Section 21(1) of the Trade Marks Act 1994 ("TMA 1994") is a domestic provision of UK law that has no EU equivalent. It states that any aggrieved person may bring proceedings for relief where a person threatens proceedings for infringement of a registered trade mark, other than where certain limited exceptions apply.

The Court of Appeal has allowed an appeal against a decision that a letter from Spanish lawyers which impliedly threatened proceedings in respect of infringement of Community trade marks ("CTMs") within the meaning of section 21(1) TMA 1994 fell within the ambit of "without prejudice" privilege.

Business Impact

  • Holders of CTMs and non-UK lawyers should be aware that an express or implied threat of proceedings for infringement of a CTM can found the basis of a claim in the UK under section 21 TMA 1994, but only if the threat concerned was of proceedings in the UK.
  • Marking a threatening letter "without prejudice" may have little or no protective effect against a potential threats action. Whilst the Court of Appeal found that the threats in this instance were not covered by "without prejudice" privilege, the Master of the Rolls commented that genuinely "without prejudice" communications did not allow a person to make threats which would otherwise clearly fall within the ambit of section 21 with impunity; if it did, it would render that section close to being obsolete. Accordingly, great care should be taken when referring to the possibility of continued litigation or further court action in "without prejudice" communications.
  • The exceptions in section 21(1) TMA 1994 are limited and the Court of Appeal has construed them narrowly. This points to clients taking great care not to send cease and desist letters threatening proceedings, unless the client is prepared to issue proceedings for trade mark infringement. Further, it would be wise not to publicise the sending out of cease and desist letters, where no proceedings are contemplated, given that a defendant may argue that this causes damage to their business.

Facts

The claimants, Best Buy Inc and its UK subsidiary (together, "Best Buy") had developed plans to open a series of consumer electronic shops in the UK and in other EU countries under the "Best Buy" name, which the first appellant has used extensively in the US.

The defendant, a Spanish corporation, Worldwide Sales Corp España SL, owned a number of national registered trade marks and figurative CTMs including the words "Best Buy" in combination with devices and other matter.

A subsidiary of Best Buy Inc, Best Buy Enterprise Services Inc ("BBES"), applied for a CTM incorporating the words "Best Buy". The defendant opposed this application on the basis of two of its existing CTMs, each of which combined the words "Best Buy" with other wording and a logo including five stars. OHIM procedures include a mandatory "cooling off period" during which parties are encouraged to discuss settlement and it was during this period that the relevant correspondence in this matter was exchanged.

In August 2008, solicitors for BBES sent a letter to the trade mark attorney acting for the defendant stating that their client believed that there may be scope for the parties to co-exist in the EU and suggesting that the parties agree an extension of the cooling off period in order to allow further time to discuss the terms of a possible co-existence agreement.

The defendant's Spanish solicitors responded in September 2008 (the "September letter"), noting that the defendant had learnt from several press articles that BBES was planning to expand into the "European market including the Spanish one" in the near future. They stated that use by BBES of the Best Buy trade mark "in Europe and in particular in Spain, as well as in advertising and in the media", as at that time, represented "a conflict with the intellectual property rights duly registered by [the defendant] in Spain and Europe which would entitle it to tale the appropriate legal action to defend its interests". Further, they stated that use by BBES of the Best Buy trade mark "on the European market… would cause confusion and lead to a unacceptable association with [the defendant's] products causing irreparable and irreversible damage which would undoubtedly entail the cessation of its activity".

The final three paragraphs of the letter then addressed BBES's suggestion of discussing a possible negotiated solution, but requested that in the meantime BBES agree within 15 calendar days to refrain from using the "Best Buy" trade mark in Europe, issuing any press articles or making any announcements of its imminent activities in Europe. This letter was not marked "without prejudice".

Further correspondence and discussions ensued, but did not produce an agreement, and proceedings for unlawful threats under section 21(1) TMA 1994 were issued in February 2009.

Section 21(1) TMA 1994 is a domestic provision of UK law that has no EU equivalent. It sets out that, where a person threatens proceedings for infringement of a registered trade mark, other than for the application of the mark to goods or their packaging, the importation of goods to which, or to the packaging of which, the mark has been applied, or the supply of services under the mark, any person aggrieved may bring proceedings for relief.

Floyd J dismissed the action and held that, whilst the letter contained a threat of infringement proceedings with the meaning of section 21(1) TMA 1994, the September letter could not be relied on as such because it formed part of a negotiation and therefore fell within the protection of the "without prejudice" rule.

Decision

The Master of the Rolls, in his judgment, first considered the proper approach to the interpretation of the September letter. In the Master of the Rolls' opinion, in so far as this question turns on the meaning of any particular passage in the September letter, it is to be answered by reference to 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 of the passage to have intended, when read in the context of the letter as a whole.

The Master of the Rolls identified five issues raised by this appeal, answering each in order.

  1. Does the September letter contain a threat of infringement proceedings within section 21(1) TMA 1994?

The Master of the Rolls, agreeing with Floyd J, considered that, by the September letter, the defendant did "threaten… another with proceedings for infringement of a registered trade mark" within the meaning of section 21(1) TMA 1994. A threat need not be express. The defendant stated that its registered marks were "reputed and distinctive", that BBES's actions were already "causing irreparable and irreversible damage" to the defendant, and that this would entitle the defendant "to take appropriate legal action to defend its interests". A reasonable recipient of the September letter would take those statements in particular to indicate not merely that the defendant was asserting its legal rights, but that it was intending to enforce those rights against BBES.

  1. Was the threat of proceedings in the UK?

The Master of the Rolls, again agreeing with Floyd J, held that a Community-wide trade mark could found the basis of a claim under section 21(1) TMA 1994, but only if the threat concerned was of proceedings in the UK.

In the Master of the Rolls' opinion, a reasonable recipient in the position of BBES would have understood it to threaten proceedings in the UK. The September letter made numerous references to Europe, as well as to Spain, and made it clear that the defendant's concerns were Europe-wide.

Whilst the Master of the Rolls accepted that it would have been fanciful to think that the September letter would have been understood to convey an intention to bring proceedings in the courts of all 27 EU member states, he noted that a threat to do something is not the same as a promise to do it. A threat can be Europe-wide even if any claim is later only brought in one member state. Further, it was far from fanciful to conclude that the threat was intended to extend to courts in the UK, not so much because the addressee of the September letter, BBES's solicitors, were based in London, but more that the parties would both have known, not least from the press coverage referred to in the September letter, that the Best Buy group were intending to launch their European business in the UK.

  1. Does the threat fall outside the exclusions set out in section 21(1) TMA 1994?

The Master of the Rolls accepted that the September letter related to the use of the Best Buy mark in connection with services, but stated that it appeared that, at the very least, the complaint about the use of the mark "in advertising and in the media" brought the threat outside the ambit of the exclusions.

  1. As the September letter referred to settlement, could it be relied on as a threat?

The Master of the Rolls considered whether the September letter, or at least the final three paragraphs of it, would reasonably have been understood to have been intended to have without prejudice privilege status. Floyd J had concluded that the September letter could not be relied on as a threat because it formed a part of the negotiating process and as such fell within the ambit of the without prejudice rule.

The Master of the Rolls disagreed, noting that Floyd J may have "let the tail wag the dog" by concentrating on the last three paragraphs without properly considering the letter as a whole. If the bulk of the September letter would not have struck the reasonable recipient as anything other than open, that undermines the view that the final paragraphs would have been intended to be without prejudice, especially as there was no signal that these paragraphs were to be treated any differently to those preceding them. As Floyd J himself acknowledged, it could be said that "the real purpose of the [September] letter was to serve as a letter before action", and it is by no means unusual for such a letter to seek to initiate settlement discussions.

The Master of the Rolls considered that, rather than constituting an offer of proposals, the last three paragraphs amount to an invitation to treat, picking up on BBES's similar invitation at the end of the August letter. Rather than constituting or including any sort of concession or admission, they merely underlined the defendant's belief in its case and its determination to pursue it. Further, even if these paragraphs did bring the "without prejudice" rule into play, the Master of the Rolls noted that it was his provisional view that they could nonetheless be relied on to support the claimants' threat claim. Since the "without prejudice rule" is based on public policy, it has to yield on occasions to another rule or principle which may apply, and in this instance, the Master of the Rolls inclined to the view that it should not prevail over the clear statutory policy of the threats jurisdiction contained in section 21 TMA 1994. If, by writing a genuinely "without prejudice" letter, one could with impunity make threats which otherwise would clearly fall within the ambit of section 21, it would render that section close to being obsolete, except for the poorly advised.

  1. Are the claimants "person[s] aggrieved" and therefore entitled to relief under section 21?

The Master of the Rolls considered that the claimants were the direct recipients of the threat (albeit through their solicitors) and, as such, they did not need to show any damage in order to establish that they were aggrieved, although if they were required to establish a prima facie case for having suffered some damage as a result of the threat, he was satisfied that they had done so.