Background
Facts
Amendments to case
High Court
Court of Appeal
Comment
In trademark infringement proceedings,(1) the Court of Appeal has warned parties not to take unfair advantage of the civil justice system and instead to conduct litigation "with cards on the table – face up".(2)
A fundamental feature of the registered trademark system is that the owner must use its trademark or lose it. Registered trademarks that have not been used for five years or more are vulnerable to revocation on the application of a third party under section 46 of the Trade Marks Act 1994 (TMA). Trademark owners have, however, an opportunity to commence or resume use even once the five-year period has expired. Such use shields the trademark registration from revocation. However, any commencement or resumption of use within a three-month window before an application for revocation is made is not taken into account, unless preparations for the commencement or resumption had already begun in good faith (section 46(3) of the TMA).
The claimant (ABP) and the defendants (Voyetra) were both in the business of selling computer gaming accessories. ABP was the registered proprietor of two UK trademarks for STEALTH and STEALTH VR, both registered for "audio headsets for playing video games". Voyetra were also selling video game headsets under the sign STEALTH. Both ABP and Voyetra had been using STEALTH for headsets since mid-2014.
In November 2020, ABP issued trademark infringement proceedings against Voyetra under sections 10(1) and 10(2) of the TMA. In their defence, served on 2 February 2021, Voyetra relied on their honest concurrent use of the STEALTH mark. ABP applied for summary judgment on its entire claim. However, on 9 July 2021 and before the summary judgment application had come before a court, Voyetra gave notice to ABP that they intended to make an application for permission to amend their defence and introduce two new counterclaims.
Voyetra wanted to make these amendments to reflect their acquisition of a trademark that, in Voyetra's view, had decisive relevance to the issues in the infringement proceedings. The chain of events giving rise to Voyetra's application to amend began on 28 January 2021 with the acquisition by a shell company (NCL) of a registered trademark for STEALTH, covering "hi-fi apparatus, instruments and loudspeakers", which predated ABP's UK trademark registrations (this acquired trademark is referred to in the Court of Appeal's judgment as "Mark 250"). Crucially, on the date of acquisition by NCL, Mark 250 had not been used for over five years, making it susceptible to revocation for five years' non-use pursuant to section 46 TMA. On 15 March 2021, NCL licensed Mark 250 to Voyetra, the licence expressed to be effective from 28 January 2021. On 15 June 2021, NCL assigned Mark 250 to Voyetra.
Voyetra sought to amend their case to add:
- a counterclaim for infringement of Mark 250 by ABP;
- a defence under section 11(1B) of the TMA to ABP's infringement claim (this defence provides that, in certain circumstances, a trademark which is later in date is not infringed by an earlier mark); and
- a counterclaim for invalidity of ABP's UK trademark registrations.
At first instance, the High Court gave permission for Voyetra to amend their case to introduce the defence under section 11(1B) of the TMA and their counterclaim for infringement of Mark 250. ABP appealed.
ABP's key argument on appeal was that the amendments could and should have been made earlier. It alleged that Voyetra had held off from seeking to amend their case, knowing that to make amendments earlier would have tipped ABP off about Voyetra's licence and subsequent acquisition of Mark 250, potentially prompting ABP to seek revocation of Mark 250. ABP submitted that the series of steps (ie, acquisition by NCL, licence to Voyetra and eventual transfer of Mark 250 to Voyetra) had been deliberately structured to enable Voyetra to resume use of Mark 250 for the three-month period stipulated in section 46(3) of the TMA (and so protecting it from revocation) without disclosing that this was happening. This was, ABP argued, a strategy of deliberate concealment, the delayed application to amend being a tactic deployed by Voyetra with a view to ensuring that ABP remained unaware of Voyetra's interest in and use of Mark 250 until the revocation opportunity under section 46(3) of the TMA had passed.
Voyetra contended that they had been entitled to do this in order to make a "meaningful amendment" to their defence.
The Court of Appeal held that the High Court had been wrong to permit the amendments.
Giving the leading judgment, Lord Justice Birss proceeded on the basis that Voyetra's actions would be effective under the TMA to amount to genuine use of Mark 250 under section 46 of the TMA, capable of defeating an application for revocation by ABP once it had been given notice of the application to amend. He was satisfied that Voyetra had wanted to amend in order to advance a case that was legitimate and permissible under the TMA but said that this was not a "trump card in Voyetra's hands".(3) He went on to say:
the fact an amendment advances a case permissible under the relevant law is obviously relevant, but it is not determinative. Such an amendment may well be refused if its unjustified lateness is prejudicial to the other party.(4)
Birss LJ held that Voyetra's application to amend had been late. His reasoning was that NCL had at all times been acting on behalf of Voyetra, which meant that Voyetra's defence under section 11(1B) of the TMA had been available to them from 28 January 2021 (the date on which NCL took the assignment of Mark 250). This defence could, therefore, have been pleaded from the beginning in the original defence, as that had not been filed until 2 February 2021. Birss LJ commented "when one appreciates that in fact Voyetra could have pleaded this point in January and with no amendment at all, its lateness is even more stark".(5)
This lateness called for an explanation justifying it because:
an amendment which might otherwise be allowed, could well be refused if its lateness has caused unjustifiable prejudice to the other party. Therefore an explanation is needed in order for the court to work out whether or not it is a case in which, despite the prejudice caused by the lateness, nevertheless the balance comes down in favour of allowing the amendment.(6)
Voyetra had not produced any evidence to explain the lateness of their request to amend, and Birss LJ considered the reason for this to be that "written down [it] would have looked deeply unattractive".(7) The question of what justification (if any) Voyetra were advancing for the timing of the amendments was "a question which required an answer, and none was given".(8) Birss LJ held that by not putting in any evidence on this issue, the position had been unclear and had to develop over time, enabling Voyetra to advance arguments about timing that would have been scotched had they produced proper evidence when they should have. The right conclusion on the evidence before the Court was that the lateness of the application to amend had been deliberately calculated to cause prejudice to ABP and no good reason had been provided for that lateness.
Birss LJ rejected the argument that ABP could itself have found Mark 250 on the register and applied to revoke it in good time. In his view, this was not a point against ABP. He was satisfied that ABP was not under a duty to monitor the register for this purpose.
Birss LJ concluded by expressing his view that Voyetra had attempted to take advantage of the process of civil justice itself. To permit the application to amend would be to sanction an act of deliberate concealment by Voyetra. ABP's appeal was allowed.
Two key lessons can be learned from this judgment:
- Trademark litigants need to be mindful of the need to act with propriety within the civil justice system. A party may well have legitimate rights under the TMA and is entitled to plead and rely on those, but the manner in which that is done must not be open to an allegation that underhand tactics which are prejudicial to other litigants are being used. As summed up by Birss LJ, "the fact that Voyetra's conduct can be taken to be legitimate under the Trade Marks Act did not absolve Voyetra as a litigant in civil proceedings from addressing the timing of the step taken in the litigation".(9)
- Although the Court of Appeal was clear that parties are under no general obligation to monitor trademark registers for marks that could impact on their own trademark rights, it is highly advisable for brand owners to do this. Early identification of, and action to revoke, conflicting marks can avoid more complex disputes arising later. Parties should also consider acquiring earlier conflicting marks that are not in use to avoid these falling into third-party hands. Trademark owners should procure good monitoring software for this purpose and work closely with legal advisers to carefully define the scope of these ongoing searches.
For further information on this topic please contact Gill Dennis or Florian Traub at Pinsent Masons by telephone (+44 20 7418 8250) or email ([email protected] or [email protected]). The Pinsent Masons website can be accessed at www.pinsentmasons.com.
Endnotes
(1) ABP Technology Limited v (1) Voyetra Turtle Beach Incorporated (2) Turtle Beach Europe Limited [2022] EWCA Civ 594.