Trade mark owners should take care when enforcing their rights in the UK. The law allows any aggrieved person to claim remedies (including damages) where threats of infringement of a registered trade mark are made, unless exemptions apply. There is no European Union equivalent to this United Kingdom law.

Its rationale is to deter 'groundless' infringement threats, which unjustifiably interfere with a recipient's trade. Professional advisers who make such threats on their client's behalf can also be sued.

The case of Best Buy Co Inc & Anor v Worldwide Sales Corp España SL [2010] EWHC 1666 (Ch) demonstrates that this extends to enforcement of Community Trade Marks where a threat of proceedings which extends to the UK is made. The case also confirms that remedies can also be claimed when the threat is made during 'without prejudice' negotiations. The case highlights that foreign counsel advising clients on enforcement of Community Trade Marks in territories which include the UK need to be cautious.

The relevant provision is section 21 of the Trade Marks Act 1994. A section 21 claim can be highly costly, for example, if a business takes profitable products off the market following an infringement threat.

Section 21 exempts claims for infringement threats concerning (a) the application of the mark to goods or their packaging; (b) importation of goods, where the mark has been applied to such goods or their packaging; or (c) supply of services under the mark. The court construes these exemptions narrowly.

In this case, Best Buy Inc and its subsidiary (together 'Best Buy') planned to open a series of consumer electronic shops in the UK and Europe under the Best Buy name. España, a Spanish company, owned two Community Registered Trade Marks including the words 'Best Buy' in combination with devices. Best Buy applied to register a mark incorporating the words 'Best Buy' as a Community Trade Mark. España opposed. Best Buy applied to revoke one of España's registrations. The parties therefore corresponded, via their legal counsel, to try and reach settlement.

This included a letter from España's counsel which:

  • stated that Best Buy's use of the Best Buy trade marks in Europe and in particular in Spain, as well as in advertising and in the media 'represents a conflict with the intellectual property rights duly registered by my client in Spain and Europe which would entitle it to take the appropriate legal action  to defend its interests'; and
  • requested Best Buy not to use the trade marks in Europe, issue any press articles or make any announcements of its imminent activities in Europe until settlement was reached.

Although the same letter made it clear that there was scope for negotiations, these were not successful. Best Buy issued proceedings against España under section 21.

The High Court decided that while a non-exempt threat to sue in the UK had been made, this was made as part of 'without prejudice' negotiations and was therefore privileged. On this basis, the court denied Best Buy's claim.

On Best Buy's appeal, the Court of Appeal reversed the decision. It is useful to look at the Court of Appeal's approach.

To determine if a threat, and the other criteria required by section 21, exist, the court will look at 'what a reasonable person, in the position of the recipient of the letter, with its knowledge of all the relevant circumstances as at the date the letter was written, would have understood the writer ... to have intended, when read in the context of the letter as a whole'.

The Court of Appeal held that:

  1. there was no need for the words used to be highly specific to constitute a threat, and that the       defendant here did make a threat;
  2. even though the letter did not specifically refer to a threat of proceedings in the UK, it did       emphasise the defendant's European-wide rights. Since Best Buy had publicised that its launch   would be in the UK, the court felt a reasonable recipient would have understood that there had       been a threat of infringement proceedings in the UK;
  3. the threat did not fall within the section 21 exemptions, as it was not limited to use of the mark in   supply of services. Reference to wider activities, such as use of the mark 'in advertising and in the media' brought the threat outside the exemption;
  4. the court at first instance did not consider the letter as a whole. The letter did not exclusively       comprise a settlement offer, but also contained 'open' correspondence in which the defendant       stated its belief in the strength of its case. The court also went on to say that in its view, even a    genuinely 'without prejudice' letter is unlikely to prevail over the policy behind section 21, as otherwise that section would be rendered close to useless. This suggests that the 'without       prejudice' exception may not be available to defendants of section 21 claims; and
  5. the claimants were the direct recipients of the letter (albeit through their solicitors) and       therefore did not need to show damage in order to bring a claim; although even if they were so       required, the court was satisfied that they had done so.

The case emphasises the need for extremely cautious drafting at all stages of correspondence in contentious trade mark matters, even during negotiations.