You want a pizza me?

23 / 04 / 2018

Following an earlier decision in the Intellectual Property Enterprise Court[1], the Court of Appeal recently dismissed an appeal against a declaration of invalidity in respect of the word trade mark “CASPIAN” and permitted a cross-appeal declaring a device mark incorporating the word “Caspian” to have been invalidly registered[2].

These two cases should serve as a useful warning to trade mark owners on the danger of unregistered earlier rights.

We review the recent Caspian Pizza trade mark case decision in the Court of Appeal and highlight the talking points below. We focus on the claim for “passing off” and trade mark infringement, and challenges to the validity of trade marks where goodwill is limited to a particular locality.

Background

The claimants’ trade marks comprised the word mark CASPIAN (the Caspian Mark) registered with effect from 8 July 2005 in respect of restaurants and related services, and the following mark:

(the “Device Mark“).

The Device Mark was registered with effect from the 21 September 2010 in respect of certain specified foodstuffs, including pizza ingredients.

The claimants opened a pizza restaurant in Birmingham in 1991 under the name Caspian Pizza, which later expanded into a chain in and around Birmingham.

The defendants operated a pizza restaurant in Worcester, which first opened in 2002, also using the “Caspian” name.

The claimants stated that it had entered into an oral franchise agreement with the defendant permitting the defendant to operate the Worcester restaurant under the Caspian Pizza name. The claimants stated that it was a term of that agreement that any goodwill generated by the defendants by the operation of the Worcester restaurant would be assigned to the claimants and monthly royalty payments would be payable.

However, the Court found the claimants to be unreliable witnesses and was unable to accept any of their evidence “unless it was common ground or supported by documents“. The notion of the franchise agreement was therefore rejected.

The claims

The claimant claimed that the defendants had committed the tort of passing off and infringed both trade marks through use of similar or identical marks at the defendants’ Worcester restaurant.

The principle behind the tort of “passing off” is that “a person is not to sell his own goods or services under the pretence that they are the goods or services of another person[3]. However, to bring a successful claim for passing off, the claimants must satisfy the following three-stage test set out in the Jif Lemon case[4], i.e. establish that there is:

  1. a goodwill or reputation attached to its goods or services;
  2. a misrepresentation by the defendant to the public, likely to lead the public to believe that the goods or services offered by the defendant are those of the claimant; and
  3. damage to the claimant as a result of the misrepresentation.

The claimants had established goodwill in their business in Birmingham, however they could not produce evidence to show that this goodwill was present in Worcester. There could not be any possibility of misrepresentation. This is because if the public in Worcester did not know about the claimants’ restaurant in Birmingham there is no possibility the public could be led to believe that the defendants’ goods and services were connected with the claimants’.

The claim for passing off therefore failed.

Trade mark infringement

In relation to the claim for trade mark infringement, the defendants conceded that the Worcester restaurant used identical signs to the claimants’ trade marks in relation to similar goods or services. However, they relied on a defence under article 6(2) of the Trade Marks Directive[5] (the Directive), which is also implemented by section 11(3) of the Trade Marks Act 1994 (TMA) and provides as follows:

“[A] trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade, an earlier right which only applies in a particular locality if that right is recognised by the laws of the Member State in question and within the limits of the territory in which it is recognised.”

The “earlier right” referred to is the right to bring a claim for “passing off”. The defendants therefore needed to show that they had the right to bring such a claim, in respect of the word “Caspian”, in Worcester, prior to the registration of the claimants’ trade marks.

The Court found that the defendants had developed goodwill pre-dating the trade mark registrations – since they had been operating in Worcester since 2002 – and could have brought a claim for passing off. As such the defendants could rely on the defence provided by article 6(2) of the Directive and therefore the claim for trade mark infringement failed.

Counter-claim for invalidity

The defendants then counterclaimed that both the claimants’ trade marks should be declared invalid on the basis that they had an earlier right in word “Caspian” and had the right to bring a claim for passing off in respect of that unregistered trade mark prior to the effective date of registration of the claimants’ trade marks.

Article 4(4)(b) of the Directive (which is implemented by sections 47(2)(b) and 5(4)(a) of the TMA) provides that a registered trade mark:

“shall be liable to be declared invalid where, […] rights to a non-registered trade mark […] were acquired prior to the date of application for registration of the subsequent trade mark, and that non-registered trade mark […] confers on its proprietor the right to prohibit the use of a subsequent trade mark.”

As mentioned above, the defendants had already established that they had a right to bring a claim for “passing off” prior to the date of the claimants’ trade marks. However, the issue in dispute was whether the defendants needed to demonstrate that they could bring an action for “passing off” across a greater area to bring a successful claim for invalidity under article 4(4)(b) than is necessary to mount a successful defence to trade mark infringement under article 6(2) of the Directive.

The claimants stated that the Court should follow the decision in Redd[6], in which the court found that a claim for invalidity under article 4(4)(b) required the party making the claim to have established a goodwill across a wider area (e.g. nationwide or at least in a significant part of the UK) than was necessary to rely on the defence provided under article 6(2).

The defendants on the other hand, directed the Court to the decision in SWORDERS[7]  in which the Registrar found that, since an application to register a national trade mark was a “notional expansion” of the applicant’s business into all areas nationwide, it was only necessary for a third party to demonstrate that it had an earlier right sufficient to bring a claim for passing off anywhere in the UK, for such third party to successfully oppose the registration of that national trade mark.

The Court’s analysis

The Court, siding with the decision in SWORDERS, held that it was implicit in the provisions of the Directive and the TMA, that to oppose the registration of a trade mark (or invalidate a registered trade mark), the opponent only has to demonstrate that it had established goodwill in the relevant mark over an identifiable geographical area that would qualify for protection in passing off proceedings. It was not necessary to show that it had goodwill throughout the UK or in a geographical area which overlapped with the place where the trade mark applicant or owner carries on business using the relevant mark.

As a result, the Court dismissed the claimants’ appeal and granted the defendants’ cross-appeal, declaring both the Caspian Mark and, since “Caspian” was the “essential and most prominent element” of the Device Mark, the Device Mark invalid.

Key points to take away

  1. If you are looking to register a trade mark, it is important to first check whether there are any third parties already using a similar or identical mark. The third party could later invalidate your mark, even if they do not initially oppose the registration.

Trade mark applicants are entitled under section 13(1)(b) of the TMA to limit the territorial scope of their application, but this must be done on registration. The court cannot retrospectively limit a registered trade mark.

  1. If you own a registered trade mark and find a third party using a similar mark, you should take caution and first try to establish whether that mark could endanger your own mark. If unsure, speak to your solicitors.
  2. If you want to register a trade mark, do not delay in doing so.

[1] See Caspian Pizza Limited, Behzad Zarandi, Nadar Zand v Maskeen Shah, Malvern Hills Estates Limited [2015] EWHC 3567 (IPEC)

[2] See Caspian Pizza Limited and others v Shah and another [2017] EWCA Civ 1874

[3] See Perry v Truefitt (1842) 6 Beav. 66

[4] See Reckitt & Colman Products Ltd v Borden Inc [1990] UKHL 12

[5] EU Directive 2008/95/EC

[6] Redd Solicitors LLP v Red Legal Ltd [2012] EWPCC 54

[7] SWORDERS Trade Mark dated 28 July 2006 (O-21206)