Budejovicky Budvar Narodni Podnik v Anheuser-Busch Inc

The Oxford English Dictionary provides the following definition for to steal a march: “in military sense, to succeed in moving troops without the knowledge of the enemy; hence gen. to get a secret advantage over a rival or opponent.” That is what the American Budweiser beer company (I call it “AΒ”) claims to have done to their long-standing foe, the Czech Budweiser beer company (“ΒB”).

BΒ says not so for two reasons:

That AB’s tactic is so sneaky, so unfair, that English law should step in and estop (as English lawyers, using old Norman French, say) AB from asserting the position it has apparently gained.

As a matter of EU trade mark law, the tactic, clever though it was, simply has not worked.

AB is a brewer based in Missouri and has sold beer under the trade mark “Budweiser” since about 1875. ΒB is a brewer in the town of Ceske Budovice (formerly “Budweis”) in the Czech Republic. Since 1895 it also has sold beer under a trade mark consisting of or including “Budweiser”. It is not suggested that either side adopted the name otherwise than purely innocently.

From time to time each side has also used or attempted to register “Bud” as a trade mark. It is common ground that this word would be taken as an abbreviation of “Budweiser” and as far as trade marks are concerned may be taken as an equivalent to that word.

But although the names are the same, the beers are not. Their tastes, prices and get-ups have always been different. In markets where they have co-existed, consumers have by and large become aware of the difference, though of course there will always be some small level of confusion.

As world trade expanded it was inevitable that the markets of the two companies would also expands, so that sooner or later they would find places where they overlapped. This has led to a quite astonishing series of legal battles around the world. Apparently the first of these was as long ago as 1911. So we are nearing a 100 year war. It would be an interesting but very substantial exercise to collect all the decisions of all the courts and all the trade mark registries of all the countries where the battles have taken place. Many lawyers and their families in many places must be grateful that these two parties apparently cannot produce a once and for all world-wide settlement.

In the UK, to which I now turn, the war is more recent – being only about 30 years old. It was ΒB who first actively entered the UK market, doing so in 1973. AB gradually entered the UK home market a little later, starting in 1974.

In November 1976 ΒB applied to register “Bud” as a trade mark. Naturally AB opposed. The opposition, as was unfortunately too common in those days, meandered on slowly until, in 1979 AB upped the ante.

It did so by going on the offensive. It sued ΒB for passing off, seeking an injunction to prevent ΒB from using “Budweiser”. Of course ΒB responded by not only defending but counterclaiming for an injunction to restrain AB from passing off by using “Budweiser”. Whilst this major battle was raging, the trade mark opposition was stayed.

The result of the case was a goalless draw. Both at first instance (Whitford J ) and on appeal, the claim and counterclaim failed, [1984] FSR 413. The courts decided that neither side was making a false representation; that there was a dual reputation in the mark and name “Budweiser.”

The case was actually an example of what both English common law and statute law had long recognised: that there are cases where two parties with similar or even identical trade marks can and should be allowed to co-exist. This was known as the doctrine of “honest concurrent use.” Its history was described by Lord Diplock in a case concerned with a battle between the American General Electric company and the then mighty English General Electric Company, “GE” TM [1972] 1 WLR 729. He said, at p.742:

I make no apology for this lengthy quotation. I believe it has important lessons for us today. Just as the expansion of trade within an individual nation state of the 19^th century required trade mark law to accommodate cases where two owners had independently and honestly commenced use of their respective but identical or confusingly similar marks, so in today’s globalising market there may be a need for a similar accommodation. And that is particularly true of the law of the European Union, one of whose main purposes is to have a single market.

Turning back to the facts here, after the goalless draw the two protagonists, instead of agreeing that co-existence was the result at least for the UK and reaching a sensible co-existence agreement to minimise confusion, carried on their squabble in the now-revived trade mark opposition. AB’s opposition to ΒB’s application to register “Bud” failed both at the trade mark registry and on appeal to Walton J [1988] RPC 547.

The parties also renewed a battle about the registration of the word “Budweiser” itself. On 11^th December 1979 AB had applied to register it for “beer, ale and porter.” ΒB of course opposed and the proceedings dragged on. On 28^th June 1989 ΒB made a cross application to register Budweiser. And of course AB opposed that.

These cross applications and oppositions took a ridiculously long time to get finally determined. The Court of Appeal in February 2000 decided that both oppositions should be dismissed. So both sides could have a registration of Budweiser. The decision was reached under the provisions of the old, 1938 UK Trade Marks Act which expressly allowed concurrent registration of the same or confusingly similar marks in circumstances where there was honest concurrent use or other special circumstances.

Following the decision, on 19^th May 2000 each side was put on the register of trade marks as an owner of a trade mark consisting of the word Budweiser.

The upshot of all this is that ΒB had two registrations, one for Bud (application date November 1976) and one for Budweiser (application date June 1989). AB had a registration of Budweiser (application date December 1979).

In any rational world that ought to have put an end to things provided each side sensibly kept its get-up and form of usage distinct from the other’s. But the world of trade marks is not always rational. In 1994 the UK implemented the Trade Marks Directive 89/104 and a wholly new regime for registered trade marks came in. (The Directive has been replaced by Directive 2008/95/EC but not in any material respect, including, sensibly, the numbering.) It is said that this new regime has provided the rules which enables AB to steal a march on ΒB.

Although the Judge below used the provisions of the UK Trade Marks Act 1994, it is common ground that those provisions not only are intended to implement the Directive but have the same meaning. Unfortunately the draftsman of the Act got the idea that it would be helpful in implementing the Directive to use different language. It is not. Quite the opposite. At best it wastes everyone’s time trying to relate the section to the provision of the Directive which it is implementing. At worse it positively misleads. So, as I think should be the standard practice at all levels, I will use just the language of the Directive.

The relevant provisions are as follows:

trade marks of the following kinds with a date of application for registration which is earlier than the date of application for registration of the trade mark ….

trade marks registered in the Member State

Where, in a Member State, the proprietor of an earlier trade mark as referred to in Article 4 (2) has acquiesced, for a period of five successive years, in the use of a later trade mark registered in that Member State while being aware of such use, he shall no longer be entitled on the basis of the earlier trade mark either to apply for a declaration that the later trade mark is invalid or to oppose the use of the later trade mark in respect of the goods or services for which the later trade mark has been used, unless registration of the later trade mark was applied for in bad faith.

Any Member State may provide that paragraph 1 shall apply mutatis mutandis to the proprietor of an earlier trade mark referred to in Article 4 (4) (a) or another earlier right referred to in Article 4 (4) (b) or (c).

In the cases referred to in paragraphs 1 and 2, the proprietor of a later registered trade mark shall not be entitled to oppose the use of the earlier right, even though that right may no longer be invoked against the later trade mark.

On 18^th May 2005, that is four years and 364 days after the parties’ respective Budweiser marks were put on the register, AB applied to the Trade Marks Registry for a declaration that ΒB’s Budweiser registration was invalid. The case runs thus:

Although both side’s marks were put on the Register on the same day, AB’s was an “earlier trade mark” by virtue of Art 4(2) – its date of application was earlier and that is what matters.

The marks and goods are identical and so by virtue of Art 4(1)(a) BB’s mark is liable to be declared invalid.

There was no question of acquiescence because the five year period provided by Art 9 was not over.

The timing was such that by the time BΒ learned of it, it could not launch a counter-attack on AB’s “Budweiser” registration. It would have been able to do so earlier. For it had the registered mark Bud with an even earlier date of application than AB’s 1979 date and “Budweiser” was confusingly similar to Bud. In principle a case of invalidity could thus be made out under Art. 4(1)(b). But by the time BB learned of AB’s attack such a case would be met by a plea of acquiescence by virtue of Art. 9.

This is the march which AB claims to have successfully stolen. If correct the position is that AB will have a registration of “Budweiser” which cannot be attacked. Prima facie it will be in a position to assert it against ΒB’s use of Budweiser, even though that started as long ago as 1973 and has built up a very substantial goodwill in this country since then. Annual sales run at just under 100,000 hectolitres.

We asked Mr Michael Bloch QC who appeared for AB whether it was AB’s intention in fact to sue. He said there was no present intention to do so, though his clients would not give any undertaking not to. He indicated that if the associated matter (wording on the bottle and the packaging) used by ΒB were to change, the position might be otherwise.

We of course do not have to decide whether if AB did indeed sue, it would win. Prima facie it would have a case under Art.5(1)(a) (same mark, same goods) but conceivably it might be met by a defence of no confusion in fact by reason of the manner and history of use (itself perhaps involving yet another expedition to Luxembourg). There is also a serious question of whether the law would allow the destruction or deprivation of the valuable property ΒB clearly owns in the goodwill in the name “Budweiser”. The case could also find its way to Strasbourg (see what I say about property below). And there may be other defences to this notional trade mark infringement action.

What is clear, however, is that potentially BB will be worse off if it loses its registration of “Budweiser”. This is so for three reasons:

Firstly, as matter of UK law, it is a defence to a trade mark infringement suit that the defendant is using his own registered mark, see s. 11(1) of the UK Act. (s.11(1) has no counterpart in the Directive. It is not necessary here to ask whether it is consistent with the implementation of the Directive, for ostensibly it does cut down infringement rights. If it were inconsistent, then that would be a matter for the Commission).

Secondly. BB would not be a position to assert its registration of Budweiser against AB. If each side were in that position there would be the commercial equivalent of a nuclear standoff.

Even if AB do not sue now, there is no guarantee it will not do so in the future – and any change, however apparently harmless in the get-up, packaging or even manner of advertising or extent of sale, might be used by AB as a justification for the suit.

I can take this quite shortly for in my opinion it is not remotely made out.

As a matter of procedure the point was simply not pleaded at all. Nor was it raised in the Trade Marks Registry. We are simply asked to assume the following facts, namely that AB spotted what could be done by a last-minute strike, lay low until that last minute and attacked at a time when BB could not counterattack. We are not asked to assume that AB ever did anything, either positively or by implication, to lull BB into a false sense of security.

I do not see why we should assume those facts. That in itself is enough to dispose of the point.

But even if they are so, I see no beginning of a defence. When on 25^th September 1805 Napoleon secretly and with great speed crossed the Rhine with La Grande Armée and put his army at the rear of the Austrian army at Ulm, or when on the night of 12^th/13^th September 1759 General Wolfe scaled the Heights of Abraham, no law of war was broken. The enemy were simply taken by surprise. Litigation between competing commercial enterprises is no different. People are entitled to use the rules of substantive and procedural law to their best advantage.

Of course parties must not abuse those rules – for instance by attempting to re-litigate matters already decided between them, or, without a good reason, by vexing a party a second time with a matter which could have been raised in earlier litigation. That sort of thing one can fairly call an “abuse of process”, a subject most recently examined by the House of Lords in Johnson v Gore Wood [2002] 2 AC 1. But merely to use the process cannot be an abuse of it.

Mr Mellor sought to persuade us otherwise. He sought to rely upon the principles of equitable estoppel identified in cases such as Habib Bank v Habib Bank AG Zurich [1981] 1 WLR 1256. There the Court of Appeal endorsed what the test Oliver J had propounded at first instance in Taylors Fashions v Liverpool Victoria Trustees:

Mr Mellor also bravely – indeed to my mind wildly - suggested that this case fitted the well-known five probanda test of Fry J in Wilmott v Barber (1880) 15 Ch. D 96:

I do not see AB’s conduct as remotely satisfying this test. BB is not shown to have made any mistake as to its supposed legal rights. Nor to have spent any money or done any other act on the faith of those legal rights. It has just sold its beer as it always did. Nor is it shown that AB knew BB was mistaken about its rights. For all it knew BB was laying in wait to spring the trap the other way. And there is no suggestion of any encouragement of BB by AB. Far from it. As years of litigation must have taught it, BB well knew AB would take any point it legitimately could.

The English law defence of equitable estoppel fails.

The language of Art. 9(1) is:

The “acquiescence” must be “in the use of a later trade mark registered in that Member State whilst being aware of such use”.

Clearly AB knew of BB’s use at all times. But did AB “acquiesce” in that use? And if it did, did the period of “acquiescence” only start from the date when BB’s mark was registered? Or does acquiescence run from the time a party first learns of the use and finds it has to put up with it?

These involve questions of interpretation of the Directive, as to the meaning of “acquiescence” in context and of “a period.” Mr Bloch contends they are acte clair and are in AB’s favour so no reference to the ECJ is necessary. Mr Mellor does not go so far as to say it is acte clair the other way. He says there is enough doubt that a reference is necessary.

Fundamentally these questions raise the question of how far EU registered trade mark law permits honest concurrent use of trade marks. There is a lot to be said for the view that if a party has knowingly had his mark co-exist for five years or more in the market with the same or a confusingly similar mark honestly adopted by another, the marks should co-exist for the future. It should make no difference if the first party could not for some part of the five year period have taken any action under the law of registered trade marks to stop the other. For in practice in all Member States (or practically all) unfair competition rules would allow action to be taken at the outset in the normal case of a new conflicting user. In exceptional cases such as the present, the result would be that a long-standing co-existence would simply continue. There is no harm in that and potentially much harm to one co-existor or the other if it cannot.

So is the position acte clair? I turn to consider the arguments. On one meaning (the narrow meaning) of the word, a party can only “acquiesce” in the conduct of another if he is in a position to stop it. Merely standing by when you can do nothing about it would not be enough to amount to acquiescence. But the word can have a wider meaning too – you can be said to “acquiesce” in a situation where you can do nothing about it and just have to put up with it – enforced tolerance is enough. If the context of Art.9 requires the wider meaning, then AB and BB can fairly be said to have, perforce, acquiesced in each other’s use of “Budweiser” for over 30 years.

There is quite a lot to be said for the wider meaning. Firstly Recital 11. This reads:

Next there are the travaux préparatoires. The first Draft of a Convention for a European Trade Mark was in 1964. Work on this was suspended (partly, I cannot help but note with some amusement, because it was expected in 1972 that parallel work on a European Patent “would soon be finalised”!). In 1976 the Commission produced a “Memorandum on the creation of a European trade mark”. This used the 1964 draft as a starting point. In 1980 the Commission published a proposed Directive and Regulation (EC Bulletin Supplement 5/80). Work on the Directive then preceded work on the Regulation and in 1985 the Commission came up with an Amended proposal for a Directive (EC C 351/05).

These materials show that the basic concern was to create, after a certain period of time, a position of legal certainty for the owner of a “later” mark which potentially conflicted with an “earlier” mark. The general idea was that if the owner of the earlier mark knowingly stood by for a certain time, he should lose any right to stop the use (and registration) of the later mark. Cases of long-standing co-existence are of course a fortiori such a case. So it can reasonably be inferred that there was no intention whatever to create a situation by which one of two long-standing honest concurrent users could create a position whereby he could exclude the other. That would remove legal certainty.

Further, there is no indication in the travaux that acquiescence is to be regarded as starting only at the date when the owner of the earlier trade mark gets his registration. Thus, for example the commentary on draft Art. 44 (which ultimately became Art 9 of the Directive) in the 1980 draft says:

It is not necessary to burden the main text of this judgment by setting out all the details of the travaux in it. For the convenience of the specialist reader I have done so in the form of an Annex.

Whilst not conclusive, I think that Mr Mellor is right to say that the travaux are generally supportive of BB’s position. There is certainly enough here to justify and require a reference.

I should mention several other points which are or could be relevant. Firstly, even if “acquiescence” has the narrow meaning of “knowingly standing by when in a position to stop” a rival’s use, the owner of a trade mark can acquiesce in another’s use without himself having his own mark registered. I have mentioned this point already. I should expand: for it is all too easily forgotten that the law of registered trade marks stands within a context of other, generally very powerful, rights to prevent unfair competition. Art. 10bis of the Paris Convention requires countries of the Union to assure nationals of such countries effective protection against unfair competition. All members of the EU are parties to Paris and will have their own law of unfair competition – some wider than others. But, even the narrowest form must, by Art. 10bis (3)(i), prohibit acts which create confusion with a competitor.

So, if A has an unregistered mark in use and B starts using the same or a confusingly similar one, the law of unfair competition will enable A to stop B even if A has no registered trade mark. If A knowingly stands by and does nothing, even on the narrow meaning, he will acquiesce in B’s use.

Why does that matter in the context of the present debate? Well, because it strongly suggests that the period of acquiescence for the purposes of Art. 9 does not start on the arbitrary date of actual registration of the senior mark. You can acquiesce before any such date on any meaning of the word “acquiesce.”

Then there is the point made by AB – that if there can be acquiescence by the holder of the senior mark before the date of his registration and so before he could ever rely on it, then his right to object to the use or registration of the junior mark could be lost even before he gets his mark registered. This, it is suggested, is absurd, But why so? Why should it matter if, as I have just shown, you can acquiesce without any registered trade mark right at all? And why should it matter where, as here, there is a long-standing period of honest concurrent use?

There is also this fact, that in the context of a trade mark right conflicting with a designation of origin, the Court of Justice has recognised that there may be honest concurrent use. It did so in Gerolsteiner Brunnen v Putsch Case C-100/02 where the defendant sold Irish Kerry water in Germany. It was found that there was virtual identical aural similarity with the trade mark Gerri but nonetheless the marks could co-exist. The court said

There is also this consideration, closely allied to the need for legal certainty. Under some systems of law (UK and Irish and I suspect others) when a mark has developed a substantial reputation in market, that reputation is regarded as property. Goodwill can be very valuable indeed. So where there has been longstanding honest concurrent use each party has a valuable goodwill in the shared reputation – a goodwill which the law will protect against third party usurpers. Now if the law of trade marks is as contended for by AB then one party will or may be in a position to destroy the goodwill of the other. Nay more than that, effectively to take it over. That hardly sounds right.

Finally I should mention briefly Warren J’s first instance decision of Sunrider Corp. v Vitasoy International [2007] EWHC 37 (Ch) which was followed and agreed with by Norris J in this case. All I wish to say is that the arguments in that case were nowhere near as developed as they were before us and that in one respect Warren J, as he accepted in argument here, fell into error. This was in his giving significance to the idea that if acquiescence could only run from the date of registration of the “acquiescor’s” mark, then he could lose his right to oppose registration of the junior mark. As Mr Mellor pointed out, there is nothing in the Directive requiring or permitting a Member State to have a pre-registration opposition procedure. So that cannot be a relevant consideration.

The upshot of all this is that I think we need the opinion of the European Court of Justice about Art 9 to resolve this case.

Mr Mellor also suggests that there is a question about the meaning of Art. 4(1)(a). This provides:

Mr Mellor suggests that the Court might recognise a further exception in the case of long established honest concurrent use. For in such a case the guarantee of origin of the mark is not impaired by the use of the mark by each party. Once such concurrent use is established the mark does not solely indicate the goods of just one of the users. It means one or the other. Hence there is no impairment of the guarantee and, if impairment is the touchstone of Art 4(1), no infraction of it.

AB submit that no questions about Art 4(1) should be asked. It is submitted that there is no basis for them. It is said they would “assume facts that have not been proved even where alleged, that they are disputed by AB and that AB has had no opportunity to make submissions”.

I cannot understand any of that. That there has been long established concurrent user as described in the cases is simply beyond dispute. Are we to pretend the cases never happened? I simply do not know what facts could be disputed.

Accordingly I would also submit questions about Art.4(1). They would not need an answer of course if the true solution to the honest concurrent use problem lies in Art. 9(1).

I turn to the form of the questions. We asked the parties to agree if they could. True to form they could not. So we must devise our own bearing in mind the parties’ suggested drafts. What I propose below is not to be regarded as necessarily final. The parties are to be at liberty to suggest, in writing, alterations within 14 days of the judgment being handed down. However only essential alterations or additions are likely to carry weight.

As a preliminary, essentially uncontroversial point, should the questions be framed by reference to Directive 89/04 or 2008/95? AB points out that the Court in L’Oréal, Case C-487/07 at [3], said that the former should be used in that case because the relevant facts occurred before the new version came in. So here. We will use the original Directive.

The questions which at this stage I think are appropriate are as follows:

An essential part of the 1964 Draft concerns the provisions dealing with the incontestability of the EEC trade mark, contained in Articles 120 to 126. These rules are based on the assumption that it is in the interest of legal certainty that, after a certain period of time, a registered trade mark may no longer be impugned or may be impugned only under certain conditions. They are intended particularly to take into account the interest of trade mark owners planning to introduce a new trade mark on the market.

Most of the organizations which have submitted their views to the Commission agree that the concept of legal certainty is of great importance. This concept has already been reflected in a number of proposals contained in the Memorandum, and in particular the proposal that new applicants should be given information which is as comprehensive as possible about the existence of prior trade mark rights by means of a search to be carried out by the EEC Trade Mark Office. Similarly, the proposal to adopt a broad definition of the concept of trade mark which embraces all distinctive signs, and to create an incentive, by limiting opposition proceedings to registered marks, to convert designations previously protected on the basis of mere use into registered EEC trade marks, advances the concept of legal certainty in trade mark law.

Where the proprietor of a trade-mark or other exclusive right has for three consecutive years acquiesced in the use in a Member State of a later trade-mark which is likely to create confusion with his trade-mark or right, he shall not be entitled to apply for invalidation of the later trade-mark or cause its use to be prohibited in that Member State or in another Member State except where the application for the later trade-mark was made in bad faith.

I agree with Lord Justice Jacob that we should submit questions on Articles 4(1) and 9 to the Court of Justice for the reasons which he has so clearly articulated. I would only add the following in relation to my judgment in Sunrider. The arguments before this court were different from those which were made to me in Sunrider. I was persuaded by those arguments that opposition proceedings under the Trade Marks Act 1994 contained no equivalent to section 48 and that, therefore, a 5-year period of acquiescence prior to registration of the junior mark would bar an invalidity attack but not an opposition. This would have led to an odd mis-match between the invalidity and opposition provisions. However, as Mr Mellor points out as noted by Lord Justice Jacob, there is nothing in the Directive requiring or permitting a Member State to have a pre-registration opposition procedure at all. Given the freedom to choose whether to have such a procedure, it is unsurprising that the Directive contains no acquiescence provision mirroring those in relation to invalidity. I was, I think, wrong to attach the importance which I did to this mis-match in drawing conclusions about the intention of the Community legislature in relation to invalidity actions.

I agree. I add only this: is it too much to hope that before they embark on this next round of litigation, these warring parties can be brought to understand the merit of mediation and the advantages of a lasting truce to hostilities? I recommend it to them.