ENGLISH HIGH COURT GRANTS CONDITIONAL STAY OF IP CLAIM

In an example of an interaction between intellectual property (“IP”) claims and arbitration, the English High Court granted a conditional stay of the claimants’ IP claim pursuant to s9 of the Arbitration Act 1996 (the “Act”) and its inherent case management jurisdiction. In AJA Registrars Ltd and another company v AJA Europe Ltd [2020] EWHC 883 (Ch), the claimants argued that AJA Europe Limited (“AJA Europe”) was using their logo in the UK in the same markets in which one of the claimants, AJA Registrars Limited (“AJA Registrars”) operated, thereby misrepresenting that AJA Europe’s business or services were the business or services of AJA Registrars. AJA Europe successfully applied for a stay, arguing that the underlying dispute between the parties originated from agreements containing an arbitration clause.

Background

The parties

AJA Registrars and AJA Europe entered into a number of agreements, which aligned their businesses in various territories and granted licences to use IP and other rights. AJA Registrars’s parent company, Holding Socotec S.A.S. (“Socotec”, and together with AJA Registrars, the “Claimants”), acquired AJA Registrars's business in 2018.

The agreements

In particular, AJA Registrars and AJA Europe entered into:

• an agreement, under which AJA Registrars granted to AJA Europe, until its termination in 2018, a revocable licence to use the “AJA” name (the “License”) in a number of territories, and which prohibited AJA Europe from registering logos or trade marks without AJA Registrars’s consent, which was subsequently amended (the “2014 Agreement”); and
• an agreement, under which AJA Europe granted to AJA Registrars, until its termination in 2019, the Licence in the UK, and which prohibited AJA Registrars from registering logos and trade marks without AJA Europe’s consent (the “2015 Agreement”, and together with the 2014 Agreement, the “Agreements”).

Each Agreement contained an arbitration clause providing that any dispute or claim arising out of the Agreements was to be referred to arbitration. Socotec was not a party to the Agreements.

The trade marks

In 2018, a UK trade mark using “AJA” in a design was registered in AJA Europe’s name (“AJA Europe’s Trade Mark”). In the meantime, international trade marks using “AJA” were registered in Socotec’s name in 2018 and 2019 (“Socotec’s Trade Marks”).

The IP claim

The Claimants initiated proceedings before the High Court, alleging: (i) infringement by AJA Europe in the UK of Socotec’s Trade Marks; (ii) passing off in the UK by AJA Europe as AJA Registrars's business or services; and (iii) invalidity of AJA Europe’s Trade Mark.

Stay application

AJA Europe successfully applied to stay the Claimants’ claim, relying on s9 of the Act, and, alternatively, the court’s inherent case management powers. It argued that the dispute was whether and to what extent the Claimants gave AJA Europe permission to use the “AJA” name, and whether any such permission had been terminated. It then argued that this dispute should have been referred to arbitration under the Agreements.

The court’s decision on the stay application

The court concluded that the main issues in the IP claim were (i) the underlying ownership of the “AJA” name rights in the UK; (ii) whether AJA Registrars exclusively owned the goodwill in the UK businesses associated with that name; and (iii) whether AJA Europe's prior rights meant that there was no misrepresentation. The court noted that although the issues arose in a claim in tort, they reflected issues about entitlement and rights under the Agreements. Specifically, whereas AJA Registrars sought to rely on the 2014 Agreement, AJA Europe's defence ultimately relied, in particular, on the 2015 Agreement. The court therefore decided that the passing off claim was brought in respect of a matter which was to be referred to arbitration under the 2015 Agreement.

The court noted that there was a sufficiently close connection between the issues in the tort claim and the dispute about the ownership that rational businessmen were likely to have intended such a dispute to be decided (like a contractual dispute) by arbitration, applying the test in Microsoft Mobile Oy v Sony Europe Limited [2017] EWHC 374 (Ch).

Conditions of stay

The court concluded that AJA Registrars’s claim should be stayed under s9 of the Act. Given that there was no arbitration agreement between AJA Europe and Socotec, the court could not stay Socotec’s claim under s9. However the court decided that Socotec’s claim should also be stayed as a matter of discretion and good case management, in order to avoid parallel proceedings.

Both stays were conditional:

• AJA Registrars’s stay was conditional on AJA Europe appointing an arbitrator in the arbitration proceedings. The court noted that the reference had to relate to the determination of the ownership rights to use "AJA" under the agreements, or otherwise, but it may include other issues.
• The stay in respect of Socotec’s claim was conditional upon (i) AJA Registrars’s stay being operational; and (ii) AJA Europe sending to the Claimants a draft defence to Socotec’s claim (as AJA Europe’s defence had emerged in an “unsatisfactory and piecemeal way”). The court accepted that AJA Europe should not be compelled to disclose the substance of the dispute to the public, given that the matters are to be arbitrated, and therefore remain confidential.

Arbitrability of IP claims

The court also noted that there was “the faintest of issues” about whether an IP claim could be referred to arbitration, on the basis that there was certain relief that only the court or the UK Intellectual Property Office could grant. The court reiterated that (i) this is not an impediment to an arbitrator determining the substance of the dispute and the underlying issues; and (ii) as part of the award the arbitrator can direct the parties to make necessary applications for the required relief.

Comment

This case is an interesting example of the potential interplay between IP claims and arbitration. While IP claims are mainly litigated in national courts, there has been an increase in the use of arbitration clauses in licence agreements and, therefore, of the arbitration of IP disputes. The decision confirms that the English courts will usually view contractual IP disputes as arbitrable.

For more information, please contact Chris Parker, Partner, Olga Dementyeva, Associate, or your usual Herbert Smith Freehills contact.