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IP Cases & Commentary – Details

1 June 2011

Court of Appeal Issues Decision in Best Buy Co Inc and another v Worldwide Sales Corporation España SL

Readers will recall that last summer we reported the decision from the Chancery Division in England and Wales in Best Buy Co Inc and another v Worldwide Sales Corporation España SL. This case concerned the meaning of 'groundless threats' and 'without prejudice' correspondence.

To recap, the facts were as follows:

The US corporation (and its UK subsidiary), Best Buy, intended to open a series of shops in the UK and elsewhere in Europe under the name BEST BUY.

A Spanish company, Worldwide, held a number of CTM and EU national trade mark rights incorporating the words BEST BUY in conjunction with other graphical elements.

Best Buy applied for a CTM incorporating the words BEST BUY (as below) which was opposed by Worldwide.

Best Buy wrote to Worldwide to try to explore the possibility of arriving at a co-existence agreement. They receive a 'without prejudice' letter in return which included a statement that Worldwide would be entitled to take appropriate legal action to defend their interests in the event that Best Buy should commence use in the European market. Best Buy raised proceedings for unjustified threats under s21 of the UK TMA ’94.

Readers will recall that s21 permits an aggrieved party to commence proceedings for unjustified threat of legal action unless the threat relates to the following acts:

  • the application of the trade mark to goods/packaging
  • importation of goods to which (or the packaging of which) the trade mark has been applied
  • the supply of services under the trade mark

The following issues were to be decided:

Did the letter actually threaten proceedings? If so, was the threat permissible as being within the unactionable category in s21(above)? If an actionable threat had been made, was the letter in any event inadmissible as it was marked 'without prejudice'? Did s21 apply only to threats in respect of infringement of UK registrations, or did it also apply to CTM infringements anywhere in the EU?

The court dismissed the action for unjustified threats, answering the above questions as follows:

S21 concerns threats of infringement proceedings to be raised in the UK only (whether of a UK or CTM registration). However, s21 applies even if proceedings in the UK are not specifically mentioned, provided this would be one of the range of options available.

However, the reasonable recipient of the letter would have understood the threat as relating to the supply of services under the BEST BUY brand – and was therefore excluded as an un-actionable threat.

In any event, the letter fell within the protection of without prejudice correspondence – part of the letter was in response to the offer to open negotiations; the other part sought to underline Worldwide’s rights if agreement could not be reached. The letter could not be chopped up and the whole was entitled to protection as a genuine offer to settle.

However, the Court of Appeal has now reversed this decision, holding that while the judge’s characterisation of the letter as a threat was correct, his conclusion regarding 'without prejudice' was not. The conclusion was that the judge as wrong to hold that the letter was privileged from use in court.

Effectively therefore, the Court of Appeal’s view was that the letter could be chopped up. Although it did contain an offer to negotiate a settlement, it also threatened infringement proceedings. The letter was dual purpose in that it was intended to act as a letter before action, as well as opening the possibility of negotiations. As such, negotiations in the correspondence in issue were not sufficiently advanced to have moved into a 'without prejudice' zone.

he conclusion from this case therefore it that 'without prejudice' correspondence must focus solely on a genuine attempt to settle proceedings amicably.

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