Trade Marks - Cormeton Fire Protection Ltd v Cormeton Electronics Ltd.

 

Jane Lambert

Intellectual Property Enterprise Court (Mr David Stone) Cormeton Fire Protection Ltd v Cormeton Electronics Ltd and another [2021] EWHC 11 (IPEC) (18 Jan 2021)

This was a dispute between parties that had once been closely associated but had subsequently fallen out over rights to use branding that they had previously shared.  The claimant, Cormeton Fire Protection Limited, had collaborated with the second defendant, John Aitchison, to set up the first defendant, Cormeton Electronics Limited, to develop an electronic fire alarm business at the claimant's premises in 1989. The shares in the new company were held by Michael Warburton, a director and secretary of the claimant company, and Mr Aitcheson. Mr Warburton held 60% and Mr Aitcheson 40%. In 2003 Mr Warburton sold his shares and the company found new premises. Cormeton Fire Protection and Cormeton Electronics did different kinds of work but they continued to refer enquiries to each other until 2015.   In 2014 Mr Warburton's son succeeded his father as a director of the claimant company.  Cormeton Electronics dropped the word "Electronics" from the side of its vans. The claimant registered the word CORMETON as a trade mark for a range of goods and services in classes 6, 9, 37, 40, 41, 42 and 45 under trade mark number UK3164188 with effect from 12 May 2016 and started these proceedings in 2019.

The Proceedings

The claimant claimed that the defendants had infringed the trade mark and passed off the first defendant's business as and for that of the claimant. They also complained of the defendant's use of the logo appearing above on the ground that it was a copy of a copyright work that had been created by the elder Mr Warburton. The defendants denied trade mark and copyright infringement and passing off on several grounds including an express or implied licence when Mr Warburton sold his shares. They also counterclaimed for the invalidation and revocation of the trade mark.  Some 22 issues were agreed by the parties in a minute of order that was made by consent without a case management conference hearing.  These are listed at para [11] of the judgment of Mr David Stone who tried the action and counterclaim on 19 and 20 Nov 2020 as a deputy judge of the High Court. Mr Stone delivered his judgment in Cormeton Fire Protection Ltd v Cormeton Electronics Ltd and another [2021] EWHC 11 on 18 Jan 2021.

Copyright

The copyright claim collapsed when Mr Warburton senior admitted in cross-examination that he had not created the logo at the top of the page and that it was likely to have been made by Cormeton Electronics. The claimant contended that it was still entitled to claim that copyright in an earlier work that Mr Warburton may have created had been infringed but it did not seek permission to amend its particulars of claim until the very end of the trial. As the deputy judge had invited the claimant to apply for am amendment at an earlier stage of the proceedings the judge refused to grant permission at that point.  As the claimant could not claim title to the copyright in the work that was alleged to have been infringed the learned judge dismissed that part of the claim.

Whether there was an Agreement in 2003 on the Use of the CORMETON Brand

The defendants had pleaded that the claimant and the first defendant had traded in partnership but that defence was abandoned in the course of the trial.  Instead, they alleged an agreement whereby the first defendant would be allowed to continue to use the CORMETON brand when Mr Warburton senior sold his shares in Cormeton Electronics. At first, they contended that there had been a written agreement but neither a complete document nor any trace of a draft could be found. Mr Stone reasoned that Mr Warbuton and Mr Aitchison had been good friends and probably saw no point in instructing solicitors to draw up a formal written licence agreement.  At paras [67] and [68] the learned deputy judge held that there had been an oral agreement for Cormeton Electronics to continue to use the trading style that it had used before Mr Warburton sold his shares and the company moved to new premises. He concluded at [72] that "the oral agreement between the Claimant and the First Defendant in 2003 included (relevantly) the following terms:

i) The First Defendant could continue to trade under CORMETON ELECTRONICS and CORMETON ELECTRONICS LIMITED;
ii) The First Defendant could continue to use the Domain Name; and
iii) The First Defendant would not trade under CORMETON, CORMETON ELECTRONICS or CORMETON ELECTRONICS LIMITED in relation to mechanical fire protection goods and services – rather it would only trade in the supply and sale of electrical safety equipment."

The defendants urged the deputy judge to find that the agreement also included a term that the claimant would not trade under a name including CORMETON for the supply and sale of electrical safety equipment.  He refused to make such a finding on the ground that it had not been sought in the counterclaim and there was no evidence that such a term had ever been agreed;

Invalidation 

S.47 (1) of the Trade Marks Act 1994 enables the registration of a trade mark to be declared invalid on the ground that the trade mark was registered in breach of s. 3 or any of the provisions referred to in that section (absolute grounds for refusal of registration). The defendants relied on s.3 (3) (b) which provides that:

"A trade mark shall not be registered if it is-
…
(b) of such a nature as to deceive the public (for instance as to the nature, quality or geographical origin of the goods or services)."

The defendants submitted that the registration was misleading in that CORMETON could be used by both the claimant and the first defendant and not just by the claimant.

Mr Stone rejected that submission as wrong in law as well as wrong on the facts,  S.3 was concerned with absolute grounds of refusal and not with relative ones.   The ground relied upon was not eiusdem generis the other grounds in s.3.  It was inconsistent with Case C-259/04 Elizabeth Florence Emanuel v Continental Shelf 128 Ltd [2006] ETMR 56, Melly's Trade Mark Application [2008] ETMR 41, Sworders Trade Mark BL O-212-06 and Case C-689/15 WF Gözze Frottierweberei v Verein Bremer Baumwollbörse [2017] Bus LR 1795. The defendants' contention would have driven a coach and horses through the relative grounds provisions of the Act. Also, as the deputy judge had found that the claimant had licensed the first defendant, the defendant's argument that the registration was invalid was a non-starter.

Revocation

The defendants applied for revocation under s.46 (1) (d) on the ground that the mark had become deceptive in that it was associated with two different businesses.  The deputy judge rejected that argument as inconsistent with the Court of Justice's decision in Emanuel.   The defendants had relied on the House of Lords' decision in Scandecor Development AB v Scandecor Marketing AB [1999] FSR 26 and [2002] FSR 7 but Scandecor did not assist the defendants because the case was settled before it could be determined. In any event, the point of law at issue was decided a few years later in Emanuel.

Trade Mark Infringement

The defendants admitted that they had used the CORM ETON and CE signs for some goods and services for which the mark had been registered and others that were similar to specified goods and services. The learned deputy judge found a link in relation to all the first defendant's goods and/or services and that the first defendant's use of those signs had taken unfair advantage of and/or been detrimental to the distinctiveness and/or repute of the claimant's mark.   It followed that the defendants had infringed the mark under all 3 subsections of s.10 subject to the licence mentioned above and possible defences.

Honest Concurrent User

As Mr Stone had found that most of the defendants' uses of the CORMETON signs had been licensed it was conceded that there could have been no honest concurrent user. After considering Judge Hacon's observation in Bentley 1962 v Bentley Motors [2019] EWHC 2925 (Ch) that where two separate entities have co-existed for a long period, honestly using the same or closely similar names, the inevitable confusion that arises may have to be tolerated, the deputy judge concluded at [118] that there had been only a handful of occasions between 2003 and 2016 of use outside the terms of the licence, it had not been for a long period and the first defendant's use for fire protection and other services had not been honest. He, therefore, rejected the defence of honest concurrent user.

Passing off

The claimant alleged passing off by reason of the use of the above logo and the CORMETON mark. Mr Stone rejected the claim for use of the logo on the ground that the first defendant had created the logo and had probably acquired goodwill in it.  However, he upheld the claim for passing off in relation to the mark subject to the licence and defences on the grounds that the defendants had admitted that the claimant had acquired goodwill before 2003.   The facts and matters that had given rise to an action for trade mark infringement applied equally to passing off. The defence of honest concurrent user failed for the same reason as it had failed in the trade mark claim.

Estoppel/Acquiescence

The defendants argued that the claimant was estopped from objecting to the first defendant's use of the CORMETON and CE signs because it had acquiesced in or not objected to such use.  The deputy judge expressed sympathy for the argument but held that he was bound by paras [56] to [61] and [84] to [96] of Mr Justice Males's judgment in Marussia Communications Ireland Ltd v Manor Grand Prix Racing [2016] EWHC 809 (Ch) and paras [90] to [92] of Mr Recorder Douglas Campbell QC's in Coreix Limited v Coretx Holdings Plc and others [2017] EWHC 1695 (IPEC) that estoppel or acquiescence cannot operate as a defence to allegations of registered trade mark infringement.  He acknowledged that English courts are no longer obliged to follow judgments of the Court of Justice but regarded that issue as a matter for the Court of Appeal and not for him.

Summary

Mr Stone summarized his findings at [134]:

"i) The Work [ie the above logo] is not an original artistic work created by Michael Senior in which copyright subsists. The Claimant's copyright case therefore fails;
ii) In 2003, the Claimant and the First Defendant agreed that:
a) The First Defendant could continue to trade under CORMETON ELECTRONICS and CORMETON ELECTRONICS LIMITED;
b) The First Defendant could continue to use the Domain Name; and
c) The First Defendant would not trade under CORMETON, CORMETON ELECTRONICS or CORMETON ELECTRONICS LIMITED in relation to mechanical fire safety goods and services – rather it would only trade in the supply and sale of electrical safety equipment;
iii) Those uses in (ii)(a) and (ii)(b) above are therefore under licence, and do not therefore infringe sections 10(1), 10(2) or 10(3) of the TMA nor constitute passing off;
iv) The Mark is not invalid under section 3(3)(b) of the TMA nor liable for revocation under section 46(1)(d) of the TMA;
v) The First Defendant's uses of CORMETON on its own in relation to the First Defendant's Goods/Services are outside the terms of the 2003 licence and infringe the Mark under sections 10(1), 10(2) and 10(3) of the TMA and constitute passing off;
vi) The First Defendant's uses of the Signs and the CE Sign in relation to mechanical fire protection goods and services are outside the terms of the 2003 licence and infringe the Mark under sections 10(1), 10(2) and 10(3) of the TMA and constitute passing off; and
vii) Trade mark infringement and passing off are not avoided on the basis of honest concurrent use, estoppel or acquiescence."

Comment

This is likely to become a very useful authority because the issues that arose in this case arise frequently in practice but there is very little authority on how they should be resolved  Those issues could have been avoided had Mr Warburton and Mr Aitchison drawn up a comprehensive separation agreement on the sale of Mr Warburton's shares which would have included a clause on the use of the CORMETON brand.  As it appears from para [31] of the judgment Mr Warburton was paid £240,000 for the shares, it would have been well worth the expense.  Anyone wishing to discuss this article may call me on 020 7404 5252 during office hours or send me a message through my contact form.