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||Neutral Citation Number:  EWHC 1553 (Ch)
||Case No: HC12D01447
IN THE HIGH COURT OF JUSTICE
INTELLECTUAL PROPERTY and
COMMUNITY TRADE MARK COURT
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
MR. JUSTICE BIRSS
|| HEARST HOLDINGS INC.
FLEISCHER STUDIOS INC.
||- and -
THE PARTNERSHIP (TRADING) LIMITED
U WEAR LIMITED
J FOX LIMITED
Emma Himsworth QC (instructed by Hamlins) for the Defendants
Hearing dates: 6th May 2014
HTML VERSION OF JUDGMENT
Crown Copyright ©
Mr. Justice Birss :
- This judgment deals with two matters which arose after my main judgment in this case was handed down on 25th February 2014. The background is set out in that judgment at  EWHC 439 (Ch). The representation before me is the same as the representation at trial. The case concerns claims by the claimants against the defendants in relation to Betty Boop merchandise. In the judgment I found that the defendants were liable for trade mark infringement and passing off. The court sat as a Community Trade Mark Court in hearing the case because four of the registered trade marks relied on were Community trade marks.
- In December 2013, following a very late amendment to the defendants' pleadings, the issues in these proceedings as a whole were split. The main trade mark and passing off case remained on track for trial in January 2014. That is the trial to which my main judgment relates. Two issues were separated to be tried at a later date, currently listed in January 2015. The two issues hived off were the claimants' claim for copyright infringement and the defendants' claim that the registered trade marks were invalid on bad faith grounds. The reason the latter was separated from the rest of the trade mark case to be tried with the copyright claim was because the bad faith allegations were linked to the copyright argument. The trial for which I have just given judgment was also subject to certain conditions set out in the December 2013 order.
- The trial considered not only the question of infringement in the United Kingdom but also looked at the position in other European countries. So for example, there was evidence about the claimants' Betty Boop merchandise in Spain and France. It was clear that the claimants were seeking pan-European relief relating to the Community trade marks under Art 98(1) of the Community Trade Marks Regulation (EC) 207/2009 (the CTMR) based on the court having jurisdiction under Art 97(1) to 97(4) CTMR.
- After judgment the defendants raised a new point. The claim form in England was issued on 4th April 2012 but it turns out that when this claim began there were already proceedings in Italy concerning Betty Boop merchandise. In Italy the first claimant, Hearst Holdings Inc., sued a number of Italian companies in three separate proceedings in the court in Bari. One proceeding is against a company called Grimaldi Group SRL. Grimaldi were a licensee of AVELA Inc.. So, just as AVELA had granted licences to the second, fourth and fifth defendants in the English proceedings, so it had granted a licence to use Betty Boop imagery to Grimaldi. The goods which were complained of by Hearst in Italy and were sold by Grimaldi were goods which had been produced pursuant to the AVELA licence. In Italy, Grimaldi sought to bring a third party indemnity claim against AVELA and on 26th October 2010 the Bari Court authorised Grimaldi to serve a third party claim on AVELA, service being effected on 31st January 2011. AVELA entered an appearance before the Italian Court on 25th May 2011 which included a claim for invalidity of the Italian and Community registered trade marks alleged to have been infringed. Following a hearing on 15th July 2011, Hearst filed a brief in Italy which included a claim against AVELA for joint liability for the acts of Grimaldi in Italy. All of these procedural steps took place before the claim form in the United Kingdom was issued.
- The other two Italian cases are against C3V SRL and Eurofil SRL. They began with customs seizures in August 2010 and led to civil proceedings being commenced by Hearst against C3V and Eurofil in the court at Bari. C3V and Eurofil brought third party indemnity claims against AVELA. AVELA introduced a counterclaim for invalidity of the registered marks in January 2012 and in March 2012 in oral submissions Hearst contested AVELA's appearance, asked for a rejection of the claims raised but also argued that AVELA was liable for the acts of trade mark infringement of C3V and Eurofil.
- All three Italian actions are running concurrently. They are next due in court on 6th June 2014. The Italian actions include two Hearst Community Trade Marks No.s 008596348 and 008596546. The same marks are in issue in this case. In Italy AVELA has advanced a claim that these two CTMs are invalid. The other registered trade marks in issue in Italy are Italian national trade marks, for the same Betty Boop device which is depicted in my judgment at paragraph 4, registered in classes 16, 18, 25, 28 and 3.
- The defendants before me now contend that the UK court should decline jurisdiction on part of these actions and stay the remainder on three grounds, they are;
i) Under Article 109 of the CTMR;
ii) Under Article 104 of the CTMR;
iii) Under Article 28 of Council Regulation 44/2001 (the so called "Brussels I" Regulation).
- The relevant part of Article 109 of the CTMR is as follows:
Simultaneous and successive civil actions on the basis of Community trade marks and national trade marks.
1. Where actions for infringement involving the same cause of action and between the same parties are brought in the courts of different Member States, one seised on the basis of a Community trade mark and the other seised on the basis of a national trade mark:
(a) the court other than the court first seised shall of its own motion decline jurisdiction in favour of that court where the trade marks concerned are identical and valid for identical goods or services. The court which would be required to decline jurisdiction may stay its proceedings if the jurisdiction of the other court is contested;
(b) the court other than the court first seised may stay its proceedings where the trade marks concerned are identical and valid for similar goods or services and where the trade marks concerned are similar and valid for identical or similar goods or services.
- Counsel for the defendants submits that Article 109 1(a) and (b) are both engaged in this case. She submits that the proceedings in Italy and the UK involve the same cause of action, the same parties and that, depending on which trade marks are considered, the conditions in sub-paragraphs (a) or (b) are satisfied. Counsel argues that the Italian court in Bari was the court first seised and accordingly the UK court must decline jurisdiction, at least in relation to the issues covered by Article 109 1(a). In relation to issues covered by Article 109 1(b), Ms Himsworth submits that if the court has declined jurisdiction on certain issues under Article 109 1(a), that will have an important impact on the exercise of the discretion arising under Article 109 1(b) and in the present circumstances would lead to a stay of the remainder of the trade mark infringement proceedings (whether under UK national or Community trade marks) at least insofar as that claim was brought against AVELA.
- Counsel for the claimants submits that Article 109 does not apply. He accepts that the cases involve the same parties (at least in part, which he accepts is sufficient to satisfy requirements of the Article) and he accepts that some of the various trade marks in issue in the two member states satisfy the requirements of sub-paragraph (a) and some satisfy sub-paragraph (b). However Mr Mellor argues that the action in England does not involve the same cause of action as any of the three actions in Italy and so Art 109 is not engaged.
- The second argument is advanced under Article 104. The relevant parts of that Article provide that:
Specific rules on related actions
(1) A Community trade mark court hearing an action referred to in Article 96, other than an action for a declaration of non-infringement shall, unless there are special grounds for continuing the hearing, of its own motion after hearing the parties or at the request of one of the parties and after hearing the other parties, stay the proceedings where the validity of the Community trade mark is already in issue before another Community trade mark court on account of a counterclaim or where an application for revocation or for a declaration of invalidity has already been filed at the Office.
- Counsel for the defendants submits that Article 104(1) applies because the validity of two of the Community trade marks in this case were already in issue in Italy and so since the trial before me was an action referred to in Article 96, I must stay the proceedings unless there are special grounds for continuing the hearing. Again Counsel for the claimants does not agree. He submits that in this case although Article 104(1) clearly applies there are special grounds for continuing and in the exercise of my discretion I should not grant a stay.
- The third argument arises under Article 28 of the Brussels I Regulation. That article is best considered alongside Article 27 of the same Regulation. They are:
Lis pendens – related actions
(1) Where proceedings involving the same cause of action and between the same parties are brought in the courts of different Member States, any court other than the court first seised shall of its own motion stay its proceedings until such time as the jurisdiction of the first court seised is established.
(2) Where the jurisdiction of the court first seised is established any court other than the court first seised shall decline jurisdiction in favour of that court.
(1) Where related actions are pending in the courts of different Member States, any court other than the court first seised may stay its proceedings.
(2) Where these actions are pending at first instance, any court other than the court first seised may also, on the application of one of the parties, decline jurisdiction if the court first seised has jurisdiction over the actions in question and its law permits the consolidation thereof.
(3) For the purposes of this Article, actions are deemed to be related if they are so closely connected that it is expedient to hear and determine them together to avoid the risk of irreconcilable judgments resulting from separate proceedings
- Ms Himsworth submits that the whole trade mark and passing off case in England is a related action under Article 28 as compared to the proceedings in Italy and so the court has a discretion to stay these proceedings in favour of the proceedings in Italy. She submits that in the circumstances I should stay any remaining elements of this case which have not already been stayed (or had jurisdiction declined) under Article 104 or 109 CTMR. That would apply to other claims, such as passing off and also, if any order made so far relates only to AVELA and not the other defendants, to the other defendants. If neither article of the CTMR has led to a stay or declining of jurisdiction then I should stay this case in any event. Mr Mellor accepts that Article 28 applies to this case but does not agree that I should stay these proceedings. He submits that in the circumstances no stay should be ordered.
- Ms Himsworth argues that although these proceedings should be stayed because of the earlier Italian proceedings, that does not mean that no relief of any kind could be granted. It is common ground that even if proceedings are stayed either in whole or in part, the two Regulations preserve the possibility of provisional protective measures in the meantime, pending the resolution of the dispute (Art 31 Brussels I and Art 103 CTMR). Ms Himsworth submits that this is the basis on which I should consider granting any relief going forward from today.
- The hearing of these applications took place on 6th May 2014 as part of the hearing to determine the form of order arising from my main judgment. I heard the parties' arguments and informed them that I was going to refuse to decline jurisdiction and was going to refuse a stay with reasons to follow. This judgment sets out my reasons.
Article 109 CTMR
- Article 109 CTMR applies where actions for infringement involving the same cause of action and between the same parties are brought in the courts of different Member States. There is no doubt in this case that these actions involve the same parties since both Hearst and AVELA are parties to both sets of proceedings. Also that state of affairs existed before the UK case began.
- It is clear that the expression "cause of action" in the phrase "action for infringement involving the same cause of action" in Article 109 has the same meaning as it appears in Article 27 of the Brussels I Regulation.
- Under Article 27 of the Brussels I Regulation, if related actions involve the same cause of action and are between the same parties in two Member States, the court second seised must decline jurisdiction. No discretion is involved in those circumstances. On the other hand, under Article 28 where related actions are pending in two different Member States the second court may decline jurisdiction and then a discretion is involved.
- It is plain that the purpose of these general rules in the Brussels I Regulation is to reduce or avoid the risk of irreconcilable judgments. In some cases a stay or declining of jurisdiction by the second seised court is mandatory and in other cases the second court has a discretion although that discretion is different depending on the circumstances.
- The application of the Brussels I Regulation to trade mark cases is also affected by the fact that proceedings for validity of trade marks are subject to the exclusive jurisdiction provisions in Art 22. Also each Member State has a Community Trade Mark Court which will have jurisdiction over Community trade marks. The Community Trade Mark Courts have jurisdiction over infringement and validity. In relation to validity OHIM also has jurisdiction.
- Articles 109 and 104 of the CTMR are related to Articles 27 and 28 of the Brussels I Regulation. They set up for Community trade marks a scheme with the same structure as the one applicable generally under Articles 27 and 28 of Brussels I. In some situations the court second seised must decline jurisdiction, in other words the result is mandatory. In other situations there is a discretion to be exercised. In some situations the exercise of the discretion is heavily circumscribed. When a challenge to the validity of a Community trade mark is already in existence in the first court, which is after all itself a Community Trade Mark Court, the court second seised shall stay the proceedings unless there are special grounds for continuing (Art 104(1)).
- The purpose of the specific rules in the CTMR about successive actions in trade mark cases is the same as the objective of the general rules in the Brussels I Regulation, it is to reduce or avoid the risk of irreconcilable judgments.
- In The Alexandros T  UKSC 70, the Supreme Court had to consider the question of whether two proceedings involved the same cause or causes of action. Paragraph 28 of the judgment of Lord Clark, with whom Lord Sumption and Lord Hughes agreed, summarised the principles in EU Law which are relevant to determination of this question. I will not set out the summary which runs from paragraph 28(i) to 28(vii). It refers to a number of the leading cases on the subject including Gubisch v. Palumbo (Case C-144/86), The Tatry (Case C-406/92), and Sarrio v. Kuwaiti Investment Authority  1 AC 32.
- The critical point is that the term "cause of action" in the Brussels I Regulation has an autonomous meaning under EU law and is not to be interpreted in accordance with its normal UK meaning. Where a provision uses the expression "same cause of action" it must be read as referring to "proceedings which have the same cause and the same objet". The terms cause and objet derive from the French version of the text of Brussels I but are held to apply generally. Proceedings which have the same cause must have the same facts and the same rule of law as the basis for the action. Proceedings which have the same objet must have the same "end in view". The requirements of identity are cumulative. In order to fall within Article 27 proceedings in different jurisdictions must (a) be based on the same facts, (b) depend on the same rule of law, and (c) have the same end in view. Of course they must also involve the same parties but that is not in issue before me.
- Since "cause of action" has the same meaning in Art 109 CTMR as it does in Art 27 Brussels I, it follows that this reasoning applies to Art 109.
- In its form in the prior regulation to the current CTMR, Article 109 CTMR was considered by the Court of Appeal in Prudential Assurance v. Prudential Insurance  EWCA Civ 327. At that time the provision was Article 105 of Council Regulation 40/94. The terminology used in Chadwick LJ's judgment is a little different from the terminology used in The Alexandros T. The learned Lord Justice used the expression "same cause of action and the same subject matter". However in substance Chadwick LJ reached the same conclusion as to the requirements to be satisfied by the provision as I derive from the later Supreme Court decision in The Alexandros T. The focus on the phrase "subject matter" is no longer relevant but the principles are the same as the ones articulated by Chadwick LJ – see in particular paragraphs 37 and 38 of his judgment.
- In Football Data Co. v. Sportradar  EWCA Civ 330, the Court of Appeal discussed Article 27 in the context of a case about database rights. I was referred to the judgment of Lord Justice Jacob at paragraphs 31 to 37 which also cites Gubisch and The Tatry (Chadwick LJ also referred to Gubisch). Ms Himsworth point out that in his judgment Jacob LJ stated that the expressions cause and objet do not have narrow meanings, they have wide meanings the emphasis being to avoid conflicting decisions. I accept that submission.
- Mr Mellor submits that applying these legal principles leads to the conclusion that the parallel proceedings in Italy and in the UK do not involve the same cause of action because they are not based on the same facts and because the ends in view are not the same. I will address the question of "same facts" first.
- The simple point is that the infringements relied on by Hearst in Italy are acts carried out by the three Italian companies referred to. The particular images of Betty Boop which are complained of in Italy are different from any of the images which were in issue in the English proceedings. So the Italian proceedings as compared to the English proceedings involve different defendants selling different goods with different images of Betty Boop. Of course it is true that the acts are said to infringe the same law and the cases include the same parties, but he argues that the facts are different.
- Mr Mellor submits that the only claim made in Italy by Hearst against AVELA is that AVELA is liable as an accessory for the acts committed by the Italian companies in Italy. So he argues that the facts regarding AVELA are different too. In England AVELA is argued to be primarily liable for some acts of infringement and is argued to be liable as joint tortfeasor in respect of other acts of infringement. However the claim for accessory liability in England is based on liability for the acts of the other English defendants (Poeticgem, The Partnership, U Wear and J Fox); it is not based on a claim for liability for the acts of the Italian licensees (Grimaldi, C3V or Eurofil).
- Ms Himsworth argues to the contrary. She does not dispute that the images used in Italy and the acts of the Italian companies are different from any acts in issue in the English case. However, she submits that what do amount to the same facts are the facts relating to the liability of AVELA in Italy. AVELA's liability in Italy and in the UK is due to the acts of its relevant licensee (if proved). AVELA is accused of being a joint tortfeasor in the UK and essentially the same allegation is made in Italy. Therefore the facts are the same in both cases and the same cause of action therefore exists as between Italy and the UK. She also points out that in terms of the "end in view", the relief sought in the UK case at least on a pan-European basis would cover Italy and would cover the acts of licensing the Italian companies.
- I will consider the "end in view" below. In any event however in my judgment Mr Mellor is right about the facts. Both the English case and the Italian cases are about the sale to European consumers of Betty Boop merchandise which has been licensed by AVELA. In a sense therefore they are about the same issues in general terms but they are not concerned with the same facts. The primary acts relied on in Italy are the acts of the Italian defendants Grimaldi, C3V and Eurofil. They are acts of a very similar kind to acts carried out by Poeticgem, U Wear and J Fox in England but they are not the same acts. The persons carrying them out are different and the individual transactions are different transactions. Moreover the images of Betty Boop used in Italy are different from the images used in the English case. The accessory liability of AVELA in Italy is based on its relationships with the particular Italian defendants. Those relationships are different from the relationships between AVELA and the other English defendants and the facts relating to each relationship are different. I reject the submission that the same cause of action is involved in the English proceedings and the Italian proceedings.
- I turn to consider the "end in view". It is clear that the relief sought in the English court overlaps with the relief sought in the Italian court. For example in the English case pan-European injunctive relief is claimed. Nevertheless, Mr Mellor submits that even though the injunction sought in England would overlap with the events in Italy, nevertheless the "ends in view" are not the same since the objective of the Italian case is focussed on the acts of the Italian companies in Italy whereas the objective of the English case is focussed on the acts of the defendants in the English case in England. Considering the financial relief claimed, Mr Mellor submits it is focussed on the acts committed by the individual defendants. He also argues that the rule can only work if the relief sought in the court second seised which then declined jurisdiction would be available in the court first seised and submits that that is not the position in these cases as between the English and Italian courts. Important parts of the relief the claimants seeks in the English court is not available in the Italian proceedings (and vice versa).
- This seems to me to be a more difficult question, which does not strictly arise given my finding in relation to the facts but in deference to the arguments I will consider it. Obviously it would be highly undesirable for the courts of two Member States to award inconsistent relief. I expect the irreconcilable judgments which these provisions seek to avoid are not only judgments in the narrow English sense of the court's reasons for reaching a legal conclusion but also include judgments in a wider sense encompassing the order of the court granting relief. No doubt like "cause of action" so "judgment" has an autonomous meaning under EU law not necessarily the same as its English meaning.
- The question is whether the objet of two cases are necessarily identical because the possibility exists for the two courts to make inconsistent orders. I prefer Mr Mellor's submission in relation to the "end in view". It seems to me that the fact that relief arising out of one case in one country may overlap with the issues in another country does not necessarily mean that the ends in view are identical. The objective of the English court is to grant proper relief to compensate the claimant for the acts proved in the English case. The objective of the Italian court will be correspondingly focussed on the proper relief arising from the acts proved before the Italian court.
- Accordingly I find that Article 109 of the CTMR does not apply in this case and I reject Ms Himsworth's first submission.
Article 104 CTMR
- The next question relates to Article 104 CTMR. There is no doubt that Article 104 applies because AVELA brought an invalidity claim in Italy before the proceedings in the UK were started. The only question arising is whether there are special grounds for continuing the hearing in the UK. Before me the parties agreed that the judgment of the Court of appeal in Starbucks v. BSkyB  EWCA Civ 1201 is the leading authority on this question. Etherton LJ (as he then was) drew out a number of conclusions in paragraphs 102 to 112. I will not set them out here. Important ones for present purposes are that the policy behind Article 104 is the avoidance of inconsistent decisions and that this is of particular importance in the context of Community trade marks. It is clear that the presumption in favour of a stay under Article 104 is a strong one and it would be a rare and exceptional case where there are special grounds within Article 104. Also it is a matter which the parties cannot determine themselves, it is a matter for the court which should be addressed at the earliest opportunity in the proceedings. Two further particular matters arise. First is that the existence of a passing off claim is not regarded as a special feature since it is a commonplace in infringement claims (para 115). I accept that. Second Ms Himsworth argues that mere lateness cannot create a special ground for refusing a stay. I will consider that below. Overall she submits that there are no special grounds for refusing a stay in this case and I should stay the proceedings on the Community trade marks.
- I reject Ms Himsworth's characterisation of this situation. To describe what has happened in this case as mere lateness is unreal. In this case the court has already given judgment both on infringement and on the validity of the CTMs in issue on the points which were in issue at trial. In my judgment for this point to be raised at this stage in these proceedings is wholly unprecedented and is certainly "rare and exceptional".
- How either party could have permitted this situation to arise is beyond me. Both parties deserve serious criticism for allowing this to happen. Neither party has sought to explain why they failed to draw this matter to the court's attention in these proceedings. I infer that it suited Hearst not to bring this matter to the court's attention because it wanted the English court to rule on the matter. That does not excuse their failure to do so. However, I make exactly the same inference about AVELA. I infer that AVELA then changed its mind and decided to raise this point after the judgment had been given. AVELA hoped to win in England and now it has lost it wants to raise the Italian proceedings as a way of trying to salvage something.
- Whatever the parties' respective motives were or are, since the policy behind these Articles is to avoid irreconcilable judgments or at least the risk of irreconcilable judgments, the policy is wholly defeated if the point is only taken after a judgment in the court second seised has been given. That is what has happened in this case.
- I can only speculate what would have happened if the point had been raised at the proper time in this case, that is right at the beginning, some two years ago. I suspect significant parts of this action might have been stayed pending the Italian proceedings. However that is not what happened. In these wholly unprecedented circumstances it would be absurd to stay the English proceedings. The proceedings have more or less finished. It is true, as Ms Himsworth submits, that until today no relief has been granted, but that is only because it was not convenient to have dealt with the relief on the very day the judgment was handed down.
- The issues being considered in Italy and the issues considered in my judgment are clearly related and it is possible that the court first seised, i.e. the Italian court, may come to different conclusions on some or all of those related issues. There could be an irreconcilable result. But the risk of an irreconcilable result cannot be avoided or reduced by staying these proceedings. I refuse to stay this case.
Article 28 Brussels I
- The third submission is that the matter should be stayed under Article 28. I can deal with that shortly and with regard to my previous conclusions. If I had decided to stay part or all of these proceedings under either of the previous submissions, then a very real question might have arisen under Article 28, but since I have decided not to, and since the discretion under Article 104 is weighted heavily in AVELA's favour but I have nevertheless refused to exercise it in that way, I fail to see how I could realistically come to any other conclusion in relation to Article 28. I will not stay these proceedings under Article 28.
- A second matter which was addressed at the hearing on 6th May and for which I gave my decision at the hearing with reasons to come later was the claimants' application for summary judgment. This arises as follows. The order of Norris J in December 2013 split these proceedings in two and included hiving off the bad faith invalidity claim brought by the defendants against the claimants' trade marks. In the light of the judgment the claimants' submitted that the bad faith claim could not succeed and so summary judgment should be given disposing of it.
- The defendants' allegation is that the marks were registered in bad faith contrary to section 3(6) of the Trade marks Act 1994 (Art 52(1)(b) CTMR) because they represent an illegitimate attempt to obtain monopoly rights in the well known Betty Boop character (and the name) despite the claimants having "no rights (e.g. copyright) in the said character".
- In other words the case pleaded involves proving a negative, that is to say that the claimants have no rights in the character. Copyright is given as an example and the plea goes on in sub-paragraphs (2) to (8) to set out a case to establish the defendants' proposition that the claimants do not have and never acquired any copyright in the Betty Boop character. (I will assume that paragraph (7) should be read as referring to copyright, as Ms Himsworth submitted). An important point is that the allegations are focussed on copyright in the character. The point is not focussed on whether any given drawing which includes a picture of Betty Boop may or may not be an artistic work in which copyright subsists belonging to the claimants. The allegations are about copyright in a character itself. For this purpose, I can take it that while under US law it may be possible to have copyright in a character, such a thing is not possible under the UK law of copyright.
- The particulars of the plea continue at sub-paragraphs (7) and (8):
7. Accordingly the application for trade mark protection by the claimants represented an attempt to obtain indefinite protection via the law of trade marks in a well known cartoon character in which as of the date of application it had no rights in the character Betty Boop which were either owned by third parties or had expired.
8. Such an application is thus to be characterised as one made in bad faith.
- So it is said the claimant had no rights in the character and so the applications for trade mark protection were made in bad faith and the marks were invalid. Since the details of the allegation are all focussed on copyright, it made sense in December 2013 for this allegation to be hived off along with the copyright claim to be tried later.
- The trial in which I have just given judgment only related to registered trade marks including Community trade marks and to passing off. The passing off case addressed the question of goodwill and reputation. I held that the claimants had established a goodwill and reputation sufficient to bring a claim in passing off. The claimants refer to a number of findings of fact which were made in the judgment relating to the passing off claim. They are set out in paragraph 9 of the fourth witness statement of Nick Rose, the claimants' solicitor, in support of this application. The key points are that the claimants merchandising activities relating to Betty Boop in the UK began well before any of the trade mark applications. The activities began in the mid 1980s. The earliest trade marks were applied for in 1992. The judgment had to deal with the attack on validity which had not been separated. This attack was advanced by AVELA under s. 3(1)(b)/Article 7(1)(b) and s. 3(1)(c)/Article 7(1)(b) of the Act or the CTMR. The relevant finding was as follows:
"I have already found that the words Betty Boop and her visual image were distinctive by 2009. The earliest marks were filed in 1992, well after the claimants merchandising work began. Although the distinctive nature of the signs will have grown over the years since the claimants work began, there is no basis in the evidence to say that the signs had not acquired sufficient distinctiveness by the time the marks were registered to be valid in accordance with the proviso to s. 31 or with Article 73. I reject the invalidity attacks." [paragraph 140]
- Mr Rose's witness statement also refers to paragraph 187 of my judgment. In this paragraph I referred to and acknowledged the wide effect of the finding of infringement in this case but noted that without the reputation associated with the marks "being continually renewed and refreshed by the considerable efforts of the claimants and their licensees, the wide conclusion would not follow".
- So the claimants submit that on the findings of fact made at the trial it cannot be said that the claimants' marks were registered in bad faith. It cannot be said that at the relevant date they had no rights. The rights the claimants had were rights in passing off. There was a goodwill and a reputation. Putting it another way the claimants had unregistered trade mark rights at the relevant dates. Therefore the pleaded allegations cannot stand. To apply to register trade marks in which you have a goodwill and reputation cannot amount to a bad faith application by someone with "no rights" relating to the marks applied for. The claimants submit that even if one assumes in the defendants' favour all the allegations pleaded concerning copyright (which I should say they do not accept but which for this purpose they accept should be assumed), then the pleaded allegation cannot succeed.
- In response to this application, the defendants take two points. First they submit that the bad faith claim based on copyright is a good claim, it ought to be investigated at trial and summary judgment should be refused. The second point is that if one assumes the allegations in relation to copyright in the defendants' favour, what has really happened is that the claimants have built up goodwill and reputation founded on a misrepresentation about the ownership of copyright. The goodwill has not been built up in a legitimate way. It is an example of goodwill founded on a misrepresentation in what was described in Caterham Cars v Birkin Cars  3 SA 938 (SCA), a decision of the Supreme Court of Appeal of South Africa. So the bad faith plea considered in this way is a good one and the matter should go to trial in January 2015.
- In reply to the second point, the claimants' submit that the misrepresentation allegation is not open to the defendants. First, it is not pleaded. This is clearly correct. An amendment would be required although none is sought before me. Second, such an amendment would not be permitted because the point is in fact an argument that the passing off claim is wrongly decided. It is a collateral attack on the judgment which has already been given. Moreover the misrepresentation point is one which should have been taken in December 2013 when the court was considering how to manage these proceedings. If the point had been taken at that stage it would have made it necessary to decide all the copyright issues and the passing off issues together. The court would not have managed the case in the way it did and split the trial. Most likely the court in December would have simply refused the defendants' applications to amend as they were all made too late. But alternatively, the court would have sent the entire case off for a much later trial date and no doubt with some costs order made against the defendants. It is now too late to allow this argument into these proceedings. In this respect the claimants rely on the so called Aldi guidelines, that is to say the decision in Aldi Stores v WSP Group  1 WLR 748 and the cases following it: Stuart v Goldberg Linde  1 WLR 233; Gladman Commercial Properties v Fisher Hargreaves Proctor  EWCA Civ 1466.
- Third, the claimants submit that the misrepresentation point is a bad point in any event. The alleged misrepresentation is a very long way from the facts of the Caterham Cars case. It is unreal to suggest that the goodwill and reputation built up by the claimants in relation to Betty Boop merchandise were built up or founded on a misrepresentation about ownership of copyright. Images of the character and the name were being used as indications of trade origin (i.e. trade marks) at the relevant times. Even if, which I should assume for this purpose, the claimants' representations of ownership of copyright are to be characterised in the manner alleged by the defendants, the claimants submit this had nothing to do with the building up of the goodwill.
- There is no dispute about the standard for summary judgment. In her skeleton argument Ms Himsworth summarised the situation as one in which the burden is on the applicant for summary judgment to establish the negative proposition that the respondent has no real prospect of success. In this context "real" is used in the sense of not being false, fanciful or imaginary rather than in the sense of a reference to probability. Moreover, such an application is not an opportunity to conduct a mini trial on the documents without the existence of disclosure or cross examination. She refers to the well known judgment of Sir Andrew Morritt V-C in Celador Productions Ltd v Melville  EWHC 2362 (Ch) and of Mummery LJ in Doncaster Pharmaceuticals v Bolton  EWCA Civ 661.
- In relation to the test for bad faith itself, Mr Mellor referred to the judgment of Arnold J in Red Bull  EWHC 1929 (Ch) and in particular paragraphs 131 to 138; I will not set them all out. Ms Himsworth referred to the judgment of Mr Geoffrey Hobbs QC in Club Sail Trade Marks  RPC 32 and in Ian Adam Trade Mark  RPC 21.
- A number of particular points are worth highlighting. First, bad faith is a serious allegation which must be distinctly proved. Second, it includes not only dishonesty but also some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable experienced men in the particular area being examined. Third, it is intended to prevent abuse of the trade mark system; for example where the applicant knowingly supplies untrue or misleading information in support of his application or abuse vis-à-vis third parties. Fourth, the invalidity of the application is not conditional on the trade mark itself being either registerable or unregisterable in relation to any goods or services of the kind specified. The objection is absolute in the sense that it is intended to prevent abuse of the system for requiring title to a trade mark by registration. Finally, in order to determine whether an applicant is in bad faith the court will make an overall assessment.
- I turn to consider the allegations in this case.
- I will assume for this purpose that the claimants dishonestly claimed that they had copyright in the Betty Boop character at all material times. If it had been true that at the date the marks were applied for the claimants had no rights at all and no justification or logic behind a trade mark application, save for a possible ownership of copyright in the Betty Boop character, then I can see there might be a case to answer in relation to bad faith. If the only putative justification for the applications had been a claim to character copyright but that claim was being made dishonestly then the argument might have substance. No doubt that is why the pleading was not the subject of an application to strike out.
- However, it is now clear that those are not the facts and there has been a binding determination as between these parties that those are not the facts. Assuming everything pleaded in relation to copyright in the defendants' favour, the fact remains that the court has found that at the relevant dates the trade marks were distinctive and that this was the result of the efforts of the claimants and their licensees. In my judgment the pleaded case is hopeless. The claimants did not have "no rights" when the marks were applied for. The allegation has no real prospect of success and it is appropriate that I should give summary judgment on the point in favour of the claimants.
- The second question is whether the alternative case advanced by Ms Himsworth based on an allegation of misrepresentation should be permitted. I will not permit the point to be advanced, essentially for the reasons relied on by the claimants. First, the argument would be a collateral attack on the judgment which has already been given. That is a sufficient reason on its own. Second, having regard to the way in which these proceedings have been managed, it would be wrong to permit the defendants to raise the misrepresentation allegation at this stage. It is a point which could and should have been raised before the hearing in December 2013 so that when the court came to manage these proceedings on that occasion it would have been taken into account. Even if it is the case that the defendants did not think of it until after December, that is not a justification for permitting it to be raised in this way. The case management decisions made in December 2013 were critical to the fair and proportionate resolution of this dispute. To link the passing off claim to the copyright arguments would undermine the decision that was made in December 2013. It is simply too late to raise it now. This second reason is also a sufficient reason on its own to refuse to allow the argument to succeed. Third, although I do not have to decide whether the misrepresentation point is a good one or not, I must say that I doubt I am depriving the defendants of the opportunity to advance a meritorious argument. The facts are a long way from Caterham Cars and the argument is not a strong one.
- Finally I should mention the pre-trial review. After the decision in December 2013 to split the trials but before this trial came on, there was a pre-trial review at which counsel for both sides appeared. On that occasion Ms Himsworth submitted that her clients should be permitted to advance various arguments which did link copyright and passing off and referred to Mirage Studios v Counterfeit Clothing  FSR 14. To have acceded to that submission would have undermined the earlier case management order made by Norris J in December 2013 and I refused to do so. The pre-trial review left the terms on which the case was to be tried in January 2014 in the same state as had been ordered by Norris J. As I have said before, the terms of the order of Norris J were the price the defendants had to pay to be permitted to raise the new allegations at all.
- There was a suggestion before me at the hearing on 6th May that Caterham Cars had also been referred to by the defendants at the pre-trial review but that was a mistaken recollection. It was not. nevertheless it is right to say that amongst the points mentioned, there was a reference to the misrepresentation argument. In any event there was no appeal from the order at the pre-trial review.
- Accordingly I will accede to the claimants' summary judgment application and reject the ground of invalidity of the trade marks in issue on bad faith grounds. The application for a declaration of invalidity on the grounds of bad faith was brought in relation to all the UK registered trade marks and the Community trade marks referred to in paragraph 3 of my main judgment. It is dismissed.
- At the hearing on 6th May 2014 the defendants raised another new point, this time linking together a possible stay in favour of Italy with the summary judgment point. Counsel for the defendants submitted that even if I was not prepared to stay any of the rest of the case, I should stay the bad faith ground of invalidity of the trade marks. After all it had not been decided in the main judgment. Moreover given that the points on stays in favour of Italy were addressed at the hearing on 6th May earlier in the day than the question of summary judgment, the summary judgment application had not been determined at the moment in time the stay was being considered.
- This was yet another new point raised by the defendants. The application for summary judgment was commenced in March 2014 following the handing down of the judgment on 25th February 2014. The problem of the Italian proceedings was raised in early April 2014, just before the hearing at which the form of order and summary judgment were supposed to have been dealt with on 11th April. The case had to be adjourned to 6th May to look into the position in Italy. Throughout this period the defendants have taken numerous points (including a number not addressed in this judgment such as a debate about the court's pan-European jurisdiction under Art 97 and 98 CTMR) but amongst those points, they had not taken this point until 6th May. It can also be said that the Italian court has not yet pronounced on the question of bad faith and to that extent an irreconcilable result might be avoided if I stayed that aspect of the case. However there are factors pointing the other way. First the considerations which applied to the stay under Art 104 still apply. My main judgment has been given already. Second, considering the summary judgment application itself, it was ripe for determination at the moment the possible impact of the Italian proceedings was raised. Third it is a matter of summary judgment. I have found that the argument advanced by AVELA has no real prospect of success. There is no need for further proceedings relating to it. Fourth, the conclusion is consequential on and follows from the findings in the main judgment. They are linked together as part of the rare and exceptional circumstances which exist in this case. In my judgment the right course in these circumstances is to address and decide the summary judgment point and I have done so.
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