IP Cases & Commentary – Details
7 January 2013
To Stay or not to Stay: That is the Question - Starbucks (HK) v Sky, EMI v Sky
On 13 September 2012, the UK Court of Appeal upheld a stay of infringement proceedings pending the outcome of an invalidity application at OHIM in respect of alleged trade mark infringement. What makes the case interesting is that, whilst upholding that stay, the Court of Appeal simultaneously upheld a decision not to stay infringement proceedings in respect of the same (allegedly) infringing service, NOW TV, where invalidity proceedings had also been commenced at OHIM.
Some legal background
Under Article 104(1) of the Community Trade Mark (CTM) Regulations, a Court hearing a CTM infringement action shall, "unless there are special grounds for continuing the hearing", stay the proceedings where the validity of the CTM is already in issue before another court or where an application for revocation or declaration of invalidity has already been filed at OHIM. In short, there is a presumption of staying the infringement proceedings unless there are 'special grounds'.
EMI v Sky (first instance)
Avid readers of this newsletter will recall (issue 64 "Now That's What I Call a Balance of Convenience") Sky's success in seeking a stay of infringement proceedings pending conclusion of an invalidity action at OHIM. EMI, owner of a NOW CTM and promoter of albums sold under the NOW THAT'S WHAT I CALL MUSIC brand, sued Sky for trade mark infringement and passing off in relation of Sky's proposed use of the 'NOW TV' name for an imminent television service. Sky sought a stay of the proceedings pending the outcome of an application to OHIM to have the NOW mark removed from the register on the basis of alleged non-use. The stay was granted.
Starbucks (HK) v Sky (first instance)
The EMI case was joined, at the Court of Appeal, with another: Starbucks (HK) v Sky. At first instance, Mr Justice Arnold had reached an entirely different conclusion based on a separate set of facts. Starbucks (HK) had commenced its own action against Sky alleging trade mark infringement (relying on its CTM for a slightly stylised NOW) and passing off in respect of the same proposed launch, on the basis that NOW TV would infringe its CTM. The services of the CTM were essentially identical to Sky's proposed use.
Starbucks had claimed that it had goodwill and reputation in the UK through use of the names NOW TV and NOW, such that Sky's use of NOW TV would amount to passing off.
Starbucks (HK)'s parent company, PCCW, had significant commercial activity in Hong Kong, and accordingly substantial goodwill and reputation had been acquired within the Chinese population in the UK in the NOW TV name. Furthermore, between 2000 and 2002, PCCW had offered an internet television service in English to consumers across the globe through the domain name www.now.com, and although the use of the service had ceased, the goodwill had not disappeared. Moreover, another company in the PCCW group had been using the name NOW and the NOW mark under licence since 2004 in relation to the provision of broadband services, and those services were similar enough in nature for any accumulated goodwill to be relevant to a passing off action.
Before it was sued (but after receiving a warning letter), Sky had applied to OHIM to invalidate Starbucks' NOW mark as being devoid of distinctive character and/or indicative in relation to the services for which it was registered.
Even if the CTM were found to be valid, Sky argued that the scope of protection of that mark would be so narrow that it would not be infringed by the signs which Sky planned to use, because there was no likelihood of confusion with NOW TV. Sky also denied passing off.
Mr Justice Arnold ordered an expedited trial, refusing Sky's application for a stay pending the outcome of the OHIM invalidity proceedings. In his view:
- Starbucks had established special grounds, as required under Article 104(1) of the Community Trademark Regulation, to support its submission that a stay of infringement proceedings should not be granted, because of the urgency of the matter;
- if the stay were granted, it might take years to resolve the invalidity proceedings before OHIM; and
- it would not be right to stay the passing off claim - which was not affected by Article 104(1).
- It may well be that he had also felt that the UK Court was well suited to determine the issues speedily, which was in both parties' interests.
Court of Appeal Decision
The Court of Appeal dismissed both appeals by EMI and Sky respectively.
When are there 'special grounds' within the meaning of Article 104(1)?
The Court emphasised that there was very little authority on the meaning of 'special grounds' in Article 104(1) and its conclusions were as follows:
- The policy objective of Article 104(1) was to avoid inconsistent decisions. This policy was particularly important in the context of a CTM given its 'unitary character'.
- The presumption in favour of a stay under Article 104(1) is a strong one. This was because of the importance of the policy of avoiding inconsistent decisions in the particular context of CTMs (as mentioned above).
Consequently, it will be a 'rare and exceptional case' where there were special grounds within Article 104(1).
'Special grounds' relates to factual circumstances specific to the given case. It was irrelevant whether there were systemic differences in terms of rules of evidence, procedure and powers of case management applicable to proceedings in the CTM courts of different member states and at OHIM. For those reasons, it was irrelevant that an application to OHIM would take a long time.
Sky's argument, that 'special grounds' must relate only or primarily to circumstances which would not give rise to irreconcilable decisions, was rejected. The CTM Regulation itself expressly contemplated that there could be circumstances in which there were inconsistent decisions concerning the same CTM. The issue to be addressed was whether, on the making of a counterclaim for invalidity or revocation, the infringement claim should be permitted to proceed notwithstanding the risk of inconsistent decisions.
The general need of a business to know 'where it stood' is not sufficient for 'special grounds'. The urgency must be such as to 'surmount the heavy presumption in favour of a stay', bearing in mind that protective and provisional measures might be available to protect the claimant in the event of any delay.
It was not relevant that the application to OHIM had been made on a purely reactive basis to a threat of infringement proceedings.
How does this apply in Starbucks (HK) v Sky?
The Court of Appeal did not agree that the reactive nature of Sky's applications to OHIM was of any relevance to the determination of the stay application. Similarly, the fact that there was a passing off claim was irrelevant: it was commonplace that infringement claims were accompanied by passing off claims.
Nonetheless, the first instance judge, Mr Justice Arnold, was entitled to take the view that there were exceptional circumstances of urgency. Sky had had plans to launch its service imminently (it did in fact do so on 17 July 2012), and it was in its interests to be able to do so. PCCW was also looking at launching its own NOW television service later in the year in the UK. It was not a case in which it would have been appropriate to delay Sky's launch by interim relief. As such, the Court considered the circumstances 'unusual' and Sky's appeal against the refusal to stay was dismissed.
How does this apply in EMI v Sky?
The Court of Appeal indicated that the first instance judge, John Baldwin QC, was both entitled and right to take a different view of the urgency from that taken by Arnold J. He had found that EMI had shown no urgency in launching a NOW-branded music TV channel and had no definite plans. Further, EMI had reached an agreement with Starbucks (HK) for the latter to be free to use the NOW mark in relation to a TV service in the near future. In contrast to the position in the Starbucks proceedings, the first instance Judge was entitled to conclude that EMI could be adequately compensated in damages for any loss. As such, EMI's appeal against the decision to stay was dismissed.
What does it all mean?
The Court of Appeal set out in this judgment some helpful guidance on the approach that a CTM court should take on an application for a stay of infringement proceedings under Article 104(1) of the CTM Regulation. It has made it clear that factors such as the existence of passing off claims, the length of time it might take for invalidity proceedings to come before OHIM, or the reactive nature of an application to OHIM, will not constitute special grounds.
The divergent outcomes highlight the fact-specific nature of applications under Article 104(1). The key difference between the two actions was the view taken by the respective judges as to the urgency, and whether an interim injunction would have been appropriate.
What happened next?
The Starbucks speedy trial duly took place in October, with judgment on 2 November 2012. Mr Justice Arnold (again) held that the CTM of Starbucks (HK) was invalid as it was both indicative of a characteristic of a TV service (ie, its immediacy) and devoid of distinctive character (as 'now' was regularly used by others in the broadcasting industry). He was critical of the CTM having been granted at all by OHIM with a mere "figurative fig-leaf of distinctiveness" (ie, the 6 lines emanating from the 'O', as shown below):
He also held that, even if the CTM had been valid, it was not infringed as the scope of protection was very narrow and the use of NOW TV was not an infringement. On passing off, he held (on the facts) that there was insufficient UK goodwill to found a passing off action.