No small beer: Court of Appeal examines rationale for departure from Retained EU law in reframing statutory acquiescence to use of a trade mark
Introduction
Statutory acquiescence is a defence against trade mark invalidity and infringement proceedings where the owner of an earlier trade mark had (actual or deemed) knowledge of the later trade mark for a period of five years, without initiating proceedings against the later mark (see here). The five-year period was traditionally calculated from the time when the earlier trade mark owner became aware of both the use and registration of the later trade mark. This was established in the case of Budvar, where the Court of Justice of the European Union (“CJEU”) outlined four requirements for establishing the defence of statutory acquiescence. This has remained the established position in the UK as Budvar formed part of the UK’s Retained EU Law (“REUL” following Brexit. The Court of Appeal, with particular direction from Arnold LJ, outlined a justification to depart from REUL and Budvar in Industrial Cleaning Equipment[1].
The Court of Appeal decided to exercise the power afforded to them under the European Union (Withdrawal) Act 2018, after taking significant cognisance from the murmurings of dissent in the European Union’s (“EU”) General Court and the EUIPO, to conclusively depart from Budvar. As a result, the five year period applicable in the UK for statutory acquiescence now runs from the date on which the existing proprietor of a trade mark becomes aware of the use of a later trade mark, irrespective of when they become aware of the trade mark’s registration. This decision may have ramifications for trade mark proprietors and outline the importance of exercising enforcement rights where available.
Background
The trade mark dispute principally concerns the use of the acronym “ICE”. The Claimant, Industrial Cleaning Equipment, provides retail, rental and maintenance services for commercial and consumer cleaning equipment in the UK, using the “ice” logo (below on the left), which has been used since 2007. There are two Defendants in the appeal, Intelligent Cleaning Equipment Holdings Co Ltd, who holds the Intellectual Property rights for the “ICE Group” (separate from the Claimant) and Killis Limited, the ICE Group’s UK distributor. The ICE Group broadly design and manufacture floor cleaning machines in China and import these to the UK.
The first Defendant is the proprietor of two international trade marks – one for the word mark “ICE” and another for the logo “ICE” registered in Class 7 and with the WIPO on 18 June 2015. In terms of the EUIPO, the wordmark was accepted on 24 May 2016 and the logo on 14 June 2016 respectively. These were replaced with comparable UK marks as a consequence of Brexit, which have a date of entry of 25 May and 15 June 2016.
The Claimant, despite previously denying any knowledge of use of the Defendants’ trade marks, eventually admitted knowledge of such use from circa July 2014. It was also discovered that the parties had a previous business relationship yet the Claimant insists that they were unaware of the Defendant’s trade marks until 26 July 2019. This is when the dispute began, where the Claimant alleged infringement of their trade mark and passing off. The Defendants relied on their EU trade marks, and the Claimant proceeded with filing for invalidation at the EUIPO. Despite attempts to negotiate, the claim form was issued on 24 May 2021, commencing formal proceedings.
IPEC Decision
The first instance decision granted the Claimant relief for trade mark infringement against the First and Fourth Defendants. The Court rejected the Defendant’s defence of statutory acquiescence, applying Budvar, such that the five year period only starts to run when the earlier trade mark proprietor has knowledge of both the use of the later trade mark and of its registration. The Judge also claimed that since the Claimant first became aware of the Defendants’ Trade Marks on receipt of the letter dated 26 July 2019, the claim form had been issued and served well before the expiry of the five-year period for acquiescence. The Defendants’ appealed this decision, resulting in the judgment of the Court of Appeal.
Court of Appeal
The Defendants’ appeal was based on two key elements:
- That it is not necessary for the proprietor of an earlier trade mark to be aware of the later mark’s registration in order for the five years to begin to run. It was sufficient that the later trade mark was registered and that the proprietor of the earlier trade mark was aware of the use of the later trade mark. This would require a formal departure from Budvar. (“Issue 1”)
- Where the later trade mark is an international trade mark, the registration date for the purpose of determining when the five years starts to run is the international registration date and not the date from which the trade mark is protected in the EU. The Defendants also contend that, if this was answered in the negative, then the relevant date is the date of acceptance, whereas the Claimant contends it is the date of publication. (“Issue 2”)
Issue 1 – Must the proprietor of the earlier mark be aware of the later mark’s registration for the five years to begin?
Current approach
Statutory acquiescence is found in s.48(1) of the Trade Marks Act 1994 (“TMA”) but as Arnold LJ explained in his judgment, this incorporated Article 9 of EU Directive 89/104 and implemented provisions from Directives 2008/95 and 2015/2436 on statutory acquiescence. This is important to appreciate given that the Defendant originally had EU trade marks. He later explained that although there were changes of the semantics pertaining to acquiescence between the various Directives, these changes were often not material.
Budvar
Arnold LJ proceeded to explain the existing approach in Budvar and its impact upon appeal processes through domestic and European Courts. He referred to the Budvar decision in the Court of Appeal, where they had sought CJEU guidance on acquiescence and in particular the commencement of the five year period under Art.9(1) of Directive 89/94.
In the CJEU’s judgment, at paragraph 74, The Advocate General stated that “the proprietor must be aware of the registration and use of the later mark” and concluded at paragraph 87 that “The five-year period…starts running from the time at which the proprietor of the earlier mark becomes aware of the registration and use of the later mark in the Member State in which the later mark has been registered.” The CJEU then proposed a four-pronged approach for statutory acquiescence, with condition four requiring awareness of both the registration of the later trade mark and the use of that trade mark after its registration.
Alternative approach in Ghibli and Marchi Italiani
Arnold LJ then referred to an earlier case Ghibli, where the Second Board of Appeal had taken a different approach, this time in relation to Article 53(2) of Regulation 40/94. In this case, Article 53(2) was interpreted to mean acquiesce to five years of use and whether they knew of the registration for five years was irrelevant. Furthermore, Arnold LJ referred to Marchi Italiani that followed Ghibli, where the Second Board of Appeal ruled that the period of acquiescence must precede the date of registration of the trade mark, as the use only exists after the date of registration. Interestingly, the Court of Appeal held that the EUIPO continue to regard Ghibli as sound law despite it seemingly being at odds with the guidance of Budvar.
Divergence by General Court
Arnold LJ then turned his attention to the departure from Budvar in the European Union’s General Court. In I Marchi Italiani, the General Court applied the four conditions to be satisfied to achieve acquiescence. However, they interpreted Article 53(2) of Regulation 40/94 that the relevant date starts running when the proprietor becomes aware of the use of that mark, which must necessarily be later than that of registration of the trade mark. In a CJEU appeal on I Marchi Italiani, the CJEU dismissed an appeal but did not explicitly comment on the contrast between the CJEU’s approach and the General Court’s. Arnold LJ then listed several cases that have seemingly followed in the same vein and despite the CJEU’s intention to bind, it appears that there has been a clear diversion in the EUIPO and General Court. As a result, Arnold LJ held that these discrepancies should be rectified.
Arnold LJ’s reasoning to depart Budvar
Noting the European Court and EUIPO’s divergence from Budvar, Arnold LJ held that the more natural reading of the operative words of Regulation 207/2009, Regulation 2017/1001, Directive 2015/2436 was that the proprietor of the earlier trade mark must be made aware of the user of the later trade mark but not the registration of the later trade mark. He echoed the sentiments of the Second Board of Appeal in Ghibli and stated that if legislative intention had been to require knowledge of both use and registration, then it would have been simpler to say so.
Arnold LJ referred to his comments in Coombe v Wolf (which we commented on here) where he outlined the distinction between registration and use, with the former conferring a negative right and the latter a positive one. Furthermore, use relates to the commercial market, whereas registration does not. Arnold LJ delved further, describing the premise of statutory acquiescence as a defence against an earlier proprietor who is insufficiently vigilant to stop the use of a later trade mark, and as a result proprietors should be encouraged to monitor the register. Interestingly enough, Arnold LJ was of the opinion that the current Budvar approach could have a perverse incentive for proprietors to not consult the register in order to prevent the five years from commencing. It was clear that Arnold LJ was uncomfortable with the requirement for knowledge of registration as an operative part of the test.
Departing from Budvar
Budvar was retained EU case law under s.6(7) of the European Union (Withdrawal) Act 2018 and under s.6(3), did continue to bind the lower courts. Although the Court of Appeal acknowledged the caution of departing from precedent, Arnold LJ, supported by Nugee LJ (with an excellent summary at paragraph 119-124) and Lady Justice King, ultimately agreed that this was the correct decision. The lack of explanation from the CJEU combined with the evidence disparity between subsequent judgments and Budvar resulted in Arnold LJ questioning whether the CJEU may depart from it in the future.
The Court of Appeal overruled Budvar, and held that the five year period must start to run when the proprietor of the earlier trade mark becomes aware of the use of the later trade mark and the later trade mark is in fact registered, whether or not the proprietor of the earlier trade mark is aware of the registration of the later trade mark. This not only meant the Defendant was successful on the first limb of their appeal but illustrates a subtle but significant shift for statutory acquiescence in the UK.
Issue 2: What is the registration date in the case of an international trade mark protected in the EU?
On issue 2, although not so significant, the Court of Appeal conducted an analysis of registering an EU Trade Mark under Regulation 207/2009. After assessing the approach in Budvar and Ghibli, and I Marchi Italiani, Arnold LJ held that this must be when the international trade mark is accepted by the EUIPO, not when it was registered as an international trade mark. The Court of Appeal did not believe it was necessary to divulge further, on whether it was the date of acceptance or the second republication date. As a result, however, the defendants were not successful on issue 2, as the claim form was issued in time to prevent a five-year period of acquiescence.
The Court of Appeal also dealt with passing off, concluding that, if the Claimant’s case of statutory acquiescence was successful, it would bar the Claimant’s claim for passing off as well as its claim for infringement of the Claimant’s Trade Mark.
Comment
This is a subtle but significant departure from an established area of law from the CJEU. Since Budvar, statutory acquiescence under s.48(1) of the TMA 1994 has been interpreted to require awareness of both the use of the later trade mark and the registration. However, it is now clear that following the Court of Appeal’s judgment, and in particular Arnold LJ approach, statutory acquiescence will run from the date the earlier proprietor was made aware of the use of the later trade mark, irrespective of whether they are aware of its registration.
The ramifications of this decision now broadens the defence of statutory acquiescence against a claim of infringement or invalidity in trade mark proceedings. Proprietors of trade marks must ensure they are proactively monitoring their portfolio and in the event there is a potential infringer, they must take action as soon as possible as the countdown is on from the minute you are aware of their use.
Article co-authored by Greg Rock, Trainee Solicitor at CMS
[1] Industrial Cleaning Equipment (Southampton) Ltd v Intelligent Cleaning Equipment Holdings Co Ltd & Anor [2023] EWCA Civ 1451.
