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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Millen v Karen Millen Fashions Ltd & Anor  EWHC 2104 (Ch) (16 August 2016)
Cite as:  EWHC 2104 (Ch)
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7 Rolls Building
London EC4A 1NL
B e f o r e :
sitting as a Deputy Judge of the High Court
| Karen Denise Millen
|- and -
|(1) Karen Millen Fashions Limited
(2) Mosaic Fashions US Limited
James Mellor QC and Lindsay Lane (instructed by Fieldfisher LLP) for the Defendants
Hearing dates: 10, 13, 14, 15 and 17 June 2016
Crown Copyright ©
Richard Meade QC:
|The background facts||29|
|Development of the KAREN MILLEN business up to the SPA||31|
|The state of the KAREN MILLEN business at the time of the SPA||41|
|Development of the KAREN MILLEN business after the SPA||65|
|Corporate structure of the KAREN MILLEN business||86|
|Circumstances of the retail trade||90|
|Expert evidence of US law||101|
|Principles of contractual interpretation||118|
|Restraint of trade||130|
|Construction of the SPA, and its application (other than clause 5.1.7)||136|
|The "frozen in time" argument||143|
|Interpretation of clause 5.1.7||202|
|Interpretation of clause 10 – further assurance clause||220|
|Application of clause 10||231|
|Application of clause 5.1.7||248|
|Assessment of similar or competing business, confusing similarity||280|
|China in 2004||283|
|The USA in 2004||30|
|The position at the date of these proceedings||311|
|Interest of each Defendant to enforce||315|
|Jurisdiction under clause 21||321|
a. Negative declarations that the restrictive covenants in the SPA cannot be enforced by the Defendants, or can only be enforced to a limited extent.
b. Negative declarations that the application for and maintenance of various registered trade marks would not breach the SPA.
c. Negative declarations that the use of those trade marks would not breach the SPA.
d. A negative declaration that carrying on business under the name KAREN MILLEN in the US would not breach the SPA if the name were to be used for homewares but not women's apparel or women's fashion accessories.
e. A negative declaration that the name KAREN solus (i.e. without MILLEN), in plain text or with or without stylised elements, in respect of any goods and services, would not be confusingly similar to KAREN MILLEN such that its use would not breach the SPA.
f. Damages and injunctive relief in relation to the EDV Complaint.
a. Declarations that the Claimant's opposition and cancellation proceedings in the US and China are in breach of the SPA (and related injunctions).
b. Declarations that the Claimant's US applications are in breach of the SPA (and related injunctions).
c. Injunctions pursuant to the SPA to prevent the Claimant carrying on business anywhere in the world under the names KAREN or KAREN MILLEN (or anything confusingly similar) in relation to the goods covered by the Claimant's US applications.
d. Damages arising from the above.
a. A declaration and related mandatory injunction requiring the Claimant to consent to some of the Defendants' trade mark applications (and damages). This is based on a further assurance clause in the SPA (clause 10).
b. An injunction to prevent the Claimant from doing or omitting to do any act which has the effect of damaging the Defendants' concessions or other similar arrangements (and damages). This arises from one of the restrictive covenants in the SPA.
The background facts
Development of the KAREN MILLEN business up to the SPA
The state of the KAREN MILLEN business at the time of the SPA
a. From 1998 it had a licence agreement with Andrew Actman Limited for KAREN MILLEN eyewear, for the EU plus the Channel Islands, Iceland and Switzerland.
b. From 2000 it had a licence agreement with Boots for KAREN MILLEN cosmetics and body care products, for the UK and Ireland. It was not particularly successful and while it was still in place in 2004, it was dwindling. There was an allegation by the Defendants that cosmetics had reached the US stores prior to the SPA but Ms Capp gave very clear evidence (albeit based on hearsay to some extent) that that was not the case, and I accept her account. The Defendants more or less gave up on the point in their closing submissions. To be fair, it seems confusion had arisen because cosmetics display stands had reached the US stores, but not been used.
c. The KAREN MILLEN stores, concessions and franchises sold bags, belts, purses, scarves and footwear. I accept the Defendants' submissions that it is hard to reconstruct what precisely was sold after the passage of time and it is possible other accessories as well were sold, but there is no evidence on which I can proceed to assume that that was the case, so I do not. They did not ever sell homewares such as bedlinen, cutlery, glassware, furniture or the like.
d. The goods other than women's clothes accounted for a small part of the business' turnover (under 10%) but it was not trivial either in percentage or absolute terms, and it is clear that the business was making a serious effort in relation to them. The fact that, for example, the Boots deal did not work well was not for want of effort or desire on the part of the KAREN MILLEN business.
e. There was a general intention and desire to continue to expand the range of goods offered, although it was not specifically directed to any particular product category.
21 Q. Taking a step back from the detail, the general point is that
22 everybody expected the Karen Millen business to expand in
23 terms of turnover, geographical extent and product range, did
24 they not?
25 A. Yes.
2 Q. And that process would have been accelerated with the greater
3 financial muscle behind the purchasers of the new business?
4 A. Correct.
5 Q. That is why, as part of the purchase price that you received
6 in the 2004 SPA, you were content to reinvest that in a
7 shareholding in the purchasers' business?
8 A. Yes.
9 Q. Because you expected them to make a success of Karen Millen?
10 A. Because I expected them to continue to do as well as we had.
a. The brand was associated mainly with women's clothing of relatively high quality for its price.
b. Typical prices for KAREN MILLEN clothes were, using the UK high street for this specific comparison only, at the top end of high street prices.
c. KAREN MILLEN clothes were perceived to have a strong design element. The designs were strongly modern rather than traditional.
d. There were numerous outlets for KAREN MILLEN clothes and other products, which varied considerably in their nature.
e. The brand was associated with some products other than clothes and consumers would be aware of this generally, without being aware of details unless they had actually bought some. Even then, they would be unlikely to have an awareness of the overall scope of all the activities of the business over time.
Development of the KAREN MILLEN business after the SPA
Corporate structure of the KAREN MILLEN business
Circumstances of the retail trade
Expert evidence of US law
a. the strength of the earlier mark;
b. proximity of the goods;
c. similarity of the marks;
d. marketing channels used;
e. type of goods and the degree of care likely to be exercised by the purchaser; and
f. perceived natural expansion of the product lines.
Principles of contractual interpretation
" First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook  AC 1101, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision.
 Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve.
 The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. [..]
 Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party.
 The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties."
Restraint of trade
Construction of the SPA, and its application (other than clause 5.1.7)
"5.1 In consideration of the Rollover Purchaser and the Cash Purchaser entering into this Agreement, [Karen Millen and Kevin Stanford] (and the other sellers for the purposes of clauses 5.1.4 and 5.1.5 only) hereby severally undertake with the Rollover Purchaser and the Cash Purchaser and for the benefit of the Rollover Purchaser's Group and each Group Member (and their respective successors in title) that, except with the express prior written consent of the Rollover Purchaser (and except in pursuance of their respective duties and obligations owing to the Rollover Purchaser's Group from time to time) they will not and shall procure that none of their Connected Persons shall, whether on their own behalf or with or on behalf of any person, and whether directly or indirectly and in whatever capacity:-
5.1.4 at any time after the date of this Agreement, use or attempt to use in the course of any business, any KMHL IPR (as defined at Schedule 2);
5.1.6 at any time after Completion carry out any act or omit to do any act, the effect of which is to adversely affect any Group Member's concession or other similar arrangement with any third party (including department stores) where such effect could reasonably have been avoided by virtue of the party in question acting differently; and
5.1.7 at any time after Completion in any connection with any business which is similar to or competes with the business of the KMHL Group (not only in the United Kingdom but anywhere in the world) use the name "Karen Millen" or any other name confusingly similar thereto (including names which use, as a prefix or suffix, "KM" or "K.Millen").
5.3 Each of the undertakings in clause 5.1 shall be construed as a separate and independent undertaking and if one or more of the undertakings is held to be void or unenforceable, the validity of the remaining undertakings shall not be affected.
5.4 [Karen Millen and Kevin Stanford] (and the other Sellers for the purposes of clauses 5.1.4 and 5.1.5 only) agree that the restrictions and undertakings contained in clause 5.1 are reasonable and necessary for the protection of the Rollover Purchaser's Group's legitimate interests in the goodwill of the KMHL Group, but if any such restriction or undertaking shall be found by any court or other competent authority to be unenforceable ("Invalid Restriction") but would be valid and enforceable if some part or parts of such Invalid Restriction were deleted or amended, such Invalid Restriction or undertaking shall apply with such modification as may be necessary to make it valid and enforceable."
"Each party shall, from time to time on being reasonably required to so by any other party, now or at any time in the future, do or procure the doing of all such acts and/or execute or procure the execution of all such documents as may reasonably be necessary to give full effect to this Agreement."
"This Agreement shall be binding upon and enure for the benefit of the personal representatives permitted assigns and successors in title of each of the parties and every other person with enforceable rights under this Agreement but shall not be assignable nor shall any party or any other person with enforceable rights under this Agreement be entitled to deal in any way with any interest it has under this Agreement, save that the Rollover Purchaser and/or the Cash Purchaser may, at any time, assign all or any part of their respective rights and benefits under this Agreement, to any transferee of the share capital of any Group Member provided that such transferee remains within the Group, or to any institutional funder of the Rollover Purchaser and/or the Rollover Purchaser's Group from time to time for so long as such assignee remains an institutional funder PROVIDED THAT any Seller shall have no greater liability to an assignee or assignees in aggregate than such Seller would have had to the assignor."
"20.1 Nothing in this Agreement is intended to confer on any person any right to enforce any term of this Agreement which that person would not have had but for the Third Party Right Act except that:
20.1.1 clause 5 (restrictive covenants) confers on the third parties expressly identified therein rights which are, respectively, directly enforceable by them subject to and in accordance with the terms of this Agreement; and
20.1.2 (without prejudice to all other relevant terms) the benefits conferred by clauses 7 (indemnities), 9 (announcements), 10 (further assurance), 11 (assignment), 12 (entire agreement), 13 (waiver, rights and release), 16 (set off), 17 (default interest) and 18 (notices) are also directly enforceable by those third parties, respectively, insofar as the rights referred to in clause 20.1.1 are concerned."
"21.1 This Agreement shall be governed by, and construed in accordance with, English law.
21.2 In relation to any legal action or proceedings to enforce this Agreement or arising out of or in connection with this Agreement ("Proceedings") each of the parties irrevocably submits to the jurisdiction of the English courts and, waives any objection to Proceedings in such courts on the grounds of venue or on the grounds that the Proceedings have been brought in an inconvenient forum."
The "frozen in time" argument
"means all patents, trade marks, copyright, moral rights, rights to prevent passing off, rights in designs, know how ("Know-How") and all other intellectual or industrial property rights (including in relation to Software), in each case whether registered or unregistered and including applications or rights to apply for them and together with all extensions and renewals of them, and in each and every case all rights or forms of protection having equivalent or similar effect anywhere in the world"
"8.1 Details of all Intellectual Property Rights relating to the business of the KMHL Group ("KMHL IPR") which the Warrantors believe are material to the business of the Group are listed in the Disclosure Letter."
a. Clauses 5.1.5 and 5.2 (dealing with confidential information) are not frozen in time because they provide for information which subsequently becomes public.
b. Clause 5.1.6 is not frozen in time because it relates to acts in the future in relation to concessions acquired in the future.
c. Clause 5.4 is not frozen in time because it would require consideration of the goodwill of the KMHL Group at the time of the assessment.
d. Goodwill is a "living, ongoing thing".
e. The restrictive covenants are forward looking in the sense of preventing future conduct.
f. There could be a practical problem trying to identify the state of the intellectual property rights in 2004, at some (much) later date. The Defendants say that the current proceedings prove that.
Interpretation of clause 5.1.7
Interpretation of clause 10 – further assurance clause
Application of clause 10
Application of clause 5.1.7
10 As has been seen, Lord Woolf said that an application for a negative declaration requires appropriate circumspection on the part of the court. In Nokia Corp v InterDigital Corp  EWHC 802 (Pat) Pumfrey J said this:
" … A line of authority running from Guaranty Trust Company of New York v Hannay & Co  2 KB 536 through Messier-Dowty Ltd v. Sabena SA  1 All ER 275 , culminating in the judgment of Neuberger J in Financial Services Authority v Rourke (unreported) 19th October 2001, establishes three relevant principles:i) The correct approach to the question of whether to grant negative declarations was one of discretion rather than jurisdiction.
ii) The use of negative declarations should be scrutinised and their use rejected where it would serve no useful purpose, but where such a declaration would help ensure that the aims of justice were achieved, the court should not be reluctant to grant a negative declaration.
iii) Before a court can properly make a negative declaration, the underlying issue must be sufficiently clearly defined to render it properly justiciable."
This seems to have been approved on appeal,  EWCA Civ 1618;  FSR 23. The third principle was accepted by Arnold J in Actavis UK Ltd v Eli Lilly & Co  EWHC 234 (Pat) , at .
"12 The final sentence of the skeleton argument of Ms Michaels, who appeared for Skyscape, was:'Obviously, it is open to the Court, if it sees fit, and depending upon the extent of any findings it makes, to grant a DNI in different terms to those sought.'
This seemed possibly to be not as innocuous as it looked. During Ms Michaels' opening speech I asked her to elaborate on Skyscape's idea of the correct approach by the court to an application for a DNI. It became clear that the real application being made by Skyscape, couched in reassuring and characteristically persuasive language by Ms Michaels, was that were I to decide that the declaration in Annex 1 was too wide in this or that regard, I should make a declaration in whatever narrower form I thought appropriate. Putting it bluntly (which Ms Michaels understandably did not), if I was not prepared to grant the DNI sought in full, Skyscape was willing to take whatever declaration it could get, at least pending any appeal.
13 To see where this would lead, the starting point was the specific order sought by Skyscape. It appears as Appendix 1 to this judgment. It is a DNI relating to (i) the sign SKYSCAPE in a variety of fonts, alternative colours and in upper and lower case, (ii) the sign SKYSCAPE CLOUD SERVICES in similarly various presentations, and (iii) 18 logos. For each of these signs the DNI is sought in relation to (a) 10 different types of service provided to the UK public sector in the UK and (b) the provision of services enabling transition to each of those 10 services. It can be seen that the DNI sought covers a very large number of combinations of signs and services.
14 Potentially all of these combinations had to be compared with the Cited Marks. The specifications of the five Cited Marks were long – in the case of four of them, spectacularly long. So the possibility of infringement would have to be assessed by comparing all the combinations of signs and services contemplated in the DNI with the Cited Marks across the range of goods and services specified in each of them. The logic of Skyscape's case was that in the event that I were not prepared to accept the proposed DNI in full form, I should ring fence all of the combinations of Skyscape's signs and services encompassed by the proposed order in respect of which I was prepared to grant a DNI.
15 I took the view that this would have been very unfair to Sky. Sky was entitled to direct my attention to what, from its standpoint, was the most vulnerable part of the DNI. It could point to a narrow range of Skyscape's signs when used for a narrow range of services, or even just one of each. In other words Sky could attempt to persuade me that Skyscape's sign X, when used for Y services, would infringe part P of the specification of Cited Mark Q. If I were convinced by Sky's argument, the DNI sought would be refused. It would be irrelevant that other combinations of Skyscape's sign and service within the draft Order would not infringe any part of the specifications of any of the Cited Marks."
Assessment of similar or competing business, confusing similarity
China in 2004
The USA in 2004
a. The mark is a strong one which even in 2004 had a real power to identify the KAREN MILLEN business.
b. The goods for which the Claimant seeks negative declarations cover more or less the whole scope of those things which fashion brands branch out into. Some are closer than others to what the KAREN MILLEN business had already done, but as a whole they are really quite similar to clothes (this deliberately rolls into one the similarity of goods and zone of natural expansion concepts used in US law).
c. Although the Claimant's declarations do not specify it, they include identical trade channels (and in reality I expect the Claimant would use very similar if not identical trade channels were she to launch).
d. These are goods for which some care is used in purchasing, but I do not think that customers exercising care would be any less likely to be confused. If anything, turning their minds to it might cause them to reason that the Claimant's new business was an expansion of the KAREN MILLEN business.
e. A customer who were to see one type of the Claimant's goods would know that there were likely to be others, but would have no way to know what those might be. So seeing KAREN MILLEN rugs would suggest that there might well be KAREN MILLEN clothes from the same source. The consumer would not know.
f. The risk of statements by the Claimant as to her past connection with the KAREN MILLEN business being misunderstood (but I would have reached the same conclusion without this factor).
The position at the date of these proceedings
Interest of each Defendant to enforce
Jurisdiction under clause 21
a. Count (I) of the EDV Complaint alleges (at §45) that Ms Millen "has, without justification, breached the [SPA] by (i) beginning a competing business venture in connection with her name; (ii) filing US trade mark applications for marks incorporating [Ms Millen's] name; (iii) attempting to use the KAREN MILLEN marks; and (iv) initiating the Cancellation proceedings in the USPTO against [the Defendants'] KAREN MILLEN marks."
b. Count (II) of the EDV Complaint seeks a declaration (at §53) that the Defendants (i.e. the Plaintiffs in the Complaint) may use, apply for register and maintain any US trade mark incorporating Ms Millen's name, because [Ms Millen] has consented to the Defendants' use, registration and ownership of trade marks incorporating Ms Millen's name. The claimed declaration was based on a number of assertions setting out the alleged meaning and effect of the 2004 SPA: see §§48-52 of the EDV Complaint.
c. Count (III) of the EDV Complaint seeks a declaration (at §59) that the Defendants (i.e. the Plaintiffs in the Complaint) did not procure a false or fraudulent registration when they declared to the USPTO that Ms Millen had consented to their registration in the USA of the trade marks in question. The claimed declaration was based on the assertion that the terms of the 2004 SPA amounted to the giving of consent by Ms Millen to the registration of those trade marks: see §§14, 56-58 of the EDV Complaint.
"This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract."
"(1) Where— (a) a right under section 1 to enforce a term ('the substantive term') is subject to a term providing for the submission of disputes to arbitration ('the arbitration agreement'), and (b) the arbitration agreement is an agreement in writing for the purposes of Part I of the Arbitration Act 1996, the third party shall be treated for the purposes of that Act as a party to the arbitration agreement as regards disputes between himself and the promisor relating to the enforcement of the substantive term by the third party.
"(2) Where— (a) a third party has a right under section 1 to enforce a term providing for one or more descriptions of dispute between the third party and the promisor to be submitted to arbitration ('the arbitration agreement'), (b) the arbitration agreement is an agreement in writing for the purposes of Part I of the Arbitration Act 1996, and (c) the third party does not fall to be treated under subsection (1) as a party to the arbitration agreement, the third party shall, if he exercises the right, be treated for the purposes of that Act as a party to the arbitration agreement in relation to the matter with respect to which the right is exercised, and be treated as having been so immediately before the exercise of the right."