UK Court of Appeal rules on validity of trade mark in light of prior existing localised goodwill

Summary

The UK Court of Appeal in Caspian v Shah considered whether a trade mark could be invalidated on the grounds of prior existing third party goodwill in a confined geographical area. On 23 November 2017, the Court of Appeal ruled that, under section 5(4) Trade Marks Act (TMA 94), goodwill established in a specific locality was capable of preventing registration of a countrywide mark: it was not necessary for goodwill to be established nationwide.  In the same way, the Court of Appeal confirmed that, once a trade mark had been registered, prior localised goodwill was capable of invalidating a mark under section 47 TMA 94 (Caspian Pizza Ltd & Others v Shah & Anor).

The Court recognised that an application for registration could be made subject to territorial limitations, but clarified that, once a trade mark was registered, the trade mark registration could not be altered to restrict its geographical scope.

Business Impact

• The decision represents a shift in the weight attributed to earlier localised rights in deciding on the validity of a mark.
• Businesses considering registration of marks should make due diligence enquiries and find out whether the unregistered version of the mark has been used by other businesses, even if only in confined localised areas.
• Less distinctive marks in respect of goods and services are more likely to be already in use and, as a result, run a higher risk of being invalidated on the basis of prior existing rights.

Background

The owners and licensee of a word mark for "Caspian" and device mark featuring the word "Caspian" started trade mark infringement proceedings for the unauthorised use by the defendants of the name "Caspian Pizza" for a pizza business, after an alleged informal franchise agreement had ended.

The trial judge, HHJ Hacon, ruled that the word mark had been invalidly registered under section 5(4) TMA 94, because the defendants had established prior goodwill in the Caspian Pizza name, sufficient to found an action for passing off. However, the trial judge held that the device mark was valid and infringed, as the logo within the device mark had only been used by the defendants after registration.

The claimants appealed against the judge's decision to invalidate the word mark and the defendants cross-appealed against the judge's findings that the device mark was valid and infringed.

Decision

The Court of Appeal accepted the defendants' argument that the word "Caspian" was an essential feature of the device mark and, on the basis that the trial judge had considered that use of the word "Caspian" could have been restrained in an action for passing off, the validity of the word mark and device mark should have been considered together. The validity of both the word and device mark therefore depended on the application of sections 5(4) and 47 TMA 94.

The Court of Appeal considered two relevant cases, with conflicting outcomes:

1. SWORDERS, an opposition proceedings' decision, in which the Hearing Officer refused registration of a mark which had been used by the opponent in a locality in respect of similar services to those for which the trade mark was applied; and
2. Redd Solicitors v Red Legal, a High Court decision in which Judge Birss QC (as he then was) refused the defendant's claim that the claimant's trade mark was invalid, even though the defendant had acquired, prior to the registration, goodwill in the mark sufficient to found an action for passing off. The Judge simply considered the defendant to have a locality defence enabling it to use the mark in the location it had been using the unregistered mark.

In keeping with HHJ Hacon's approach, the Court of Appeal followed the decision in SWORDERS, rather than the judgment in Redd and confirmed that the only statutory requirement for section 5(4) is that the opponent has established goodwill in an identifiable area suitable to qualify for protection in passing off proceedings. Both the word and device marks were held to be invalid.