In a recent significant judgment, the High Court has opened up a potential new cause of action for trademark owners seeking to challenge third-party applications to register identical or confusingly similar UK trademarks.
Litecoin Foundation Limited v (1) Inshallah Limited (2) Nasjet Limited (3) John Pepin(1) concerned the Litecoin cryptocurrency, which had been developed and promoted by the claimant (LFL). The two defendant companies were incorporated in the United Kingdom but had never traded. However, Inshallah Limited owned a number of trademark registrations. Pepin was the sole shareholder and director of both companies and he had, for many years, sold both internet domain names and trademarks.
In December 2017, Inshallah filed a UK trademark application for the word mark LITECOIN covering financial services and virtual currency (the "Inshallah application"). LFL asked Inshallah to surrender or transfer the application but no agreement was reached. In January 2018, LFL filed its own UK trademark application for LITECOIN, which Nasjet opposed. Subsequently, in May 2018, LFL issued proceedings in the Intellectual Property Enterprise Court (IPEC), part of the High Court, seeking an injunction to restrain the defendants from passing off any goods, services or business as those of LFL.
District Judge Hart granted the injunction. She was satisfied on the evidence that LFL had built up sufficient goodwill in the name "Litecoin" in the United Kingdom to rely on in an action in passing off. Significantly, she held that the Inshallah application gave rise to a misrepresentation to the public in the passing-off sense. The misrepresentation arose because UK trademark applications appear in a publicly accessible journal. This meant that the filing of the Inshallah application was "a public announcement to the world of a purported connection between Inshallah and the Litecoin name".(2) The suggestion that this connection existed was strengthened as "inherent in the [Inshallah application] was an assertion of the right to use the sign and an intention to do so".(3)
The judge went on to hold that the Inshallah application was also an instrument of fraud within the ratio of One in a Million.(4) Inshallah had no connection with the name "Litecoin" and nor did it have any intention to use it, but sought instead to dishonestly benefit from, and appropriate goodwill in, the name. Pepin and Inshallah's previous conduct in vexatiously registering and selling domain names and trademarks to legitimate business owners was held to be relevant evidence to support this decision.
Accordingly, the judge granted an injunction restraining the defendants from "pass[ing] off any goods, services or business as, or connected with or associated with, the goods, services or business of [LFL] whether by use of the trade mark LITECOIN or any similar name or mark".(5) Acknowledging that her judgment was novel in a number of respects – in particular, insofar as it was the first in which the alleged passing off consisted of a trademark application – the judge gave the defendants permission to appeal.
The defendants did appeal on a number of grounds, the most significant of which was that the judge had erred in finding that the Inshallah application was an actionable misrepresentation.
In a restrained judgment, Enterprise Judge John Kimbell held that District Judge Hart had been "correct to reach the conclusion she did".(6) He agreed with the judge's reasoning on all of the issues relevant to the assessment of an actionable misrepresentation and backed up the trial judge's conclusions with some observations of his own.
He held that parties filing a UK trademark application must confirm that "the trade mark is being used by the applicant, or with his or her consent, in relation to the goods or services shown, or there is a bona fide intention that it will be used in this way".(7) By signing the application form for the Inshallah application, Pepin (on behalf of Inshallah) was "obviously"(8) making a clear representation of fact – namely, either that Litecoin was already being used by Inshallah or that there was a genuine intention on the part of Inshallah to use the name Litecoin in connection with a financial services or virtual currency business. The appeal judge rejected the defendants' argument that the filing of a trademark application is only a "preparation"(9) for a potential misrepresentation.
The appeal judge was also satisfied that the trial judge had been fully entitled to consider the defendants' history of registering and selling domain names and trademarks in reaching her conclusions. He stated as follows:
The Court of Appeal in One in A Million held, at least when an instrument of fraud case is being advanced, the court should consider 'the intention of the defendant, the type of trade and all the surrounding circumstances'. LFL's claim was expressly advanced as an instrument of fraud and the court found that case to be made out on the facts. It was therefore entirely appropriate for the Judge to consider the evidence of Mr Pepin's previous conduct in relation to other trade mark applications. There was, in my judgement, no misunderstanding or misapplication of the law as set out in One in A Million by the District Judge.(10)
The defendants further submitted that no injunction should have been granted, as LFL had not provided evidence of suffering any loss or potential future loss arising from the defendants' conduct. The appeal judge quickly dismissed that argument. He held that there is no requirement for actual damage to be proved, or even proof that it will certainly occur, in order to obtain an injunction to prevent passing off – "it is enough that the court concludes that what is going on is calculated to infringe the claimant's rights in future".(11) Holding that the injunction should be maintained, the appeal judge observed as follows:
the existence of a mere quia timet action in the case of a threatened passing off by a company which has not even traded but which has made an application amounting to an instrument of fraud was expressly recognised by the Court of Appeal in One in A Million.(12)
As an IPEC judgment, and one relating to a matter that began on the small claims track in that court, this ruling has largely fallen under the radar. However, it potentially has real practical significance for trademark owners.
The judgment extends the reach of One in a Million to provide that a mere application by a third party to register a UK trademark without having a connection with that mark or an intention to use it can amount to passing off. In certain circumstances (and the defendant's previous conduct will be relevant here), the application will also amount to an instrument of fraud.
In essence, the ruling gives trademark owners another option when faced with a third-party application to register a UK trademark that is identical or confusingly similar to their own. Opposing the application remains an option (one that is both tried and tested and effective). Seeking an injunction arguing that the application amounts to passing off (and also possibly an instrument of fraud) is now a second option.
However, realistically, the second option is likely to be deployed only against those applicants suspected of having bad-faith motives or acting vexatiously, with a "conventional" opposition likely remaining the route of choice in other cases. It is significant to note that in order to succeed in obtaining an injunction, the third-party applicant need not have traded under the mark or begun to use it at all. Further, the trademark owner need not prove that they have yet suffered, or will suffer, loss but merely satisfy the court that the third party's actions are calculated to infringe their rights in the future.
Bad faith is a hot topic in the trademark world at the moment, with the Court of Appeal's ruling in Skykick(13) still fresh in people's minds and a heightened anticipation that the issues in that case might end up in the Supreme Court. This unexpected IPEC ruling seems to be another weapon against trademark applications made with an element of bad faith. The famous "instrument of fraud" arising from One in a Million has been extended from domain names to company names, and now to trademark applications. It will be interesting to see what use trademark owners make of this judgment in seeking to prevent passing off at the trademark application stage and even before, some would say, the passing off has really begun.
For further information on this topic please contact Gill Dennis or Désirée Fields 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.
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