Prior rights and pizza

The UK Court of Appeal recently handed down judgment in Caspian Pizza and ors. v Shah and ors. [2017] EWCA Civ 1874, which has taken another look at whether someone with a valid ‘locality’ defence to trade mark infringement has sufficient right to invalidate the trade mark asserted against it.

Background and first instance

The background of the matter has some surprising complexity, simplified here to facts relevant to the Appeal for ease of reading. The Claimants own pizza take-away restaurants, set up originally in Birmingham in 1991. It expanded over time through licencing/franchising arrangements.

The Defendants operate several pizza restaurants in the Caspian Pizza name, the relevant one being the Worcester location, which opened in 2004.

The Claimants filed the trade mark CASPIAN (the “Caspian Mark”) registered with effect from 8 July 2005 in respect of restaurants. Subsequently, they filed the below “Device Mark” registered with effect from 21 September 2010 in respect of foodstuffs including items suitable for making pizzas.

The Claimants sued for infringement of its trade marks; the Defendants argued: 1) they had a valid defence under 11(3) of the Trade Marks Act 1994 (ie. an earlier right in respect of its locality); and 2) the trade marks should be rendered invalid under s47 and s5(4)(a), because the Defendants had a prior right which would be sufficient to found their own action for passing off at the time of registration.

The first instance judge held that there was a valid defence to trade mark infringement because the Defendant’s use pre-registration had established goodwill in that particular locality. It was held not relevant that the mark had been used first in Birmingham, as there is nothing in the law that makes reference to a prior use elsewhere in the UK.  Although this point was not appealed, the Appeal judge agreed it was good law.

The trial judge also held the Caspian Mark invalidly registered because, at the date of registration, the Defendants had established goodwill in the name in Worcester sufficient to have a passing off claim. The judge did not declare the Device Mark invalid, however, as it appeared the Defendant’s use was post-registration and generally could not rely on prior use.

The position up until that point (in Redd Solicitors v Red Legal) was that prior local use that was sufficient to provide a defence under 11(3) did not also establish a ground of invalidity under s47 and s5(4)(a).

The Appeal

The Claimant appealed against the finding of invalidity against the Caspian Mark; the Defendant counter-appealed that the Device mark should have been declared invalid (because of the dominance of the word CASPIAN in the device).

The devil in the detail of the Appeal is whether someone with a prior right, who may have a valid defence for infringement, should be able to prevent a later trade mark applicant from ‘encroaching’ into their local territory through a national trade mark filing.

Of relevance was a UKIPO decision (which was not considered in the Redd case) where the opponent to a trade mark registration was permitted to restrain the later applicant. It was noted by the Hearing Officer in that decision that the trade mark rules allow for a geographical limitation at the time of registration – or, in other words, the means to ‘not encroach’ on another’s territory already exist in the rules.

The first instance judge preferred this approach, as did the Appeal judges, and applied the reasoning to this case, which was a challenge to validity post-grant. In the judge’s view, the court did not have discretion, so long as the ground for invalidity was made out under s5.

The Claimants’ appeal was dismissed and the Defendants’ allowed, meaning both trade marks were rendered invalid.

Comment

Since the Redd decision, there has been a certain unease: the prior right holder could not be sued under a trade mark for its use in a particular locality, but was forever restricted to using the mark in that one locality as long as the national trade mark existed. While this may suit some businesses, on another reading, this was potentially an unintended consequence of the ‘first to file’ system which recognises that a trade mark is a national right.

Each case will always be determined on the facts, but it in this case the Court has confirmed that establishing prior rights (and goodwill) in a locality is a potential and powerful tool, not only where defending a trade mark infringement claim, but also if attacking a national trade mark post-grant.

This result for the Defendants should not be taken as confirmation that a company can operate risk-free without a registered trade mark. Best practice is always to seek advice of a legal professional at the earliest possible stage.