Who owns Goodwill generated by an Employee or Partner?

1. City of Sheffield
2. Rotherham
3. Doncaster
4. Barnsley

Jane Lambert

Jay Bhayani is a well-known employment lawyer in Sheffield. When the Doncaster law firm Taylor Bracewell LLP wanted to set up an employment law department with an office in Sheffield they turned to Ms Bhayani to set one up. They agreed to make her a salaried partner and to practise from Sheffield in the name or style of "Bhayani Bracewell."

Ms Bhayani worked for the firm from 2011 until 2014 but then fell out with them. For a little while after she had left the firm they continued to practise from Sheffield in the Bhayani Bracewell name.  She sued them for passing off alleging that their continued use of the Bhayani Bracewell business name and certain other acts might lead people to believe that she was still working there. Taylor Bracewell replied that any goodwill that accrued to the Bhayani Bracewell name belonged to them and not to her.  They applied for judgment on the ground without a trial on the ground that Ms Bhayani had no real prospect of succeeding in her claim and there was no other compelling reason why the case should go to trial.

Taylor Bracewell's application came on before Judge Hacon in the Intellectual Property Enterprise Court ("IPEC") and his judgment is reported at Bhayani and Another v Taylor Bracewell LLP [2016] EWHC 3360 (IPEC) (22 Dec 2016). For anyone who is interested, I analysed the arguments and judgment in Case Note: Bhayani v Taylor Bracewell LLP - Goodwill generated by a Partner or Employee 19 Jan 2016.

Judge Hacon decided the point in favour of Taylor Bracewell.  After reviewing the case law he concluded that "in the general run, goodwill generated by the acts of an employee will be vested in the employer" and, similarly, "where an individual works in a partnership the goodwill generated by his acts will in the normal course vest in the partnership." However, he acknowledged that there were exceptions and considered what they might be and how they might arise. He concluded that an employee or partner acquires goodwill only in respect of activities outside the scope of the employer's or the partnership business. Applying that rule to the facts of the case before him. His Honour could find no reason why the general rules should not apply,

There were other issues in this case. The judge reviewed the principles by which the court can decide a case without a trial, the difference between reputation and goodwill for the purpose of an action for passing off and whether there was any scope for arguing that Taylor Bracewell's registration of the Bhayani Bracewell trade mark should be revoked on the ground that it was likely to mislead the public. Should anyone wish to consult me on any of those points, call me on 01484 599099 during office hours or send me a message through my contact form.

Sheffield Educational Charity's Trade Mark Case: NOCN v Open College Network Credit4Learning

In NOCN  v Open College Network Credit4Learning [2015] EWHC 2667 (IPEC) (25 Sept 2015) NOCN which is based in Sheffield sued its former affiliate OCN Credit4Learning for trade mark infringement and passing off for using the following sign:

The Trade Marks

NOCN had registered the following signs as well as the letters OCN and NOCN as trade marks for accreditation and certification services:

The Arguments

NOCN argued that it was the only organization in the country that was entitled to use the initials OCN or the swoosh device in relation to vocational qualification and accreditation services.  OCN Credit4Learning replied that OCN was short for "Open College Network" and counterclaimed for invalidation of the registration of the letters "OCN" as a trade mark.

The Decision

The action and counterclaim came on before His Honour Judge Hacon who held that NOCN had no monopoly of the use of the letters OCN and declared the registration of those letters as a trade mark to be invalid. However, he found that OCN Credit4Learning's use of the dot device in a sort of V shape around the words "OCN Credit4Learning" was too similar to the swoosh device in NOCN's trade marks and found that such use amounted to trade mark infringement and passing off.

The Reasons for the Decision

The judge came to his decision because a trade mark is supposed to distinguish one supplier's goods or services from those of all others. OCN is simply an abbreviation for "open college network" of which there are several in the UK. Some of these are affiliated to NOCN while others are not. If NOCN were allowed a monopoly of the abbreviation it would make it difficult for other open college networks to carry on their business.

On the other hand the letters "OCN" combined with the swoosh device were capable of distinguishing NOCN's services from those of other organizations. The dots device when combined with the letters "OCN Credit4Learning" looked very like NOCN's registered trade marks. Its use might lead people to believe that OCN Credit4Learning was somehow connected with NOCN.

If anyone is interested in the legal issues I have discussed them at length in When one charity sues another - NOCN v Open College Network Credit4Learning 4 Oct 2015 NIPC Law.

The Postscript

In a postcript to his judgment, Judge Hacon said:

"I now know that between them the parties, both charities, have incurred well over £400,000 on fees in this litigation. A very strong recommendation to settle at the case management conference was not taken up. The laudable cause of encouraging adult education will presumably have to endure an equivalent cut in funding solely because this dispute was not resolved at an early stage. Such an outcome is much to be regretted."

The action and counterclaim were brought in the Intellectual Property Enterprise Court, the successor to the Patents County Court, which requires trials to be completed in 2 days and limits the costs that one party can recover from the other to a scale (see Jane Lambert New Patents County Court Rules NIPC Law 31 Oct 2010). However, nothing in the new rules prevents lawyers charging their clients more than the costs that they can recover on the scale and that seems to have happened in this case.

Alternatives to Litigation

There are alternatives to litigation which parties to a dispute are required to consider (see paragraphs 8 to 11 of the Practice Direction - Pre-Action Conduct and Protocols). These include direct negotiations, mediation, expert determination, early neutral evaluation, arbitration and proceedings in the Intellectual Property Office.

Most disputes are settled by direct negotiations between the parties or their legal advisers. If conducted in the right spirit with a proper exchange of information and documents they can be the fastest and cheapest way of resolving a dispute. The Practice Direction promotes such negotiations by requiring parties to exchange information and documents in their letters of claim and response and they can be penalized if they fail to do so.

If a dispute cannot be settled by direct negotiations the parties are required to consider alternatives. One of the reasons why direct negotiations do not always succeed is that the parties do not usually know each other's bottom line or interests. Another is that bitter emotions and recriminations can get in the way. Mediation addresses those problems. It is essentially a form of negotiation where the mediator makes it his or her business to understand the underlying issues and suggest solutions which may not have occurred to either party but with which both may live. I am a mediator specializing in IP disputes and I sit on the WIPO and Consensus Mediation Panels. The Intellectual Property Office also offers a very cost-effective mediation service for trade mark and other IP disputes.

Expert determination, early neutral evaluation and arbitration are all forms of adjudication, that is to say where the parties agree to refer their dispute to a trusted third party for determination. ICANN's Uniform Domain Name Dispute Resolution Policy for generic top level domain name disputes and the IPO's opinion service for patent disputes is an example of early neutral evaluation.  The terms upon which neutrals are retained will depend on the needs and wishes of the parties. Our panel of arbitrators can sit as experts, neutrals or arbitrators in any kind of dispute though I specialize in IP.

Although the Registrar of Trade Marks does not have jurisdiction in infringement disputes his hearing officers can hear revocation and invalidity disputes. Proceedings before a hearing officer are more informal than court proceedings and can often be disposed of without a hearing. Costs are awarded in IPO proceedings but these rarely exceed a few thousand pounds.

Further Information

Should anyone wish to discuss this article or trade mark law or passing off in general call me on 01484 599090 during office hours or use my contact form.

Register your Registrable Rights at once

Over the last few days I have been advising a client who has been threatened with proceedings for Community trade mark infringement. Nothing unusual about that except that my client was the first to use the mark that he is now alleged to have infringed. In fact, he had been using the mark for quite a while before the other side applied to register the mark. It's just that he never thought of registering it for himself. And why should he because advertising and sales give the right to prevent others from using a trade mark, don't they? Why pay lawyers or attorneys to register something that is already yours.

In a sense that is right because nobody can pass off their goods or their services off as yours. As Mr Justice Arnold said in Enterprise Holdings, Inc v Europcar Group UK Ltd and Another  [2015] EWHC 17 (Ch) the elements of an action for passing off are as follows:

"(1) the claimant's goods or services have acquired a goodwill in the market and are known by some distinguishing name, mark or other indication;
(2) the defendant has used, or threatens to use, a name, mark or other indication which has led, or is likely to lead, the public to believe that goods or services offered by the defendant are goods or services of the claimant, or connected with it, and thus to a misrepresentation by the defendant (whether or not intentional); and
(3) the claimant has suffered, or is likely to suffer, damage as a result of the erroneous belief engendered by the defendant's misrepresentation"

(see my case note  Car Wars: Enterprise and Europcar 21 Jan 2015 NIPC Law).

A right to bring an action for passing off is an "earlier right" within the meaning of art 53 (2) of the Community Trade Mark Regulation (Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark OJ 24.3.2009 L78/1). My client could have opposed the registration under art 8 (4) of the Regulation and he could still apply for the invalidation of the registration under art 53 (2). But an action for passing off requires evidence of use such as sales figures and advertising spend and lots of samples of packaging and advertising just to satisfy the first element and you have to prove misrepresentation and confusion as well.

So much easier just to register the mark which you can do on-line from just £170. You can apply to register before you start trading and you are allowed up to 5 years from the date of application to register the mark before you need to use it. That means that you can prevent others from using the mark even before you have started to use it yourself which you could never do if you relied solely on passing off. Also, if you have applied for a mark in the UK or any of the other countries in the EU it is much easier to oppose or invalidate a subsequent Community trade mark.

This is not the first time that I have had to advise in a  case such as this. The last time it happened the client decided to re-brand as it was cheaper, easier and more certain than bringing cancellation proceedings in OHIM. And it is not just trade marks where this sort of thing can happen. It also happens with designs. In fact it is easier with registered or registered Community designs because there is no examination of prior art. So remember. If you have a brand or product design register the distinguishing sign or design first. Just like Spencer and Diana Hannah did with "Herdy" (see Case study Intellectual Property: Herdy 21 Jan 2015 IPO website).

If you want to talk about this article or trade marks or registered designs in general give me a ring on 01484 599090 during office hours or use my contact form.

The Tour de France and ambush marketing

Holmfirth - the Tour de France passes through my home town

The Tour de France is of particular interest to me this year because the route passes a few hundred yards from my front door. Crash barriers have already been erected along Chapel Hill in Huddersfield and the route is festooned with yellow, green, white and polka dot flags. As everyone in this county knows, the Tour is setting off from Leeds and two of the stages are taking place in Yorkshire with a third in the East of England. There has been an arts festival since the 27 March 2014 and an international business festival in Leeds this week.

Like all major sporting events the Tour is dependent on sponsorship but sponsorship is vulnerable to ambush marketing. To protect the sponsors of the London Olympics from ambush marketing new intellectual property rights were created, namely Olympic association right by the Olympic Symbol etc. (Protection) Act 1995 and London Olympic association right by the London Olympic Games and Paralympic Games Act 2006. HM government was obliged to enact this legislation by the host city contract which it signed with the International Olympic Committee. Such feather bedding for the Olympic sponsors was criticized by many at the time including me (see "Olympics Association Right and London Olympics Association Right" 31 July 2012 NIPC law).

There has been nothing like those association rights for the Tour with the result that there has been a blossoming of yellow bicycles, assorted coloured flags and tea rooms and pubs throughout the county have broken out in measles (or is it polka dots). No doubt this decoration has been with the permission of the tour organizers but could anything be done about it if it was not? La Société du Tour de France has registered a number of Community and UK trade marks for the words "Le Tour de France" and some of the Tour's symbols for a large number of classes but it does not seem to have registered the colours of any of the maillots or indeed the polka dots. There is the the law of passing off, of course, but I would not like to argue that yellow, green or red spots is associated with the Tour and none other. In any case, by the time an application for an injunction came before the courts the cyclists would be well on their way to Champs-Élysées.

So tant pis as our friends across the channel would say, but does it matter?  I would reply "ce n'est pas grave",

Geographical Indications - "If it's outside Yorkshire it's not worth ..................!"

The first day of August is Yorkshire day. Originally it commemorated the battle of Minden 1759 at which the 51st Regiment of Foot distinguished itself but it is now a celebration of all things Yorkshire. My home town of Holmfirth celebrated the day with all sorts of events as you can see from the Holmfirth Yorkshire Day Facebook page. I think that there were more Yorkshire flags around town for Yorkshire day than there were union flags for the royal wedding or even HM's diamond jubilee.

And why not. Yorkshire is a grand place, isn't it.  In the words of the Yorkshire Airlines sketch "If it's outside Yorkshire it's not worth bloody visiting. And the same goes for food and drink, right.  So how can you make sure that what you eat and sup actually originate from God's own county.

Well art 22 (2) of TRIPS requires members of the World Trade Organization to "provide the legal means for interested parties to prevent:

(a) the use of any means in the designation or presentation of a good that indicates or suggests that the good in question originates in a geographical area other than the true place of origin in a manner which misleads the public as to the geographical origin of the good;
(b) any use which constitutes an act of unfair competition within the meaning of Article 10bis of the Paris Convention (1967)."

For the purposes of this article geographical indications are defined by art 22 (1) as "indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin."

Traditionally the UK has protected geographical indications by the registration of collective and certification marks under s.49 and s.50 of the Trade Marks Act 1994 and the law of passing off (see Bollinger v Costa Brava Wine Co Ltd [1960] Ch 262, Vine Products Ltd v Mackenzie & Co Ltd [1969] RPC 1, John Walker & Sons Ltd v Henry Ost & Co Ltd [1970] 1 WLR 917 and Taittinger v Allbev Ltd [1993] FSR 641). These are now reinforced by Regulation (EU) No 1151/2012 of the European Parliament and of the Council of 21 November 2012 on quality schemes for agricultural products and foodstuffs (OJ 14.12.2012 L343/1).

This regulation provides three types of protection:

• Protected designation of origin ("PDO") which covers agricultural products and foodstuffs that are produced, processed and prepared in a given geographical area using recognised know-how;

• Protected geographical indication ("PGI") which covers agricultural products and foodstuffs closely linked to the geographical area where at least one of the stages of production, processing or preparation takes place in the area; and

• Traditional speciality guaranteed ("TSG"} which highlights traditional character, either in the composition or means of production.

Art 13 (3) of the Regulation requires  member states to take appropriate administrative and judicial steps to prevent or stop the unlawful use of PDI and PGI that are produced or marketed in their territories. 

Applications for registration of a product are made to the competent authority of any of the member states which in the case of the UK means the Regional and Local Food Team, Food and Family Group at the Department for Environment, Food and Rural Affairs ("DEFRA"), Area 8E, 9 Millbank, Nobel House 

17 Smith Square, London SW1P 3JR. Tel: 020 7238 6623 Fax: 020 7238 5728. The application then proceeds according to the following schematic:

So what Yorkshire goodies have achieved protected status under any of those schemes? Not a lot as it happens.  Swaledale and Swaledale ewes cheese and Yorkshire forced rhubarb so far though an application has just been published for Wensleydale cheese.

Geographical indications will be one of the topics I will discuss in my seminar on Branding - Trade Marks, Passing off, Domain Names, Geographical Indications in London on 25 Sept for which there are still a very small number of places. If you want to discuss how to achieve PDO, PGI or TSG status for your local produce or indeed to object to someone else's application for such status contact my  my clerk Stephen on 01484 599090 or fill in my contact form.  You can also follow me on twitter, Facebook, G+, Linkedin and Xing.

Talk to Halifax Law Society: Trade Marks and Passing Off

I have been asked to talk about trade marks, passing off, geographical indications and the legal protection of brands generally to Halifax Law Society at the White Swan Hotel in Halifax on Tuesday, 20 March 2012 between 13:30 and 15:30.


My talk will cover the following topics:

• Definitions: what is a brand and what is a trade mark;
• Common law protection of brands;
• Trade mark registration;
• TRIPS, Paris and Madrid;
• Trade mark directives;
• Trade Marks Act 1994;
• Community trade marks;
• Registration in the Trade Mark Registry and at OHIM;
• Objecting to a registration: third party observations, opposition, invalidity and revocation;
• Infringement proceedings in the Chancery Division and the Patents County Court;
• Passing off;
• Geographical Indications;
• Domain names; and
• Company Names Tribunal.

For further information, my contact at Halifax Law Society is Carol Stevenson of Finn Gledhill on 01422 330000 or enquiries@finngledhill.co.uk but the Halifax Law Society blog also invites enquiries to David Swarbrick (@dslippy) at dwarb@gmail.com on 0795 457 9992. I am also happy to be contacted on  0113 320 3232 or through my contact form and I shall pass on any enquiries to Carol or David. 

Finally, I wish you all a happy New Year.

Beer and Trade Marks: Samuel Smith v Lee

"This is a case about Yorkshire pride, in more ways than one" said Mr. Justice Arnold in the first sentence of his judgment Samuel Smith Old Brewery (Tadcaster) v Lee (t/a Cropton Brewery) [2011] EWHC 1879 (Ch) (22 July 2011). He continued:

"The protagonists, Samuel Smith and Cropton Brewery, are two proud, small, independent Yorkshire breweries. There is no dispute about the quality of their respective beers. The casus belli is Samuel Smith's claim that Cropton Brewery has infringed Samuel Smith's registered trade mark for a stylised white rose device, and committed the tort of passing off, by use of labels incorporating two similar stylised white rose devices. For the uninitiated, a white rose is the traditional symbol of the county of Yorkshire, having been the emblem of the House of York during the Wars of the Roses. The dispute is one which ought to have been capable of settlement out of court a long time ago. Instead it has grown into a case which is out of all proportion to what is at stake in commercial terms. One explanation for this is Yorkshire pride; but I fear that the English legal system bears a measure of responsibility as well."

The causes of action were trade mark infringement and passing off. There was also a counterclaim for groundless threats under s.21 of the Trade Marks Act 1994.

The Trade Marks

The claimant company had registered two trade marks but the one around which this case revolved was 1,006,571 for beer in class 32. Its other mark was 2,005,780 in respect of "draught and bottled beer, all brewed in Yorkshire" in Class 32. Although that mark had been pleaded the judge made no further reference to it in his judgment.

The Alleged Infringements

Mr. Lee, the proprietor of Cropton Brewery had produced two labels to which Samuel Smith objected. One was for "Yorkshire Bitter" distributed by Marks and Spencer shown to the left.

The other was "Yorkshire Warrior" which was marketed partially to raise money for the benefit of troops serving in the Yorkshire Regiment shown below.

The Arguments

The claimant complained that the "Yorkshire Bitter" and "Yorkshire Warrior" labels infringed its trade marks under art 5 (1) (b) of the Trade Marks Directive (that is to say s. 10 (2) of the Act) and also art 5 (2) or s.10 (3) and that such use also amounted to passing off. The defendant argued that the white rose elements of the signs complained of are "indications concerning the … geographical origin" of the goods, namely Yorkshire. The threats were alleged to have been contained in letters to Marks & Spencer from the claimant's trade mark agents and solicitors on 10 Dec 2007 and 7 July 2010 respectively.

Decision

Mr. Justice Arnold held that:

(1) The "Yorkshire Bitter" label did not infringe Samuel Smith's registered trade mark;

(2) The "Yorkshire Warrior" one did, but

(3) Mr. Lee had a defence under art 6 (1) (b) of the Directive or s.11 (2) of the Act in respect of its use before the end of October 2009 but not afterwards;

(4) the use of the "Yorkshire Warrior" amounted to passing off though the use of the "Yorkshire Bitter" one did not; and

(5) the counterclaim failed because the defendant had not been a person aggrieved in respect of the first letter and the second letter did not amount to a threat.

How the Judge reached his conclusions

Throughout his judgment, his lordship referred not to the Act but to the EU legislation that is implemented by the Act. He probably did that as he directed himself in the principles derived from the well known decisions of the Court of Justice of the European Union on all the points that were before him. These are so well known that it would be otiose to repeat them but if anybody wants to look them up those on the art 5 (1) (b) or s.10 (2) point start at paragraph [76], those on art 5 (2) or s.10 (3) at paragraph [107] and those of the art 6 (1) (b) or s.11 (2) defence at paragraph [111].

As to why "Yorkshire Bitter" did not infringe, he said this at paragraph [105]:

"So far as Yorkshire Bitter is concerned, the identity of the goods and the distinctive character of the Trade Mark favour a likelihood of confusion, but the differences between the white rose device and the Trade Mark, the remainder of the sign and the identification of Cropton Brewery as the producer on the front of the label all militate against it. Samuel Smith has not adduced any evidence of weight to demonstrate a likelihood of confusion. Samuel Smith's dilatoriness in pursuing Marks & Spencer and Cropton Brewery over the matter suggests that it did not consider that there was a real likelihood of confusion. I infer that Yorkshire Bitter was only included in the case because Samuel Smith thought it would look odd to pursue Yorkshire Warrior without pursuing Yorkshire Bitter. Be that as it may, the evidence of experience strongly suggests that there is no likelihood of confusion. Overall, I am not persuaded that Samuel Smith has established that there is a likelihood of confusion."

As to why "Yorkshire Warrior" did, he said at [106]:

"Turning to Yorkshire Warrior, the identity of the goods and the distinctive character of the Trade Mark again favour a likelihood of confusion. In this case the white rose device is more similar to the Trade Mark, and it is more a dominant element of the sign, than in the case of Yorkshire Bitter. Importantly, Cropton Brewery is not identified as the producer on the front of the label. Furthermore, I think many consumers would miss the small print identifying it on the rear of the label. The evidence of the three independent witnesses considered above is some evidence of a likelihood of confusion, although not strong evidence. As I have explained, there is also the evidence of how Yorkshire Warrior has been sold in at least one retail outlet. Although there is no evidence of actual confusion in practice, for the reasons given above it is more difficult to place confidence in this as showing there is no likelihood of confusion than in the case of Yorkshire Bitter. In my view the majority of consumers will not be confused. Overall, however, I am persuaded that there is a likelihood that some consumers will be confused into believing either that Yorkshire Warrior is a Samuel Smith product or that it has some other connection with Samuel Smith."

The art 6 (1) (b) defence requires "use is in accordance with honest practices in industrial or commercial matters." The Yorkshire Warrior label is based on the cap badge of the Yorkshire Regiment which the defendant honesty and reasonably thought he had been licensed to use but on 22 Oct 2009 the colonel of the regiment asked him to stop.

As to passing off, the absence of evidence of confusion scuppered any cause of action in respect of the "Yorkshire Bitter" label but the reasoning set out in paragraph [106] above sufficed in respect of "Yorkshire Warrior".

The reason why the defendant was not a person aggrieved in respect of the first letter is that Marks & Spencer do not seem to have taken much notice of it. They continued to buy "Yorkshire Bitter" for over two years after receiving the letter and did not even pass on the letter to the defendant at first. The second letter went out of its way to assure Marks & Spencer that it did not wish to drag them into the proceedings.

Mediation

The judge's postscript was that in future mediation should be explored for disputes of this kind as soon as practicable. The IPO offers an excellent mediation service as does WIPO and indeed do NIPC. The IPO has listed a whole lot of other mediation providers of whom I am one. Anyone who wants to learn more about mediation and other types of ADR should call me on 0800 862 0055 or contact me through this form.

Trade Marks and Passing Off: Tubzee Ltd v Safron Foods Ltd and Others

This was a trade mark and passing off case between two Halifax kulfi makers. 

The claimant company, Tubzee Ltd., had registered a number of signs as British and Community trade marks for kulfi including the following:

It complained that the defendant, Saffron Foods Ltd and its directors had infringed its registered trade marks marks by adopting packaging that included

(1) a "K" with a dropped tail extending under the letters "ulfi"; and

(2) 2 circular pots pointing inwards pouring a white liquid in a vertical stream.

Two members of the public said that they had been misled into purchasing Saffron's products by such get-up.

A claim was launched by Tubzee in November 2007 and came before Judge Behrens sitting in Leeds last week (Tubzee Ltd v Safron Foods Ltd and Others [2008] EWHC B15 (Ch) (7 Oct 2008)). The judge accepted the consumers' evidence and found that there had been trade mark infringement and passing off.   He also found that Saffron's directors were personally liable as joint tortfeasors though his reasoning on the point is very sketchy.

Now I have blogged this case even though there was not much law in it for two reasons. First, it was heard in Leeds and the more publicity that is given to IP cases tried in the North the better. Secondly, it was a case in which the successful party was represented not by solicitors but by patent attorneys, namely Franks & Co. of Sheffield. I might add that the claimant's counsel was once Kate Kennedy but one would have to be a St Andrean to understand the significance of that.