The Battle of Revolax - Fox Group International Ltd v Teleta Pharma Ltd.

Author August Malmström Copyright Expired Source  Wikimedia Commons 
 








Jane Lambert

Intellectual Property Enterprise Court (HH Judge Melissa Clarke) Fox Group International Ltd v Teleta Pharma Ltd [2021] EWHC 1714 (IPEC) (23 June 2021) 

There really was a battle of Revolax between Russia and Sweden in 1808 but that has nothing to do with this article. Revolax is also the name of a hyaluronic acid dermal filler manufactured by the Korean company Across Co., Ltd ("Across") which Fox Group International Ltd. ("Fox") enjoyed the exclusive right to distribute in the UK.

Notwithstanding a clause in Fox's distribution agreement recognizing that "trademarks, trade names, designs, copyright and other property rights included in the product possess are the unique property of [Across]" and making clear that Fox did not have or acquire any rights, title or interest in that property, Fox applied to register REVOLAX as a UK trade mark in classes 3, 5, 10, 35 and 44 under trade mark number UK3283033 on 20 April 2018.

Across distributed Revolax branded hyaluronic acid dermal fillers in other countries through different distributors one of which was the Polish company Alfafarma Sp. z o.o ("Alfa"). Teleta Pharma Ltd ("Teleta") bought Revolax dermal fillers that had been placed on the EU market by Alfa and offered them for sale in the UK.

On 26 Nov 2018 Fox's solicitors sent a letter before claim to Teleta alleging trade mark infringement and passing off and requiring certain undertakings.  Even though Teleta gave those undertakings in the desired form, Fox issued proceedings in the Liverpool Circuit Commercial Court.  Teleta counterclaimed for the invalidation of the trade mark on grounds of bad faith and damages and other relief for groundless threats.

It appears that Fox discontinued its claim in February 2019.  The counterclaim must have been transferred from the Commercial Circuit Court to the Intellectual Property Enterprise Court ("IPEC") because a case management conference took place before Her Honour Judge Melissa Clarke in July 2020.  The learned judge directed the following issues to be tried:

"i) Whether in all the circumstances of the case, not least taking into account Article 13.1 of the DA, the UK Trade Mark was applied for in "bad faith" within the meaning of section 3 (6) of the Trade Marks Act 1994 ("the Act").

ii) Was Fox's solicitors' letter before claim to Teleta of 26 November 2018:
a) an unjustified threat of trade mark infringement proceedings against Teleta under section 21 of the Act;
b) in relation to which Teleta is a person aggrieved?

iii) Whether the alleged threats made in the Letter before Claim were not actionable within the meaning of s21A of the Act because they were made to a person who had done, and/or intended to do, an act mentioned in subsection s21A (2) (b) of the Act in relation to goods and their packaging (namely importing, for disposal, goods to which and to the packaging of which the sign Revolax had been applied), whether jointly or pursuant to a common design to import such goods for disposal, with BR Pharma?"

The proceedings came on for trial before Judge Melissa Clarke on 27 and 28 April 2021.  Her Honour handed down judgment in Fox Group International Ltd v Teleta Pharma Ltd [2021] EWHC 1714 (IPEC) on 23 June 2021.  By para [94] of her judgment, she concluded that:

"Fox applied for the UK Trade Mark in bad faith within the meaning of section 3 (6) of the Act. Accordingly, the UK Trade Mark is and always has been invalid pursuant to section 47 (1) of the Act and the Court will make a declaration accordingly."

In para [95] she said:

"The Letter of Claim contained actionable unjustified threats of trade mark infringement proceedings against Teleta under section 21A of the Act in relation to which Teleta is a person aggrieved. Damages are to be determined at a quantum trial if not agreed."

Judge Melissa Clarke considered first the question:

"i) Whether in all the circumstances of the case, not least taking into account Article 13.1 of the DA, the UK Trade Mark was applied for in "bad faith" within the meaning of section 3 (6) of the Trade Marks Act 1994 ("the Act")."

Readers should be aware that "DA" was the judge's abbreviation for Fox's distribution agreement with Across and that art 13.1 of that agreement contained the following previously mentioned provision:

"Exclusive Distributor recognizes that trademarks, trade names, designs, copyright and other property rights included in the product posses are the unique property of Manufacturer ("ownership"). Exclusive Distributor do not have or acquire the rights, title and interest in this property. But Exclusive Distributor can mark "Exclusive Distributor" consent with Manufacturer".

S.3 (6) provides:

 "A trade mark shall not be registered if or to the extent that the application is made in bad faith".

Teleta's counsel referred the judge to paras [130] to [138] of Mr Justice Arnold's judgment in Red Bull GmbH v Sun Mark Ltd and Another [2012] EWHC 1929 (Ch):

"Bad faith: general principles
[130] A number of general principles concerning bad faith for the purposes of section 3 (6) of the 1994 Act/Article 3 (2) (d) of the Directive/Article 52 (1) (b) of the Regulation are now fairly well established. (For a helpful discussion of many of these points, see N.M. Dawson, "Bad faith in European trade mark law" [2011] IPQ 229.)
[131]  First, the relevant date for assessing whether an application to register a trade mark was made in bad faith is the application date: see Case C-529/07 Chocoladenfabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH [2009] ECR I-4893 at [35].
[132] Secondly, although the relevant date is the application date, later evidence is relevant if it casts light backwards on the position as at the application date: see Hotel Cipriani Srl v Cipriani (Grosvenor Street) Ltd [2008] EWHC 3032 (Ch), [2009] RPC 9 at [167] and cf. Case C-259/02 La Mer Technology Inc v Laboratoires Goemar SA [2004] ECR I-1159 at [31] and Case C-192/03 Alcon Inc v OHIM [2004] ECR I-8993 at [41].
[133] Thirdly, a person is presumed to have acted in good faith unless the contrary is proved. An allegation of bad faith is a serious allegation which must be distinctly proved. The standard of proof is on the balance of probabilities but cogent evidence is required due to the seriousness of the allegation. It is not enough to prove facts which are also consistent with good faith: see BRUTT Trade Marks [2007] RPC 19 at [29], von Rossum v Heinrich Mack Nachf. GmbH & Co KG (Case R 336/207-2, OHIM Second Board of Appeal, 13 November 2007) at [22] and Funke Kunststoffe GmbH v Astral Property Pty Ltd (Case R 1621/2006-4, OHIM Fourth Board of Appeal, 21 December 2009) at [22].
[134[ Fourthly, bad faith includes not only dishonesty, but also "some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular area being examined": see Gromax Plasticulture Ltd v Don & Low Nonwovens Ltd [1999] RPC 367 at 379 and DAAWAT Trade Mark (Case C000659037/1, OHIM Cancellation Division, 28 June 2004) at [8].
[135] Fifthly, section 3(6) of the 1994 Act, Article 3 (2) (d) of the Directive and Article 52 (1) (b) of the Regulation are intended to prevent abuse of the trade mark system: see Melly's Trade Mark Application [2008] RPC 20 at [51] and CHOOSI Trade Mark (Case R 633/2007-2, OHIM Second Board of Appeal, 29 February 2008) at [21]. As the case law makes clear, there are two main classes of abuse. The first concerns abuse vis-à-vis the relevant office, for example where the applicant knowingly supplies untrue or misleading information in support of his application; and the second concerns abuse vis-à-vis third parties: see Cipriani at [185].
[136] Sixthly, in order to determine whether the applicant acted in bad faith, the tribunal must make an overall assessment, taking into account all the factors relevant to the particular case: see Lindt v Hauswirth at [37].
[137] Seventhly, the tribunal must first ascertain what the defendant knew about the matters in question and then decide whether, in the light of that knowledge, the defendant's conduct is dishonest (or otherwise falls short of the standards of acceptable commercial behaviour) judged by ordinary standards of honest people. The applicant's own standards of honesty (or acceptable commercial behaviour) are irrelevant to the enquiry: see AJIT WEEKLY Trade Mark [2006] RPC 25 at [35]-[41], GERSON Trade Mark (Case R 916/2004-1, OHIM First Board of Appeal, 4 June 2009) at [53] and Campbell v Hughes [2011] RPC 21 at [36].
9138] Eighthly, consideration must be given to the applicant's intention. As the CJEU stated in Lindt v Hauswirth:

'41. … in order to determine whether there was bad faith, consideration must also be given to the applicant's intention at the time when he files the application for registration.
42. It must be observed in that regard that, as the Advocate General states in point 58 of her Opinion, the applicant's intention at the relevant time is a subjective factor which must be determined by reference to the objective circumstances of the particular case.
43. Accordingly, the intention to prevent a third party from marketing a product may, in certain circumstances, be an element of bad faith on the part of the applicant.
44. That is in particular the case when it becomes apparent, subsequently, that the applicant applied for registration of a sign as a Community trade mark without intending to use it, his sole objective being to prevent a third party from entering the market.
45. In such a case, the mark does not fulfil its essential function, namely that of ensuring that the consumer or end-user can identify the origin of the product or service concerned by allowing him to distinguish that product or service from those of different origin, without any confusion (see, inter alia, Joined Cases C-456/01 P and C-457/01 P Henkel v OHIM [2004] ECR I-5089, paragraph 48).'"

The judge accepted Fox's submission that:

" ...... the effect of the decisions of the CJEU in C-104/18 P Koton Mağazacilik Tekstil Sanayi ve Ticaret v European Union Intellectual Property Office, EU: C:2019:724, CJE and Case C-371/18. Sky plc v SkyKick UK Ltd EU: C:2020:45 (in particular Koton at [45] and Skykick at [74]) is that dealings which are not dishonest in the trade mark context cannot now be characterised as dealings in bad faith because they "…fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular area being examined", which is the fourth principle identified by Arnold J in Red Bull at [134], relying on Gromax Plasticulture Ltd v Don & Low Nonwovens Ltd [1999] RPC 367 at 379 and DAAWAT Trade Mark (Case C000659037/1, OHIM Cancellation Division, 28 June 2004) at [8]."

She noted that the Court of Justice of the European Union had said in Koton that the meaning and scope of 'bad faith' must be determined by considering its usual meaning in everyday language, whilst also taking into account the context in which it occurs and the objectives pursued by that regulation. She quoted paras [45] tp [47] of Koton:

"[45] While, in accordance with its usual meaning in everyday language, the concept of 'bad faith' presupposes the presence of a dishonest state of mind or intention, that concept must moreover be understood in the context of trade mark law, which is that of the course of trade. In that regard, Regulations No 40/94, No 207/2009 and No 2017/1001, which were adopted successively, have the same objective, namely the establishment and functioning of the internal market (see as regards Regulation No 207/2009, judgment of 27 June 2013, Malaysia Dairy Industries, C-320/12, EU: C:2013:435, paragraph 35). The rules on the EU trade mark are aimed, in particular, at contributing to the system of undistorted competition in the Union, in which each undertaking must, in order to attract and retain customers by the quality of its goods or services, be able to have registered as trade marks signs which enable the consumer, without any possibility of confusion, to distinguish those goods or services from others which have a different origin (see, to that effect, judgments of 14 September 2010, Lego Juris v OHIM, C-48/09 P, EU: C:2010:516, paragraph 38, and 11 April 2019, ÖKO-Test Verlag, C-690/17, EU: C:2019:317, paragraph 40).
[46] Consequently, the absolute ground for invalidity referred to in Article 52(1)(b) of Regulation No 207/2009 applies where it is apparent from relevant and consistent indicia that the proprietor of an EU trade mark has filed the application for registration of that mark not with the aim of engaging fairly in competition but with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, or with the intention of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark, in particular the essential function of indicating origin recalled in the previous paragraph of this judgment.
[47] The intention of an applicant for a trade mark is a subjective factor which must, however, be determined objectively by the competent administrative or judicial authorities. Consequently, any claim of bad faith must be the subject of an overall assessment, taking into account all the factual circumstances relevant to the particular case... It is only in that manner that a claim of bad faith can be assessed objectively." (The judge's emphases).

Judge Melissa Clarke said at para [45] of her judgment:

"In Koton, the single question of law referred to the CJEU was whether the General Court was wrong to find that the existence of bad faith presupposes that the contested mark is registered for goods or services identical with, or similar to, those in respect of which an earlier mark is registered. The CJEU held that it was, and that this was an error of law which vitiated the General Court's reasoning (at [57] and [58])." 

She added that the judgment under appeal was ordered to be set aside.

In Sky v Skykick  Mr Justice Arnold has asked the Court of Justice "whether it can constitute bad faith within the meaning of art. 51 (1) (b) of Regulation 40/94 and art. 3 (2) (d) of First Directive 89/104 simply to apply to register a trade mark without any intention to use it in relation to specified goods or services." It referred to Koton and added:

"Such bad faith may, however, be established only if there is objective, relevant and consistent indicia tending to show that, when the application for a trade mark was filed, the trade mark applicant had the intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark."(judge's emphasis).

The judge directed herself at [48] to apply those principles in addition to those identified by Mr Justice Arnold which are not affected by Koton and Skykick.   She summarized those principles as follows:

"i) the relevant date for assessing whether an application to register a trade mark was made in bad faith is the application date;
ii) although the relevant date is the application date, later evidence is relevant if it casts light backwards on the position as at the application date;
iii) a person is presumed to have acted in good faith unless the contrary is proved. An allegation of bad faith is a serious allegation which must be distinctly proved. The standard of proof is on the balance of probabilities, but cogent evidence is required due to the seriousness of the allegation. It is not enough to prove facts which are also consistent with good faith;
iv) whether conduct by a person is dishonest is judged by ordinary standards of honest people. That person's own standards of honesty are irrelevant to the enquiry."

Fox argued at trial that Across had consented to its registration of REVOLAX as a British trade mark.  There was no evidence of express consent and precious little of implied consent.  Her Honour concluded at [84]:

"i) Fox knew that Across supplied Revolax branded product into the territories of the EEA.
ii) Fox knew it was not the owner of the rights in REVOLAX. It had received pertinent and clear legal advice from Ms McCormick of TM Direct about trade mark rights as between a manufacturer and a distributor which Ms Quinn, a director of Fox, had read and understood.
iii) Fox had acknowledged this by signing the DA which, in Article 13.1 reserved all rights in trade marks, including the REVOLAX mark, to Across.
iv) Although Fox had the opportunity to comment on, negotiate and obtain specific advice in relation to Article 13.1 before signature of the DA, it did not do so.
v) Nor did it copy the DA or Article 13.1 to TM Direct when it instructed it to make the UK Trade Mark application on the very same day that it signed the DA.
vi) I have found that Fox did not have the consent of Across to make the UK Trade Mark application and it was not reasonable for Fox to believe that it had such consent.
vii) It applied for the UK Trade Mark to prevent any other UK company, including legitimate traders such as Teleta, from advertising for sale or selling Revolax in the UK, without consideration of the free movement of goods across the EU."

Those conclusions led her to find that judged by the ordinary standards of honest people, Fox's intention in applying for the mark was dishonest." In her judgment, those actions were not consistent with good faith. By obtaining the UK Trade Mark, Fox undermined and intended to undermine the purposes of the system for registration of trade marks in the UK: (i) by taking for itself rights which it knew belonged to Across; and (ii) by preventing UK consumers from identifying the true origin of Revolax products.   She was also satisfied that Fox had sought to distort competition by intending to prevent even legitimate sales of Revolax in the UK by third-party sellers seeking to benefit from the free movement of goods across the EU.

The judge took the second and third issues together:   

"ii) Was Fox's solicitors' letter before claim to Teleta of 26 November 2018:
a) an unjustified threat of trade mark infringement proceedings against Teleta under section 21 of the Act;
b) in relation to which Teleta is a person aggrieved?

iii) Whether the alleged threats made in the Letter before Claim were not actionable within the meaning of s21A of the Act because they were made to a person who had done, and/or intended to do, an act mentioned in subsection s21A (2) (b) of the Act in relation to goods and their packaging (namely importing, for disposal, goods to which and to the packaging of which the sign Revolax had been applied), whether jointly or pursuant to a common design to import such goods for disposal, with BR Pharma?"

S.21A of the Act provides:

"(1) Subject to subsections (2) to (6), a threat of infringement proceedings made by any person is actionable by any person aggrieved by the threat.
(2) A threat of infringement proceedings is not actionable if the infringement is alleged to consist of -
     a) applying, or causing another person to apply, a sign to goods or their packaging,
     b) importing, for disposal, goods to which, or to the packaging of which, a sign has been applied, or
     c) supplying services under a sign.
(3) A threat of infringement proceedings is not actionable if the infringement is alleged to consist of an act which, if done, would constitute an infringement of a kind mentioned in subsection 2(a), (b) or (c).
(4) A threat of infringement proceedings is not actionable if the threat –
...................
      d) is made to a person who has done, or intends to do, an act mentioned in subsection 2(a) or (b) in relation to goods
      or their packaging, and
       e) is a threat of proceedings for an infringement alleged to consist of doing anything else in relation to those goods 
      or their packaging."
 
Fox relied on the defence provided by s.21A (4) of the Act. Judge Melissa Clarke held at [61] that a person who has or intends to import goods for disposal for section 21A purposes is limited to an actual importer, and who that may be is a matter of fact to be determined in the circumstances of the case.

She noted at [88] that Fox did not dispute that its letter before claim of 26 Nov 2018 contained unjustified threats of trade mark infringement proceedings, nor that in relation to those threats Teleta was a person aggrieved.  The only issue in dispute was whether the threats were not actionable because Teleta was an importer of the Revolax products.

There was documentary evidence that the company that had imported Revolax into the UK was Teleta's sister company BR Pharma International Limited ("BR Pharma") and that title passed to Teleta in the UK. The learned judge found at para [93] that BR Pharma was the importer and Teleta was not.  Accordingly, Fox's defence to the counterclaim failed.

In the first paragraph of her judgment, Judge Melissa Clarke observed:

"This case is a cautionary tale to potential claimants who are considering trade mark infringement proceedings against a potential defendant they suspect of trading in infringing goods. The moral of this particular story is, like that of many cautionary tales, simple and seemingly obvious. A potential claimant should, before issuing a letter before claim or a claim alleging trade mark infringement: (i) check that the suspect goods are, in fact, infringing and not legitimate branded goods; and (ii) check it had the legitimate right to register the trade mark it alleges has been infringed. Had the claimant in this case taken those steps, it would not have had to discontinue its claim against the defendant for trade mark infringement with the costs consequences that follow. Nor would it find itself defending the defendant's counterclaim for trade mark revocation on the grounds of bad faith, and for damages for groundless threats pursuant to section 21A of the Trade Marks Act 1994, as it now does before me."

Anyone wishing to discuss this article, trade marks or threats actions generally may call me on 020 7404 5252 during normal office hours or send me a message through my contact form.

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