Special Effects Ltd v L'Oréal SA L'Oréal (UK) Ltd

On 30th June 2000, in accordance with s.32 Trade Marks Act 1994, David Charles Jones and his wife Jennifer Ann Jones applied to the Comptroller-General of Patents, Designs and Trade Marks as the registrar for the purposes of the Trade Marks Act 1994 (“the Registrar”) for the registration of the mark SPECIAL EFFECTS for goods in class 3, namely conditioners and hair lotions and services in class 44, namely beauty and cosmetic therapies. After acceptance and publication pursuant to ss.37(5) and 38(1) TMA, on 23rd November 2000 notice of opposition was given by L’Oréal SA, a company incorporated in France. It objected to the proposed registration on grounds for which ss. 3(1)(a), 3(3)(b), 5(2)(b) and 5(4)(a) TMA provide. The opposition was heard by Mr Allan James for the Registrar on 8th August 2002. By his decision dated 22nd August 2002, for reasons to which I shall refer in greater detail later, he dismissed the opposition. Consequently SPECIAL EFFECTS (“the Mark”) was registered in the name of Mr and Mrs Jones under s.40(1) TMA on 25th October 2002. (It was assigned by them to their wholly owned company and the claimant in these proceedings, Special Effects Ltd, on 8th May 2003.)

On 9th July 2004 solicitors for Special Effects Ltd (“the Claimant”) wrote to L’Oréal (UK) Ltd, the second defendant, claiming that it had infringed the Mark by the use of its brand SPECIAL FX. Such contentions were denied by solicitors for L’Oréal SA, the first defendant, in a letter dated 17th August 2004. In addition they contended that the registration of the Mark was invalid and ought to be revoked. After a good deal of intermediate correspondence the claim form in this action was issued by the Claimant on 13th May 2005 against L’Oréal SA and L’Oréal (UK) Ltd (“the Defendants”) seeking injunctions and associated relief to restrain such infringement. In its particulars of claim dated 16th May 2005 the Claimant relied not only on the primary allegations of infringement but also on the course of the opposition proceedings which, it claimed, precluded the Defendants from challenging the validity of the Mark on grounds of estoppel, cause of action or issue, and abuse of process. In their defence and counterclaim the Defendants did indeed contend that the registration of the mark was invalid. In addition the Defendants raised various specific defences under Article 6 ECHR and ss.11(3) and 46 TMA.

On 6th October 2005 Peter Smith J ordered that the following preliminary issues be determined:

(1)

Whether either or both Defendant(s) is/are precluded by cause of action estoppel, issue estoppel, or abuse of process from challenging the validity of the Claimant’s registered trade mark No. 2,237,923 on some or all of the grounds relied upon by them;

(2)

Whether either or both Defendant(s) is/are precluded by cause of action estoppel, issue estoppel, or abuse of process from alleging use of the marks complained of herein before the application for the said registered trade mark (a) as part of the basis for a defence under section 11(3) of the Trade Marks Act 1994; (b) as part of the basis for a counterclaim for passing off;

(3)

Whether the United Kingdom or England and Wales is capable of being a particular locality for the purposes of section 11(3) of the Trade Marks Act 1994;

(4)

Whether, in the event that the Claimant is successful on the preliminary issues above (excluding (3) above), paragraph 14 of the Defence and Counterclaim must necessarily be struck out in consequence; and

(5)

On the assumption (for the purpose of this issue only) that the Defendants can establish the facts to establish a case in passing off (as pleaded in the Defence and Counterclaim herein), should the claim under paragraph 14 of the Defence be struck out/summary judgment given in relation thereto due to the fact that the period of five years following the date of completion of the registration procedures of United Kingdom Trade Mark No 2 237 923 has not yet lapsed.

In addition Peter Smith J ordered that there be determined at the same time the claimant’s application that:

(6)

the Defendants’ defence under Article 6(1) of the European Convention on Human Rights be struck out as having no reasonable prospect of success, or alternatively that summary judgement against the Defendants be given in relation to the said allegation.

Those are the issues I now have to determine. Before considering them it is necessary to describe in more detail the underlying facts including but not limited to the opposition proceedings, the pre-action correspondence and the details of the pleadings in this action.

The Defendants are members of a well known group of companies making and selling cosmetics. The First Defendant holds and administers the intellectual property rights of the Group. The Second Defendant is the company through which the Group trades in cosmetics within the UK. The Group had and has a number of different marks and has sold its products under a number of different names. The marks with which this case is concerned are FX and device and FX STUDIO LINE and device registered in the name of L’Oréal SA on various dates between March 1995 and October 1997. Those are the names under which the Second Defendant has sold these products in the UK.

In 1999 Mr Jones, who had recently sold his practice as a chartered accountant, and his wife, who was undergoing an intensive one year course in beauty therapy, decided to collaborate in the development of a range of cosmetic products. They investigated various products, such as rose water, and considered various brand names such as ‘Aquatoner’. In due course they lit upon the name SPECIAL EFFECTS. They thought it an ‘ideal and catchy name’. After investigating its availability, on 30th June 2000, they applied for its registration for the classes which I have already specified. The Defendants have abandoned the allegation formerly made by them in paragraph 27(4) of their defence and counterclaim that the Joneses adopted the Mark in bad faith.

S.3 TMA contains a number of grounds, known as absolute grounds, on which registration must be refused. They include the following:

S.5 contains a number of grounds, described as relative grounds, on which registration must be refused. They include marks which because of identity or similarity of the mark or the goods in respect of which it is to be used is likely to give rise to confusion on the part of the public (s.5(2)(b)). Similarly a mark the use of which is liable to be prevented by virtue of a rule of law protecting an unregistered trade mark shall not be registered. Application for registration of a mark is dealt with in sections 32 to 34. Ss. 37 to 41 deal with the procedure for registration and opposition thereto. This is the procedure the First Defendant adopted in 2000.

The notice and grounds of opposition were served by the First Defendant on 23rd November 2000 pursuant to s.38(2). There were four grounds, namely:

On 22nd February 2001 the Joneses filed a counterstatement. They denied the meanings attributed to their mark in grounds 1 and 2 of the notice of opposition. They averred that their mark was distinctive and would not deceive the public. They did not admit the alleged use of FX or SPECIAL FX but denied that their mark was identical or similar or likely to cause confusion. The grounds of opposition were supported by a statutory declaration made on 10th July 2001 by M. Jose Monteiro on behalf of the first defendant in terms which drew no distinction between the Defendants. He contended that the Defendants had used not only the mark FX but also the mark SPECIAL FX and produced documents said to demonstrate that fact. In their statutory declaration in answer Mr and Mrs Jones specifically denied that any of the evidence on which M. Monteiro relied showed any relevant use by the Defendants of the mark SPECIAL FX. In his statutory declaration in reply M. Monteiro produced a quantity of further evidence which, according to him, demonstrated the use by the Defendants of the mark SPECIAL FX.

As I have indicated the opposition was heard by Mr Allan James on 8th August 2002. In his judgment dated 18th August 2002 he rejected each of the grounds put forward by the First Defendant. In the case of ground 1 he allowed an amendment so as to rely on s.3(1)(c) instead of s.3(1)(a). He commented on the lack of evidence and concluded in paragraph 18:

“In the absence of evidence showing that special effects is a generic term for a category of cosmetics or cosmetic services used in television, films etc the first of the opponents objections under s.3(1)(c) must be rejected.”

In paragraph 21 he added:

“...on the basis of the sparse material before me, my judgment is that the trade mark SPECIAL EFFECTS is not an indication which may serve, in trade, to designate the quality or intended purpose or other characteristics of the goods or services. The opponent’s second objection under s.3(1)(c) therefore also fails.”

In the case of ground 2 he considered that it was really the flip-side of the first objection and failed for the like reasons. In the case of the fourth ground he concluded in paragraph 37:

“The likelihood of confusion must be assessed through a global comparison of all relevant factors. As I have already noted, it is common ground that there is no visual similarity between the trade marks. There is a limited degree of aural resemblance between the marks, but there is no evidence that aural similarity is exceptionally significant in this market. In these circumstances, my conclusion that any conceptual similarity between the trade marks would not be immediately apparent to the average consumer of cosmetics must inevitably lead to the conclusion that there is no likelihood of confusion between the respective trade marks, even when they are used for identical goods.”

He also rejected the third ground. In this case he pointed out that his conclusion in respect of the fourth ground meant that the use of the Joneses mark could not amount to a misrepresentation in relation to the First Defendant’s goodwill claimed to have been acquired from use of the mark FX. He then pointed out that it followed that the only way the First Defendant could make good its third objection “is to show that its goodwill was known by the trade mark SPECIAL FX” prior to the date of the Joneses application. He then considered in detail the evidence on this issue to be found in M. Jose Monteiro’s two statutory declarations. He concluded in paragraph 52:

“I conclude that there is no established use of the trade mark SPECIAL FX prior to the relevant date. It follows that the ground of opposition under s.5(4)(a) must fail...”

Seemingly the Defendants foresaw this conclusion for on 9th August 2002 the first defendant applied to the Office for Harmonization in the Internal Market (“OHIM”) for registration of the sign SPECIAL FX in a stylised form. The claimant filed notice of opposition based on its earlier registration of the Mark. Its ground was that comprised in Article 8(1)(b) Council Regulation 40/94 of 20th December 1993, namely the likelihood of confusion arising from similarity of the marks and the goods to which they would be applied. By its decision made on 25th November 2005 OHIM concluded that there was no likelihood of confusion and dismissed the claimant’s opposition. Much had happened in the meantime.

On 9th July 2004 solicitors for the claimant wrote to the Defendants complaining of their use of the sign SPECIAL FX. They sought undertakings in the absence of which proceedings would be instituted. They noted, in passing, the First Defendant’s CTM application, to which I have referred in paragraph 14 above, and described it as “clearly invalid”. The solicitors for the Defendants replied on 17th August 2004 denying infringement. They maintained that the First Defendant’s mark was L’OREAL PARIS SPECIAL FX STUDIO LINE. They stated that they were collating evidence to show that their products were not sold or known as SPECIAL FX. They also indicated their view that the claimant’s mark was invalid and liable to revocation under s.47(2)(b) TMA and that they were collecting evidence to back up the statements of M. Jose Monteiro in the unsuccessful opposition proceedings. The letter went on to indicate what such evidence was.

On 9th September 2004 the solicitors for the claimant expressed their surprise at the disclosure of evidence not adduced in the opposition proceedings. The letter continued:

“However, the additional evidence that your clients have produced to date is completely unsatisfactory. Our client requires your clients to properly substantiate their claim to a protectable right in SPECIAL FX sign.”

The Claimant’s solicitors then demanded disclosure of 9 categories of document. Correspondence in relation to those matters continued for some weeks. On 13th December 2004 the claimant’s solicitors wrote contending that:

“Your client has failed to provide any meaningful new evidence or arguments (beyond those already rejected by the registry in opposition proceedings) in defence to our client’s claim.”

These proceedings were instituted on 13th May 2005. In the particulars of claim the claimant avers the registration of its mark SPECIAL EFFECTS. In paragraphs 2 to 6 it sets out its allegations in relation to the trading by the Defendants in a range of hair products called SPECIAL FX. It alleges that the use of such a name by the Defendants is liable to cause confusion on the part of the public. It contends (paragraph 8) that the Defendants have infringed the claimant’s mark. In paragraph 9 the claimant refers to the allegations in the pre-trial correspondence that its mark is invalid on absolute grounds under ss.3(1)(c) and (d) TMA and on relative grounds under s.5(4) TMA. In paragraphs 10 and 11 it alleges the opposition proceedings and the fact that the First Defendant did not appeal. In paragraph 12 it avers the assignment of the Mark from the Joneses to the claimant.

The relevant estoppels are set out in paragraphs 13 and 14 in the following terms:

“13.

In the premises the First Defendant is precluded from challenging the validity of the Claimant’s said registered trade mark by virtue of:

(a)

Cause of action estoppel arising from the said opposition proceedings.

(b)

Issue estoppel arising from the said opposition proceedings.

(c)

The doctrine of abuse of process. In all the circumstances it would be an abuse of process for the First Defendant to attack the validity of the Claimant’s said registered trade mark again, on the same grounds as in the said opposition proceedings, or on related grounds, or on grounds available to the First Defendant at the time but not advanced.

14.

The Second Defendant is also precluded from challenging the validity of the Claimant’s said registered trade mark. The reasons applicable to the First Defendant set out above are binding on the Second Defendant because its interest in the SPECIAL FX range of products is the same or very similar to the First Defendant’s, and because of the close corporate relationship between the Defendants. In all the circumstances, the aforesaid estoppels are binding on the conscience of the Second Defendant, and the Second Defendant is a privy of the First Defendant for these purposes.”

By their undated defence and counterclaim served at the end of June 2005 the Defendants admitted and averred that the Second Defendant had distributed and sold hair products bearing the sign L’OREAL PARIS SPECIAL FX STUDIO LINE with device or in conjunction with the name L’OREAL and subsidiary to it the sign SPECIAL FX STUDIO LINE since 31st May 2000. They denied (paragraph 8) that there was any risk of confusion between those marks. In paragraphs 9 and 10 the Defendants relied on s.11(1) and (3) TMA.

In paragraphs 11 and 27 the Defendants contend that the Mark SPECIAL EFFECTS is invalid for failure to comply with s.3(1)(b),(c) and (d), s.5(2)(b) and s.5(4)(a) TMA. These ground are identical to those advanced by the First Defendant in the opposition proceedings save that s.3(1)(b) and (d) were not explicitly relied on.

In paragraphs 14 and 27 to 34 the Defendants allege that the Claimant’s mark should be revoked under s.46(1)(a) on the basis that the Mark has not been used and cannot lawfully be used by the Claimant given the Defendants’ cause of action for passing off. In paragraphs 19 to 23 the Defendants deny that they are precluded by any of the estoppels or principles on which the Claimant relies. They contend in particular that:

On 19th August 2005 the claimant applied for the trial of preliminary issues and comparable relief supported by witness statements made by Mr and Mrs Jones on 5th August 2005. This application led to the order of Peter Smith J made on 14th October 2005 to which I have already referred. On 17th and 18th November 2005 3 witness statements were filed on behalf of the Defendants. The first is from M. Monteiro. He deals with the history of the opposition proceedings and the Defendants’ conduct in relation to them. He expresses concern at the prospect of such proceedings being capable of giving rise to any form of bar to later proceedings raising the same or similar issues. He also deals with the position of the Second Defendant. The other two witnesses, Francesca Fitzgerald and Christopher White, deal with the merits of the defence and counterclaim and the Defendants’ claim for passing off in relation to the use by the Defendants of the First Defendant’s marks and signs. It is not disputed that all such evidence was available for use in the opposition proceedings.

As I have already mentioned (paragraph 14 above) on 25th November 2005 OHIM concluded that the use of the respective marks of the Claimant and the First Defendant would not give rise to any likelihood of confusion and dismissed the Claimant’s opposition to the First Defendant’s application to register as a community trade mark the sign SPECIAL FX in a stylised form. On 24th January 2006 the Claimant gave notice of appeal against that decision. There is no application before me in which the Defendants rely on the decision of OHIM.

Are either or both Defendants precluded by cause of action estoppel, issue estoppel, or abuse of process from challenging the validity of the Claimant’s mark SPECIAL EFFECTS on some or all of the grounds relied upon by them?

This is the first issue to which I referred in paragraph 3 above. It raises a number of discrete issues in relation to the principles to be applied, the grounds to which they apply and the distinct position of the Second Defendant. I start by considering the leading authorities in the following order, namely Arnold v NatWest Bank plc [1991] 2 AC 93; Johnson v Gore-Wood [2002] 2 AC 1; Buehler AG v Chronos Richardson [1998] RPC 609 and Hormel Foods Corpn v Antilles Landscape Investments NV [2005] RPC 28.

Arnold v NatWest Bank plc [1991] 2 AC 93 is the leading modern authority on cause of action and issue estoppel. The question was whether the decision of Walton J in relation to the first of several quinquennial rent reviews under a long lease was binding as between the parties on a second or subsequent rent review. The House of Lords, in agreement with the Court of Appeal, concluded that, in the special circumstances of that case, it was not. In his speech, with which the other members of the Appellate Committee agreed, Lord Keith of Kinkel summarised the relevant principles in the following passages:

(a)

“It is appropriate to commence by noticing the distinction between cause of action estoppel and issue estoppel. Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment. The discovery of new factual material which could not have been found out by reasonable diligence for use in the earlier proceedings does not, according to the law of England, permit the latter to be reopened.” [p.104D-E]

(b)

“Cause of action estoppel extend also to points which might have been but were not raised and decided in the earlier proceedings for the purpose of establishing or negativing the existence of a cause of action.” [p.104F-G]

(c)

“Issue estoppel may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to reopen that issue.” [p.105D-E]

(d)

“Issue estoppel, too, has been extended to cover not only the case where a particular point has been raised and specifically determined in the earlier proceedings, but also that where in the subsequent proceedings it is sought to raise a point which might have been but was not raised in the earlier.” [p.106B]

(e)

“There may be an exception to issue estoppel in the special circumstance that there has become available to a party further material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point was specifically raised and decided being material which could not by reasonable diligence have been adduced in those proceedings.” [p.109B]

Johnson v Gore-Wood [2002] 2 AC 1 concerned successive claims for professional negligence against a firm of solicitors in connection with a proposal to buy certain land and the exercise of an option for that purpose. The first action was brought by the prospective purchaser, a company controlled by the claimant in the second action, Mr Johnson, and was settled on payment of a substantial sum to the company. When Mr Johnson brought the second action the solicitors applied to strike it out as an abuse of the process of the court. That contention succeeded in the House of Lords. After an extensive review of the authorities the relevant principles were summarised by Lord Bingham of Cornhill at page 31 in the following terms:

“But Henderson v. Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in early proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.”

I should also note that at page 32 Lord Bingham of Cornhill approved the test of privity formulated by Sir Robert Megarry V-C in Gleeson v Whippell [1977] 1 WLR 510, 515:

"Second, it seems to me that the substratum of the doctrine is that a man ought not to be allowed to litigate a second time what has already been decided between himself and the other party to the litigation. This is in the interest both of the successful party and of the public. But I cannot see that this provides any basis for a successful defendant to say that the successful defence is a bar to the plaintiff suing some third party, or for that third party to say that the successful defence prevents the plaintiff from suing him, unless there is a sufficient degree of identity between the successful defendant and the third party. I do not say that one must be the alter ego of the other: but it does seem to me that, having due regard to the subject matter of the dispute, there must be a sufficient degree of identification between the two to make it just to hold that the decision to which one was party should be binding in proceedings to which the other is party. It is in that sense that I would regard the phrase 'privity of interest . . . .'"

Lord Bingham of Cornhill observed that Mr Johnson made decisions and gave instructions on behalf of the claimant in the first action and could have, had he wished, joined his personal claim with that of his company.

Lord Millett [page 59] noted that the abuse of process principle could, unlike cause of action or issue estoppel, protect the integrity of a settlement. He continued:

“However this may be, the difference to which I have drawn attention is of critical importance. It is one thing to refuse to allow a party to relitigate a question which has already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which has not previously been adjudicated upon. This latter (though not the former) is prima facie a denial of the citizen's right of access to the court conferred by the common law and guaranteed by Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms (Rome, 4th. November 1950). While, therefore, the doctrine of res judicata in all its branches may properly be regarded as a rule of substantive law, applicable in all save exceptional circumstances, the doctrine now under consideration can be no more than a procedural rule based on the need to protect the process of the Court from abuse and the defendant from oppression. In Brisbane City Council v. A.-G. for Queensland [1979] A.C. 411 at p. 425 Lord Wilberforce, giving the advice of the Judicial Committee of the Privy Council, explained that the true basis of the rule in Henderson vHenderson is abuse of process and observed that it

". . . ought only to be applied when the facts are such as to amount to an abuse: otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation."”

The other two cases to which I referred in paragraph 24 above indicate particular applications of the principles of cause of action and issue estoppel and abuse of process in closely related fields. In Buehler AG v Chronos Richardson [1998] RPC 609 the defendant had unsuccessfully opposed the grant of a patent in the Opposition Division of the European Patent Office. The patent was issued. Subsequently the patentee sued the unsuccessful opposer in the Patents County Court for its infringement. The unsuccessful opposer defended the claim on the ground that the patent was invalid for the reasons it had unsuccessfully advanced in the EPO. The claimant applied to strike out that defence on the ground of res judicata. The judge dismissed the application and the Court of Appeal dismissed the appeal.

It was conceded that the cause of action on which the claimant sued, namely for infringement of the patent, was not the same as that before the EPO, namely whether the patent should be maintained or revoked. The Court of Appeal concluded that the latter claim was not the same as the cause of action on which the unsuccessful opposer counterclaimed either because the jurisdiction and grounds for revocation were different, and narrower, in the EPO when compared with s.72 Patents Act 1977. At page 616 Aldous LJ noted that there was a more fundamental reason why no estoppel could arise, namely the decision of the Opposition Division was not a final decision. He analysed the jurisdiction and procedure of the Opposition Division observing that

“Opposition proceedings are not true inter partes proceedings as Article 114 makes clear. The Opposition Division can examine facts of its own motion and is not restricted to the facts, evidence and arguments provided by the parties.”

Later he noted

“Once granted, the patent becomes a patent of the chosen contracting state. It is the courts of that contracting state that have to decide infringement and revocation and any decision of the European Patent Office does not preclude the courts of the contracting state from deciding all issues of infringement and revocation.”

These considerations led Aldous LJ to conclude that the decision of the Opposition Division though final in one sense was not final for the purpose of the doctrine of estoppel. At page 620 he said:

“The decision of the Opposition Division, relied on as giving rise to an estoppel, concluded the opposition and once the appeal period had expired there was no possibility of the parties continuing with it. In that sense it was final. But as pointed out by Lord Herschell in Nouvion v Freeman (1890) l5 AC l that can be said of some interlocutory judgments. He said at page 9:

"It is obvious, therefore, that the mere fact that the judgment puts an end to and finally settles the controversy which arose in the particular proceedings, is not of itself sufficient to make it a final and conclusive judgment upon which an action may be maintained in the Courts of this country ...."

For an estoppel to arise the judgment of the earlier Court, in this case the decision of the Opposition Division of the European Patent Office, must finally and conclusively decide the validity of the patent. That it did not do. Validity is finally decided in revocation proceedings by the Courts of the Contracting States. It follows that no cause of action estoppel arises from the decision of the Opposition Division of the European Patent Office.

Issue Estoppel

Issue estoppel can arise where a plea of res judicata cannot be established because the causes of action are not the same (see Thoday v Thoday (1964) P 181). But it cannot arise unless the judgment relied upon as giving rise to the estoppel was a final judgment. That being so, for the reasons already stated, no issue estoppel arises in this case.”

I shall return to this case later in connection with the submission of the Defendants that the decision of the Registrar in this case was not final in the relevant sense either.

Hormel Foods Corpn v Antilles Landscape Investments NV [2005] RPC 28 was decided by Mr Richard Arnold QC sitting as a deputy High Court judge of the Chancery Division in January 2005. It was part of a long-running dispute between the claimant, the manufacturer of SPAM luncheon meat, and the defendant the maker of an internet security programme for filtering unsolicited or ‘spam’ e-mails. The former had registered the mark SPAM in relation to class 29 ‘canned meats’ in 1938. The latter had registered the mark SPAMBUSTER in relation to class 44 ‘computer programming’ in 1997. In March 2001 the claimant commenced proceedings under s.47 TMA for a declaration of invalidity in respect of SPAMBUSTER. In February 2002 the Registrar dismissed the application. The claimant did not appeal. In April 2003 the claimant again instituted proceedings against the defendant under s.47 TMA seeking a declaration that the defendants mark had been invalidly registered and ought to be revoked. The defendant counterclaimed for the same relief in respect of the claimant’s mark.

The Deputy Judge set out the relevant statutory provisions contained in ss.3, 46 and 47 TMA and the underlying facts of the two sets of proceedings in paragraphs 1 to 28. In paragraphs 29 to 70 he considered at some length a number of relevant authorities on cause of action estoppel and issue estoppel. I should note his observations and conclusion in a number of passages.

In paragraph 31 the deputy judge considered whether the judgment of the registrar on an application under s.47 was capable of giving rise to an estoppel. He said:

“Counsel for the Claimant accepted that a decision of the Registrar was capable of founding a plea of res judicata since it was a decision of a court of competent jurisdiction. In my judgment he was right to do so: see Spencer Bower, Turner & Handley, The Doctrine of Res Judicata (3^rd ed.) at paragraphs 21-25. It may be noted that section 72(5) of the Patents Act 1977 provides that a decision of the Comptroller-General of Patents does not estop any party to civil proceedings in which infringement of a patent is alleged from alleging invalidity of the patent, whether or not any of the issues involved were decided in the decision. This provision would be unnecessary if such a decision was not capable of giving rise to a plea of res judicata. There is no equivalent provision in the 1994 Act.”

He then considered (paragraph 32 et seq) how to identify the causes of action both in general and in patent and registered design cases. He referred to a number of authorities in chronological order. In paragraph 74 he noted that

“where invalidity is put in issue by way of defence, the defendant is asserting invalidity of the patent and in that sense advancing a cause of action.”

He then referred again to the decision of the Court of Appeal in Coflexip SA v Stolt Offshore MS Ltd [2004] FSR 34 and continued:

“In any event, the distinction adopted by the majority judgment in Coflexip v Stolt between cause of action estoppel and issue estoppel with regard to the other instances of infringement does not undermine the general point which emerges from this line of authority that, where a party has unsuccessfully challenged the validity of a patent or registered design, the judgment (or perhaps, more strictly, the order consequent on the judgment) creates a cause of action estoppel which prevents that party from subsequently challenging the validity of that patent or registered design again even upon different grounds (except, possibly, in the circumstances considered by Pumfrey J in Agilent v Waters).”

In the light of all the authorities he concluded, in paragraph 86 that:

“(i)

a person who attacks the validity of a patent or registered design is under a duty to put his full case in support of that attack at trial; and (ii) if he is unsuccessful, he will be barred by cause of action estoppel from attacking the validity of the patent or registered design in subsequent proceedings whether on the same or different grounds (except, possibly, in the circumstances identified by Pumfrey J). It appears that this is so even if he could not have discovered those different grounds by the exercise of reasonable diligence before the first trial, which may be thought somewhat harsh.”

The deputy judge then considered the position with regard to trade marks. In paragraphs 95 and 96 he said:

“95.

As a matter of principle, however, I cannot see any reason why the law with regard to cause of action estoppel as it has been developed in the patents and registered design cases should not apply to trade marks. I am encouraged in this view by paragraph 168 of The Doctrine of Res Judicata, which treats Poulton v Adjustable Cover as being applicable to trade mark infringement actions. (For the avoidance of doubt, I should make it clear that I am not considering the position where a person who has unsuccessfully opposed the registration of a trade mark then applies for a declaration of invalidity.)

96.

In the present case, the Claimant is attacking the validity of the Defendant’s Mark after having unsuccessfully attacked the validity of the Defendant’s Mark in the Registry proceedings. For the reasons given above, I consider that the Claimant is barred from doing so by cause of action estoppel notwithstanding the fact that it now relies upon different grounds.”

Counsel for the Defendants fastened on the last sentence in paragraph 95. He submits that the deputy judge did not apply the principles to opposition proceedings in the Registry and there are good reasons why I should not. By contrast counsel for the Claimant, whilst recognising that the deputy judge out of an abundance of caution excepted opposition proceedings, submitted that the logic of his conclusions demands the extension of the relevant principles to opposition proceedings. It is convenient therefore to consider at this stage whether it is appropriate to apply principles of cause of action and issue estoppel to opposition proceedings.

Counsel for the Defendants relies on three grounds, namely (1) the practical differences between opposition proceedings under s.38(2) and invalidity proceedings under s47(1), (2) the unwelcome consequences if the logic of the deputy judge’s conclusions are extended to opposition proceedings and (3) the lack of finality in respect of opposition proceedings.

With regard to the first point, it is the case that opposition proceedings have become relatively low cost and informal. Counsel for the Defendants points out that the rules as to costs and disclosure are different, cross-examination is rare and that, though enormously experienced, the hearing officers are not normally qualified lawyers. This view of opposition proceedings is confirmed by the witness statement of M. Monteiro in this action describing how he decides whether to devote the resources of the Defendants to opposition proceedings and if so to what extent.

With regard to the second point counsel for the Defendants points out that if the principles applied by the deputy judge are extended to opposition proceedings then an unsuccessful opponent will be unable to defend subsequent infringement proceedings on grounds of invalidity. Thus, either the opposition jurisdiction will not be used at all or it will be used much more seriously than now. In addition, he suggests, a successful opposition under s.5(4)(a) TMA would enable the opponent to rely in subsequent passing off proceedings on the decision of the Registrar notwithstanding that such a claim would not be within his jurisdiction. Thirdly, he suggests that such a principle may lead to more than one and inconsistent estoppels. He points to the decision of OHIM which, prima facie, is later than and inconsistent with the earlier decision of the Registrar.

With regard to the third point, Counsel for the Defendants suggests that the decision of the Registrar in opposition proceedings cannot be final as to the validity of the mark or its registration because it does not exist at the time of the decision in the opposition proceedings.

Counsel for the Defendants reserves for argument in the higher courts whether the decision of Mr Arnold QC in Hormel Foods Corpn v Antilles Landscape Investments NV is right. Before me he accepted that I must follow that decision and the logic of it unless I am convinced that it is wrong in law. No one has sought to persuade me that it is wrong and I am certainly not convinced that it is. Accordingly I must not only apply its ratio decidendi but follow where the logic of the decision leads.

It is true that there are differences between the practice and procedure of the Registry in opposition proceedings under s.38(2) and infringement proceedings in the High Court where invalidity is raised by way of defence to claims of infringement. But there is no relevant difference between the practice and procedure of the Registry in opposition proceedings under s.38(2) and invalidity proceedings under s.47(1). The former takes place before registration the latter afterwards. In each case the issues are those for which ss.3 and 5 provide. Counsel for the Defendants did not suggest that Mr Arnold was wrong to conclude in paragraph 31 (see para 34 above) that the Registrar in opposition proceedings was a court of competent jurisdiction whose decisions were capable of giving rise to a plea of res judicata. In view of the passages in Spencer Bower to which Mr Arnold referred, like him, I consider that the concession impliedly made before me was rightly made.

It is also true that opposition proceedings under s.38(2) are necessarily taken before the mark is registered whereas those under s.47(1) are taken after registration. Equally on registration s.72 TMA applies so as to confer prima facie validity. These seem to me to be distinctions without any relevant difference. In each case the issues are whether any objection to registration can be made out under ss.3 or 5 TMA. In each case the order of the Registrar is, subject to appeal, final. The fact that it may give rise to an estoppel binding in later proceedings in a court, such as the High Court, higher in the judicial hierarchy, is an inevitable consequence of the acceptance of the proposition that the decisions of lower courts may give rise to an estoppel.

The case is quite unlike Buehler AG v Chronos Richardson [1998] RPC 609 where the relevant jurisdiction was divided between the national courts and the Opposition Division of the European Patent Office. Nor in my view can it sensibly be said that the co-existence of both s.38(2) and 47(1) makes it plain that proceedings under the first are necessarily interim and not final because of the existence of the second. There is no obligation to take opposition proceedings, nor in the later proceedings is the registrar or court bound to reconsider the decision of the Registrar in opposition proceedings.

For all these reasons I conclude that the principles to which Mr Arnold gave such close consideration in Hormel do apply to decisions of the Registrar in opposition proceedings, notwithstanding his reservation contained in paragraph 95 (see paragraph 37 above). Accordingly I must consider the principles of cause of action estoppel, issue estoppel and abuse of the process on that basis.

It is well settled that cause of action estoppel applies where a cause of action in the second action is identical to a cause of action in the first. If it is then the estoppel will preclude relitigation not only of points or issues which were raised in the first proceedings but also those which might have been. (see paragraphs 25 (a) and (b) above.) Counsel for the Defendants contends that this condition is not satisfied. The cause of action in the opposition proceedings was, he submits, the prospective registrability of the mark SPECIAL EFFECTS. The cause of action, by defence and counterclaim, in the instant proceedings is the validity of the registration made on 25th October 2002. I am unable to accept that distinction. The principle is founded on the public interest in finality and concern that litigants shall not be faced with the same claim twice. The underlying issues, namely the applicability of ss.3 and 5 TMA are identical. It would undermine the principle if a distinction so formal and insubstantial could make it inapplicable.

The issues in fact raised were the same. It is true that there was some confusion in the opposition proceedings whether the First Defendant relied on s.3(1)(a),(b) or (c) (see paragraphs 7-10 of the Registrar’s decision). In the end the opposition was tested in accordance with sub-paragraph (c) because that was the choice of the representative of the First Defendant. In any event the estoppel covers not only the issues which were raised by those which might have been but were not, i.e. s.3(1)(d). In the absence of fraud or collusion, and none is alleged, the bar is absolute (see paragraph 25(b) above).

That conclusion is sufficient to dispose of this issue but in case the matter goes further and in view of some of the subsequent preliminary issues I should briefly indicate my views on issue estoppel and abuse of the process. With regard to issue estoppel the conclusion must be the same unless it can be said that in this case there are special circumstances why such an estoppel should not, in the interests of justice, preclude relitigation of the same issues in these proceedings. Counsel for the Defendants relied on a number of matters. First, he submitted, the evidence in the action, particularly the witness statements of Ms Francesca Fitzgerald and Mr White, is much fuller and more persuasive than that which the First Defendant adduced in the opposition proceedings. Second, the immediate reaction of the Claimant in the correspondence which occurred in 2004, see paragraph 16 above, was to require the defendants to prove their case. Not until 2005, by which time the decision of Mr Arnold in Hormel was available did they change tack and rely on the alleged estoppels instead. Thirdly it is suggested that to preclude both defendants from contesting the infringement claim on grounds of invalidity would be contrary to Article 6 ECHR. Fourthly, it is suggested that the decision of the Registrar as to the application of s.3(1)(c) was based on the decision of ECJ in Procter & Gamble Co v OHIM (BABY DRY) [2002] RPC 17 which is now regarded as wrong in law.

I do not accept any of those submissions as giving rise to special circumstances sufficient to exclude an issue estoppel. First, it is not suggested that the evidence of Ms Fitzgerald and Mr White was not available at the time of the opposition proceedings, or indeed that it would have been conclusive in favour of the Defendants had it been adduced at that stage. The defendants have only themselves to blame if their evidence at that stage was not, as they now suggest, the best then available to them. It is not suggested that the demand of the Claimant made in its solicitors’ letter of 9th September 2004 caused the Defendants to change their position in any way. If the conduct of the claimant at that stage ought to be visited with any sanction costs is more than enough. Third, as Lord Millett recognised in Johnson v Gore-Wood (see paragraph 28 above), there can be no objection founded on Article 6 ECHR in the case of a rule of substantive law arising from earlier proceedings determined on their merits. Fourth, whatever criticism may be made of the decision of the ECJ in BABY DRY the findings of the Registrar in paragraphs 12 and 19 of the judgment of the hearing officer justify his conclusions in respect of s.3(1)(c) under the case law which succeeded BABY DRY.

In respect of the abuse of process alternative I have difficulty seeing how the claimant could succeed on this basis if it had failed on both cause of action and issue estoppel. It is unnecessary to consider this alternative any further.

I turn then to consider the special position of the Second Defendant. In his evidence in the opposition proceedings M. Monteiro described himself as the proxy of the First Defendant and deposed to the use of the marks FX and SPECIAL FX on products for sale in England. In his first witness statement in this action M. Monteiro averred (paragraphs 28 and 29) that

“28.....The First Defendant carries on no business in the United Kingdom connected with the relevant goods at issue in these proceedings. The first defendant is the proprietor of various registered and unregistered trade marks which are relevant to the counterclaim in these proceedings.

29....The Second Defendant carries on business in the UK only. It is responsible for the distribution, marketing and sale of a wide range of beauty products in the UK. In carrying out these activities, the second defendant’s only substantive business connection with the first defendant is that it is permitted to use certain trade marks owned by the first defendant in relation to the beauty products it trades in.”

He goes on in paragraph 30 to emphasise that the two Defendants are distinct legal and economic entities such that the Second Defendant would not be obliged to comply with any directive from the First Defendant.

Counsel for the Defendants contends that the Second Defendant was not and is not a privy of the First Defendant. He emphasised the evidence of M. Monteiro to which I have referred. He submitted that the interest of the First Defendant in opposing the registration in the first place lay in its interest as a trade-mark owner to prevent the registration of a potentially conflicting mark. He suggested that, as the owner of goods which were at risk of forfeiture, the interest of the Second Defendant was quite different. He submitted that in the case of the Second Defendant a finding of privity would infringe the Second Defendant’s rights under Article 6 because it would never have had the opportunity itself to challenge the validity of the mark SPECIAL EFFECTS.

I do not accept these submissions. The principle to be applied is that formulated by Sir Robert Megarry in Gleeson v Whippell and approved by the House of Lords in Johnson v Gore-Wood (see paragraph 27 above). What must be ascertained is whether there is a sufficient degree of identity between the First Defendant and the Second Defendant to make it just that the decision in the opposition proceedings should be binding on the Second Defendant in these proceedings. In my judgment the answer to that question is in the affirmative. The Second Defendant could have been joined as a party to the opposition proceedings. In his evidence in the opposition proceedings M. Monteiro evidently regarded the First and the Second Defendants as one person; hence his references to ‘my company’ in contexts which can now be seen to refer to the Second Defendant alone. Both are concerned with marks which are owned by the First Defendant and used by the Second Defendant in its business in the UK, the former as owner the latter as licensee. The dispute with the claimant concerns the validity and use of their rival marks. Both defendants are members of the same group. Even accepting that the First Defendant is not entitled to give directions to the Second Defendant there is no reason to think that the ultimate holding company cannot give directions to both of them. In my view, prima facie, each company in a group is to be regarded as the privy of every other company in the group unless it demonstrates the contrary. Otherwise the principles of estoppel will become largely inoperable in a corporate structure.

Finally, in this context I should refer again to Article 6 ECHR. The right to a fair and public hearing within a reasonable time by an independent and impartial tribunal is to be given effect “in the determination of his civil rights”. As I have already pointed out (paragraph 51 above) there is no objection to a rule of substantive law precluding relitigation by a privy. Not only is the privy estopped where it is just that he should be but this is a necessary consequence of the right of the other party to the original proceedings to the effective enforcement of the judgment in his favour. I can see no reason why Article 6 ECHR should preclude a cause of action or issue estoppel against one properly identified as a privy of the other party to the first set of proceedings.

Having concluded that both Defendants are subject to both cause of action and issue estoppel arising from the opposition proceedings the first issue requires me to relate that conclusion to each ground relied on by them for challenging the validity of the mark SPECIAL EFFECTS. In relation to cause of action estoppel the Defendants are precluded from relying on each and all the grounds which are founded on any part of ss.3 or 5 TMA. In relation to issue estoppel the Defendants are precluded from relying on the various allegations which correspond to findings of the Registrar. They are readily identified in the table provided by counsel for the Claimant which is reproduced below.

I have taken the formulation of the second issue from the order of Peter Smith J. If one substitutes the mark SPECIAL FX for “the marks complained of herein” and the date 30th June 2000 for “the application for the said registered trade mark the issue may be more comprehensibly reformulated as:

Are either or both Defendants precluded by cause of action estoppel, issue estoppel, or abuse of process from alleging use by them of SPECIAL FX before 30th June 2000 for the purpose of a defence under s.11(3) TMA or a counterclaim for passing off?

The answer follows from my earlier conclusions. The question whether the First Defendant had used the mark SPECIAL FX before 30th June 2000 was expressly raised in the opposition proceedings, see paragraphs 10 and 13 above. The issue was concluded against the First Defendant. In my judgment both the First Defendant, and for the reasons given earlier, the Second Defendant are precluded from relitigating this issue. It is a classic case of issue estoppel. In my view, as before, there are no special circumstances sufficient to negative such an estoppel. Accordingly I answer both parts of this issue in the affirmative.

Is the United Kingdom or England and Wales capable of being a particular locality for the purposes of section 11(3) of the Trade Marks Act 1994?

Article 6.2 of the Trade Mark Directive 89/104 of December 1988 provides that:

“The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade an earlier right which only applies in a particular locality if that right is recognised by the laws of the member state in question and within the limits of the territory in which it is recognised.”

This provision was given effect by s.11(3) TMA in the following form:

“A registered trade mark is not infringed by the use in the course of trade in a particular locality of an earlier right which applies only in that locality.”

The section goes on to define an “earlier right”.

In paragraph 10 of their defence the Defendants indicate that they will rely on the local goodwill generated before 30th June 2000 by the use of the Sign or Earlier mark as so defined in the pleading. In paragraph 4 of the reply the claimant contends that the Defendants are precluded by estoppel from relying on any such use. Further and in any event they deny that either the UK or England and Wales is capable of being a particular locality.

In view of my conclusion on the second issue, see paragraph 59 above, this, the third, issue does not arise. It is a pure point of law, primarily European. It is not dependent on any finding of fact. Its determination should await a case in which it arises for decision.

If the Claimant is successful on the first and second preliminary issues, should paragraph 14 of the Defence and Counterclaim be struck out?

S.46(1)(a) TMA provides:

“46.(1) The registration of a trade mark may be revoked on any of the following grounds-

(a)

that within the period of five years following the date of completion of the registration procedure it has not been put to genuine use in the United Kingdom, by the proprietor or with his consent, in relation to the goods or services for which it is registered and there are no proper reasons for non-use;”

In paragraph 14 of their defence the Defendants seek to take advantage of this provision. They contend that even if there is sufficient similarity between the marks to cause confusion the Claimant is not entitled to relief because:

“the claimant has not made any genuine use of the Mark in relation to goods....under class 3...and cannot lawfully do so within a period of five years from [25th October 2002]...”

The purpose of this preliminary issue is to ascertain whether in the light of my conclusions thus far it is open to the Defendants to rely on their passing off claim based on use of the mark SPECIAL FX so as to establish the lack of any lawful use at any time down to 25th October 2007. I have already concluded in relation to issue 3 above that the Defendants are precluded by issue estoppel from relying on use of the mark SPECIAL FX at any time before 30th June 2000. However they are not so precluded from relying on any use of their mark SPECIAL FX between 30th June 2000 and the date of the completion of the registration procedure, namely, 25th October 2002. If such use infringed the claimant’s mark it might be incapable of generating a lawful reputation in itself. But the question of whether it would infringe the claimant’s mark is the issue in the action.

Accordingly I conclude that the Defendants are entitled to allege and prove if they can lawful use of their mark SPECIAL FX in the period 30th June 2000 to 25th October 2002. I answer this issue in the negative. However that will be small comfort to the Defendants unless they are also successful on the fifth issue.

If the Defendants can establish the facts to establish a case in passing off (as pleaded in the Defence and Counterclaim herein), should the claim under paragraph 14 of the Defence be struck out/summary judgment given in relation thereto due to the fact that the period of five years following the date of completion of the registration procedures of United Kingdom Trade Mark No 2 237 923 has not yet lapsed?

This issue arises from the terms of s.46(1)(a) quoted in paragraph 63 above. The Defendants maintain that on the assumption built into the issue, namely proof of its passing off claim arising from its use of the mark SPECIAL FX, it is certain that at the expiration of the period of five years on 24th October 2007 the conditions for the operation of the subsection will have been satisfied. They seek now an order for revocation of the mark SPECIAL EFFECTS effective from 25th October 2007.

In my view this claim is premature and should be struck out. Parliament has given those in the position of the Claimant a period of five years in which to establish genuine use of its mark or proper reasons for its non-use. This court can neither prophesy nor speculate what will happen over the next 17 months. As counsel for the Claimant points out the Defendants might lose interest, grant a licence or cease trading altogether. It would not be impossible to make some legitimate use of the mark SPECIAL EFFECTS coupled with a prominent disclaimer to avoid any risk of confusion. Similarly it is not possible now to predicate that there can be no proper reason for non-use in 2007.

For all these reasons I answer this, the fifth, issue in the affirmative. In my view this claim should be struck out.

Should the Defendants’ defence under Article 6(1) of the European Convention on Human Rights be struck out as having no reasonable prospect of success, or alternatively that summary judgement against the Defendants be given in relation to the said allegation?

In paragraph 23 of the defence and counterclaim it is averred that:

“..the attempt by the claimant to preclude the Second Defendant from relying on invalidity of of the claimant’s mark by way of defence to infringement proceedings is contrary to Article 6(1) European Convention on Human Rights.”

I have dealt with and rejected this submission in paragraphs 51 and 56 above. As counsel for the Defendants submitted it is not a question of striking out a defence which would otherwise go to trial.

In view of my decisions as to the existence and effect of cause of action and issue estoppels binding on both Defendants there is nothing left in the allegation to be struck out.

For all these reasons I conclude that:

I invite counsel to agree a minute of order to give effect to these conclusions. I will hear further argument on the form of that order and on the question of costs.