A grave warning rang out of the Intellectual Property Enterprise Court on 23 June 2021 - do not bring trade mark enforcement proceedings without doing your homework first.
Fox Group International Ltd (“Fox”), is the exclusive UK distributor of REVOLAX, a hyaluronic acid dermal filler product manufactured by Korean company Across Co., Ltd (“Across”). Fox was the claimant in this action.
Teleta Pharma Limited (“Teleta”) is a wholesaler supplying goods including a range of cosmetic products. Teleta was the defendant in this action.
In December 2018, Fox, disgruntled by Teleta’s sale of REVOLAX in the UK, issued a claim against Teleta for trade mark infringement and passing off.
However, Fox’s claim backfired, it decided to withdraw its claim when it received Teleta’s defence, but this did not stop both of Teleta’s counterclaims being successful. The Court held that Fox’s UK trade mark REVOLAX was invalid having been applied for in bad faith and that Fox’s letter of claim amounted to an actionable unjustified threat.
BACKGROUND
Fox’s Claim
Prior to issue, on 26 November 2018, Fox’s representatives sent Teleta a letter of claim which alleged Teleta was passing off its goods as those of Fox, who (the letter insisted) owned goodwill in the REVOLAX mark, and that Teleta was infringing the REVOLAX trade mark pursuant to section 10(1), 10(2) and 10(3) of the UK Trade Marks Act 1994 (the “Act”). Teleta, without any admission of liability, gave interim undertakings whilst it considered the position.
Despite Teleta’s measured response, Fox proceeded to issue a claim for trade mark infringement and passing off just four days later - the claim was issued in the wrong Court.
In January 2019, as part of its defence to Fox’s claim, Teleta provided Fox with evidence that the products it was selling in the UK were genuine REVOLAX products placed on the market in the EU (Poland) with the consent of Across.
Teleta was therefore within its rights to sell these products in the UK, and, in February 2019, Fox discontinued its claim, and shouldered the cost consequences that followed. As such, Her Honour Judge Melissa Clarke’s ruling was limited to Teleta’s counterclaims.
Teleta’s Counterclaims
Teleta counterclaimed that Fox had registered its UK REVOLAX trade mark despite its knowledge that it did not have legitimate rights to do so. The mark was therefore invalid as having been applied for in bad faith.
Further, Teleta argued that Fox’s letter before action was an actionable unjustified threat pursuant to section 21 of the Act. Fox sought to rely on s21A(4) of the Act and persuade the Court that, although it had not asserted it in the letter before action, Teleta was the importer of the goods in question and, resultingly, its threats were not actionable.
THE FACTS AND ARGUMENTS
Bad faith
The facts: Prior to the proceedings, Fox had raised concerns about the importation of REVOLAX into the UK from other territories with its manufacturer, Across. Fox attempted to convince Across that it required a UK trade mark to assert against unlawful REVOLAX goods entering the UK; but it was held that Fox never received consent from Across to register such a mark. Subsequent to these discussions, Across and Fox signed a distributorship agreement which expressly stated that all relevant intellectual property, including trade marks, belonged to Across.
Nevertheless, once the distributorship agreement had been executed by both parties, Fox filed REVOLAX as a UK trade mark in its sole name. Teleta asserted that the purpose of this unauthorised registration, was to:
“seek to prevent the operation of the free market and freedom of trade throughout the EEA and/or to curtail and/or harm the operation of trade by Across which has appointed distributors and/or agents throughout the EEA and elsewhere”.
To support its contention, Teleta highlighted that Fox also filed an EU mark just two days after issuing proceedings.
The judgment: To inform its consideration of bad faith, the Court considered the principles identified by Arnold J in Red Bull and further in Koton, and Skykick applied:
“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; and
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.”
The Court reviewed the evidence on communications with Across, and advice Fox had received from a trade mark attorney and found that Fox, fixed with the knowledge of the distributorship agreement, applied for the mark with dishonest intentions by the ordinary standards of honest people.
The Court decided the application was inconsistent with good faith in light of Fox’s intention to take Across’ rights for itself and to prevent UK consumers from appreciating the true origin of REVOLAX products.
As a result, the Court held, Fox sought to distort competition and restrict the free movement of goods within the EEA.
Threats
The facts: At trial, Fox did not deny its letter of claim contained a threat, nor that Teleta was aggrieved in accordance with the Act. The issue in dispute was whether Teleta was an importer, and that therefore whether the threat was not actionable.
Fox submitted, in reliance on s21A(2)(b) and s21A(4) of the Act, that the definition of an importer should extend to an individual entering into a common design with the importer to import, which is akin to joint tortfeasorship.
The judgment: Based on the language incorporated into statute, the Court rejected the submission that Teleta was the real ‘cause’ of the importation in its entirety and found that the importer would be limited to the actual importer.
IMPLICATIONS
The implications of this case are clear. If you are contemplating a case for trade mark infringement, it is important to take a step back and consider the position.
Ask yourself, do you have valid registered (or unregistered) rights? If you wish to make an application for a trade mark, but are unsure of your standing, seek advice from a trade mark attorney as a first step.
If Fox had given proper thought to its ability to bring the action, it would have at least tried to clarify its right to apply for a UK trade mark. Here, Fox ran a risk in costs for bringing a baseless action, and no doubt damaged to its relationship with its manufacturer.
In addition, it is key that businesses and their advisors undertake investigations into a potential infringement before writing a letter before claim and certainly before issuing a claim. The steps a rights holder takes should be both considered and informed, with the risks of counterclaims and costs exposure factored in to the strategy taken forward.
