Passing off and trade marks: issue estoppel as defence

Summary

Background

A trade mark may be refused registration because the application was made in bad faith (section 3(6), Trade Marks Act 1994) (TMA) (section 3(6)). It may also be refused registration if the use of the mark in the UK is liable to be prevented by the law of passing off (section 5(4), TMA) (section 5(4)).

A trade mark may be found invalid on various grounds, including because earlier rights take precedence over the challenged mark on relative grounds (section 47(2), TMA).

Article 2 of the Trade Marks (Relative Grounds) Order 2007 (SI 2007/1976) (2007 Order) provides that only the proprietor of the earlier mark or right can object, in opposition proceedings, to registration of a trade mark on a ground in section 5(4). The proprietor may also apply for a declaration of invalidity on the grounds in section 47(2) of the TMA (the relative grounds) (Article 5, 2007 Order).

The restrictions on who may apply for a declaration of invalidity do not apply where the application is made on the ground that the mark was registered in bad faith.

Issue estoppel may arise when an issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant, one of the parties seeks to reopen that issue (Arnold v National Westminster Bank plc [1991] 2 AC 93).

Facts

Between 1986 until 2016, half-brothers I and W were members of a musical group known as LOVE INJECTION or LUV INJECTION. The group was referred to as a "sound". Following their split in 2016, I performed with others under the name "Love Injection" and less frequently "Luv Injection". W started to perform under the name "Luv Injection Sound" together with others, not including I, who were involved in the group before the split.

In 2017, W applied to register LOVE INJECTION SOUND and LUV INJECTION SOUND as trade marks. The first application was granted, but I opposed the second application, and applied to invalidate the first registration, on the grounds of bad faith and passing off.

The Intellectual Property Office (IPO) upheld I's claims for revocation of the registered mark and opposition to the mark on both grounds. The group was operated by its members before the split, including both I and W, as a partnership at will. Until the split, as an unincorporated association and a partnership at will, the goodwill in the name "Love injection" belonged to the changing members of the sound. As the members of the sound, including I, were the owners of the goodwill until the split in 2016, at the relevant date in the proceedings I, together with the other members of the sound, owned the goodwill. Therefore, as I had the requisite goodwill, the use of W's mark would amount to misrepresentation leading to damage. W did not appeal.

In 2019, I brought a claim in his own name, and not on behalf of the dissolved partnership, arguing that use of the name "Love injection" was passing off by W.
W filed a defence and counterclaim arguing that "Love injection" was W's name, he was operating as a sole trader and the goodwill belonged to him. W also argued as an alternative that at the date of the split in 2016, the goodwill belonged to the group, which was a partnership at will.

I applied to strike out W's defence on the basis of estoppel and abuse of process.

The Intellectual Property Enterprise Court struck out most of W’s primary and alternative defences on the basis of issue estoppel and granted an injunction preventing W from using the "Love Injection" name. It held that both I and W were also estopped from denying the findings of the IPO in the invalidity proceedings and that there were no special circumstances which would disapply that estoppel. W appealed.

Decision

The court allowed the appeal. It held that W should be permitted to advance his alternative defences.

It was doubtful that the IPO's decision had created issue estoppel, as the decision was based on two separate grounds: bad faith and passing off. Where the court finds alternative grounds in favour of the successful party, those findings do not create issue estoppels because the losing party cannot effectively appeal against any of them separately, and if one is upheld the appeal will fail. There might be a cause of action estoppel or merger but no issue estoppel because no single finding could be legally indispensable to the conclusion.

Even if there had been issue estoppel, here there were various special circumstances which would entitle W to challenge I's standing to bring proceedings in passing off otherwise than for the benefit of the partnership, in particular the lack of any opportunity for W to mount an effective appeal against the objection based on section 5(4). The court also took into account the continuing impact on W's future ability to trade under the name.

The IPO had also failed to appreciate that the partnership had been dissolved when the group split in 2016. Goodwill in a name is partnership property and partners are not entitled individually to exercise proprietary rights over any partnership assets. Both I and W, as partners at the date of dissolution, were entitled to ask for the partnership assets to be realised and divided between them but neither was solely entitled to the goodwill.

The 2007 Order does not address the question of whether one of plural co-owners can oppose registration. Where, as here, one co-owner seeks to register a sign as a trade mark which would effectively prevent their co-owner from continuing to use the sign, it seems appropriate to preserve the ability to object under section 5(4).

Comment

This decision considers the extent to which, under the 2007 Order, one only of several partners who are co-owners of goodwill in an unregistered mark may, acting alone, oppose registration of the mark by another partner.

Also of interest is the discussion of the extent to which issue estoppel may arise where a decision of a court or tribunal has been reached on two grounds.

Case: Thomas v Luv One Luv All Promotions Ltd and another [2021] EWCA Civ 732

First published in the July 2021 issue of PLC Magazine and reproduced with the kind permission of the publishers. Subscription enquiries 020 7202 1200.