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26 January 2024

Court of Appeal uses post-Brexit power to diverge from CJEU precedent on acquiescence – choosing between EU authorities

In Industrial Cleaning Equipment v Intelligent Cleaning Equipment,[1] the Court of Appeal, comprised of Lord Justice Arnold (who gave the primary judgment), Lord Justice Nugee, and Lady Justice King (who both agreed), used the powers under s. 6(5A) of the European Union (Withdrawal) Act 2018 (‘EUWA’) and the European Union (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020 to depart from the CJEU decision in Budvar.[2] Departing and developing a new line of precedent case law has been a hot topic since the Brexit referendum and now we are starting to see how it will work in reality, in this case on the law relating to acquiescence and trade marks. However, it is worth noting that, in this case, the departure was really a question of which line of European authorities should be followed.

This case was a dispute over the trade mark ‘ICE,’ which was the acronym of both the Claimant and First Defendant’s company name (in the latter case it was also the acronym of the Defendants’ group). The appeal was with regard to so-called ‘statutory acquiescence’ under s. 48 of the Trade Marks Act 1994 (‘TMA’) (and the equivalent EU directives and regulations).

Section 48 states that where the proprietor of a trade mark or right knows about and does not object to a later trade mark for a continuous period of five years, that proprietor loses the right to make an application to have the later mark declared invalid, and also loses the right to object to the use of the later trade marks for the goods and services for which it has been used in the period of five years.

Background

The Claimant had used the logo  since 2007, which it filed as a trade mark in the UK in October 2015, registered in January 2016 (the ‘Claimant’s Trade Mark’). The First Defendant filed international trade marks for the word ‘ICE’ and the logo  under the Madrid Protocol in June 2015 based on an earlier registration in the USA. The international trade mark application designated various territories, including the EU. The opposition period in the EU passed without objection, and the marks were duly registered in May and June 2016 respectively. After Brexit, the EU trade marks were converted into two comparable International (UK) registrations (the ‘Defendants’ Trade Marks’).

The Claimant eventually admitted that it had knowledge of the Defendants’ use of the Defendants’ Trade Marks since at least July 2014. The Claimant sent the Defendants a Letter of Claim alleging infringement of the Claimant’s Trade Mark and passing off in July 2019. After issuing but then withdrawing an application to invalidate the Defendants’ Trade Marks at the EUIPO, the Claimant’s Claim Form was issued in May 2021, and was served in September 2021.

At first instance, HHJ Melissa Clarke decided that, subject to the defence of statutory acquiescence, the Defendants’ Trade Marks would be invalid pursuant to sections 47(2)(b) and 5(4)(a) of the TMA, as the Claimant would have been able to restrain the Defendant from using the mark under the law of passing off.

The judge rejected the Defendants’ case on statutory acquiescence, finding that the five year period only starts to run when the earlier trade mark proprietor has knowledge both of the use of the later trade mark and of its registration.[3] The judge found that the Claimant only had knowledge of the Defendants’ Trade Marks when they were informed of such in a letter from the Defendants’ lawyer in July 2019. She followed the CJEU decision in Budvar, as she was required to do, but said that she would have interpreted the legislation in the same way even without that precedent.[4]

The Appeal

The Defendants appealed on two points, both of which were relating to the date on which the five period starts to run. From a general trade mark law perspective, the key point of appeal was whether the:

[P]roprietor of the earlier trade mark [had] to be aware of the registration of the later trade mark in order for time to run: [or whether] it is sufficient that the later trade mark is in fact registered and that the proprietor of the earlier trade mark is aware of the use of the later trade mark.[5]

The Defendants recognised that this point of appeal required the Court of Appeal to depart from Budvar and invited the Court to do so.

EU case law

Arnold L.J. considered the CJEU’s decision in Budvar. That case concerned a dispute between Anheuser-Busch (‘AB’) (a Missouri-based brewer which has sold beers called ‘Budweiser’ since 1875) and Budejovický Budvar (‘BB’) (a Czech brewer from the town of Ceske Budovice (formerly ‘Budweis’) which has sold beers under the word ‘Budweiser’ since 1895. BB entered the UK market in 1973. AB followed in 1974, although it had previously supplied Budweiser to US armed forces personnel at US bases in the UK. In 1979, AB sued BB for passing off. BB counterclaimed on the same grounds. Whitford J. dismissed both the claim and the counterclaim and said that both parties could use ‘Budweiser’ in the UK. The Court of Appeal agreed.

AB applied to register BUDWEISER as a UK trade mark in 1979. BB opposed. BB applied to do the same in 1989, and AB opposed. The Register of Trade Marks, the High Court, and the Court of Appeal each stated that both parties were entitled to register BUDWEISER in the UK. Both marks were entered on the register on May 19th 2000.

In 2005, AB applied for a declaration of invalidity of BB’s registration on the grounds that AB had an earlier application and therefore an earlier trade mark. BB relied on the defences of statutory acquiescence and honest concurrent use. The hearing office and judge at first instance agreed with AB, and the Court of Appeal referred a number of questions to the CJEU, including[6]:

  1. What is meant by ‘acquiesced’ in Article 9(1) of Directive 89/104 and in particular;
    • is ‘acquiesced’ a Community law concept or is it open to the national court to apply national rules as to acquiescence (including delay or long-established honest concurrent use)?
    • if ‘acquiesced’ is a Community law concept can the proprietor of a trade mark be held to have acquiesced in a long and well-established honest use of an identical mark by another when he has long known of that use but has been unable to prevent it?
    • in any case, is it necessary that the proprietor of a trade mark should have his trade mark registered before he can begin to ‘acquiesce’ in the use by another of (i) an identical or (ii) a confusingly similar mark?
  2. When does the period of ‘five successive years’ commence and in particular, can it commence (and if so can it expire) before the proprietor of the earlier trade mark obtains actual registration of his mark; and if so what conditions are necessary to set time running? [sic]

There were a number of interveners, including the European Commission, whose arguments the Advocate-General summed up as follows[7]:

“The Commission is of the opinion that the period of acquiescence starts to run from the time at which the proprietor of the earlier mark becomes aware of the use of the registered later mark. The period can thus begin at the earliest on the date of registration of the later mark, if that mark is used from that time and the proprietor of the earlier mark becomes aware of that use from that time.”

Unsurprisingly, the Advocate-General found that ‘acquiescence’ within the meaning of Art. 9(1) of the Directive (from which s. 48 of the TMA is derived) is a concept of EU law, to be given autonomous and uniform interpretation. Her final conclusion was that[8]:

“‘The five-year period of acquiescence provided for in Article 9(1) of the directive starts running from the time at which the proprietor of the earlier mark becomes aware of the registration and use of the later mark in the Member State in which the later mark has been registered. The period of acquiescence can start running at the earliest from the date of that registration, if the later mark has been used from that date and the proprietor of the earlier mark became aware of that use at that time.”

The First Chamber of the Court of Justice agreed with the Advocate-General, but like the Advocate-General, did not spell out its reasons for concluding that the proprietor of the earlier trade mark must be aware of the registration, as well as the use, of the later trade mark.[9]

The CJEU set out four requirements for the start of the five year period for acquiescence[10]:

  1. Registration of the later trade mark in the Member State concerned;
  2. The application for registration of that mark being made in good faith;
  3. Use of the later trade mark by its proprietor in the Member State where it has been registered; and
  4. Knowledge by the proprietor of the earlier trade mark that the later trade mark has been registered and used after its registration.

Budvar was followed by I Marchi Italiani v OHIM[11], in which the EU General Court set out the Budvar fourth test as follows:

  1. The proprietor of the earlier trade mark must be aware of the use of that trade mark after its registration.[12]

This formulation means that that the proprietor of the earlier trade mark needs only to be aware of the use of the later trade mark after the date of registration, rather than having to be aware of both the use and the registration.

However, when this was appealed to the CJEU, the Court found that the General Court had not meant to change the position from Budvar (though it does not address the differences in formulation specifically)[13]:

‘It should be noted at the outset that the General Court recalled, in paragraph 31 of the judgment under appeal, the case-law according to which four conditions must be met in order for the limitation period to run in the event of the use of a trademark identical to the earlier mark. Those conditions include, in particular, the fact that the later mark must be registered, as well as the fact that the proprietor of the earlier mark must be aware of the registration of the later mark and the use of that mark after its registration (see, by analogy, judgment of 22 September 2011, Budejovický Budvar, C-482/09).’

However, the EUIPO Guidelines for the Examination of European Trade Marks does not align, as they follow the case of Cristanini v Ghibli[14], a Second Board of Appeal decision of what was then called OHIM (now the EUIPO) that preceded the decision in Budvar, but does not appear to have been raised during arguments in Budvar. As of 2023, the Guidelines continued to state that[15]:

“The proprietor of the contested mark cannot be required to prove, in addition to the invalidity applicant’s awareness of the use of the contested EUTM, that the invalidity applicant was also aware of its registration, for at least 5 years, as an EUTM. The reference in Article 61(1) and (2) EUTMR to acquiescence in the use of a later ‘EUTM’ merely refers to the requirement that the later sign must have been registered as an EUTM for at least 5 years. This is an objective requirement, which is independent of the invalidity applicant’s knowledge (21/10/2008, R 1299/2007-2, Ghibli (fig.), § 41-47).”

In I Marchi Italiani, the Second Board of Appeal followed Ghibli, and so too it appears had the General Court, but both were overruled by the CJEU. Since that case, the case law of the EUIPO/the General Court appeared to be at odds with the CJEU, even though the latter is binding on the former.

Decision of the Court of Appeal

In order to overturn a previous decision of the CJEU, a new decision of the CJEU would be required. The CJEU does occasionally depart from its previous decisions, through decisions of a Grand Chamber, but that is rare. Post-Brexit, as Arnold L.J. puts it, for the UK[16]:

‘That course is no longer open to us, however. We must decide the issue for ourselves. That involves answering two questions. First, what is the correct interpretation of the legislation? Secondly, if we consider that the correct interpretation of the legislation is that contended for by the Defendants, should we depart from Budvar?’

Arnold L.J. found that it was the Court’s role to interpret the relevant directives and regulations having regard to the wording of the relevant provision, its context, and the objectives of the legislation.[17] In his judgment, the more natural reading of the directives and regulations was the approach taken in Ghibli, i.e. that the proprietor of the earlier trade mark must be aware of the use of the later trade mark after its registration, but not the registration of the later trade mark per se.[18] To reach this decision he relied on the recitals to the directives and the opinion of the Board of Appeal in Ghibli, that if the legislative intention had been to require knowledge of both use and registration, it would have been easy to say so.[19]

Arnold L.J. then considered his own judgment in Combe International v Dr. August Wolff,[20] with which the other two Lord Justices agreed[21]:

“58. [Section 48(1)] specifies a single condition which has two separate consequences. It is important to distinguish the condition from the consequences.

  1. The condition is that ‘the proprietor of an earlier trade mark … has acquiesced for a continuous period of five years in the use of a registered trade mark in the United Kingdom, being aware of that use [emphases added]’. Thus the acquiescence must be in respect of the use of the later trade mark. Acquiescence in the registration of a later trade mark which is not being used does not give rise to a defence under section 48(1)’

  1. Combe point out that the defence created by section 48(1) only applies to later trade marks which are registered and not to unregistered trade marks. Combe argue that an application for a declaration of invalidity is an attack upon the existence of the registration which founds the defence, and therefore that must suffice to preclude acquiescence in the use of the earlier trade mark. The judge was persuaded by this argument, but I disagree. As I have explained, registration and use are different things. The defence is founded upon acquiescence in use, not acquiescence in registration. A claim for a declaration of invalidity constitutes action to oppose the registration of the later trade mark, but it does not constitute action to oppose the use of the later trade mark. Action to oppose use of the later trade mark requires a claim for infringement.” [sic]

Arnold L.J. considered his previous reasoning and found that it supports interpreting the legislation as only requiring knowledge of the use of the later trade mark after its registration, and not knowledge of its registration per se. Therefore, it would follow that, provided that the later trade mark is in fact registered, the time period should run from the date on which the proprietor of the earlier trade mark becomes aware of use of the later trade mark, not from some later date.[22]

The purpose of the register is to be a public database that companies can search to find which marks have been registered and protected (and applications therefor). If the date of knowledge of the registration was the trigger for the five year period rather than the date of registration, then that would give a perverse incentive for business not to consult the register so as to lengthen the time frame for objection.[23] The date of knowledge of registration is also more burdensome to prove, given that a business’s knowledge of the registration is likely to come from being informed by its legal representatives. Such correspondence is covered by legal professional privilege, and no inference may be drawn by a court from the claim to privilege.

Accordingly, Arnold L.J. concluded that:

“[T]he legislation should be interpreted as meaning that the five year period starts to run once the proprietor of the earlier trade mark becomes aware of the use of the later trade mark, and the later trade mark is in fact registered, whether or not the proprietor of the earlier trade mark is aware of the registration of the later trade mark. In order to give effect to this conclusion, however, this Court must depart from Budvar.”

Departing from Budvar

Arnold L.J. found that Budvar is ‘retained EU law’ within the meaning of the EUWA, and that the Court of Appeal can only depart from CJEU decisions in the way that the Supreme Court can depart from previous Supreme Court decisions. This power is to be exercised sparingly and with great caution.[24]  Arnold L.J. was primarily convinced that this was a suitable time for exercising this power due to the fact that[25]:

[N]either the Advocate General’s Opinion nor the Court’s judgment contained any analysis of the issue, but simply stated a bald conclusion. Furthermore, they do not appear to have had the benefit either of receiving any arguments on this point or of considering the reasoning in Ghibli. Still less did they review the considerations discussed in Combe and above.”

He also stated that Budvar was an isolated decision, with even I Marchi Italiani not being entirely consistent. The situation would be different if, such as in Warner Music v TuneIn[26] (see our article on that case here [link: https://www.vennershipley.com/insights-events/tunein-with-europe-still/]), the CJEU had developed consistent case law over a line of 25 decisions, including several Grand Chamber decisions.[27] The UK Supreme Court have consistently stated that the power to depart is to be exercised with great caution, and that was endorsed by the Court of Appeal in the Warner Music case.

The CJEU’s decision in Budvar was further isolated by being at odds with the case law in the General Court and the EUIPO. Arnold L.J. did not suggest that the CJEU would definitely change its position should the question of acquiescence came before it again, but he said that it was a real possibility.[28]

One of the reasons that the Supreme Court has to be cautious in overturning previous Supreme Court decisions is to maintain legal certainty in the English justice system. The same caution is expected with EU decisions. However, Arnold L.J. considered that this was not a concern in this case, as[29]:

“Few trade mark proprietors are likely to have based their commercial strategies on this aspect of Budvar. Moreover, a well-advised trade mark proprietor would be aware that EUIPO and the General Court have taken a different approach and that the Court of Justice might depart from Budvar.”

Arnold L.J. summed up his decision thus[30]:

“Accordingly, I conclude that this Court should depart from Budvar to the extent of holding that the five year period starts to run when the proprietor of the earlier trade mark becomes aware of the use of the later trade mark and the later trade mark is in fact registered, whether or not the proprietor of the earlier trade mark is aware of the registration of the later trade mark.”

Commentary

Now that the United Kingdom has left the EU, the English Courts are able to depart from the decisions of the bodies of the EU, including the CJEU. There have been questions as to whether any judges would be willing to divert from retained EU law, notwithstanding the power to do so in the EUWA, without a specific Act of Parliament.  The Warner Music case led many to think the prospect of departing was remote.  This case was unusual the court showing the willingness to depart from CJEU precedent, but of course they were really picking between two EU authorities and not agreeing to take the UK in a totally new direction.  What the case does tell us is that the chances of departure might be greater where the Court considers that the CJEU’s decision would lead to an illogical or unreasonable outcome. Whether this is a one-off or a portent of things to come remains to be seen.

The main lesson from this decision is that, in the UK at least, the five year time period for statutory acquiescence (i.e. the time after which a registered trade mark proprietor can, if they have taken no action, no longer object to the validity of a later trade mark or the use of the mark in question) begins to run at the point after the registration of the later mark, that the earlier mark proprietor has knowledge of the use of the later mark. The earlier mark proprietor does not need to have knowledge of the registration of the later mark, as this is implied by that mark being on the register. Whether the CJEU would follow this decision should a case in the line of Budvar come before it again, we will have to wait and see. Unless and until that occurs, the position in the EU is that acquiescence will only occur if the earlier mark proprietor has actual knowledge of the registration and the use of the later mark and takes no action to prevent such.

[1] Industrial Cleaning Equipment (Southampton) Ltd v Intelligent Cleaning Equipment Holdings Co Ltd & Anor [2023] EWCA Civ 1451 (06 December 2023)

[2] Budějovický Budvar, národní podnik v Anheuser-Busch Inc (C-482/09)

[3] Above n. 1 at 15.

[4] Ibid.

[5] Above n. 1 at 17.

[6] Above n. 1 at 42.

[7] Above n. 1 at 44.

[8] Above n. 1 at 48.

[9] Above n. 1 at 51.

[10] Above n. 1 at 52.

[11] Case T-133/09 I Marchi Italiani Srl v Office for Harmonisation in the Internal Market (Trade Marks and Designs) [EU:T:2012:327]

[12] Above n. 1 at 58.

[13] Above n. 1 at 60.

[14] Case R 1299/2007-2 Cristanini v Ghibli SpA  (unreported, 21 October 2008)

[15] Above n. 1 at 57.

[16] Above n. 1 at 65.

[17] Above n. 1 at 69.

[18] Above n. 1 at 70.

[19] Ibid.

[20] Combe International LLC v Dr August Wolff GmbH & Co KG [2022] EWCA Civ 1562

[21] Ibid. at 58-62.

[22] Above n. 1 at 74.

[23] Above n. 1 at 75.

[24] Above n. 1 at 81.

[25] Above n. 1 at 83.

[26] Warner Music UK Ltd v TuneIn Inc [2021] EWCA Civ 441, [2021] Bus LR 1119

[27] Above n. 1 at 85.

[28] Above n. 1 at 85.

[29] Above n. 1 at 86.

[30] Above n. 1 at 89.