Warning 1: this post contains a liberal sprinkling of pizza-themed imagery and should under no circumstances be read on an empty stomach.
Warning 2: the recent Court of Appeal decision in Caspian Pizza Limited v Shah [2017] EWCA 1874 serves as a cautionary tale for businesses across the UK that a registered trademark can be invalidated if it is found that it was being used by another business operating in a particular place prior to registration.
Following the decision in Caspian, some unlucky businesses might find that their validly registered trademarks have vanished faster than a hot slice of takeaway pizza.
The Facts
The Appellants operate a chain of restaurants under the name “Caspian Pizza” in and around Birmingham. The first restaurant opened in 1991. The Respondents operate pizza restaurants in Worcester under the same name with the first opening in 2002. In 2005, the Appellants validly registered a national trademark for “CASPIAN”.
The High Court decision
At first instance (Caspian [2015] EWHC 3567 (IPEC)), it was argued that the Defendants (Shah) had entered into a franchise agreement with the Claimants (Caspian) in 2008, which had subsequently broken down in 2013. However, since 2013 the Defendants had still used the “CASPIAN” trademark, thereby committing an infringement according to the Claimants.
His Honour Judge Hacon QC found that there had been no franchise agreement. He also accepted the Defendants’ defence under s.11(3) of the Trade Marks Act 1994 that their use of the mark had established goodwill in the Worcester area prior to the Claimants’ registration. Therefore, the Defendants had an “earlier right” that would have allowed them to bring a successful passing off claim.
However, the Judge went a step further and ruled that not only did the Defendants’ establishment of goodwill in Worcester provide them with a defence under s.11(3) but it also meant that the Claimants had invalidly registered their trademark under s.5(4)(a) of the Act. Therefore, the Claimants not only lost their infringement claim but also had their validly registered trademark declared invalid. It was this invalidation of the registered trademark that formed the basis of the appeal.
The Court of Appeal’s decision
The Court of Appeal consisting of Lord Justices Gloster, Patten and Richards, unanimously upheld the decision of the Judge and dismissed the appeal.
Lord Justice Patten, giving the leading judgment, followed the decision in SWORDERS Trade Mark dated 28 July 2006 (O-212-06) in asserting that once a defence under s.11(3) of the Act has been established, invalidity under s.5(4)(a) automatically follows. At § 26, he stated that section 47 of the 1994 Act contains no provision allowing the Court to make a geographical carving out provision of the trademark. Therefore, the nationally registered trademark had to be invalidated in its entirety as opposed to being amended to exclude the Worcester area where the Respondents operate.
The consequences
This decision may have severe consequences for businesses across the UK who may find their validly registered trademarks are vulnerable to being declared invalid simply because a business operating in a particular place was using the trademark before it was nationally registered. The business that had registered the trademark does not have to know that another business was using its trademark in an obscure and localised part of the country in order to be affected.
In practical terms, the decision means that a business using a trademark in the outskirts of Dundee could invalidate the nationally registered trademark of a business based in London if the Dundee-based business can show that it used the trademark prior to registration in a localised area and could have brought a valid passing off claim.
The Court of Appeal’s decision invokes uncertainty and undermines the security that a validly registered trademark should bring. Whether the decision will be scrutinised by the Supreme Court is yet to be seen.
