On 24 January 2012 the Court of Appeal handed down judgment in WHG (International) Ltd, WHG Trading Ltd and William Hill Plc v 32Red Plc. The appeal case involved three trade marks that were all registered to online gaming operator 32Red Plc: a Community trade mark ("CTM") for the word "32Red"; a CTM for a device containing "32Red"; and a UK trade mark for the number "32". The Court of Appeal upheld the validity of all three trade marks and the trial judge's finding that the 32Red CTMs were infringed by rival online casino operator, 32Vegas. A cross-appeal from 32Red that their UK mark for "32" was infringed by 32Vegas was also successful. 

Key Points

  • The ground of "bad faith" was raised in the claim for invalidity for UK mark "32" – The Court of Appeal found that the mark was valid and that 32Red had not acted in "bad faith" by registering the number "32" in the UK, citing Arnold J's reasoning in Cipriani which was subsequently affirmed by the ECJ in the Lindt Case.
  • The Court of Appeal's finding that UK mark "32" was infringed – The Court of Appeal agreed that the dominant and distinctive feature of both "32Red" and "32Vegas" was "32". Having already established that 32Vegas caused inherent confusion and infringed the 32Red CTMs, it was ruled that use of the dominant feature "32" in 32Vegas was enough to infringe the UK trade mark for the number "32".

Business Impact

  • The Court of Appeal ruling on the ground of "bad faith" provides a useful reminder to brand owners that careful pre-emptive filing for a Community or UK mark may be used to strengthen their position in the market and also to legitimately reinforce their position ahead of upcoming litigation.
  • A number on its own may be registered validly as a trade mark and be distinctive of goods and services.
  • Applying to register a dominant or distinctive feature of a mark may be critical in protecting an established brand from attacks that seek to manipulate and exploit such a key recognisable feature. In this case the distinctive feature was the number "32". The Court of Appeal has confirmed that such registrations are not necessarily made in "bad faith" and are capable of being infringed by rival brands seeking to exploit the distinctive feature.

Background

This case was an appeal from the decision of Mr Justice Henderson in the Chancery Division. The grounds of appeal were so wide and comprehensive that the Court of Appeal characterised the proceeding as "a full scale, wide-ranging attack on the Judge's analysis and conclusions on virtually every aspect of his judgment". Lord Justice Etherton delivered the leading judgment and was quick to dispatch with the numerous grounds of appeal raised by the Appellants.

The case involved a trade mark dispute between two online casino operators in the UK market. The Respondent, 32Red Plc ("32Red") is a Gibraltar company that operates an online casino under the same name and has the following registered trade marks: a CTM for the word "32Red"; a CTM for a device containing "32Red"; and a UK trade mark for the number "32". The marks are all registered for gaming, gambling and betting services. The company was described as being a substantial online gaming business which has operated under the 32Red brand since 2002 and has a recognised reputation in the UK.

In 2008 the William Hill Group purchased a similar online gaming business from an Antiguan Company, for operation in UK. That online gaming business was called "32Vegas" and had not previously been advertised or operated in the UK. The Appellants, WHG (International) Ltd and WHG Trading Limited WHG (together William Hill Online and hereinafter "WHG") operated the business and were granted licences to use the unregistered mark "32Vegas" and the domain name "32Vegas.com".

32Red brought proceedings against WHG shortly after the 32Vegas business commenced operation in the UK, alleging that use of the 32Vegas brand was infringing its trade marks.

At first instance it was ruled that WHG's use of the 32Vegas brand infringed the 32Red CTMs and WHG's counter claim that the 32Red marks were invalid was rejected. Further, 32Red's claim that its UK trade mark for the number "32" had also been infringed was rejected.

WHG appealed the trial Judge's findings that 32Red's CTMs had been infringed by the use of 32Vegas and that the 32Red trade marks were valid.

32Red cross-appealed the finding that its UK trade mark (for the number "32") had not been infringed by 32Vegas.

Appeal decision

The grounds of appeal were wide and covered every aspect of the judgment at first instance. The Court of Appeal, in the lead judgment of Lord Justice Etherton, carefully set out all the key aspects of the judgment below and made repeated reference to the detailed reasons of Mr Justice Henderson. The Court of Appeal systematically dismissed each of the Appellants' grounds of appeal and the reasons of Mr Justice Henderson were affirmed on every point, save for the cross-appeal made by the Respondents in respect of UK mark "32", which was allowed.

CTM Rights

Infringement

The Court of Appeal agreed with the findings made on infringement of 32Red's CTM rights at first instance. In addressing the Respondent's claims made in the court below under Council Regulation 207/2009 on the Community trade mark ("CTMR"), Mr Justice Henderson found under Article 9(1)(b) that 32Vegas was undeniably similar to the 32Red CTMs and would give rise to the likelihood of confusion by the public (from the perspective of the average online gambler) that the competing gaming businesses were somehow linked or were the same entity.

It followed that the arguments for infringement under Article 9(1)(c) were also determined in favour of 32Red. All the elements were satisfied:

  • there was a clear similarity between 32Vegas and the 32Red CTMs;
  • 32Red had an established reputation in the UK; and
  • the operation of 32Vegas was determined to be detrimental to 32Red's distinctive character and reputation.

Invalidity

The Court of Appeal agreed with Mr Justice Henderson's findings on the grounds argued for invalidity of the 32Red CTMs under Article 7(1)(b), (c) and (d) and Article 52. The findings made as regards revocation under Article 51(1)(c) were also affirmed.

The challenges to validity under Article 7(1)(b) and (c) did not succeed as it could not be shown that the 32Red marks designated the character of the online gaming offered, nor was it found to be devoid of distinctive character. At its highest it was accepted that the number "32" with the word "Red" could possibly describe a particular result in roulette, but that was not enough to designate a characteristic of roulette, let alone the suite of services provided by the online gaming business.

The argument for invalidity under Article 7(1)(d) was dismissed as being "equally hopeless". There was nothing in the evidence that could establish a customary usage of either "32" or "Red" that had any connection at all to the designated goods and services.

Revocation of the marks was argued under Article 51(1)(c) by reference to 32Red's use of the number "32" as a Google Adwords sponsored search term. This argument also failed and it was noted that the Adwords feature is well known to the public and although possibly irritating to some people, the use of "32" as a sponsored link would not serve to confuse or mislead the public.

UK trade mark for the number "32"

Invalidity

32Red's UK trade mark was challenged on the same grounds of invalidity that were relied upon for the Community trade marks above, using the equivalent sections 3(1)(b), (c) and (d) of the Trade Marks Act 1994 ("TMA"). Again, the Court of Appeal could not find fault with the reasons of Mr Justice Henderson. The challenge to the UK trade mark for the number "32" on each of these grounds (i.e. lack of distinctiveness; designations or indications of characteristics; and use of customary signs or indications) failed and was dismissed for the same reasons as set out for the CTM Rights above.

Further, an additional ground of invalidity was argued that the UK trade mark was applied for by the Respondent in "bad faith" in contravention of section 3(6) of the TMA. WHG claimed that the registration of "32" was solely intended to prevent other traders from using the number 32 and therefore prevent them from entering the online casino and gaming market; that the registration was made without a genuine belief that it was a proper trade mark; and that 32Red had no genuine intention to use the mark "32".

This ground also failed and Lord Justice Etherton affirmed the findings at first instance that 32Red had acted in good faith by registering "32" in the UK. In following the guidance applied to the equivalent provision in Article 52(1)(b) of the CTMR by Arnold J in the Cipriani Case and by the ECJ in the Lindt Case (C-529/07), the Court noted that it does not constitute bad faith for a party to:

  • file an application for a mark merely because they are aware that a third party intends to use the same mark for identical goods or where similar marks are already being used; or
  • file a registration simply in order to strengthen their position in forthcoming litigation; or
  • register only the distinctive part of a trade mark rather than the actual trade mark itself.

It was found that 32Red filed the application for "32" in the UK for good tactical reasons and where 32Red believed that 32Vegas was infringing the 32Red CTMs. It was also found that no significant commercial use had been made of "32" in isolation within that market and there was evidence that 32Red had genuine uses for the "32" mark.

The Court again cited Cipriani noting that "an allegation of bad faith is a serious one which must be distinctly proved, and that a person is presumed to have acted in good faith unless the contrary is established." Accordingly, the ground of bad faith for invalidity was not made out and it was ruled that the Respondent had indeed acted in good faith.

All grounds of invalidity were rejected by the trial judge who concluded that the UK trade mark was validly registered.

Infringement

In making his ruling at first instance on the alleged infringement of 32Red's UK trade mark, Mr Justice Henderson ruled that there was no significant use of the UK trade mark "32" in isolation and as such, he ruled that 32Red had not yet acquired a sufficient reputation in that mark. On that basis alone the claim of infringement under section 10(2) of the TMA was rejected by Mr Justice Henderson.

The Court of Appeal disagreed with this point and allowed the cross-appeal of the Respondent claiming that the "32" mark was infringed by 32Vegas. The leading judgment of Lord Justice Etherton states:

"In my Judgment, the cross-appeal succeeds. The Judge appears to have assumed that it was not legally possible for there to be an infringement of the 32 number mark under section 10(2) in the absence of separate reputation established by use. That was incorrect. Having found inherent confusion and infringement of the 32Red mark by use of 32Vegas, and that the number 32 was the dominant feature of the Community marks and 32Vegas, he had no proper basis for saying there was no infringement of the 32 number mark under section 10(2)."