In proceedings in which the defendants had already been found liable for passing off and trademark infringement in respect of the BETTY BOOP trademarks, the High Court has rejected the defendants' application to have the remaining copyright infringement and trademark invalidity proceedings stayed in favour of earlier, related Italian proceedings.
The defendants' application for a stay of the claimants' remaining copyright infringement claim and the defendants' remaining trademark invalidity counterclaim was based on the fact that, when the claim form was issued on April 4 2012, three sets of proceedings already existed in Italy concerning BETTY BOOP branded merchandise. These Italian proceedings consisted of:
- a claim by Hearst Holdings Inc (the first claimant in the English proceedings) against a number of Italian companies that were purportedly licensed by AVELA Inc (the first defendant in the English proceedings) to sell BETTY BOOP branded merchandise;
- third-party indemnity claims brought by the Italian companies against AVELA;
- a claim by AVELA to invalidate Hearst's Italian and Community registered trademarks alleged to have been infringed by the Italian companies; and
- a claim by Hearst against AVELA for joint liability in relation to the acts of the Italian companies.
Importantly, the Italian courts were seised of all these claims before the claim form was issued in the English courts.
The judge refused the defendants' application for a stay of the English proceedings, ruling that the policy behind Article 104 of the EU Community Trademark Regulation is to avoid irreconcilable judgments, or at least the risk of irreconcilable judgments, and this policy is wholly defeated if an application for a stay under Article 104 is brought only after a judgment in the court second-seised has been given – in the circumstances, the risk of irreconcilable judgments would not be mitigated by granting the stay. The defendants' extreme delay therefore constituted "special circumstances" not to grant a stay under Article 104. In coming to this decision, the judge provided a useful exposition of Articles 104 and 109 of the Community Trademark Regulation, and Articles 27 and 28 of the EU Brussels Regulation (44/2001).
Article 109 of the Community Trademark Regulation deals with simultaneous and successive civil actions on the basis of Community trademarks and national trademarks in the courts of different EU member states. It provides that:
"Where actions for infringement involving the same cause of action and between the same parties are brought in the courts of different Member States, one seised on the basis of a Community trade mark and the other seised on the basis of a national trade mark:
(a) the court other than the court first seised shall of its own motion decline jurisdiction in favour of that court where the trade marks concerned are identical and valid for identical goods or services. The court which would be required to decline jurisdiction may stay its proceedings if the jurisdiction of the other court is contested;
(b) the court other than the court first seised may stay its proceedings where the trade marks concerned are identical and valid for similar goods or services and where the trade marks concerned are similar and valid for identical or similar goods or services."
Article 104 of the Community Trademark Regulation provides that a Community trademark court hearing an action for infringement, revocation or invalidity (but not a declaration of non-infringement):
"shall, unless there are special grounds for continuing the hearing, of its own motion after hearing the parties or at the request of one of the parties and after hearing the other parties, stay the proceedings where the validity of the Community trade mark is already in issue before another Community trade mark court on account of a counterclaim or where an application for revocation or for a declaration of invalidity has already been filed at the Office."
The judge found as follows:
- For the purposes of Article 109 of the Community Trademark Regulation, the parties were the same before the English and Italian courts (to satisfy this test it was clear that not all parties needed to be the same, just some).
- The expression 'same cause of action' had the same meaning as under Article 27 of the Brussels Regulation.
- Referring to the principles laid down in The Alexandros T ( UKSC 70) (for further details please see "The Alexandros T: Supreme Court considers Regulation 44/2001"), Gubisch v Palumbo (Case C-144/86), The Tatry (Case C-406/92) and Sarrio v Kuwaiti Investment Authority ( 1 AC 32), 'same cause of action' must be read as referring to "proceedings which have the same cause and the same objet" (a test derived from the French text of the Brussels Regulation).
- 'Cause' means "the same facts" and "the same rule of law as the basis for the action", while 'objet' means "the same end in view". All of these requirements must be present for the same cause of action test to be satisfied.
Were the facts and the rule of law the same?
Both the English and Italian proceedings concerned the sale to European consumers of Betty Boop merchandise, which was licensed by AVELA. In a sense the proceedings were about similar issues in general terms, but they were not concerned with the same facts. The persons carrying out the infringing acts in Italy and the transactions themselves were different in the UK and Italian proceedings and the images of Betty Boop used in Italy were different from the images used in the English proceedings.
Did the proceedings have the same end in view?
The judge found this to be a more difficult question, but preferred the claimants' argument that the ends in view were not the same: just because relief arising out of one case in one country may overlap with the issues in another country does not necessarily mean that the ends in view are identical. The objective of the English court was to grant proper relief to compensate the claimants for the acts proved in the English case, while the objective of the Italian court would correspondingly be focused on the proper relief arising from the acts proved before the Italian court. On this reasoning, it is difficult to envisage a scenario where two sets of proceedings will have the same ends in view, unless identical facts are proved and relied on, and identical relief is sought, in each court.
Accordingly, Article 109 of the Community Trademark Regulation did not apply.
There was no doubt that Article 104 applied because AVELA brought an invalidity claim in Italy before the proceedings in England were started. However, the question of whether there were special grounds for continuing the hearing in England still had to be considered. The judge relied on Starbucks v BSkyB ( EWCA Civ 1201) as the leading authority on this question, noting that the clear presumption in favour of a stay under Article 104 was strong and it would be a rare and exceptional case where there are special grounds within Article 104.
Counsel for the defendants submitted that mere lateness cannot create a special ground for refusing a stay under Article 104; however, the judge rejected 'mere lateness' as a characterisation of the timing of the defendants' application for a stay. Rather, for the application to be raised after the main judgment on infringement and passing off was "wholly unprecedented" and "certainly 'rare and exceptional'". Both parties were severely criticised for not bringing the existing Italian proceedings to the court's attention previously; the judge suspected that if they had been raised at the appropriate time, significant parts of the English proceedings might have been stayed pending the Italian proceedings.
The risk of irreconcilable judgments between the English and Italian courts could not be avoided or reduced by staying the English proceedings, and the application for a stay under Article 104 of the Community Trademark Regulation was refused.
As the judge had already refused to stay the proceedings under Article 104 (the wording of which is more favourable than Article 28 of the Brussels Regulation), no real question arose as to whether a stay should be granted under Article 28 of the Brussels Regulation.
In addition to defending the stay application successfully, the claimants also made a successful application for summary judgment in relation to the defendants' trademark invalidity counterclaim. The court found that the defendants' evidence did not support their allegation that the claimants had no rights in the mark in question when they applied to register it.
The judgment reinforces the decision in The Alexandros T, cementing the position that for proceedings to have the 'same cause of action' they must have:
- the same facts;
- the same rule of law as the basis for the action; and
- the same end in view.
The judgment is also a salutary warning to those seeking to rely on Article 104 to stay proceedings. Serious delay in making an application can constitute special circumstances not to grant a stay, even though the presumption in favour of a stay is a strong one and should be rebutted only in a rare and exceptional case. Such a rare and exceptional case is where the court second-seised has already given judgment on the claim and the risk of irreconcilable judgments would not be mitigated by granting the stay.
The judge was scathing in his assessment of both parties' behaviour in failing to bring the Italian proceedings to the English court's attention earlier – a failure which had put the English court at the unavoidable risk of making an irreconcilable judgment with the Italian courts. In short, when seeking to rely on Article 104 to secure a stay, do not delay.
The English court's interpretation of the Community Trademark Regulation will not necessarily be mirrored in other European jurisdictions. In France, for example, the court's interpretation of 'special circumstances' under Article 104 of the Community Trademark Regulation is markedly different (eg, see the approach in Sothys International v Européenne de Produits de Beauté, No RG 05/17476, October 17 2006).
For further information on this topic please contact Jeremy Drew or Adam Cusworth at RPC by telephone (+44 20 3060 6000), fax (+44 20 3060 7000) or email (firstname.lastname@example.org or email@example.com). The RPC website can be accessed at www.rpc.co.uk.