In a recent decision, the Court of Appeal has upheld two separate High Court decisions concerning parallel Community Trade Mark (CTM) infringement proceedings.
In March 2012, BSkyB announced that it was going to launch a new internet television service under the name “NOW TV”. This prompted two almost immediate claims for trade mark infringement.
The first was by Starbucks (HK) Ltd, not the famous coffee brand but a Hong Kong television service provider, who owned a CTM comprising “now” for various goods and services including television broadcasting.
The second was by EMI (IP) Ltd, a company within the famous EMI record group, who owned a CTM for the mark “NOW” for goods and services which included sound and audio-visual recordings (used for the NOW THAT’S WHAT I CALL MUSIC! brand).
Following separate letters before action from Starbucks and EMI’s solicitors, BSkyB applied to the Office for Harmonisation of the Internal Market (OHIM) for the cancellation of Starbucks and EMI’s CTMs.
Proceedings were issued by Starbucks and EMI shortly after notice of the OHIM applications. Starbucks sought a final injunction, damages and an accelerated trial. EMI sought a final injunction, an interim injunction, damages and an accelerated trial.
In both actions, BSkyB countered with an application that the proceedings be stayed pending the outcome of its applications to OHIM to invalidate Starbucks and EMI’s CTMs. This was based on Article 104(1) of the CTM Regulations (207/209/EC), which says that a CTM Court (which includes the High Court) shall stay an infringement action where the validity of CTM is already in issue before another CTM Court or the subject of a pre-existing application before OHIM, unless there are special grounds.
At first instance, Arnold J considered that there were special grounds for the Starbucks case to continue and for there to be an accelerated trial. DJ Baldwin QC considered otherwise in the EMI case and ordered there to be a stay pending the outcome of OHIM.
BSkyB appealed the Starbucks case and EMI appealed against DJ Baldwin QC’s decision, both on the question of the Judges’ interpretation of special grounds under Article 104 (1) of the CTM Regulations.
The Court of Appeal noted that there was very little authority on the meaning of “special grounds” and the approach that should be taken by a CTM Court on an application for a stay pursuant to Article 104 (1).
It did, however, set out its thoughts on the matter as follows:
- The objective of Article 104 (1) – i.e. the stay – was to avoid inconsistent decisions;
- However, the CTM Regulations did contemplate circumstances where there would be inconsistent decisions concerning the same CTM;
- The issue was whether the infringement proceedings should proceed despite the risk of inconsistent decisions;
- There was a strong presumption in favour of a stay under Article 104 (1);
- Special grounds will only subsist in rare and exceptional cases;
- Special grounds relate to factual circumstances specific to a given case;
- Systematic differences between courts are irrelevant;
- Specific facts giving rise to serious urgency could be special grounds (general business need was not sufficient); and
- It was irrelevant that the pre-existing application was purely reactive to the threat of infringement proceedings.
The Court of Appeal concluded in the Starbucks case that there were exceptional circumstances of urgency and accordingly there were special grounds for the proceedings to continue without a stay.
The decisive fact was that the proceedings could not have been stayed on the basis of an interim injunction because BSkyB had already launched its service. This made the case exceptional. In usual circumstances, a claimant will be adequately protected by interim injunctions.
By contrast, the Court of Appeal concluded that there was no such exceptional urgency in the EMI case and accordingly the proceedings should be stayed pending the outcome of BSkyB’s OHIM application.
The decisive factor was that EMI had shown no urgency in launching a NOW-branded music TV channel nor did it have definite plans to do so. Further, the court considered that EMI could be adequately compensated in damages for any loss.
This case highlights the tactical matters that need to be taken into account by parties when faced with possible CTM infringement proceedings.
For claimants such as EMI, their preferred forum for the dispute was the High Court. However, they will now have to wait for the OHIM decision before the proceedings can be restarted. Unfortunately, the OHIM process can take many years. With the benefit of hindsight, if EMI had launched proceedings without any pre-action correspondence, then the scenario that arose might have been avoided. However, EMI can hardly be faulted for trying to resolve matters as it did. Moreover, the whole emphasis these days is on parties doing all they can to avoid litigating unless they have to. If EMI had simply waded in with proceedings, no doubt it would have been criticised for not giving Sky an opportunity to resolve things via correspondence. Plus there might also have been costs consequences for behaving in that fashion. It will be interesting to see how a court will deal with such a costs argument if one comes before it, because we would expect a claimant to use this decision and Article 104 (1) as a mitigating factor for its failure to comply with the pre-action conduct expected of parties.
For defendants such as BSkyB, the reverse of course applies. Soon after it received the letters before action, it sent its applications to OHIM. It would have known that by virtue of Article 104 (1) such applications would have stayed any later High Court proceedings. It might have done this because it felt it had a better chance of success on cancelling the CTMs with OHIM or because it knew that it would have the effect of putting the proceedings on hold for a considerable time, time which it wanted. Either way, such an option was clearly open to them and rather surprisingly wasn’t held against them by the court.