To determine whether correspondence should be treated as an actionable threat it is necessary to establish whether a reasonable recipient would have understood the correspondence as an intention to initiate proceedings for trademark infringement. A party can therefore be subject to an action for unlawful threats of trademark infringement, despite the fact that the letter containing the threat was part of ongoing “without prejudice” negotiations.

Best Buy applied for a Community trademark incorporating the words "Best Buy" which was opposed by the Spanish Worldwide Sales Corporation España SL (Worldwide), the proprietor of a number of national and Community trademarks including the words "Best Buy".

Best Buy wrote to Worldwide regarding the possibility of entering into a co-existence agreement. Worldwide replied that the use of the trademark by Best Buy represented a conflict with its intellectual property rights which would entitle it to take appropriate legal action to defend its interests.  

In the last three paragraphs of the letter, Worldwide did state that it was open to negotiating a solution to enable Best Buy to use the trademark in Europe. However, the discussions did not produce an agreement and Best Buy commenced proceedings in the High Court for unjustified threats under section 21 Trade Marks Act 1994 (TMA).

The High Court found that although the relevant letter did amount to a threat, the fact that it was made as part of without prejudice negotiations meant it was inadmissible. Best Buy appealed against the decision.  

The Court of Appeal considered the following issues:  

1. Did Worldwide's letter contain a threat of infringement proceedings?

2. Were the threats excluded?

3. Was the letter in any event inadmissible because of the fact that it contained settlement proposals?  

Did Worldwide's letter contain a threat of infringement proceedings?

The Court of Appeal considered that, for a threat to have been made, it was necessary to show that the defendant had asserted that it had legal rights in respect of the intellectual property and that it intended to enforce those rights against the plaintiff. By stating that its marks were "reputed and distinctive" and that Best Buy's actions were "causing irreparable and irreversible damage" to it, entitling it "to take appropriate legal action to defend its interests", Worldwide's letter did threaten Best Buy with proceedings.

Were the threats excluded?

Applying a relatively narrow meaning to paragraphs s.21 TMA, the Court of Appeal found that where a threat extended to an excluded act but also went wider, it was actionable. Therefore, although Best Buy used the mark in relation to goods and services which would be excluded under s.21(1)(c) TMA, it was also used in advertising and in the media, and so was not excluded.

Was the letter in any event inadmissible?

The Court of Appeal stated that the question was whether the letter would reasonably have been understood to have been intended to have privileged status. Although the proposals at the end of the letter were considered to be a generally and unexceptionally expressed offer to negotiate a settlement, the main and earlier part of the letter would not have struck a reasonable recipient as anything other than open and there was no signal in the letter that the last three paragraphs should be treated differently.

Further, Lord Neuberger MR stated that the parties could not be permitted to think they could use the "without prejudice" label to allow threats to be made with impunity, and therefore that, even if parts of the letter could been found to be without prejudice, the threats would have been actionable and the letter would have been admissible in any case.