Inter Lotto (UK) Ltd. v Camelot Group Plc

The Defendant, Camelot, operates the National Lottery under licence from the National Lottery Commission (“NLC”). The claimant, Inter Lotto operates lotteries in public houses, under the name, “HOTSPOT”. The present proceedings concern a particular feature of the lottery organised by Inter Lotto, which enables a player to ask for draw numbers to be selected randomly, and the similar name of a lottery game run by Camelot.

Inter Lotto uses the name “HOTPICK”. According to its case, the name “HOTPICK” was chosen in July 2001. In August 2001 it began promoting HOTPICK in conjunction with its registered trademark “HOTSPOT”, through a sales force targeting public houses in the UK. Until the middle of September 2001, use of the name HOTPICK was oral, but at that time it was used in printing tickets. It claims that by 17^th October 2001 (one of the critical dates for the present proceedings) a total of almost 7,000 pubs had been visited, of which 424 were signed up with Inter Lotto. However, it was not until 28^th November 2001 that there was actual operation of its HOTSPOT game, with the “HOTPICK” feature.

Turning to Camelot’s case, it says that it chose the name “HOTPICKS” for its game in August 2001. On 17^th October 2001 it caused the NLC to apply to register the name as a trade mark for lottery services. That application was accepted by the Registrar of Trade Marks and advertised for opposition on 7^th August 2002, under the number 2283392. It was opposed by Inter Lotto on 7^th November 2002. In the meantime, on 29^th April 2002 Camelot had announced the re-naming of the National Lottery draw as “Lotto” and had begun to advertise the launch of a new “Lotto Hotpicks” game. The “Lotto Hotpicks” game first became available for play by the public on 10^th July 2002.

In January 2003 Inter Lotto brought proceedings against Camelot for trade mark infringement and passing off. It claims that it has suffered, and is continuing to suffer, significant commercial damage as a result of the confusion between the two games. The present appeal concerns a preliminary issue ordered on 19^th March 2003 by Patten J with the consent of the parties in the following terms:

This issue requires a little elaboration to understand its significance in the context of these proceedings. We are concerned with the relationship of trade mark law and passing off law. Inter Lotto seeks to rely on the well-established principle that liability in passing off falls to be determined as at the date when the defendant goes to the market under the mark or name in question. On this basis its claim is to be judged not earlier than April 2002 when Lotto Hotpicks was first launched, and by which time, according to its case, its own HOTPICK game was well-established.

Camelot, however, contends that the relevant date is 17^th October 2001, the date of its application for registration. It argues that, under the terms of the Trade Marks Act 1994, it was entitled to register the mark as at that date, unless Inter Lotto was able to establish a passing off claim by virtue of its own use prior to that date; and that any use since then by Inter Lotto should be regarded as unlawful, and not therefore such as to reinforce Inter Lotto’s claim in passing off.

There is no material dispute as to the applicable law of passing off. A trader may not conduct his business so as to lead to the belief that his goods or services are the goods or services of another. To bring such an action the plaintiff must establish a goodwill or reputation attached to his goods or services. The relevant date for that purpose is the date of the commencement of the conduct complained of (see Cadbury Schweppes Property Ltd v The Pub Squash Co Ltd[1981] RPC 429, 494 per Lord Scarman). Accordingly, apart from the effect of trade mark law, Inter Lotto would be entitled to rely on any goodwill built up at least by the time Camelot began to market their new game in April 2002.

The debate in this case therefore turns on the interaction of this law with the provisions of the Trade Marks Act 1994. For present purposes, the relevant provisions are as follows. Section 2 provides:

Section 3 ff deal with grounds for refusal of registration. Section 5 (4) is material to this case:-

Section 9 deals with the rights conferred by a registered trade mark. Sub-section (1) provides that the proprietor of registered trade mark has “exclusive rights” in the trade mark which “are infringed by its use in the United Kingdom without his consent”. By sub-section (3) -

Section 32 provides for applications for registration. It requires the applicant to state that the mark is being used in connection with services specified, or that he has a bona fide intention that it should be so used. The registration procedure is covered by section 37 ff. The Registrar makes an initial examination to satisfy herself that the application satisfies the requirements of the Act (s 37). It is then published, and there is an opportunity for any person within the prescribed time to give notice of opposition to the registration stating the grounds of opposition (s 38). If no opposition is given within the prescribed period, or if all opposition proceedings have been withdrawn or decided in favour of the applicant, the Registrar must register the mark, unless matters coming to her notice since she accepted the application show that it was accepted in error (s 40).

As already noted, the registration takes effect as of the date of the filing of the application. The trade mark is initially registered for ten years, with the possibility of renewal (s 42-3). However, a registration may be revoked if it has not been put to genuine use within five years (s 46(1)(a)); or if –

In the court below, and in the skeleton arguments before us, there was lengthy discussion of the background of the various provisions, going back (in this country) to the Trade Marks Registration Act 1875, and (in the European context) to the 1980 Commission proposals which led in due course to the 1988 Directive and the 1993 Regulation.

Such historical analysis has to be approached with caution. The background of the 1994 Act was described recently in the House of Lords:

As that summary makes clear, the 1994 Act is a hybrid. There are two main European sources: the Directive, aimed at harmonisation of the national trade-marks laws, and the Regulation, introducing the new Community trade-mark. However, many of the basic concepts are derived, in some cases solely, from previous domestic law. Old authorities may be of assistance, but:

The lack of a single historical point of reference is apparent in relation to the provisions most directly in issue in this case. Section 2(2), on which Inter Lotto principally relies has its counterpart in previous domestic legislation, but the wording has changed. Section 2 of the Trade Marks Act 1938 stated:

Mr Hobbs also referred to parallels in the European context. The preamble to the 1989 Directive includes the following:

Turning to the grounds of objection to registration, sections 3 and 5 of the 1994 Act (“absolute” and “relative” grounds for refusal) follow closely the format of Articles 7 and 8 of the Regulation, and conform to Articles 3 and 4 of the Directive. In particular, the concept of an “earlier right”, as defined in section 5(4), reflects Article 8(4) of the Regulation and Article 4(4)(b) and (c) of the Directive. It has no direct parallel in the Trade Marks Act 1938, although there is some overlap with section 11 of that Act (prohibition of deceptive matter; see Kerly para 8-102n.). By contrast, section 7, which preserves for limited purposes the concept of “honest concurrent user”, has no basis in the Directive (see Kerly para 8-112ff).

Section 9(1) of the 1994 Act, defining the rights conferred by a registered trade mark, follows Article 9 of the Regulation and Article 5 of the Directive. There is, however, no direct parallel in the European provisions for section 9(3) (applying s 40(3)), by which such rights, having been registered, are treated as effective from the date of the application.

This aspect of the 1994 Act is apparently derived from domestic legislation. Section 19(1) of the 1938 Act provided that a trade mark when registered “shall be registered… as of the date of the application for registration”. By contrast, under Article 5.1 of the Directive, the rights there defined are conferred by “the registered trade mark”; there is no provision for retrospective effect.

Article 9.3 of the Regulation goes a little further than the Directive. It provides that the rights conferred by a Community trade mark “shall prevail against third parties from the date of publication of registration”, but adds:

These examples confirm the view that the safest course is to concentrate on the terms of the 1994 Act. Under the Marleasing principle, it may be necessary to refer to the terms of the Directive to ensure conformity with the mandatory European rules for harmonisation. But reference to previous legislation in this country, or cases based on it, is likely to be of limited assistance in resolving problems created by the interaction and reconciliation of the two systems.

There is some disagreement as to whether the judge correctly understood Camelot’s case. Early in the judgment, he summarised the respective contentions as follows:

That summary, as I understand it, fairly encapsulates the issue before us. However, the judge understood that Camelot was also putting forward a broader case. He explained the two possible formulations in this way:

Before us Mr Silverleaf says that the judge misunderstood his case. As he puts in his skeleton argument:

He accepts that the judge having dealt with the broader issue, correctly formulated the narrower issue (in the introduction to paragraph 42) as follows:-

In that part of his judgment, the judge treated the case as based on the principle “ex turpi causa non oritur actio”. He characterised the “underlying principle” as being that “the behaviour of the party has been so heinous that the Court will not assist it”. He rejected its application in this case; he said:-

Mr Silverleaf says that his argument was much less far-reaching than the Judge thought. The scheme of the Act is that “earlier rights” (as defined in s 5(4)) are protected against an applicant for trade mark registration, but subsequent rights are not. That is the effect, on the one hand, of the protection of earlier rights under section 5(4), and, on the other, of the retrospective effect of registration, back to the date of application. As between the parties, that means that the rights must be defined as at the date of application for registration. How this would affect third parties is not in point; nor is any general principle relating to the “ex turpi causa” rule.

The real dispute, in my view, is masked by the form of the preliminary question:

Camelot’s case, as I understand it, does not depend on challenging that aspect of the established law of passing off. It is directed, not so much to the relevant date for the claim, as to what is to be taken into account in determining it. Infringing use after the date of the application must be ignored because it is (prospectively) unlawful.

The argument has the following stages:-

If Inter Lotto can establish its reputation and goodwill as at the date of the application, then it will be able to defeat the registration by virtue of an “earlier right” as defined in section 5(4). Even after registration, its “earlier right” would enable it to seek a retrospective “declaration of invalidity” (s 47(2)(b)). Such an earlier right is only defeated if the owner acquiesces for five years in the use of the registered trade mark (s 48(1)).

By contrast, if it is unable to establish an “earlier right” as at that date, it will have no valid grounds for opposing registration. The mark once registered will have retrospective effect from the date of application, and Inter Lotto will in principle be liable in damages for any infringing use from that date.

Thus, the date of the application is the critical date for establishing the relative rights of the two parties. Camelot cannot use its trade mark application to defeat any rights of Inter Lotto, acquired by virtue of use before that date. Conversely, if Inter Lotto has acquired no rights by that date, any subsequent infringing use will be unlawful as against Camelot, and cannot therefore be relied on to improve its passing off claim. To allow it do so would undermine the exclusive rights given by section 9 to the proprietor of the trade mark registration.

The fact that the unlawfulness will only be established retrospectively, following actual registration, cannot affect the principle of the matter. Furthermore, delay caused by opposition proceedings, which on this hypothesis would be unfounded, should not be allowed to improve the objector’s rights.

This view of the scheme of the 1994 Act is reinforced by section 48. That contains specific provision for the effects of acquiescence by owners of “earlier rights”, as defined in section 5, including rights under passing off law. There is no equivalent recognition of the possibility of “later rights” - that is, rights acquired, or improved, by use between the dates of application and actual registration.

The argument as so put is much narrower than that dealt with by the judge. It is unnecessary to determine whether he correctly understood the submissions made to him at that stage. It is enough to record that Mr Silverleaf does not submit before us that a registered trade mark confers a statutory right to use the mark, which overrides other rights. He accepts, as the judge said, that the right acquired by registration is a negative right, that is, a right to prevent others infringing.

Furthermore, before us Mr Silverleaf had not based his argument on the “ex turpi causa” (or “illegality”) principle. In my view he is right not to do so. The difficulties in determining the scope of the principle are notorious (see Law Commission Consultation Paper, “The Illegality Defence in Tort” CP 160). However, the starting point is criminal illegality, or (possibly) “other reprehensible or grossly immoral conduct” (Ibid para 1.14; the Law Commission could only find one case, in the 19^th century, where the principle had been successfully invoked in relation to conduct which was not also criminal). As the judge observed (para 44), there is some precedent for its application in the context of trade mark and passing off, where there has been misrepresentation amounting to “a fraud on the public.” However, nothing of that kind is alleged here. Furthermore, the legislation has provided that, until publication of actual registration, infringing use does not involve any criminal offence (s 9(3)(b)). Given that specific indication in the statute, I do not see how it can be open to us to hold that such use is to be disregarded under some more general “illegality” principle.

The argument therefore has to be based on the effect, express or implied, of the 1994 Act. In essence, the submission must be that it is inconsistent with the scheme of that Act, and the nature of the exclusive right conferred by registration under it, that it should be overridden by use rights acquired since the date of application.

If we were required or permitted to treat the 1994 Act as a comprehensive legislative scheme governing the relationship between registered trade marks and passing off, I could see much force in this submission. By defining and providing for “earlier rights”, the Act does give special recognition to rights acquired by use before the date of application. There is no equivalent recognition of the possibility of superior rights being acquired by use after that date. The natural implication might be that, in determining the extent of any potentially competing rights, such subsequent use is to be disregarded.

However, I do not think that course is open to us. It is ruled out by section 2(2), which provides expressly that the Act does not affect the law of passing off. This wording, as already noted, is even clearer than the corresponding provision in the 1938 Act. If the section had referred simply to its effect on “rights of action… for passing off” there might have been some room for a narrower interpretation: for example, limiting it to rights of action enjoyed by the owner of the trade mark (as the judge suggested: para 30), or rights acquired by another party before the application for registration. However, the clear effect of the section in its present form, in my view, is to confirm that the law of passing off is preserved, notwithstanding any apparent conflict or overlap with the provisions of the Act.

It is fair to say that this position is not wholly unqualified. There is at least one aspect of the 1994 Act which impinges directly on the law of passing off, that is the loss of rights by acquiescence (s 48). However, this is an express provision. In my view, section 2(2) leaves no room in the present context for the implication of terms, designed by purposive interpretation to resolve an apparent conflict with passing off law.

This conclusion is less surprising when one has regard to the history of the two systems of law. Since the beginning of the 20^th century trade mark rights have been based on registration, while passing off rights have based on use (see British Telecommunications Plc v. One In A Million Ltd[1999] FSR 1,8-9, where the history is summarised by Aldous LJ). There has sometimes been an uneasy relationship between the two, but it has never been doubted that they are to be considered separately (see Campomar Sociedad Ltd v. Nike International Ltd(2000) 46 IPR 481, for a recent authoritative review by the High Court of Australia). The 1994 Act might have been designed to achieve a tidier relationship, but that is contradicted by section 2(2).

I acknowledge that this leaves open some questions which may arise in the future, either in this case if and when Camelot’s mark is finally registered, or in other more extreme circumstances. The judge suggested a notional example:

Mr Silverleaf stands by that submission. He says that it is misleading to speak of the second trader “taking” goodwill and reputation built up by the first trader. He has only done so by use which, by virtue of section 9, is an infringement of the second trader’s rights, and for which he has a statutory right to claim damages.

Mr Hobbs’ position on the notional example is less clear. He accepts, as I understand it, that the first trader’s use would in principle be an infringement of the second trader’s trade mark rights, as from the date of the application, and that he could claim damages for loss caused by that use (although the measure of damages might be open to question). As to future use, he seemed to have three possible answers. The first was that the first trader would be able to secure revocation of the trade mark under section 46(1)(d), on the basis that its use would be liable to mislead. Alternatively, he submits that both traders would be entitled to injunctions to restrain each other. Finally as a last resort, he falls back on the comforting Latinism – solvitur ambulando; in other words, “things will sort themselves out”.

None of these suggestions seems wholly satisfactory, but I do not think that we can resolve this issue within the terms of the preliminary question. The consequences of retrospective effect, in the new Community-led system, may not have been fully worked out in the Act (cf Percy v Hall[1997] QB 924, for the analogous problem of retrospective invalidity in public law). However, these potential future difficulties do not persuade me that, contrary to the clear effect of section 2(2), we can read into the 1994 Act provisions designed to reconcile the two systems for the purposes of the limited question before us.

Finally, I should note Mr Silverleaf’s submission that, if we were against him, there should be a reference to the European Court of Justice to determine whether this conclusion is compatible with the registration scheme laid down by the Directive and the Regulation. I do not agree. The issue arises from the retrospective effect given by English law to a registered mark back to the date of application. In that respect, as I have already noted, English law provides greater protection for the registered right than is required by the Directive. The problems which it creates are ones of domestic law, and would not be a proper matter for a reference.

For these reasons, which differ in some respects from those of the judge, I would dismiss the appeal.

I agree.

I gratefully adopt Carnwath LJ’s summary of the facts. Inter Lotto and Camelot each run lotteries. Inter Lotto used the name HOTPICK for a particular feature of their game, and used it first. They canvassed many public houses to promote the game in the summer of 2001. They began to operate it on 28 November 2001.

Camelot did not begin to operate the game until 10 July 2002, though they had about two months earlier begun to advertise. They had, however, on 17 October 2001 applied (by the National Lottery Commission) to register the name HOTPICKS under the Trade Marks Act 1994 (“the 1994 Act”) as a trade mark for lottery services.

The preliminary question has been framed with a view to deciding the date at which the respective rights of the parties in the name are to be determined. Mr.Silverleaf QC, for Camelot, submits that a complete solution is provided by the 1994 Act and in particular by Section 5(4) and Section 40(3). It is submitted that the 1994 Act comprehensively provides for the resolution of any conflict which arises between competing claims to particular trade marks, whether the claims arise by virtue of competing registrations or by conflict between registrations and common law rights of action for passing off gained by a user.

Section 5(4) provides:

Section 5 makes provision for protection of earlier rights but makes the date of application for registration crucial to the resolution of competing claims, it is submitted. Rights crystallise at that date. Under Section 5(4) registration should be refused if there existed at the date of application a conflicting passing off right, but a right which comes into existence after the date of application does not affect the grant of registration. Where a trader claims he has a right to sue for passing off which prevents a second trader obtaining a trade mark registration, he has to show that the right existed at the date of application for registration. If he establishes that it does, the application should be refused (or if it has already been granted, it should be declared invalid and removed from the register (Section 47(2)). If, on the other hand, a trader claiming that he has a passing off right cannot show that the right existed at the date of application for registration by a second trader, the second trader is entitled to registration and to complain of the use by the first trader of the trade mark from the date of application for registration, though he cannot bring an action for infringement until the mark is registered (section 9(3)). That is so even if the first trader has between the date of application and the grant of registration (which may include the period between the date of application and the second trader’s first use of the mark), built up a reputation and goodwill under the mark.

The Court has not been told why Inter Lotto did not apply to register HOTPICK when they began their canvass. If Mr. Silverleaf’s submission is correct, they are plainly in a much weaker position in that they can rely only on events before 17 October 2001 as establishing a claim to reputation and goodwill sufficient to support a claim in passing off against Camelot and not also on events up to the date on which Camelot began to use the mark.

The beguiling feature of Mr. Silverleaf’s submission is the clear-cut solution it provides. Considerations as to use are subjected to the overriding importance of the application date. It also avoids the potential future difficulties which Carnwath LJ has considered in paragraphs 41 and 42 of his judgment. (On the other hand, the apparent unfairness of a mere applicant for registration (with the necessary intent) taking priority over and having a claim for damages against someone who has used he mark for several years subsequent to the date of application is avoided on Inter Lotto’s interpretation.)

I agree with Carnwath LJ that the presence in the 1994 Act of Section 2(2), which provides in terms that “nothing in this Act affects the law relating to passing off, ” is fatal to Camelot’s claim on the preliminary point. Carnwath LJ has referred to the principle that liability in passing off falls to be determined as at the date when the defendant goes to the market under the mark or name in question and that principle is preserved. The European sources described by Mr. Hobbs QC, for Inter Lotto, and considered by Carnwath LJ in his judgment, demonstrate that the application to trade marks of provisions of domestic law other than trade mark law, such as provisions relating to unfair competition, is not excluded by the Directive. The presence of Section 2(2) in the 1994 Act in my judgment defeats the submission that the statute creates a scheme whereby the provisions of Section 5(4), together with provisions as to the retrospective effects of registration, which are a feature of the statute, prevent any reliance upon reputation and goodwill established by Inter Lotto between the date of Camelot’s application and the date at which Camelot began to use the mark.

Section 5 makes detailed provision for the protection of earlier rights, including rights in passing off but it does not follow that passing off rights cannot be acquired after the date of application for registration by the competing party. In specifying circumstances in which a trade mark shall not be registered by reason of the existence of earlier rights, the section does not in my judgment have the effect of preventing later use forming the basis for a claim in passing off. The law of passing off is expressly stated in Section 2(2) not to be affected by the Act and the long-recognised possibility of establishing rights by use is thereby preserved.

I see some force in Mr. Silverleaf’s submission that Section 2(2) cannot be given full effect because the Act itself, in Section 48, provides a derogation from it, as explained by Carnwath LJ in paragraph 37 of his judgment. That derogation is a specific and limited one, however, relating to a time limit, and does not defeat the otherwise comprehensive effect of Section 2(2). Passing off rights based on use continue to exist at least to the extent that Camelot’s claim that all turns upon the date of application for registration cannot in my judgment be accepted.

For those reasons, and the reasons given by Carnwath LJ, I too would dismiss this appeal

Does anyone appear in this case? No, that is what was expected.

For the reasons given in the judgments handed down this appeal is dismissed.

There is an agreed order subject to the question of leave to appeal. The defendant’s appeal be dismissed. Defendant to pay to the claimant his costs of the appeal, including its costs of this respondent’s notice. Such costs to be the subject of detailed assessment if not agreed.

We have considered the written submissions made on the question of leave to appeal. Leave to appeal is refused.