of Appeal, demonstrate two different positions.
In SWORDERS, an application for the registration of that word was successfully opposed on the basis of prior use in the area of Bishop’s Stortford, Hertfordshire, only. The Hearing Officer found that the application to register a national mark was comparable to an expansion of the Applicant’s business into the Opponent’s area.
In Redd Solicitors, a firm of solicitors sued conveyancers trading under the name RED LEGAL in different locations in England for the infringement of the REDD registered trade mark. The Defendant underlined its prior use of RED LEGAL for one year in a specific locality and sought a declaration of invalidity. The judge held that local rights that would be sufficient to satisfy a defence under s11(3) were not automatically enough to satisfy requirements under s5(4), which required goodwill in a substantial part of the UK – the registered trade mark was held to be valid.
HH Judge Hacon preferred the view reflected in SWORDERS, and Patten LJ (delivering the Court’s judgment) agreed. For the latter, s5(4) provided for the possibility of a “geographical carve out” in the course of the registration of a trade mark to take into account prior unregistered rights. The only requirement for the opponent is that it must have built enough goodwill over a clear geographical area that is sufficient for passing off proceedings.
On the other hand, Patten LJ noted that ss47(5) and 47(6) only enabled a Court to declare partial invalidity in respect of a trade mark’s specification, not its geographical reach. Accordingly, he was compelled to declare the whole mark invalid.
In respect of the cross-appeal, Patten LJ found that the prominent component of the logo was the word component CASPIAN: accordingly, the device mark should have also been declared invalid.
Learning
This decision provides a clearer endorsement of the rights of businesses that have built local goodwill against actions for trade mark infringement by parties that have applied for the registration of marks at a later date.
It is also suggested that this dispute might have been avoided had the (alleged) franchise agreement been formalised from the start. This raises the importance not only of early trade mark registrations, but also of putting trade mark exploitation agreements in writing as early as possible in a business relationship.
Justin Bukspan is a Chartered Trade Mark Attorney at Taylor Wessing