Choice words: settlement agreement wording
11 November 2016
A recent Intellectual Property Enterprise Court (IPEC) decision has found that vague wording used in a compromise agreement was sufficient in scope to release the defendants from liability in relation to trade mark infringement and passing off.
The decision issued by the IPEC concerns a UK trade mark owner's claim to trade mark infringement and passing off. Both parties were in the business of manufacturing pre-cast concrete products.
The claimant's company, Oran Pre-Cast Ltd, owned a UK trade mark for ORAN PRE-CAST. Following an acrimonious split from the claimant's company the defendants set up Oranmore Precast Ltd and commenced use of the signs ORANMORE PRE-CAST and ORANMORE, along with the domain name oranmore.co.uk. The defendants were previously the director and general manager of the claimant's company.
The defendants sought to rely on a compromise agreement which had been agreed between the parties in a series of three letters. In particular, the defendant's relied on the wording in the claimant's letter to the defendant which stated "no claim against you, Richard Burke [defendant], in contract, common law and/or statute". The defendants believed this wording released them from any potential claim to infringement by the claimant.
The court considered that the wording of the release, whilst concise, was extremely wide-ranging.
As the release wording did not contain any explanatory definitions to assist in defining its scope, the court found that the context in which the release was given was of particular importance.
The court believed the compromise agreement was aimed at resolving all matters between the parties and provided a "clean slate". The claimant argued that the agreement should be limited to Irish law and not cover future claims. However, the court found there was no context in the background of this case to necessitate implying such limitations into the wording, plus this would in effect defeat the object of the agreement which was to provide the parties with the desired "clean slate".
In its decision the court found that any reasonable person with all background knowledge of the parties at the time would have understood the letter to have meant the release covered all known and foreseeable claims connected with the defendant leaving the claimant's company, and as such would encompass the allegations of trade mark infringement and passing off included in the claim.
As a result, the court found the wording relied on by the defendants operated as a release of liability of one of the defendants, Mr Burke, from the infringement and passing off claims. Further, as the parties were alleged joint tortfeasors it was found that the release automatically extended to the other defendants.
In a case where the signs at issue are highly similar and the parties operate in the same business field, a finding of trade mark infringement and passing off seemed inevitable, especially given evidence of consumer confusion which had been submitted by the claimant. However, whilst the court confirmed that it would have found the defendants liable for trade mark infringement and passing off, the wording in the compromise agreement rendered the claims against the defendants null and void.
It is noteworthy that in this case the claimant appears to have not sought legal assistance at the time of the letters, or when heard before the IPEC, whereas the defendants did. Whilst legal representation increases costs, cases such as these prove how vital it is to seek legal advice before attempting to draw up any form of agreement.
As the release wording did not contain any explanatory definitions to assist in defining its scope, the court found the context in which the release was given was of particular importance.
This case serves as a helpful reminder of the importance of ensuring wording of any agreement is fully considered and well-defined in its scope to avoid any potential future issues.
Case details at a glance
Jurisdiction: England and Wales
Decision level: Intellectual Property Enterprise Court (IPEC)
Parties: Oran Pre-Cast Ltd v Oranmore Precast Ltd and others
Citation:  EWHC 1846 (IPEC)
Date: 21 July 2016
Full decision: http://dycip.com/ewhc1846ipec