IP Cases & Articles

Holland & Barrett v General Nutrition: TM Licences

It is common for a brand owner to own a main brand and a number of sub-brands which incorporate the main brand, with corresponding trade mark registrations (sometimes referred to as ‘main’ and ‘auxiliary’ marks respectively).

When licensing the portfolio an issue with which both the licensor and licensee need to be alive is the maintenance of those registrations. Of particular concern for the licensor is to prevent the registrations from being revoked for non-use. For this reason, it is common to have provisions within the licence to address such non-use.

What happens, however, where the main marks are used but the auxiliary marks are not and, therefore, are liable to be revoked? This is the situation which arose in Holland and Barrett International Ltd v General Nutrition Investment Co.

Here, General Nutrition Investment Co was the owner of seven marks, three European Union Trade Marks and four United Kingdom Trade Marks. One of the European Union Trade Marks was the main mark, GNC, with the remainder being auxiliary marks (for example a device mark with the words GNC HERBAL PLUS).

General Nutrition Investment Co granted Holland & Barrett a licence for the marks.

Clause 2.1 of the licence granted "... the exclusive right to Use the Trade Marks during the term of this Agreement (as provided for under clause 5 below): (a) within the Territory…." The Territory was the United Kingdom and the term "exclusive" was defined as meaning that “... only the Licensee (including Sublicensees) have the right to use the Trade Marks in the Territory […] as contemplated in this Agreement to the exclusion of all other persons including the Licensor".

Clause 5.6 of the licence addressed the situation regarding non-use as follows: "If the Licensee ceases to Use the Trade Marks or any of them in respect of the Products for a continuous period of 5 years or more the Licensor shall be entitled to terminate this Licence in respect of such Trade Mark or Trade Marks."

Holland and Barrett did not use five of the auxiliary marks for a period of five years. As a result, General Nutrition Investment Co purported to terminate the licence for the five unused trade marks. It contended that once the licence had been terminated for a given trade mark (for example, the GNC HERBAL PLUS mark), it was entitled to use that trade mark in the United Kingdom and Holland and Barrett had no legal right to prevent that activity.

Holland and Barrett argued that termination of the licence in relation to an unused mark did not give General Nutrition Investment Co a right to do acts which breached the exclusivity of the licence of the main mark, GNC. That would prevent General Nutrition Investment Co from using, for example, the GNC HERBAL PLUS mark.

At first instance, Mr Justice Warren ruled in favour of General Nutrition Investment Co. The decision was appealed, being heard by a panel of Lady Justice Arden, Lord Justice Kitchin and Mr Justice Birss. In a unanimous decision, the Court of Appeal overturned the decision at first instance.

The Court reasoned that, “... although clause 5.6 could be interpreted as including an implied term contemplating that the licensor may itself use unused marks after the termination is triggered, such an implied term has to yield to the fundamental and express exclusivity term of the licence itself. Such a term should not give the licensor the right to act contrary to the exclusivity of the licence which would remain in place. Since in this case the exclusive licence remains in full force and effect in relation to the GNC word mark, on the facts of this case the licensor cannot use any of the five unused marks on the Products in the United Kingdom because that use would inevitably be confusingly similar to the GNC word mark.”

This is a salutary lesson for those licensors licensing trade mark portfolios. If there is to be termination of the licence for some of the auxiliary marks, there needs to be a corresponding termination of the exclusivity of the licence for the main mark.

[2018] EWCA Civ 1586 - full decision

Holland And Barrett International Ltd & Anor v General Nutrition Investment Company [2018] EWCA Civ 1586 (04 July 2018) - decision in full at Bailii.

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