Maslyukov v Diageo Distilling Ltd & Anor

On 18 September 2006 Pavel Maslyukov filed Application No. 2432800 to register the words DALLAS DHU as a trade mark in respect of “alcoholic beverages, but in so far as whisky and whisky based liqueurs are concerned only Scotch whisky and Scotch whisky based liqueurs produced in Scotland; Scotch whisky”. Subsequently Mr Maslyukov voluntarily limited the application under section 13 of the Trade Marks Act 1994 as follows: “Registration of this mark shall give no right to the exclusive use of the mark for the single malts distilled by the distillery at IV36 2RR, Forres, before its closure in 1983”.

On 13 August 2007 Mr Maslyukov filed Application No. 24632987 to register the word CONVALMORE as a trade mark in respect of the same goods as DALLAS DHU. Subsequently Mr Maslyukov voluntarily limited the application in a similar manner to DALLAS DHU, except that the limitation refers to “the single malts distilled by the Convalmore Distillery, Dufftown, Banffshire before its closure in 1985”.

Also on 13 August 2007 Mr Maslyukov filed Application No. 24632989 to register the word PITTYVAICH as a trade mark in respect of the same goods as DALLAS DHU. Subsequently Mr Maslyukov voluntarily limited the application in a similar manner to DALLAS DHU, except that the limitation refers to “the single malts distilled by the Pittyvaich Distillery before its closure in 1993”.

Mr Maslyukov’s three applications were subsequently opposed by Diageo Distilling Ltd (“DDL”) on grounds raised under sections 3(1)(c), 3(3)(a) and (b), 3(6) and 5(4)(a) of the 1994 Act.

On 1 November 2006 Diageo Scotland Ltd (“DSL”) filed Application No. 2437240 to register the words DALLAS DHU as a trade mark in respect of “alcoholic beverages, but in so far as whisky and whisky based liqueurs are concerned only Scotch whisky and Scotch whisky based liqueurs produced in Scotland”. DSL’s application was subsequently opposed by Mr Maslyukov under section 5(1) of the 1994 Act in reliance upon Mr Maslyukov’s earlier application to register the same trade mark in respect of the same goods.

In a written decision dated 7 July 2009 (BL O/188/09) David Landau acting for the Registrar of Trade Marks upheld DDL’s oppositions to Mr Maslyukov’s applications, but only on the section 3(6) ground and not on any of the other grounds. It necessarily followed that Mr Maslyukov’s opposition to DSL’s application failed.

On 3 August 2009 Mr Maslyukov filed an appeal to an Appointed Person against the hearing officer’s decisions to uphold DDL’s oppositions to his applications and to dismiss his opposition to DSL’s application. On 4 August 2009 DDL filed an appeal to this Court against the hearing officer’s rejection of its grounds of opposition under sections 3(1)(c), 3(3)(b) and 5(4)(a). On 20 August 2009 DDL and DSL filed a respondents’ notice to Mr Maslyukov’s appeal contending that Mr Maslyukov’s applications should also have been refused under sections 3(1)(c), 3(3)(b) and 5(4)(a). On 7 October 2009 Geoffrey Hobbs QC sitting as the Appointed Person decided, with the consent of the parties and the Registrar, to refer Mr Maslyukov’s appeal to the High Court so that it could be determined together with DDL’s appeal (BL O/312/09). By virtue of paragraph 25.2 of the Practice Direction to CPR Part 63, Mr Maslyukov had 14 days in which to issue a claim form seeking the determination of the appeal. He did not do so within that period. On 14 February 2010 Mr Maslyukov filed an appellant’s notice for an appeal to this court. Strictly speaking, that was not the correct procedure, but DDL and DSL took no point on that. Furthermore, DDL and DSL consented to my granting Mr Maslyukov an extension of time pursuant to paragraph 25.4 of the Practice Direction to Part 63. Accordingly, the hearing before me proceeded on the basis that Mr Maslyukov had a properly constituted appeal before this Court against the hearing officer’s decisions to uphold DDL’s oppositions to his applications and to dismiss his opposition to DSL’s application.

It is relevant to note that, in addition to the three applications which are the subject of the present appeal, Mr Maslyukov has two other applications to register trade marks in respect of the same specification of goods. These are Application No. 2461895 filed on 20 July 2007 for the word COLEBURN and Application No. 2461954 filed on 20 July 2007 for the word BANFF. Both of these applications are pending in the Registry and have not yet been advertised for opposition. As I understand it, they have been suspended pending the outcome of the present proceedings.

The hearing officer’s decision contains at paragraphs 22-91 a detailed summary of the evidence in the four oppositions and at paragraphs 92-101 a statement of certain findings of fact in the light of that evidence. Additional findings of fact are to be found later in the decision. For present purposes the facts can be summarised as follows.

DDL and DSL are part of the Diageo Group of companies headed by Diageo plc. The Diageo Group is one of the world’s leading producers of alcoholic drinks. In the remainder of this judgment I shall refer to the relevant companies within the group jointly and severally as “Diageo”. Diageo is the United Kingdom’s largest producer of Scotch whisky. It owns 29 Scottish distilleries which produce malt and grain whisky. 27 of these produce single malt whisky, that is to say, whisky produced from malted barley by a single distillery in a pot still and sold under that distillery’s name. These include Cardhu, Cragganmore, Dalwhinnie, Lagavullin, Oban and Talisker. Diageo is the successor in business to a number of distilling companies, including Distillers Company Ltd (“DCL”), Scottish Malt Distillers Ltd (“SMD”) and United Malt and Grain Distillers Ltd (“UDL”).

The production of single malt Scotch whisky is a batch process which involves six main stages: malting, mashing, fermentation, distillation, maturation and bottling. The characteristics of the final product depend both on the starting materials, including the water, and on what is done at each of these stages. The malting, mashing, fermentation and distillation stages are carried out by the distillery. As explained below, the maturation and bottling stages may or may not be carried out by or behalf of the distillery.

By law, all Scotch whisky must be matured by storage in oak casks for a minimum of three years. Many single malts are matured for much longer. The whisky continues to develop as it spends time in the wood. The majority of single malts are bottled after between 10 and 18 years, and maturation periods of 20 years or more are not uncommon.

Single malt whiskies reach the market through two principal routes. The first is that after distillation the whisky is matured, bottled and marketed by or on behalf of the distillery. The second is that the whisky is purchased in cask from the distillery (sometimes via a whisky broker) by an independent bottler, which then matures, bottles and markets it. The independent bottlers store the product in cask, often for many years, and periodically release bottlings to the market. As the product becomes more mature, it grows more complex. Both for this reason and because of its scarcity, the price tends to increase. It is not uncommon for independent bottlers to keep malt whisky for up to 50 years from its date of distillation. 50 year old product from distilleries of repute can sell for hundreds of pounds a bottle.

There are a considerable number of independent bottlers. Two of the best known are Gordon & MacPhail and Cadenhead. Many independent bottlers stock a large range of single malts for maturation. Thus Gordon & McPhail currently has over 80 single malts in store.

Single malt whiskies cease to mature once they are bottled. Nevertheless, specialist retailers and auction houses continue to sell single malts long after they have been bottled and even longer after they were distilled.

Single malt whiskies are sold under and by reference to the name of the distillery at which the whisky was distilled. Other trade marks may also appear on the bottle, in particular if it had been bottled by an independent bottler. It is usual for the label to indicate the number of years that the whisky has been aged in cask. In the case of historic production, it is also common for the label to state the year in which the whisky was distilled.

The reputation of a single malt whisky depends primarily on the distillery, but connoisseurs differentiate between different ages (i.e. years spent in cask), “vintages” (i.e. years of distillation) and bottlings.

Dallas Dhu is the name of a distillery which was built in 1898. It is located in the hamlet of Dallas, near Forres, in the Speyside district of the Highlands region. It was closed as a working distillery by DCL in 1983.

Among other reference works, Dallas Dhu single malt whisky is listed in Michael Jackson’s Malt Whisky Companion (5^th ed), which comments on vintages running from 1970 to 1980 marketed by various bottlers. Thus the 1980 vintage bottled by Gordon & MacPhail is given a score of 83 (out of 100). The entry is illustrated by a copy of the label from this bottling which features the words DALLAS DHU, a line drawing of the distillery, the year of distillation and the name of the bottler as well as the bottle size and alcohol content. As at October 2007, The Vintage House, a specialist retailer in Old Compton Street, London, stocked bottlings of the 1971, 1972 and 1982 vintages.

Gordon & McPhail has bottled and marketed Dallas Dhu malt whisky from its own in cask stock for at least 30 years. Over that time, it has sold on average 1,500 bottles a year of Dallas Dhu. Its bottlings of Dallas Dhu are sold throughout Europe and in other countries of the world. It holds significant stocks of Dallas Dhu whisky which it plans to bottle and sell over the next 25 years or more.

Dallas Dhu opened to the public as a whisky museum and visitor centre in 1988. Although the distillery is not operational, it has been preserved in working order. It is now run by Historic Scotland, an agency of the Scottish Executive. It is part of a tourist route called the Malt Whisky Trail. From 1994 to 2006 there were 186,303 visitors. The visitor centre includes a retail shop at which visitors can purchase Dallas Dhu merchandise such as stationery.

Although Diageo retains the legal ownership of Dallas Dhu, it was transferred into the guardianship of the Secretary of State for Scotland pursuant to the Ancient Monuments and Archaeological Areas Act 1979 under a Deed of Guardianship executed on 10 and 17 December 1997. The Deed provides that Diageo shall not carry out any distilling operations at the premises without the prior written consent of the Secretary of State which may be subject to reasonable conditions.

In 1999, 2000, 2001 and 2003 Historic Scotland released limited editions of Dallas Dhu whisky. These releases were bottled from casks of Dallas Dhu which Historic Scotland had purchased from independent bottlers. The bottling was carried out on behalf of Historic Scotland by an independent bottler. Historic Scotland has further casks in stock for future releases.

Convalmore is the name of a distillery which was opened in 1894. It is located in Dufftown, Banffshire, Speyside. It was mothballed by SMD in 1985. In 1992 the premises were sold to William Grant & Son Distillers Ltd (“Grants”), who use it for the storage of Scotch whisky. The feu disposition provides that Grants shall not use the premises for the distillation of Scotch whisky and that Grants shall not use the name CONVALMORE.

The Malt Whisky Companion lists vintages of Convalmore ranging from 1960 to 1981. The top scorer is a 24 year old distilled in 1978. The entry is illustrated by a copy of the label from a 1981 vintage which features the word CONVALMORE, the year of distillation, the age and the name and logo of the bottler as well as the bottle size and alcohol content. In October 2007 The Vintage House stocked bottlings of the 1960 and 1981 vintages.

In paragraph 17 of his witness statement, Kenneth Robertson, Diageo’s Director of Corporate Relations, Diaego Whisky, stated:

“In addition to the original bottlings and bottlings by independent bottlers, Diageo also on occasion issues a limited release of Convalmore whisky from its own reserves. In 2003 and 2005 Diageo released bottlings of Convalmore as part of its ‘Rare Malts’ range.”

Pittyvaich is the name of a distillery built in 1975. It was also located in Dufftown, Banffshire, Speyside. It was mothballed as a working distillery by UDL in 1993 The distillery was bulldozed in 2002 and the remnants were destroyed by fire. The site is currently a research and testing centre.

The Malt Whisky Companion lists a single bottling by Diageo of a 12 year old malt in 1991, but also refers to two bottlings by an independent bottler. The entry is illustrated by a copy of the label from the Diageo bottling which features the word PITTYVAICH, the age and the name of the bottler as well as the bottle size and alcohol content. In October 2007 The Vintage House stocked bottlings of the 1976 and 1994 vintages among others.

Banff is the name of a distillery founded in 1824. It was located at Inverboyndie, near the town of Banff in Speyside. It was closed in 1983 and subsequently demomlished. The Malt Whisky Companion lists vintages ranging from 1976 to 1980. The top scorer is a 1976 bottled by Gordon & McPhail under its Connoisseurs Choice label.

Coleburn is the name of a distillery built in 1896. It is located at Longmorn by Elgin in Speyside. It was mothballed by DCL in 1985, but the distillery is still intact. The Malt Whisky Companion lists a single bottling of whisky distilled in 1979 and aged for 21 years.

Mr Maslyukov’s evidence is as follows. He is a “technology engineer” by education. He also studied intellectual property law at the Paris-1 University in France. His professional background is in international technology procurement. He is also a professional in the alcoholic drinks industry. In 2005 he founded the English company Hispaniola Brands Ltd. He had his own distilling laboratory where he develops recipes, but he has no production facility.

In relation to DALLAS DHU, Mr Maslyukov says:

“… my plan for the ‘Dallas Dhu’ young single malt whisky was to never produce it by self but simply to select and to approach the best Scottish distiller asking to distill and to age whisky for my Company. Initially. I sincerely expected to contact the original distillery in Forres, but several Scottish independent distillers misadvised me to do this, explaining that probably this ‘ghost’ facility isn’t capable to distill. … Thus they kindly suggested me to forget the idea to ‘revive’ the Diageo’s ‘ghosts’ and advised me to look for the alternative independent distiller in Scotland. Non regarding existence of such popular statements, we trust that Forres distillery can distill for our order. Other option – is to order distilling from another selected distiller in Speyside…

The idea to use the name of a closed distillery in Scotland for the young single malt from another distillery in Scotland isn’t new…..”

In relation to CONVALMORE and PITTYVAICH, Mr Maslyukov says:

“…I dream to own the whisky production facility, a distillery in Scotland. Unfortunately my budget is too small and now I still may not afford this for my Company. Consequently, I need to spend a lot of time in travelling and in confidential negotiations with the Scottish producers, searching for the best contract distiller for my ‘private labels’….

In their whiteness [sic] statement the Opponent described the condition of the Convalmore and Pittyvaich distilleries. The one historical facility (CONVALMORE) was sold out for the maximum possible price to the Scottish whisky producer with the sadist [sic] restriction in the contract to never introduce production inside. Another facility (PITTYVAICH) was ‘bulldozed (…) with the remnants destroyed by fire’… In such extraordinary abusus around, I sincerely applied for registration to let the historical brands survive. The limitation was introduced in the Form TM21 in order to restrict the exclusive use of the mark. The whisky stock from the original distillery is reducing dramatically; the price for the old malts is increasing as well. The price, the information on the label, the rarity of the old malt from the closed facility – all such solid features create the significant gap between the old malts from the destroyed distilleries (may be potentially bottled by any anyone) and the young malt Convalmore and Pittyvaich from the best Scottish producers selected by the trademarks owner.”

For reasons that will appear, the two main issues before me concern Diageo’s objections under sections 3(6) and 5(4)(a). The hearing officer’s decision with regard to both issues involved a multi-factorial assessment of the kind to which the approach set out by Robert Walker LJ (as he then was) in REEF Trade Mark [2002] EWCA Civ 763, [2003] RPC 5 at [28] applies:

“In such circumstances an appellate court should in my view show a real reluctance, but not the very highest reluctance, to interfere in the absence of a distinct and material error of principle.”

A decision does not contain an error of principle merely because it could have been better expressed.

Section 3(6) of the 1994 Act provides:

“A trade mark shall not be registered if or to the extent that the application is made in bad faith.”

This provision implements Article 3(2)(d) of First Council Directive 89/104/EC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (now codified as Directive 2008/95/EC of 22 October 2008).

The hearing officer summarised the domestic jurisprudence on section 3(6) contained in the cases of Gromax Plasticulture Ltd v Don and Low Nonwovens Ltd [1999] RPC 367, Harrison v Teton Valley Trading Co [2004] EWCA Civ 1028, [2005] FSR 10, AJIT WEEKLY Trade Mark [2006] RPC 25, ROYAL ENFIELD Trade Marks [2002] RPC 24, HOTPICKS Trade Mark [2004] RPC 42 and NONOGRAM Trade Mark [2001] RPC 21, together with relevant principles derived from Barlow Clowes International Ltd v Eurotrust International Ltd [2005] UKPC 37, [2006] 1 WLR 1476 and Re H (minors) [1996] AC 563, in paragraph 117 of his decision as follows:

“Bad faith includes dishonesty and ‘some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular field being examined’. Certain behaviour might have become prevalent but this does not mean that it can be deemed to be acceptable. It is necessary to apply what is referred to as the ‘combined test’. This requires me to decide what Mr Maslyukov knew at the time of making the application and then, in the light of that knowledge, whether his behaviour fell short of acceptable commercial behaviour. Bad faith impugns the character of an individual or collective character of a business, as such it is a serious allegation. The more serious the allegation the more cogent must be the evidence to support it. However, the matter still has to be decided upon the balance of probabilities. The issue has to be considered as at the date of application for registration. An act of bad faith cannot be cured by an action after the date of application.”

Mr Maslyukov did not criticise this summary of the law, and it appears to me to be accurate. The hearing officer also cited the judgment of the Court of Justice of the European Communities (as it then was) in Case C-529/07 Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH [2009] ECR I-0000 at [40]-[51].

The hearing officer’s reasons for concluding that Mr Maslyukov had applied to register the trade marks DALLAS DHU, CONVALMORE and PITTYVAICH in bad faith are set out in the following passage in his decision:

“119.

In this case there is no dispute that Mr Maslyukov knew that the signs he had chosen to apply for as trade marks were the names of distilleries that were no longer functioning. Mr Maslyukov knew of the traditions of the whisky industry in relation to independent bottlers and the holding and release of whiskies. That is the state of knowledge of Mr Maslyukov.

120.

Mr Maslyukov has had no relationship with the distilleries in question. … . These cases are not about the ability for newcomers to enter into the Scotch whisky industry; they are about the applications as trade marks for the names of distilleries that are no longer functioning. Mr Maslyukov had the whole lexicon of the world to choose from in deciding upon trade marks. He chose the names of distilleries, distilleries which are or had been owned by Diageo or Diageo’s predecessors in business. He gives no persuasive reason as to why he chose these names. He states that he applied for the Convalmore and Pittyvaich trade marks in order to let the historic brands survive. I do not think that the conservation movement had extended into fighting for the survival of ‘historic brands’. I cannot see that there can be any reason for the applications than to use them as a springboard for his proposed business. As a springboard there must be a hope that the products would be identified with the distilleries and take on board the reputation that they have or had. The number of persons who know of the distilleries will certainly be greater than the number of persons who have a detailed knowledge of the distilleries. In the case of Dallas Dhu the number will be increased owing to it now being a tourist destination. It will be known not only by those who visit the defunct distillery but some of those who see the publicity for the Malt Whisky Trail.

121.

Those in the trade and the educated aficionados of single malt whisky will know of the practice of independent bottlers using the names of the distilleries on the whiskies that they release. Mr Maslyukov knows of this tradition.

122.

As held by the ECJ [in Lindt], the fact Mr Maslyukov knew of the use of the name of the distilleries for similar or identical products and applied for those names is not an act of bad faith per se. It will depend on the circumstances of the case. … In relation to the products of the Dallas Dhu and Pittyvaich distilleries there is no evidence of competition with Diageo, as it is no longer selling the products. In 2003 and 2005 Diageo released bottlings of Convalmore and so, especially taking into account the traditions of the trade, is still involved in the trade by reference to this sign

123.

In my view Mr Maslyukov is using the trade mark applications to appropriate the reputation of the distilleries; something very useful to a new business which has no history in the trade, especially when tradition and heritage are key parts of the trade. Taking into account the knowledge of Mr Maslyukov, the reputations of the distilleries, the traditions of the trade, the absence of any link of Mr Maslyukov with the distilleries I have no doubt that reasonable and experienced men in the Scotch whisky trade would consider that filing the applications falls short of the standards of acceptable commercial behaviour. (There are experts in the trade who say as much.)

124.

The limitation of the rights in the applications was after the date of application, and the question of bad faith has to be considered at the date of application. Even if I take into account the limitations I do not consider that this affects my deliberations as to the views of reasonable and experienced men in the Scotch whisky trade to the applications.

125.

The applications cover alcoholic beverages at large, not just whisky. However, the issues must be judged on whether the general categories of goods encompass goods for which there can be objection as per the judgment of the CFI in Duro Sweden AB v Office for Harmonization in the Internal Market (Trade Marks and Designs) (OHIM) Case T- 346/07 … Mr Maslyukov had plenty of time to itemise any alcoholic beverages that were of interest to him and were not whiskies and he has not done so. It also appears from the case that Mr Maslyukov’s interest in the trade marks is in relation to whiskies.”

Mr Maslyukov had understandable difficulty as a litigant in person in identifying any error of principle in the hearing officer’s decision with regard to the section 3(6) objection. As I understood his written and oral submissions, he made four main criticisms of the hearing officer’s reasoning.

First, Mr Maslyukov suggested that the hearing officer had applied a presumption of bad faith to him because he was a foreigner who was involving himself in this country’s traditions and culture. He also complained that Diageo and the Scotch Whisky Association, of which Diageo is a member, were engaged in protectionism to destroy competition from foreigners. In my judgment the hearing officer did not apply any presumption of bad faith. On the contrary, he carefully considered whether the allegation of bad faith was established on the evidence. Nor did he evince any prejudice towards Mr Maslyukov on the ground that Mr Maslyukov was a foreigner. Rightly, he focussed on Mr Maslyukov’s intentions in making the applications, rather than on Diageo’s intentions in opposing them.

Secondly, Mr Maslyukov submitted that the hearing officer had wrongly deprived him of the period of five years permitted to start bona fide use of the trade marks (i.e. by virtue of section 46(1)(a) of the 1994 Act). In my judgment the hearing officer did no such thing. The hearing officer proceeded on the basis that, as at the date of application, Mr Maslyukov intended to use the trade marks in the manner he himself claimed in his evidence.

Thirdly, Mr Maslyukov submitted that his aim was to carry on an honest business in this country. In support of this submission he referred to such matters as the fact that he has no criminal record and is not involved in counterfeit goods. In my judgment this is no answer to the hearing officer’s reasoning. It is well established that bad faith must be objectively assessed in the light of the applicant’s knowledge. It is immaterial if the applicant subjectively sees nothing wrong in what he is doing.

Fourthly, Mr Maslyukov submitted that “There’s nothing dishonest in intent to appropriate by use in Scotland reputation of the distilleries mothballed in Scotland … many, many years ago”. There are two answers to this submission. First, the hearing officer did not find that Mr Maslyukov had acted dishonestly in filing the applications: he found that Mr Maslyukov had acted in a manner which fell short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the Scotch whisky trade. Secondly, Mr Maslyukov’s submission does not challenge the hearing officer’s finding that Mr Maslyukov’s intention was to appropriate the reputation of the distilleries in question. Even if Mr Maslyukov had challenged that finding, it was a finding which the hearing officer was plainly entitled to make on Mr Maslyukov’s own evidence. Given that finding, the hearing officer was entitled to conclude that Mr Maslyukov had acted in a manner which fell short of the standards of acceptable commercial behaviour. Indeed, I agree with the hearing officer’s assessment.

In short, I can see no error of law or principle in the hearing officer’s reasoning. Moreover, I agree with his conclusion.

Diageo’s appellant’s notice seeks an order in the following terms:

“An order setting aside those parts of the decision of the Hearing Officer dated 7 July 2009 concerning Opposition nos. 95314, 95606 and 9507 by which he rejected the appellant’s grounds of opposition based on sections 5(4)(a), 3(1)(c) and 3(3)(b) of the Trade Marks Act 1994 and a declaration that the each of the said grounds of opposition was justified.”

On the face of it, Diageo’s attempt to appeal against the hearing officer’s decision even though it was the successful party is contrary to the principle in Lake v Lake [1955] P 336. In that case a husband petitioned for divorce on the grounds of his wife's cruelty and adultery. By her answer the wife denied both charges, but pleaded that if, contrary to her contention, she had committed adultery, it had been condoned. By a cross-prayer she sought a decree of judicial separation on the ground of her husband's cruelty. The commissioner dismissed the petition, pronouncing in his formal order that the charges were not sufficiently proved and that the wife had not sufficiently proved the contents of her answer. The wife applied for permission to appeal against a finding of fact which she alleged the commissioner had made, in giving the reasons for his judgment, that she had committed adultery. The Court of Appeal dismissed the application, holding that a “judgment or order” against which an appeal could be brought pursuant to section 27 of the Judicature Act 1925 (now section 16(1) of the Senior Courts Act 1981) meant the formal judgment or order which was drawn up and disposed of the proceedings and which in appropriate cases the successful party could enforce or execute. The right of appeal did not extend to a finding or statement in the reasons given by the court for making that judgment or order. In the instant case, there was nothing in the commissioner’s order against which an appeal could lie. Even if the wife succeeded in disproving adultery, the order would not require amendment. In short, as Hodson LJ put it at 345:

“This is an attempt by a successful party to appeal against an order which she has obtained in her favour. In my judgment, this court cannot entertain such an appeal.”

It is worth noting that the reason given by the wife for seeking to appeal the commissioner’s finding was a concern that she would be estopped from challenging the finding in any subsequent proceedings on the basis that it was res judicata. The Court of Appeal did not have to decide what the effect of the finding was, and did not so, but both Sir Raymond Evershed MR and Hodson LJ, with each of whom Parker LJ agreed, observed that Bright v Bright [1954] P 270 was authority for the proposition that the finding was not subject to estoppel per rem judicatam.

In Cie Noga d'Importation et d'Exportation SA v Australia and New Zealand Banking Group Ltd [2002] EWCA Civ 1142, [2003] 1 WLR 307 Waller LJ, with whom Tuckey LJ and Hale LJ (as she then was) agreed as to the law, although differing as to its application to the case at hand, said at [27]:

“Many appeals are brought on the basis of an order made by a judge prior to the formal document being drawn up, and In re B (A Minor) (Split Hearings: Jurisdiction) [2000] 1 WLR 790 demonstrates that the correct reading of Lake v Lake is not that some formal document recording the order must exist. Lake v Lake [1955] P 336 properly understood means that if the decision when properly analysed and if it were to be recorded in a formal order would be one that the would-be appellant would not be seeking to challenge or vary, then there is no jurisdiction to entertain an appeal. That is in my view consistent with In re B. That this is so is not simply by virtue of interpretation of the words ‘judgment’ or ‘order’, but as much to do with the fact that the court only has jurisdiction to entertain ‘an appeal’. A loser in relation to a ‘judgment’ or ‘order’ or ‘determination’ has to be appealing if the court is to have any jurisdiction at all. Thus if the decision of the court on the issue it has to try (or the judgment or order of the court in relation to the issue it has to try) is one which a party does not wish to challenge in the result, it is not open to that party to challenge a finding of fact simply because it is not one he or she does not like.”

Waller LJ went on to observe at [28]:

“It is in that context that it might be appropriate for the court at first instance to consider whether some declaration should be granted to provide a ‘judgment’ or ‘order’ or ‘determination’ which could be the subject of an appeal. If for example the findings of fact might be relevant to some other proceedings …, it might be appropriate to make a declaration so as to enable a party to challenge those findings and not find him or herself prejudiced by them. … It is to go beyond the scope of this judgment to consider precisely what circumstances might allow for the granting of a declaration where findings of fact might affect other proceedings. If an issue estoppel might arise that I suppose might provide a basis.”

Counsel for Diageo contended that Diageo was entitled to appeal against the hearing officer’s decision insofar as the hearing officer rejected its objections to Mr Maslyukov’s applications under sections 3(1)(c), 3(3)(b) and 5(4)(a). In support of that contention counsel relied upon the decision of the Court of Appeal in Morina v Secretary of State for Work and Pensions [2007] EWCA Civ 749, [2007] 1 WLR 3033. In that case M and B were each in receipt of income support. M was informed by the Secretary of State in June 2001 that he had been overpaid income support for December 2000 because he had failed to disclose that he had been refused asylum. M's challenge to the Secretary of State's decision to recover in June 2004 an overpayment of income support notified to M in June 2001 was treated as an application to appeal out of time against the earlier decision. A legally qualified panel member of the Social Security Appeal Tribunal refused M's application under regulation 32 of the Social Security and Child Support (Decisions and Appeals) Regulations 1999 by which an appeal could not be brought more than 13 months after notification of the decision. B appealed against the decision of the Secretary of State to pay an undisputed amount of income support by cheque on the ground that the Secretary of State had no power to make payment by cheque. A legally qualified panel member struck out the appeal for lack of jurisdiction under regulation 46 of the 1999 Regulations. A Social Security Commissioner granted M and B permission to appeal without prejudice to the Secretary of State's right to argue on jurisdiction. The commissioner subsequently held that he had jurisdiction to hear the appeals, but dismissed both appeals on the merits. He refused the Secretary of State permission to appeal on the jurisdiction issue because the Secretary of State was the successful party on the appeals. The Secretary of State applied to the Court of Appeal for permission to appeal under section 15 of the Social Security Act 1998, which provided for an appeal to lie to the Court of Appeal from “any decision” of a Commissioner on a question of law. The Court of Appeal held that the Secretary of State should be granted permission to appeal against the Commissioner’s decisions on the issue of jurisdiction and allowed the appeal.

The principal judgment was given by Maurice Kay LJ, with whom Arden LJ and Sir Anthony Clarke MR (as he then was) agreed on this issue. His reasoning on the question of the entitlement of the Secretary of State to appeal at [10] was as follows:

“It is significant that the wording of section 15 of the Social Security Act does not replicate that of section 16 of the Supreme Court Act. It concerns ‘any decision’ rather than ‘any judgment or order’. To that extent, Lake’s case is not applicable as a matter of construction. Nevertheless, the policy aspect of Lake’s case as articulated by Hodson LJ has to be borne in mind. Does it apply so as to shut out an appeal by the successful party before the commissioner? In my judgment, it does not. I find force in Mr Kovats’s submission that the ‘decision’ referred to by the commissioner in para 1 was in each case and in reality two decisions - first, that he had jurisdiction to hear the appeal and, secondly, that the appeal should be dismissed on the merits. Whilst it is difficult to imagine circumstances in which the Secretary of State, having succeeded on the merits, should be permitted to appeal in relation to some aspect of the reasoning of the commissioner on the merits, I do not think that that necessarily precludes an appeal by him on the jurisdiction point which he lost. Moreover, as Miss Lieven submits, the Secretary of State is seeking to change ‘the decision’ described in para 2. He is seeking to establish that the appeals of the claimants should have been rejected for want of jurisdiction rather than dismissed on the merits. It is mainly for these reasons that I do not consider that we are precluded by law from hearing these appeals. Having said that, however, I am not to be taken to be enabling a whole range of ‘winners’ appeals’. It is significant that, in the present case, the subject matter of the proposed appeals to this court is a ruling by the commissioner on a fundamental legal issue of jurisdiction and not a finding such as the finding of adultery in Lake’s case. The latter was of interest only to the parties and, as between them, was of no lasting legal significance in view of the finding of condonation. Thus, even where ingenuity can result in the decision of a commissioner being represented as, in reality, two decisions, I would expect this court to refuse the successful party below permission to appeal against an immaterial finding of no general significance.”

Counsel for Diageo submitted that the present case was on all fours with Morina since section 76(1) of the 1994 Act provides that an appeal lies from “any decision” of the Registrar. He argued that the hearing officer had made a series of independent “decisions” on each ground of objection raised, and that Diageo sought to overturn the “decisions” on the grounds of opposition raised under section 3(1)(c), 3(3)(b) and 5(4)(a).

I do not accept this argument. Section 40(1) of the 1994 Act provides that where an application has been accepted, and either no notice of opposition is given with the specified period or “all opposition proceedings are withdrawn or decided in favour of the applicant”, then the Registrar shall register the trade mark (except in a circumstance which is not relevant for present purposes). Thus the function of a hearing officer hearing opposition proceedings on behalf of the Registrar is to decide whether to uphold or reject the opposition. (It is possible for an opposition to succeed only in part, in the sense that it may succeed in relation to some goods or services and not others, but that does not affect the analysis.) If the opposition is upheld, the application must be refused. If the opposition is rejected, the trade mark must be registered. If the opposition is upheld, it is immaterial whether it is upheld on one ground or on multiple grounds. It follows that the “decision” for the purposes of section 76(1) is the hearing officer’s decision to uphold or reject the opposition, not his conclusion with regard to individual grounds of opposition. Thus the hearing officer in the present case, unlike the Commissioner in Morina, made a single decision with regard to each of Diageo’s oppositions to Mr Maslyukov’s applications.

This analysis is supported by consideration of the form of order sought by Diageo in its appellant’s notice. This is a declaration that the relevant grounds of opposition were justified. The Registrar has no power to make such a declaration under the 1994 Act. On appeal, this Court has the same powers as the Registrar, but no greater power. It follows that this Court would have no power to grant the declaration sought. Thus this is not a case in which the conclusions in question can be embodied in a declaration the making of which can be challenged on appeal as contemplated by Waller LJ in Noga at [28].

As counsel for Diageo made clear, Diageo’s reason for bringing the appeal was a concern that it would be estopped as a result of the hearing officer’s conclusions in other proceedings between the parties. In particular, it is concerned about parallel opposition proceedings pending before the Office for Harmonisation of the Internal Market. In my view this concern is misplaced. There can obviously be no cause of action estoppel against a party arising out of a judgment in his favour. Nor can there be any issue estoppel against the successful party on an issue on which he lost: see Spencer Bower and Handley, Res Judicata (4^th ed) at 8.25. In that paragraph the learned editor states:

“A decision of fact or law against the party who succeeded or one which was not necessary to the decision will not found an estoppel because it cannot be fundamental to the decision. It would be unjust for such a decision to create an estoppel because the person who failed on that issue cannot effectively appeal against it.”

When I brought this to the attention of counsel for Diageo, he accepted that there could be no estoppel against Diageo if Mr Maslyukov’s appeal was dismissed. (He also very properly referred to the decision of the Court of Appeal in Special Effects Ltd v L’Oréal SA [2007] EWCA Civ 1, [2007] RPC 15; but that is concerned with the different question of whether a decision against a party on an issue in opposition proceedings can give rise to an estoppel against that party in a subsequent claim for a declaration of invalidity on the same grounds.) He nevertheless submitted that Diageo was legitimately concerned because, even in the absence of any estoppel, the hearing officer’s decision might be taken to have persuasive value. In my opinion this does not mean that I have jurisdiction to entertain Diageo’s appeal.

For these reasons I conclude that I have no jurisdiction to entertain Diageo’s appeal.

CPR r. 52.5(2) provides that:

“A respondent who-

…

(b)

wishes to ask the appeal court to uphold the order of the lower court for reasons different from or additional to those given by the lower court,

must file a respondent’s notice.”

By its respondent’s notice Diageo asks this Court to affirm the hearing officer’s decision to uphold its oppositions to Mr Maslyukov’s applications on additional grounds to that which the hearing officer found established under section 3(6). As indicated above, the additional grounds relied on by Diageo are those under sections 3(1)(c), 3(3)(b) and 5(4)(a). In argument, however, counsel for Diageo made it clear that the principal additional ground relied on by Diageo was that under section 5(4)(a), and that the grounds under section 3(1)(c) and 3(3)(b) were only relied on in the alternative. Given that I have concluded that the hearing officer’s conclusion under section 3(6) is unimpeachable, it is strictly unnecessary for me for consider Diageo’s objection under section 5(4)(a). Nevertheless, I propose to do so because (i) I heard argument on this point, (ii) I have reached the clear conclusion that the hearing officer’s decision on the point was wrong, (iii) the point may have an impact on the parties’ costs position, (iv) the point is of significance to the parties not only in these proceedings, but in also other disputes, such as Mr Maslyukov’s applications to register BANFF and COLEBURN, and (v) the point is of some wider significance.

Section 5(4)(a) of the 1994 Act provides:

“A trade mark shall not be registered if, or to the extent that, its use in the United Kingdom is liable to be prevented-

(a)

by virtue of any rule of law (in particular the law of passing off) protecting an unregistered trade mark or other sign used in the course of trade

…”

This provision implements Article 4(4)(b) of the Directive.

The hearing officer quoted the following summary of the principles of the law of passing off from the speech of Lord Oliver of Aylmerton in Reckitt & Colman Products Ltd v Borden Inc [1990] RPC 341 at 406:

“The law of passing off can be summarised in one short, general proposition: no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number. First he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying 'get-up' (whether it consists simply of a brand name or trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff's goods or services. Secondly, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. ... Thirdly he must demonstrate that he suffers, or in a quia timet action that he is likely to suffer, damage by reason of the erroneous belief engendered by the defendant's misrepresentation that the source of the defendant's goods or services is the same as the source of those offered by the plaintiff.”

In the present case, it is common ground that the signs in question, namely DALLAS DHU, CONVALMORE and PITTYVAICH, are the names of three distilleries which formerly distilled single malt Scotch whisky, but have not done so for a number of years. It is also common ground that these signs formerly functioned as trade marks, denoting malt whisky of a particular provenance. Indeed, I do not understand Mr Maslyukov to dispute that they still function as trade marks. In the section of his decision dealing with Diageo’s section 3(6) objection, the hearing officer found as a fact that, as at the dates on which Mr Maslyukov filed his applications, the malt whisky produced by those distilleries continued to have a reputation amongst the relevant public under those trade marks. As noted above, Mr Maslyukov did not challenge that finding of fact on his appeal. In any event, it is firmly supported by the evidence.

Despite his finding that the trade marks had a reputation amongst the public, the hearing officer concluded that Diageo’s case under section 5(4)(a) was not made out because it had not established that it owned any goodwill in the trade marks at the relevant dates.

The hearing officer dealt first with DALLAS DHU and PITTYVAICH and then with CONVALMORE. It is convenient to consider these in reverse order.

The hearing officer’s reasons for concluding that Diageo had not established that it owned any goodwill in relation to CONVALMORE were as follows:

“136.

In 2003 and 2005 Diageo made special releases of Convalmore whisky. It has, therefore, shown a continuing relationship with whisky sold by reference to this sign, even if the distillery is no longer producing the whisky. In his witness statement Mr Robertson states:

‘Diageo also on occasion issues a limited release of Convalmore whisky from its own reserves’.

It is not clear if Mr Robertson is referring to Diageo’s reserves in particular or to reserves of Convalmore whisky in general. The distillery is now in the ownership of a third party.

137.

It is necessary to decide if at the material date, 13 August 2007, Diageo had a goodwill, whether residual or not, by reference to the sign CONVALMORE. In the absence of a clear indication that Diageo continues to have whisky from the distillery in store for future release I can only base my consideration on the basis that there has been no release of the whisky after 2005 and that there is no probability of whisky being distilled at the distillery again. Diageo has specifically prevented the new owner of the distillery from using the name of the distillery in relation to whisky and from distilling. In these circumstances I do not consider that it has established that at the material date it had a goodwill or a residual goodwill. Consequently, Diageo cannot succeed in relation to its claim of passing-off.”

I have quoted the relevant paragraph of Mr Robertson’s witness statement in paragraph 27 above. The witness statement was verified by a statement of truth. The evidence Mr Robertson gave in that paragraph was corroborated in part by an extract from the Malt Whisky Companion which he exhibited. Mr Robertson was not cross-examined. Nor was his evidence challenged in any other way. In these circumstances I am unable to understand how the hearing officer can have concluded that it was not clear whether Mr Robertson was referring to Diageo’s reserves. The words “its own” in the sentence he quoted were clear and explicit. It seems to me that the hearing officer fell into the trap I identified when sitting as the Appointed Person in EXTREME Trade Mark [2008] RPC 2:

“36.

Where … evidence is given in a witness statement filed on behalf of a party to registry proceedings which is not obviously incredible and the opposing party has neither given the witness advance notice that his evidence is to be challenged nor challenged his evidence in cross-examination nor adduced evidence to contradict the witness's evidence despite having had the opportunity to do so, then I consider that the rule in Brown v Dunn applies and it is not open to the opposing party to invite the tribunal to disbelieve the witness's evidence.

37.

Despite this, it is not an uncommon experience to find parties in registry hearings making submissions about such unchallenged evidence which amount to cross-examination of the witness in his absence and an invitation to the hearing officer to disbelieve or discount his evidence. There have been a number of cases in which appeals have been allowed against the decisions of hearing officers who have accepted such submissions. … I consider that hearing officers should guard themselves against being beguiled by such submissions (which is not, of course, to say that they should assess evidence uncritically).”

In my judgment Mr Robertson’s evidence establishes quite clearly that Diageo has a stock of malt whisky distilled at Convalmore. It has marketed malt whisky from that stock in the recent past, and it intends to do so again in the future. Such whisky is marketed under and by reference to the trade mark CONVALMORE. In those circumstances I consider it clear that Diageo owns goodwill in that trade mark. It is immaterial that, as the hearing officer found, there is no probability of whisky being distilled at the distillery again.

The hearing officer’s reasons for concluding that Diageo had not established that it owned any goodwill in relation to DALLAS DHU and PITTYVAICH were as follows:

“130.

In this case there has been no production of the whiskies at the distilleries for many years. However, whiskies bearing the names of the distilleries continue to be sold and are likely to be continued to be sold for many years to come; this is by way of the nature of the single malt whisky trade. The bottlings continue well after the demise of the distillery. Many goods continue in circulation well after the producer has ceased business eg cars and motorcycles. However, these are second hand items which are being put back onto the market. In relation to the single malt whiskies there are new releases of the product. The very date of the release also makes a difference, as the older the product the more expensive that it is likely to be. So each release, because of the aging element of the product, puts a new product onto the market by reference to the distillery. So in terms of passing-off the single malt whisky market is very different to most other markets. However, I need to consider the specifics of the cases involved here and not the generality of the market. The products of the Convalmore, Dallas Dhu and Pittyvaich distilleries all continue to be released. These are signs that are used in trade in relation to single malt whiskies. However, with the exception of the products of the Convalmore distillery the trade is being conducted by the independent bottlers. Diageo has made two releases of whisky from the Convalmore distillery, in 2003 and 2005.

131.

The issues relating to residual goodwill were dealt with by Pennycuick VC in Ad-Lib Club Ltd v Granville [1971] FSR 1. As there is no evidence of Diageo, or its predecessors in title, having made use of the names of the Dallas Dhu and Pittyvaich distilleries since the closure of these distilleries in 1983 and 1993 respectively, any goodwill must be of a residual nature. …

132.

The Pittyvaich distillery has been destroyed, the Dallas Dhu distillery is a museum run by Historic Scotland, the Convalmore distillery is owned by William Grant & Son, and no longer used for distilling. I do not consider that the argument that these distilleries could start producing whisky for Diageo has any legs. The signs as used are linked to the distilleries, the distilleries no longer distil, there is no realistic possibility that they will do so again. In The Law of Passing-Off (third edition) Christopher Wadlow at 3-178 states:

‘The better view is that if a business is deliberately abandoned in circumstances which are inconsistent with its ever being recommenced then the goodwill in it is destroyed unless contemporaneously assigned to a new owner. Otherwise, the goodwill in a discontinued business may continue to exist and be capable of being protected, provided the claimant intended and still intends that his former business should resume active trading. It is not necessary that the prospect should be imminent, but the mere possibility of resumption if circumstances should ever change in the claimant’s favour is not enough. The claimant’s intention to resume business may the more readily be believed where the original cessation was forced on him by external circumstances, but this factor is not conclusive either way.’

As far as DALLAS DHU and PITTYVAICH are concerned there has been no trade by Diageo or its predecessors in title for many years. There is no prospect of the distilleries recommencing production. It is Diageo that claims the goodwill and I do not consider that it established that it has either a current or a residual goodwill in relation to these signs and so its claim under section 5(4)(a) in relation to them must fail. …

133.

The case of Diageo is that Diageo owns the goodwill and that Diageo will suffer the damage. Whether there is a case in respect of the independent bottlers, whether there is a case in relation to the Scotch whisky industry at large (cf the Champagne cases) has not been pleaded. It is also to be noted that as the oppositions in relation to PITTYVAICH and CONVALMORE were made after the coming into force of The Trade Marks (Relative Grounds) Order 2007 on 1 October 2007, only the owner of the goodwill could file an opposition under section 5(4)(a).”

Counsel for Diageo submitted that the hearing officer had erred in principle in two main respects. Counsel’s primary submission was that, in the light of his findings of fact, the hearing officer ought to have concluded that Diageo owned a current goodwill in the trade marks. As can be seen from the end of paragraph 130, the hearing officer found that there was continuing use of the trade marks DALLAS DHU and PITTYVAICH by the independent bottlers. As can be seen from paragraph 131, however, the hearing officer proceeded on the basis that use of the trade marks by the independent bottlers did not generate any goodwill on behalf of Diageo. Counsel submitted that this was wrong. He argued that it was clear that, in continuing to mature, bottle and market whisky distilled at Dallas Dhu and Pittyvaich, the independent bottlers were acting with the implied licence of Diageo as the successor in title to the owners of those distilleries. Accordingly, he submitted that in carrying out such acts the independent bottlers generated goodwill not merely on their own behalf under their own trade marks, but also on behalf of Diageo under the trade marks DALLAS DHU and PITTYVAICH.

I agree with this analysis. It is clear that, at the time that the distilleries were in operation, they produced malt whisky which earned a reputation among the relevant public. This gave rise to goodwill under the trade marks which will have been owned by the owners of the distilleries, Diageo’s predecessors. The owners clearly consented to their malt whiskies being purchased for maturation, bottling and re-sale by the independent bottlers in the customary way in the malt whisky trade. They thereby impliedly licensed the independent bottlers to market the whiskies under the trade marks DALLAS DHU and PITTYVAICH in the future. Given the nature of the trade, and in particular the potential for maturing the whiskies for as long as 50 years, the implied licence must have extended to continuing to market the whiskies even if the distilleries ceased to distil any further batches of those whiskies, as has in fact transpired. Continued marketing of the whiskies by the independent bottlers will have relied upon the goodwill which had already been established under the trade marks, sustained that goodwill and generated new goodwill. As implied licensees of the trade marks DALLAS DHU and PITTYVAICH, the independent bottlers will not have acquired any goodwill in them. On the contrary, the goodwill will have accrued for the benefit of Diageo.

Although, as I have said, I agree with this analysis, I would go further. It is not necessary even to imply a licence to reach the conclusion that the relevant goodwill is owned by Diageo. If goods are manufactured by A under the trade mark A’S MARK, and the goods are then purchased by B who adds to or improves them in some way and re-sells them under the trade marks A’S MARK and B’S MARK, A’S MARK will continue to denote the original provenance of the goods and B’S MARK will denote the particular route by which the goods have come to the market. In such circumstances, it is immaterial whether B is operating with or without A’s consent. Either way, B’s activities will generate goodwill in A’S MARK which will accrue to the benefit of A: compare Nishika Corp v Goodchild [1990] FSR 371. There is no reason why such goodwill should not continue to accrue in favour of A if A stops producing the goods, but B has a stockpile and continues to market them. (It is not necessary for the purposes of this analysis to consider what claims, if any, A might have against B.)

This takes me to the second error of principle contended for by counsel for Diageo. In the alternative to his primary submission that Diageo owned current goodwill in the trade marks, he submitted that Diageo owned a residual goodwill in them. It can be seen from paragraphs 132 and 133 of the decision that the basis for the hearing officer’s conclusion that Diageo owned no residual goodwill was his finding that the distilleries in question no longer distilled whisky and there was no realistic prospect of distillation being resumed. Counsel for Diageo submitted that he thereby applied the wrong test.

Counsel submitted that the law was correctly stated in Kerly’s Law of Trade Marks and Trade Names (14^th ed) at 15-077 (omitting footnotes):

“If a business ceases or suspends trading temporarily, there remains a residual goodwill which the claimant might wish to sell or use in a reopened business. If once [sic] the business is definitely abandoned, however, so that the claimant no longer owns goodwill, there can be no passing off. Where no positive decision is made to abandon goodwill, but trade under the mark has nonetheless ceased with no concrete plan for restarting operations, the question of whether any residual goodwill survives, and for how long, is a question of fact in each case.”

As can be seen from paragraph 132 of the decision, the hearing officer cited Wadlow, The Law of Passing Off (3^rd ed) at 3-178. Counsel for Diageo drew attention to the fact that this issue is considered further in the Supplement to the 3^rd edition, where the author quotes the following passage from the judgment of Lewison J in Ultraframe (UK ) Ltd v Fielding [2005] EWHC 1638 (Ch):

“1877.

It is clear that, as a matter of law, goodwill can be abandoned. A common case in which abandonment is held to have taken place is where a business is discontinued, with no prospect of restarting, and its assets are broken up and sold: Pink v. Sharwood (1913) 30 RPC 725. Mr Purvis submitted that goodwill cannot be abandoned unless the person alleged to have abandoned it knew that he had it and intended to abandon it. However, the requirement of an intention to abandon was rejected in Norman Kark Publications Ltd v Odhams Press Ltd [1962] RPC 163. Mr Wadlow says in his book The Law of Passing Off (3^rd ed. para. 3-178):

‘The better view is that if a business is deliberately abandoned in circumstances which are inconsistent with its ever being recommenced then the goodwill in it is destroyed unless contemporaneously assigned to a new owner.’

1878.

I agree. In my judgment when QCL went into liquidation, without any attempt being made to sell any of its assets (still less sell the business and goodwill as a going concern), its goodwill was destroyed.”

The author also quotes a passage from the decision of Geoffrey Hobbs QC sitting as the Appointed Person in Mary Wilson Enterprises Inc’s Trade Mark Application [2003] EMLR 14. That case concerned the well-known pop group The Supremes, which had performed with a varying membership between 1961 and 1977. Each of the members of the group, one of whom was Mary Wilson, had a recording contract with Motown Record Corporation. Mr Hobbs found that, as between Mary Wilson and Motown, it had been agreed in 1974 that the worldwide rights in the name THE SUPREMES were owned by Motown, but that the position with regard to other members of the group was far less clear (see [32]-[33]). Professor Wadlow reads the decision as finding that all the goodwill in the name as at 1977 was owned by Motown. I am not sure that this is right, but it does not matter for present purposes. What does matter is that the hearing officer in that case had concluded that the goodwill in the name had been abandoned between 1977 and 1985, and in consequence that the opponents and a third singer, former members of the group who had reformed the group in 1985, had acquired a fresh goodwill under the name thereafter.

Mr Hobbs upheld the applicant’s appeal on this point, saying:

“62.

The goodwill attaching to THE SUPREMES name by virtue of the performances of the various Motown recording artists who had performed together under that name between 1961 and 1977 was a valuable asset. It remained a valuable asset on the basis that sales of Motown recordings of their performances as THE SUPREMES had continued without interruption. The marketing of live and recorded performances delivered by the new group concurrently with the marketing of recorded performances delivered by the old group, all being presented as performances of THE SUPREMES, was apt to augment the pre-existing goodwill because the live and recorded performances were likely to be attributed to a single, continuing business undertaking in the perceptions and recollections of the average consumer. The pre-existing goodwill could not, in the context of the claims raised in the present proceedings, be regarded as the property of the members of the new group without evidence (which might be evidence of release, waiver or abandonment) sufficient to justify a finding that they became successors in title thereto.

63.

The evidence on file is not sufficient to justify such a finding….”

Mr Hobbs went on to conclude at [68] that the new group had not acquired an independent or concurrent goodwill in the name THE SUPREMES, but instead had “perpetuated and extended the pre-existing goodwill attaching to THE SUPREMES name in a manner that has merged their contribution to the economic value of it with the contributions of their predecessors”.

Professor Wadlow comments:

“It is implicit in the decision of the Appointed Person that the Motown-owned goodwill had neither been abandoned in 1977, nor extinguished by 198[5]. This seems correct. In the present case it would be inappropriate to attempt to distinguish between goodwill arising from live performances, and that arising from recordings and broadcasts. Sales of Supremes records continued, there was a loyal fan base, and the name was recognised by the general public. It need make no difference that the then members of the Supremes resolved in 1977 to split up and go their separate ways: they were not in law the owners of the goodwill and their collective state of mind could not prejudice Motown’s rights.”

As I read his decision, Mr Hobbs’ reasoning did not depend on any finding that the goodwill generated from 1961 to 1977 was owned by Motown. Subject to that, I agree with Professor Wadlow’s analysis. As Mr Hobbs said later in the decision:

“86.

The applicant appealed to an Appointed Person under s.76 of the 1994 Act contending in substance that:

…

(2)

the hearing officer had mistakenly equated cessation of use with abandonment of goodwill and wrongly concluded that the goodwill in THE SUPREMES name had been abandoned when the old group disbanded in 1977;

(3)

the hearing officer wrongly concluded that the activities of the new group between 1985 and 1995 had supplanted the whole of the goodwill attaching to THE SUPREMES name by virtue of the performances of the various Motown recording artists who had performed together under that name between 1961 and 1977;

…

Points (2) and (3):

90.

I agree with the applicant on these points.”

Counsel for Diageo submitted that the hearing officer in the present case had made the same error as the hearing officer in Mary Wilson of equating cessation of use with abandonment of goodwill. I agree with this. As indicated by the statements of the law I have quoted from Kerly, Professor Wadlow’s book and Ultraframe, the test is whether the relevant business has been abandoned so as to destroy the goodwill. Mere cessation of business is not enough. Moreover, as Mary Wilson illustrates, cessation of production of goods or provision of services does not necessarily mean that there has been a cessation of business capable of sustaining goodwill, still a less a destruction of the existing goodwill.

In the present case I do not consider that the relevant business had been abandoned so as to destroy the goodwill. It is true that the distilleries were respectively turned into a museum and destroyed, but Diageo did not liquidate the companies which owned the distilleries, still less was Diageo as a whole liquidated. On the contrary, Diageo has continued to produce whisky, including single malt Scotch whisky, on a substantial scale. The goodwill which Diageo owned in the trade marks DALLAS DHU and PITTYVAICH as at the date when the distilleries ceased production was not destroyed. On the contrary, the goodwill was sustained by further sales of whisky by the independent bottlers, in much the same way as the goodwill in THE SUPREMES was sustained by further sales of records by Motown. In any event, the existing goodwill remained an asset of Diageo to exploit as it saw fit. For example, Diageo could if it saw fit build a new distillery at Pittyvaich.

Accordingly, I consider that the hearing officer was wrong to conclude that Diageo did not own any goodwill in the DALLAS DHU and PITTYVAICH trade marks.

The hearing officer also gave a second ground for rejecting Diageo’s case in relation to DALLAS DHU and PITTYVAICH, which was that it would suffer no damage. He said at paragraph 132 of the decision:

“Even if it had established a residual goodwill I cannot see what damage that it can claim as it is no longer selling the products. If inferior goods were sold under the trade marks there is nothing to establish that the purchaser would make a connection with Diageo, who have never produced the whisky at these distilleries. It would require a purchaser to follow the chain of ownership back from Diageo, an unlikely occurrence. The expert who might know of the chain of ownership would have the expertise not to link the goods to Diageo. Diageo claims that damage would also arise as the sign would no longer guarantee the quality, character, commercial or geographical origin of the product. This effectively rehearses the arguments that were made in relation to section 3(1)(c) and section 3(3)(b), and which I have rejected. In relation to DALLAS DHU and PITTYVAICH, I do not consider that Diageo would suffer any damage that falls within the parameters set out in [Sir Robert McAlpine Ltd v Alfred McAlpine plc [2002] EWHC 630 (Ch), [2004] RPC 36.”

Counsel for Diageo submitted that in reaching this conclusion, the hearing officer had made two errors of principle. First, he had overlooked the well-established principle of the law of passing off that it is not necessary for members of the public to know the identity of the manufacturer of the goods in order for the goodwill in the trade mark to be protectable, as shown by the following sentences from the passage in the speech of Lord Oliver in Reckitt which the hearing officer omitted from his citation:

“Whether the public is aware of the plaintiff's identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff. For example, if the public is accustomed to rely upon a particular brand name in purchasing goods of a particular description, it matters not at all that there is little or no public awareness of the identity of the proprietor of the brand name.”

Secondly, counsel submitted that the hearing officer had wrongly failed to recognise that damage resulting from Diegeo’s loss of control over the marks, including erosion of distinctiveness of the marks, was sufficient damage to sustain a passing off action, as shown by the following passage from McAlpine at [20] which the hearing officer himself quoted at paragraph 128 of the decision:

“When it comes to considering damage, the law is not so naïve as to confine the damage to directly provable losses of sales, or ‘direct sale for sale substitution’. The law recognises that damage from wrongful association can be wider than that. Thus in Ewing v Buttercup Margarine Ltd (1917) 34 RPC 232 Warrington LJ said:

‘To induce the belief that my business is a branch of another man’s business may do that other man damage in all kinds of ways. The quality of the goods I sell; the kind of business I do; the credit or otherwise which I might enjoy. All those things may immensely injure the other man, who is assumed wrongly to be associated with me.’

In so saying, he was not limiting the kinds of potential damage to those listed by him. Rather, he was indicating that the subtleties of the effect of passing off extend into effects that are more subtle than merely sales lost to a passing off competitor. In Associated Newspapers Ltd v Express Newspapers [2003] FSR 909 at 929 Laddie J cited this passage, referred to other cases and went on to say:

‘In all these cases [that is to say, the Clock Ltd case referred to above and Harrods v Harrodian School [1996] RPC 679], direct sale for sale substitution is unlikely or impossible. Nevertheless the damage to the Claimant can be substantial and invidious since the Defendant’s activities may remove from the Claimant his ability to control and develop as he wishes the reputation in his mark. Thus, for a long time, the common law has protected a trader from the risk of false association as it has against the risk of more conventional goods for goods confusion.’

The same Judge expressed himself more picturesquely, but equally helpfully, in Irvine v Talksport Ltd [2002] 1 WLR 2355 at 2366. Having pointed out the more familiar, and easier, case of a Defendant selling inferior goods in substitution for the Claimant’s and the consequential damage, he went on to say:

‘But goodwill will be protected even if there is no immediate damage in the above sense. For example, it has long been recognised that a Defendant cannot avoid a finding of passing off by showing that his goods or services are of as good or better quality than the Claimant’s. In such a case, although the Defendant may not damage the goodwill as such, what he does is damage the value of the goodwill to the Claimant because, instead of benefiting from exclusive rights to his property, the latter now finds that someone else is squatting on it. It is for the owner of goodwill to maintain, raise or lower the quality of his reputation or decide who, if anyone, can use it alongside him. The ability to do that is compromised if another can use the reputation or goodwill without his permission and as he likes. Thus Fortnum and Mason is no more entitled to use the name FW Woolworth than FW Woolworth is entitled to use the name Fortnum and Mason …’

‘The law will vindicate the Claimant’s exclusive right to the reputation or goodwill. It will not allow others so to use goodwill as to reduce, blur or diminish its exclusivity.’ (at 2368)

In Taittinger SA v Allbev Ltd [1994] 4 All ER 75 at 88, Peter Gibson LJ acknowledged that:

‘Erosion of the distinctiveness of the name champagne in this country is a form of damage to the goodwill of the business of the champagne houses.’

The same view was expressed by Sir Thomas Bingham MR at 93.”

I accept both of these submissions. In my judgment the hearing officer was wrong to conclude that there would be no likelihood of damage to Diegeo’s goodwill if Mr Maslyukov started using the trade marks upon goods which did not emanate from the distilleries in question.

For the reasons given above, I dismiss both Mr Maslyukov’s appeal and Diageo’s appeal.