32Red Plc (A Gibraltar Company) v WHG (International) Ltd & Ors

This is a trade mark dispute between online gaming and casino operators. The claimant, 32Red Plc (“32Red”), is a Gibraltar-registered company which first started to operate an online casino under the 32Red brand in 2002. It has always traded under the same brand name, and has sought to establish a distinctive reputation in that brand coupled with a reputation for excellent customer service. In comparison with the largest operators in the field, the business of 32Red, although substantial, is of no more than medium size. In 2009 it had approximately 25,000 active casino players who placed over 130 million bets with a value of around £170 million, generating gross revenue for 32Red of some £11 million. About 74% of this income was derived from players based in the UK.

On 6 May 2004 32Red was registered as the owner of the European Community word trade mark “32RED”, pursuant to an application filed on 16 August 2002. The number of this mark was 002814424. On 3 January 2006 32Red was also registered as the owner of a figurative sign in the form of a logo showing the number 32 and the word Red in a distinctive red cursive script on a white background, with a broken red circle around the 32. This registration was made pursuant to an application filed on 18 October 2002. The number of the mark was 002907426. Each registration was made for a range of goods and services in Classes 9, 16 and 41 of the Nice Classification, including (in Class 9) “Computer software relating to games, gaming and gambling”, and in Class 41 “Casino services; … gaming services; gambling services; … casino, betting, gaming, gambling and bookmaking services provided by means of electronic media, the Internet …”. I will refer to 32Red’s word and figurative Community trademarks as “the Community marks”.

In December 2005 the domain name “32vegas.com” was registered by an Antiguan company called Crown Solutions Gaming Limited (“Crown Solutions”), and in 2006 an online casino began to operate under the name “32Vegas”. This casino had no connection with 32Red, and its ultimate ownership at this date is still unknown. It was regulated first in Antigua and then in the Canadian Mohawk Territory of Kahnawake. It was, however, prohibited from advertising in the UK by the regulatory regime set up under the Gambling Act 2005.

These activities came to the attention of 32Red, and on 24 May 2006 a “cease and desist” letter was sent to Crown Solutions by 32Red’s lawyers in Gibraltar, Hodgson Bilton. The letter complained of wilful and fraudulent infringement of 32Red’s intellectual property rights, including in particular the Community marks, and threatened the immediate commencement of proceedings for injunctive relief if a satisfactory response was not received within seven days. The letter was copied to the Kahnawake Gaming Commission. No reply was received from either Crown Solutions or the Commission. However, 32Red took no steps to implement or follow up its threat, and the matter was allowed to rest.

According to 32Red’s founder and chief executive, Mr Edward Ware, the 32Vegas casino appeared to be a small-scale operation, the threat which it posed to 32Red’s business was limited because of its inability to operate in the UK, and in view of its offshore base and regulatory regime it was thought that enforcement proceedings would be difficult. Mr Ware accepted in cross-examination that he knew the 32Vegas website was being used by players within the EU, because otherwise infringement of the Community marks could not have been alleged; but he said he was never told by his lawyers that it would be open to 32Red to sue Crown Solutions in the UK, and he did not think to ask them.

The next important development came in October 2008, when the William Hill Group entered into a joint venture with Playtech, one of the two leading providers of gaming software. I will need to explain the background to and rationale of the joint venture in more detail later in this judgment. For now, it is enough to say that it involved the purchase of an established online gaming business run by an entity called Uniplay, which was affiliated in some way to Playtech. The Uniplay assets included the unregistered mark “32Vegas” as well as several other brands owned by Crown Solutions. From the point of view of the William Hill Group, the acquisition by the joint venture of the 32Vegas mark and the online casino business carried on under it was a small and relatively insignificant part of a much larger operation which was designed to expand and re-launch William Hill’s presence in the online gaming sector. When the joint venture was announced on 20 October 2008, the business of Crown Solutions was described as having “multiple low-key brands”, one of which was 32Vegas.

The joint venture was completed on 30 December 2008. As part of the arrangements, the domain name “32vegas.com” had been transferred from Crown Solutions to a Playtech company called Genuity Services Limited, and on 30 December 2008 Genuity Services Limited granted a licence to use the domain name together with any associated marks (whether registered or unregistered) to the first and second defendants, WHG (International) Limited and WHG Trading Limited. These are both Gibraltar-registered companies, and their function at all material times has been to carry on all aspects of the William Hill business that involve online gaming. That business is known as “William Hill Online”, a description which I will use in this judgment to refer to the first and second defendants collectively. The only relevant distinction between them is that UK customers contract with WHG Trading and non-UK customers contract with WHG (International). Otherwise the companies mirror each other and share the same assets, staff, and so on.

Under the joint venture, William Hill Online is owned as to 71% by William Hill Organisation Limited, the main trading company within the William Hill Group, and as to 29% by Genuity Services Limited. William Hill Organisation Limited is a wholly-owned subsidiary of the third defendant, William Hill Plc, which is registered in England and Wales and listed on the London Stock Exchange.

The William Hill Online companies are not only registered in Gibraltar, but they are also (like 32Red) licensed by the Gibraltar Licensing Authority and regulated by the Gibraltar Gambling Commission. An important consequence of this is that the prohibition of the advertisement of foreign gambling in section 331 of the Gambling Act 2005 does not apply to William Hill Online, because Gibraltar is (in effect) deemed by subsection (3) to be an EEA state for the purposes of the section. “Foreign gambling” is relevantly defined in subsection (2)(b) as meaning:

On 19 January 2009, less than 3 weeks after William Hill Online had begun trading, Hodgson Bilton wrote a “cease and desist” letter on behalf of 32Red to William Hill Online. Copies of the letter were also sent to the regulatory authorities in Gibraltar. The letter said this:

William Hill Online refused to back down in response to this letter, and in due course the present action was begun by the issue of a claim form on 4 March 2009. However, the claim form was then amended before service pursuant to CPR 17.1 on 30 June 2009, and it was only on 3 July 2009 that it was served on the defendants together with particulars of claim settled by junior counsel for 32Red, Mr Thomas Moody-Stuart. The reason for this delay, I infer, was that 32Red had on 27 February 2009 filed an application with the Intellectual Property Office for the registration of “32” alone as a UK trade mark. The application was successful, and the registration was made on 5 June 2009 under registration number 2509861. The registration was for use in connection with the following services in Class 41:

The particulars of claim alleged infringement by William Hill Online of the Community marks and the UK mark under (respectively) Articles 9(1)(b) and (c) of the Community Trade Mark Regulation (Council Regulation (EC) No. 207/2009 of 26 February 2009 on the Community trade mark) (“the CTMR”) and sections 10(2) and(3) of the Trade Marks Act 1994. Despite the reference to passing off in Hodgson Bilton’s letter of 19 January 2009, no claim in passing off was pleaded. There were also claims of joint tortfeasance against all three defendants, but by an order of Mr Justice Mann dated 16 July 2010 all further proceedings against the third defendant were stayed. Accordingly, the third defendant has played no part in the trial before me, which started on 13 October 2010 and concluded on 20 October.

In their amended defence and counterclaim served on 11 August 2009 William Hill Online denied that 32Red had a reputation in any of the marks and denied the allegations of infringement. They also averred that the 32vegas.com website had ceased to operate on 3 August 2009, when it had been replaced by the website 21nova.com. Thus the time during which William Hill Online actively operated an online casino under the 32Vegas brand ran only from 31 December 2008 to 3 August 2009, a period of barely seven months. Apart from the denial of infringement, William Hill Online also raised pleas that 32Red had implicitly consented to the use of signs containing the number “32” by other traders, and/or that it would be unconscionable for 32Red to seek to prevent the use of the Vegas signs anywhere in the Community.

In their counterclaim William Hill Online sought a declaration that each of the Community marks and the UK mark had been invalidly registered. Detailed grounds of invalidity were set out in a separate document also served on 11 August 2009. 32Red then responded in its amended reply and defence to counterclaim served on 8 September 2009.

Apart from Mr Ware himself, the witnesses of fact who gave evidence for 32Red were Mr Andrew Beveridge, Mr Phillip Brear and four witnesses whose evidence was directed to the issue of confusion. It will be convenient to deal with these last four witnesses when I come on to the relevant part of the case, and at this point I merely record that they were: a Dr Doreen Thompson, who lives in Newcastle-under-Lyme, Staffordshire; a Mr Christopher Cosmas, who lives in Melbourne, Australia; a Mr David Mikkelsen, who also lives in Australia, in Adelaide; and a lady who lives in Edinburgh whom I shall call Mrs F, because she wishes for understandable reasons to keep her online gaming activities secret and, although she had given a witness statement, she asked in a letter to 32Red’s solicitors dated 7 October 2010 whether she could be excused from attending court and giving oral evidence. In those circumstances, 32Red did not insist on her attendance and instead, without objection from William Hill Online, put in her statement as hearsay evidence under section 2 of the Civil Evidence Act 1995.

Mr Ware has been the chief executive of 32Red since the inception of its business on 8 January 2002. Before then he worked for the Ladbroke Group for about 14 years, and for the last two years of that period he was managing director of Ladbrokes International Limited. Mr Ware gave his evidence clearly and confidently, and I found him to be a reliable, honest and careful witness. It is no criticism to say that he naturally viewed the case from a rather partisan standpoint, and that this may have coloured some of his answers to Mr Carr QC in cross-examination.

Mr Brear is the head of gambling regulation in Gibraltar. His witness statement dated 30 September 2010 was tendered pursuant to a Civil Evidence Act notice dated 29 September. In his statement he explains that the government of Gibraltar has licensed 20 of Europe’s leading online gambling operators to base their businesses in Gibraltar and provide internet gaming services to certain parts of Europe and the rest of the world. Remote gambling is a highly regulated and supervised industry, and the integrity and reputation of the operators is of paramount importance in establishing and maintaining the confidence of the Gibraltar Regulatory Authority (“the GRA”). A significant part of the GRA’s work is to receive and deal with complaints from customers. All such complaints are reviewed and examined by the GRA, but the great majority of them can be rapidly dealt with, for example because the operator’s internal complaints procedure has not been exhausted, or because the complaint is based on a simple misunderstanding or failure to read the terms and conditions associated with the various products on offer, or because the customer is simply “trying it on” with the operator in the hope of extracting a concessionary payment. Out of every 20 complaints received, only one or two will eventually be recorded as formal complaints which need to be investigated in detail. The number of such complaints which is formally investigated is about 20 to 25 each year.

The complaints which are made come either by email or by telephone. Typically, no more than one complaint is received each day, and on some days there are none. The total number of complaints received by the GRA in a month does not normally exceed 20.

Apart from dealing with complaints, the GRA also uses various internet search and scanning tools to alert it to adverse references to Gibraltar operators, and any information obtained in this way is followed up as appropriate. In addition, the GRA maintains “a close supervisory regime of regular meetings with company executives and senior staff and reviews and examinations of any unexpected or unusual incidents”. With ten operators based within a two minute walk of the GRA, and the rest within a ten minute walk, the GRA enjoys quick and direct access to its licensees, and any incident is likely to result in rapid and detailed scrutiny of the relevant operator’s activities. These arrangements also allow the GRA to identify any developing trends, and to shape its work accordingly.

Mr Brear goes on to say this about complaints involving William Hill Online in early 2009:

Mr Beveridge has been the chief executive officer of an organisation called eCOGRA since its establishment in early 2003. eCOGRA is an acronym which stands for “e-Commerce and Online Gaming Regulation and Assurance”. It is a non-profit organisation which was first conceived in 2003 by of the online gaming operator, 888, and one of the largest online gaming software providers, Microgaming. Its mission is to set standards in the online gaming industry and to resolve disputes between players and approved sites which have been given the eCOGRA “seal of approval”. Since about 2007, eCOGRA has been self-funding and it seeks in various ways to ensure its independence from the online gaming industry. It publishes a set of requirements known as eGAP, which focus on player protection, fair gaming and responsible operator behaviour; and its seal of approval will be awarded to any online gaming business that fully complies with those requirements. The process of accreditation is a lengthy one, which often takes up to a year.

For the last two years the 32red.com site has received the eCOGRA seal of approval. Mr Beveridge says that he knows Mr Ware and Mr Pat Harrison, the head of 32Red’s customer service team, on a professional level, and that his experience of dealing with them has been excellent.

eCOGRA also awards a certified seal for software providers. One of the recipients of this seal is Microgaming, which is the software platform on which the 32red.com site runs. Playtech, which is the software provider for 32Vegas and 21Nova, is not a recipient, nor has Playtech applied for such accreditation.

In cross-examination Mr Beveridge accepted that Microgaming and Playtech both have approximately the same number of online casino sites, and that Playtech offers games to some of the world’s top casino operators. He also accepted that one of the reasons why Playtech had declined to seek eCOGRA accreditation was the involvement of Microgaming with eCOGRA. Further, he agreed that for so long as Playtech was not a member of eCOGRA it was impossible for casinos which use Playtech software, such as 32Vegas or 21Nova, to be members of eCOGRA, because without access to the Playtech software eCOGRA would be unable to check their performance. When it was put to Mr Beveridge that “the fact that a Playtech casino does not have eCOGRA accreditation is absolutely no indication that it provides a lower quality service than a Microgaming casino which does have eCOGRA accreditation”, he agreed.

On the basis of this evidence, I conclude that eCOGRA is an institution which plays a valuable role in maintaining and improving standards in the online gaming industry, and that its seals of approval are a reliable indicator of quality, but its coverage is inevitably incomplete because of its inability to grant membership or accreditation to businesses which use Playtech software. It follows that I cannot draw any adverse inferences about the quality of the service offered by 32Vegas or 21Nova from the fact that they lack eCOGRA accreditation.

The witnesses of fact who gave evidence for William Hill Online are Mr Thomas Murphy, Mr Colin Cole-Johnson and Mr Matthew Green.

Mr Murphy is a solicitor and general counsel and company secretary of William Hill Plc. He handled the contractual negotiations which led to the creation of William Hill Online, and in his witness statement he describes the evolution of the joint venture between the William Hill Group and Playtech. No challenge to the truthfulness of this account was made in his brief cross-examination by Mr Silverleaf, and I have no hesitation in accepting his evidence.

By May 2008 the William Hill Group had become concerned that its internet business had been overtaken by its competitors. There were problems with the online technology, and the Group also lacked the marketing skills to promote its online business effectively. The Group had concentrated mainly on sports betting, which was its core product in the United Kingdom, and its online presence had been comparatively neglected, especially abroad. As Mr Murphy said in cross-examination, “we felt we were at a competitive disadvantage in relation to the other big operators in the gambling space and wanted to improve our casino offering”.

It was against this background that conversations were held with a number of parties, including Playtech. The meetings with Playtech were constructive, and by June 2008 a joint venture with Playtech, called “project Isotope”, was under consideration. At a board meeting held on 29 July 2008, a presentation was made by Mr Avigur Zmora, a non-executive director of Playtech. He explained that Playtech had call options on its major affiliated companies, including Uniplay, and described Uniplay as “one of the most successful non-brand e-gaming marketing and player service companies in the world”. He identified the problems faced by William Hill, and argued that there was “huge untapped potential for the William Hill brand”.

On 11 September 2008 the board of William Hill Plc had its annual strategy “away day”, at which an internal presentation on project Isotope was made and discussed. Mr Murphy was present, and he describes the commercial rationale of the proposed deal as follows:

It is important to note at this stage that the business model employed by Uniplay, and intended to be employed for the joint venture, was the antithesis of the model pursued by 32Red, or indeed by William Hill in relation to its core UK activities. Instead of focussing on a single brand and promoting its reputation, the alternative model depended on the provision of a portfolio of brands in common ownership and encouraging customers to switch from one to another. Under this model the reputation of the individual brands was comparatively unimportant, and the principal aim was to ensure that a customer would stay within the network of linked brands and products.

Consistently with this marketing philosophy, Mr Murphy says that none of the board discussions considered the brands which formed part of the Uniplay assets:

The joint venture was agreed and announced on 20 October 2008, and as I have already said it completed on 30 December 2008. A due diligence exercise was conducted on the Uniplay assets by Playtech’s solicitors, which included trade mark issues. In relation to the mark “32Vegas”, it emerged that Crown Solutions had applied to register it as a Community trade mark, but the application had been opposed by another company (La Française des Jeux) based on its earlier registration for “vegas”. The due diligence report noted that the Crown Solutions mark would probably not be registered, and that “Crown has confirmed that the mark “32 VEGAS” is not material to Crown’s operations …”. The risk posed by the opposition to Crown Solutions’ application was dealt with by means of an indemnity in the Framework Shareholders Agreement.

Although there was one brief reference to 32Red in the due diligence report, it had no impact on the negotiations and amounted to no more than a record that 32Red was a customer of part of the assets to be acquired. Mr Murphy knew nothing about any alleged infringement of the 32Red marks until after completion in 2009.

I have already referred to the public announcement of the joint venture on 20 October 2008, which described the business of Crown Solutions as having “multiple low-key brands”. Mr Murphy’s unchallenged evidence, at the conclusion of his statement, is as follows:

Mr Cole-Johnson is the gaming director of William Hill Online. He joined the group in 2008, having previously worked for Ladbrokes for 11 years in various roles, including director of its online casino. As gaming director, Mr Cole-Johnson is in charge of the operation of all the online gaming sites of William Hill Online apart from their sports websites. Although he took up his post as gaming director just before the joint venture with Playtech which created William Hill Online, he was not involved in the planning or negotiation of the deal.

Mr Cole-Johnson was cross-examined by Mr Silverleaf on a number of topics, although at no great length. He gave his evidence clearly and dispassionately, and there is no issue about his credibility. I found him an entirely reliable witness. I will deal with much of his evidence when it becomes relevant to do so, but at this stage it is convenient to record what he said on some more general topics.

Mr Cole-Johnson makes the important point that for many customers online gaming is a form of recreation, and not just a vehicle for placing bets. There are also different types of online casino players. Some players will find a single site that they enjoy playing and will tend to stay with it for a considerable time, and possibly even for several years, but in his experience such players are in the minority. The majority of players move between sites and often have multiple accounts with different casinos or betting sites at the same time. It follows from this that there is keen competition for players amongst casinos: “There are hundreds of online casinos so customers have a very wide choice, and each one is only a few clicks away.” Such players tend to stick with games and software operating platforms that they like, while being ready to move from one casino to another. One of the most important features in attracting customers to a casino is the provision of bonuses, that is to say money given to a player in return for joining a casino or as an inducement to keep the customer playing with it. Since online gaming is a largely recreational activity, a bonus will extend a customer’s playing time on a site and make it correspondingly more attractive. According to Mr Cole-Johnson, the average player would rather receive a large bonus than any other type of free gift or promotion.

William Hill Online bonuses are mainly advertised online, but they are also offered to customers by email. The initial welcome bonus is usually for a larger amount than other bonuses that may subsequently be offered. However, the Uniplay casinos acquired by William Hill Online, including 32Vegas, had a particularly generous bonus strategy, whereby the welcome bonuses were larger than those generally offered, and subsequent bonuses were similar in value to the welcome bonuses offered on other sites. This generous bonus strategy has now been adopted by William Hill Online as a means of attracting and retaining customers. The conditions attaching to the use of bonuses are known in the industry as “wagering requirements”. In general terms, these require a customer to wager a specific amount a certain number of times before he is able to withdraw money from an account. The purpose of the requirements is to prevent the customer from simply cashing in the bonus without playing on the site at all.

Another important aspect of the online casino industry is the use of affiliates. One of the key ways of generating internet traffic to online casinos is through affiliates, which are websites that direct an internet user from the affiliate’s site to the casino in return for a small fee. There are two main types of affiliate. The first is a general site on a particular topic, for example a site that offers commentary on online casinos or poker games. The second is an “aggregator” website which offers a directory listing many online gaming services. Such sites provide one of the main ways in which customers find out about and collect bonuses. One of the attractions of the Uniplay assets to William Hill was that they already had a large affiliate network of over 70,000 affiliates. William Hill Online has now developed its own affiliates network, called “Affiliates United”.

Part of Mr Cole-Johnson’s evidence was devoted to the two marketing models for online casinos, and Mr Silverleaf explored this with him in cross-examination. William Hill now seeks to get the best of both worlds, by continuing to operate the William Hill casino as a strong brand in its own right but also adopting the “carousel” approach for the former Uniplay brands. The number of the latter brands has been reduced to nine, because no more than that are needed to make the model work. Mr Cole-Johnson agreed with the proposition that under this approach “reputation of a particular casino brand is relatively unimportant”, and that what matters is the retention of customers within the network. Customer retention in the online casino business is relatively low, and 50% of players make only one or two deposits with a casino before leaving it. Mr Cole-Johnson did not disagree with Mr Ware’s estimate that approximately 95% of players will move from one site to the next in the course of a year, although he said he would not expect the figure to be quite that high. He then agreed that “what you are interested in is how long you can keep them within the joint venture’s umbrella”.

Mr Cole-Johnson added that approximately 90% of total gaming revenue from a website will come from 10% of the customers. These are the “high rolling” players and much effort is devoted to their retention, for example by offering them bonuses, gifts and other forms of VIP treatment.

Before moving on, there is one further point about Mr Cole-Johnson’s evidence which I should mention at this stage. He says in his first witness statement that casino brands often use well known names, colours and numbers, and refers to a search by William Hill Online’s lawyers on the internet which produced more than 50 examples of online casinos and affiliate sites with numbers in their names. Apart from 32Red, the list contains five online betting sites and two affiliate sites with 32 in their names. Mr Cole-Johnson then goes on to make some brief comments about them. In cross-examination he readily accepted that he had no personal knowledge of any of these sites before the present litigation started, and that the information contained in his statement was found for him by William Hill’s lawyers.

Mr Green is the regulatory affairs manager of William Hill Online and has held that post since the beginning of 2009. He is in effect the compliance officer, and part of his job is to deal with complaints from customers and the regulatory authorities. Customer complaints are of various types, and there is an internal procedure for resolving them at different levels. Those which reach Mr Green are placed by him in a separate electronic folder. He has a different folder in which he keeps communications with the GRA, including any complaints from the GRA.

In his first witness statement, which he signed on 16 August 2010, Mr Green replied to the evidence of 32Red’s witnesses (directions having been given for the sequential service of witness statements). I will deal at the appropriate time with his evidence in relation to the issue of confusion. That evidence is of a factual nature, and no challenge was made to its general accuracy. Mr Green then dealt briefly with the evidence of Mr Beveridge and Mr Ware. He began by saying that the William Hill Online casinos meet all the regulatory requirements of the GRA, and that they participate on a basis of full co-operation with the GRA’s dispute resolution service. William Hill is also a member of the Independent Betting Adjudication Service (IBAS), which Mr Green described as a well respected and independent organisation within the betting and gaming industry which provides a free dispute resolution service. As with the GRA, William Hill Online will always fully co-operate with IBAS and adhere to any final rulings which it may make. Mr Green went on to say that the casinos’ random number generators are tested independently by one of the GRA’s approved testing houses, and that rigorous and thorough internal tests of all their hardware and software are also conducted. I should say at once that I see no reason to doubt any of this evidence.

Turning to the evidence of Mr Ware, Mr Green then said:

At the date of this statement Mr Brear’s written evidence had not yet been obtained by 32Red and served on William Hill Online. It will be recalled that in this evidence Mr Brear referred to the “unprecedented level of complaints about a single operator” which the GRA had received about the William Hill Online casinos, including 32Vegas, in the first half of 2009 (see paragraph 20 above). Mr Brear did not exhibit the relevant documents to his statement, but some at least of them have been obtained by 32Red’s solicitors from the GRA. They include an email which Mr Brear sent to Steven Reid, a William Hill board member, on 9 June 2009. The email was copied to Henry Birch, the chief executive of William Hill Online, and Mr Green. It read as follows:

On the following day Mr Birch replied, copying his reply to Mr Reid and Mr Green:

The main focus of the complaints, as appears from the two examples attached to Mr Brear’s email of 9 June, and also from material subsequently disclosed by William Hill Online, was that customers who opened an account with 32Vegas or other joint venture casinos had been provided with an initial uncovenanted bonus, without it being made clear to them that if they accepted the bonus and began to play they would not be able to withdraw any money from the account, including the customer’s original deposit, until stringent wagering requirements had been met. Understandably, this caused widespread confusion and resentment, even if the position was explained in the small print of the terms and conditions for those who took the trouble to read them.

Following service of Mr Brear’s statement, William Hill Online’s advisers must have quickly realised that paragraph 20 of Mr Green’s first statement gave a wholly misleading impression. It is therefore no surprise that on 6 October Mr Green produced a second statement. With reference to paragraph 20 of his first statement, he said this:

He then went on to explain that William Hill’s discussions with the GRA in June 2009 had concerned 23 complaints about which the GRA informed them, covering seven casinos and one poker room. Eight of the 23 complaints were about 32Vegas. Mr Green referred to the meeting with Mr Macias in mid-June 2009, and said that before it took place William Hill Online had already made some changes to the advertisement of wagering requirements, including an improved process of customer acceptance of bonuses and the relevant terms and conditions. At the time, the GRA did not provide William Hill Online with details of the 23 complaints, and so far as Mr Green is aware none of them led to any formal investigation by the GRA. If that had happened, William Hill would have been told about it. Accordingly, no formal finding against William Hill Online was ever made by the GRA.

I should add that details of the eight complaints concerning 32Vegas were subsequently supplied by the GRA to Mr Green at his request, and he exhibits them to his statement. He comments that “they are all about the sort of matters about which customers often complain”. In general terms this may be true, but I do not think the comment sufficiently allows for the gravity of the complaints about initial bonuses and wagering requirements. It was plainly something out of the ordinary which prompted Mr Brear’s email of 9 June 2009, even if it was reasonable to characterise the issues (after remedial action had been taken) as “teething problems”.

Under cross-examination by Mr Silverleaf, Mr Green sought to justify paragraph 20 of his first statement by saying that, although he was aware the GRA had contacted William Hill Online about complaints which had been received, he had forgotten that some of the complaints concerned 32Vegas and he did not check his GRA file to verify the point, although he accepted that it would have been sensible to do so. I find this explanation difficult to accept. The complaints were of a serious nature, no fewer than eight of the 23 related to 32Vegas (a far higher proportion than for any other casino), Mr Green had been present at the discussion which preceded Mr Brear’s email of 9 June 2009, and he had been copied into the relevant email traffic on that day and on 16 June. I cannot believe that an episode of this importance, and the central involvement in it of 32Vegas, would have escaped the memory of William Hill Online’s compliance officer barely one year later. At the very lowest, since Mr Green on his own admission remembered the complaints made by the GRA, he was culpably negligent in failing to check his file to see whether any of the complaints concerned 32Vegas, and in framing paragraph 20 of his statement in a way which he should have realised gave a thoroughly misleading impression. Matters are not improved, in my view, by the grudging (“it has been suggested to me”) and unconvincing attempt at exculpation in paragraph 2 of his second statement. All in all, I cannot avoid the conclusion that in this part of his evidence Mr Green has been less than frank with the court, and allowed his loyalty to his employer to get the better of his duty to tell not only the truth, but also the whole truth, in his evidence.

Each side relied on the evidence of one expert witness. 32Red’s expert was Mr Bryan Bailey, an American who in 1998 founded and has since then run an online casino review website called Casinomeister. He produced a report of some 70 pages in which he gives his opinions on a number of subjects, running from background matters such as the nature of the online gaming industry and an overview of the marketing and branding strategies used by online casinos to attract players, to a comparison of the businesses, reputation and marketing activities of 32Red and 32Vegas, and his views on the possibility of confusion between the two brands and the likely consequences of such confusion.

I will say at once that, although I have found Mr Bailey’s evidence on some of the background topics to be objective and helpful, I consider that his evidence on the comparative merits of 32Red and 32Vegas and on the issues relating to confusion has to be treated with great caution, and the weight which I can attach to it is correspondingly limited. The main reason for this is that Casinomeister (which is in effect run by Mr Bailey as a personal fiefdom) has a long-standing and very substantial commercial relationship with 32Red. Although Casinomeister did not start out as a commercial venture, it has been Mr Bailey’s full-time occupation since about 2000. It derives its income from the casinos to which it grants accreditation. 32Red has been accredited since soon after it began trading, and it has consistently won Casinomeister’s top awards (which are in the personal gift of Mr Bailey, and do not depend on any nomination or voting procedure). 32Red originally paid a monthly fee of about $1,000 to advertise on Casinomeister, which was increased to $2,000 in 2006. Since the beginning of 2008, however, Casinomeister has operated as an affiliate of 32Red on its standard terms and conditions, and in 2008 and 2009 it earned approximately 10% of its income from 32Red. The arrangement is that 32Red pays Casinomeister 35% of the losses of players who are introduced to it by Casinomeister, which is one of the top ten of 32Red’s affiliates out of a total number of around 14,000.

By way of contrast, Casinomeister has granted accreditation to only five Playtech casinos compared with 61 Microgaming casinos, and it receives only 2% of its income from all of the Playtech casinos taken together. Neither 32Vegas nor 21Nova has ever sought accreditation from Casinomeister, and when Mr Bailey first heard about 32Vegas in 2006 he immediately formed a strong adverse opinion about it because he thought the names were similar both aurally and visually and he thought that 32Vegas had been launched with the sole purpose of getting a boost from the good reputation of 32Red. As a result, he placed 32Vegas in the “Rogue Pit” on the Casinomeister website which is reserved for those casinos that provide poor customer service or conduct practices which Mr Bailey finds objectionable. Furthermore, he took this step on the basis of a single posting in the Casinomeister forum by a player who had made a complaint about customer service. Mr Bailey confirmed in cross-examination that the investigations which had led him to take this step consisted of no more than reading the single posting to which I have referred. When 32Vegas ceased trading under that name and was re-branded as 21Nova, 21Nova remained in the Rogue Pit without Mr Bailey taking any steps to contact William Hill Online, and when William Hill eventually contacted him in June 2010 about removing 21Nova from the Rogue Pit he “forgot” about the communication, as he candidly admits in paragraph 42 of his report, until he began preparation for the present case. He says that he has received no complaints about 21Nova, and due to his “earlier oversight” he now intends to place 21Nova into “probation” for a period of six months backdated to July 2010, which will expire in January 2011. As Mr Bailey said disarmingly in cross-examination:

Mr Bailey denied that he was biased against Playtech casinos, but acknowledged that he had a dispute with Playtech in 2004 which led to a letter from Playtech’s lawyers complaining of defamation. The matter was then resolved by Mr Bailey posting a statement on the Casinomeister website in which he said that his earlier statement had not been intended to cause commercial harm to Playtech, and he acknowledged that Playtech was under no obligation to provide him with information concerning its businesses and licences. This was clearly a climb down by Mr Bailey, and was presumably framed in terms which had been agreed by him with Playtech’s lawyers. Unconvincingly, to my mind, he claimed in cross-examination that the episode had led to an improvement in his relationship with Playtech, because it opened the path to a fuller dialogue between them. More revealing, I think, is the fact that Playtech declined the invitation to sponsor Mr Bailey’s 50^th birthday celebrations in July 2008 because, as Mr Bailey said in cross-examination, “they did not see the return on the investment”. Unsurprisingly, 32Red was happy to provide sponsorship in the requested sum of £5,000.

I have already mentioned that 32Red has won a number of Casinomeister’s top awards. It has in fact won the Casino of the Year award in 2003, its first full year of trading, and in every subsequent year, as well as the Casino of the Decade award in 2009. Furthermore, Mr Bailey’s love of colourful language leads him at times to denigrate William Hill and 32Vegas in terms that may reasonably lead the reader to doubt his impartiality. The most striking instance is in paragraph 175 of his report, where he says that the “malign presence” of 32Vegas continued to damage 32Red’s reputation, even after its purchase by William Hill Online. This may be contrasted with the very muted terms in which Mr Bailey refers to “one or two minor grumbles” about 32Red in paragraph 146 of his report. He goes on to say:

Mr Bailey’s comment may well be justified, but the difficulty is that the court cannot rely upon it with confidence given his very strong financial interest in the prosperity of 32Red and the history of his dealings with Playtech casinos. The court should not have to face problems of this nature in evaluating expert evidence, and difficult though it may be to find a suitably independent expert witness in the field of online gaming I cannot avoid the conclusion that Mr Bailey was not an appropriate choice. Mr Carr’s cross-examination of Mr Bailey was almost exclusively devoted to establishing this proposition, which I accept. It does not follow, however, that Mr Bailey’s evidence is entirely without value, especially on non-controversial issues.

William Hill Online’s expert witness is Mr Warwick Bartlett, who is a consultant to the gambling industry. He began his career as a Licensed Bookmaker in 1966 at the age of 18, and then ran and owned betting shops for a number of years. In 1992 he set up the British Betting Office Association, which merged in 2000 with another organisation to form the Association of British Bookmakers of which Mr Bartlett is now the chairman. He describes the Association of British Bookmakers as the leading trade association for UK betting shop operators. Its aims are to help create and sustain conditions in which socially responsible betting shop operators can compete and prosper. Its activities include advising and lobbying the Gambling Commission, local authorities, politicians and other decision-makers. Mr Bartlett was also a board member of the Horserace Betting Levy Board for six years between 2001 and 2007.

In 2000 Mr Bartlett established Global Betting and Gaming Consultants (“GBGC”) as an independent international gambling consultancy. GBGC operates from the Isle of Man with two consultants (Mr Bartlett being one of them) and a small support staff in the Isle of Man and Croatia. Its clients include operators, monopolies, lotteries, suppliers, investment banks, consultancies and governments.

Mr Bartlett was asked to describe the background to online gambling and to comment on the issues raised by the witness statements of Mr Ware and Mr Beveridge, including such matters as the allegation that 32Vegas is of significantly lower quality than 32Red, the likely behaviour of players, IBAS and eGOGRA, the major software providers, casino brands and the role of bonuses and affiliates. Apart from material produced by GBGC itself, including its thrice yearly reports on the interactive gambling industry in more than 50 countries, Mr Bartlett relied on William Hill Online’s solicitors, Linklaters LLP, to provide him with relevant raw material. In particular, he asked Linklaters to carry out searches to see if they could find any negative comment about 32Red on the internet, and the results of these searches are exhibited to his report. Mr Bartlett’s report is much shorter than Mr Bailey’s, running to 66 paragraphs and ten pages.

Mr Bartlett was cross-examined by junior counsel for 32Red, Mr Moody-Stuart. Counsel elicited that GBGC has done some work for William Hill, and been paid about £10,000 by William Hill over the last five years. That apart, however, there is no commercial relationship between William Hill and Mr Bartlett, and certainly nothing remotely comparable to the affiliation between 32Red and Casinomeister. Mr Moody-Stuart also sought to discredit Mr Bartlett’s evidence on the basis that he had asked Linklaters to look exclusively for complaints about 32Red, and had not attempted to balance his discussion of those complaints with positive evidence of praise or recommendations. Mr Bartlett’s response was that he had in fact asked Linklaters to look for all comments on 32Red, both positive and negative, but there was no need for him to deal with the positive comments because they had already been supplied by 32Red’s own lawyers. In my view it is a little unfortunate that Mr Bartlett should have adopted this approach, because it gives a rather one-sided impression, even though (as he pointed out) the positive comments are there to be found in the material exhibited to his report, and 32Red’s lawyers could safely be relied upon to uncover it. However, the point is ultimately of little significance, because Mr Bartlett accepted in cross-examination that the complaints about 32Red which Linklaters had succeeded in finding were insignificant both in number and in content. He agreed with counsel that there was “nothing of substance” in the materials which he had identified.

More generally, Mr Bartlett seemed at times surprisingly reluctant to accept that 32Red is a major online gambling operator, even though it is described as such in one of GBGC’s own publications, and over ready to draw inferences adverse to 32Red or favourable to 32Vegas when a more balanced assessment would have been appropriate. So, for example, in paragraph 42 of his report he relied on the reputation of the GRA, and the apparent compliance of 32Vegas with the GRA’s high standards, as evidence that 32Vegas was a high quality casino. When Mr Bartlett wrote this he was unaware of the complaints that had been made to the GRA about 32Vegas in 2009. When these complaints were put to him in cross-examination, he refused to accept that there was any real substance in them despite Mr Brear’s reference to an unprecedented level of complaints and the extreme concern about them expressed by Mr Birch on behalf of William Hill. I felt that here, and elsewhere, Mr Bartlett’s approach was at times lacking in objectivity, and he was too ready to adopt a partisan stance. I therefore have some reservations about his evidence, particularly in areas which involve a comparison between the merits of 32Red and 32Vegas. However, my reservations are much less serious than those which I have about the evidence of Mr Bailey, and for the most part I found Mr Bartlett’s evidence to be both reliable and helpful.

In relation to online gambling generally, Mr Bartlett makes the following observations:

In relation to bonuses, Mr Bartlett confirmed that they have become very popular and are demanded by casino players. A casino that did not offer bonuses would not survive the competition. Wagering, or “play through”, requirements are common, but take a number of different forms. The requirements are typically found in the small print in the terms and conditions, which few players take the trouble to read. Partly for this reason, and also because they restrict the player from withdrawing his cash, they can be unpopular and give rise to complaints. This is true across the whole industry.

With regard to affiliates, Mr Bartlett says this:

It is convenient at this stage to review the evidence and make findings of fact about the extent of the use by 32Red of the two Community marks and the reputation which 32Red had acquired in them during the period of the alleged infringement between January and August 2009.

32Red has traded under that name since the inception of the business in 2002. It has also used the figurative mark from the beginning, for example on the homepage of its website and (in a truncated form consisting of the broken red circle around the figure 32, without the word “Red”) as a way of breaking up content on a webpage, analogous to a bullet point. According to Mr Ware, the name 32Red was chosen after careful consideration and a good deal of research into the internet casino sector and the various brands which were operating in 2001 and 2002. An important factor in selecting the name was to differentiate 32Red from the other online casinos then operating. At that time, a number of casinos had set themselves up with themed brands of one kind or another, or with names which related to the brand of a parent bookmaker, or to recognised and obvious lucky numbers (such as 777 or 888). The name 32Red was intended to have a British flavour, and to suggest a strong connection with the game of roulette, 32 being a red number on the roulette wheel. The name 32Red was thought to be short, memorable and distinctive, and at the time when 32Red started trading there were no other gaming or gambling websites in the UK of any significance which featured the number 32 in their brand or URL. Because the number 32 is immediately next to zero on the roulette wheel, this allowed a play on words to create one of 32Red’s slogans: “Second to None”. (Perhaps fortunately, it does not seem to have occurred to anybody that the collocation might also have suggested that players were likely to win “next to nothing”). A further advantage was that the characters “3”, “2”, “r”, “e” and “d” are all close together on the keyboard of a computer and as a result are easy to type into the search box of a search engine.

In his oral evidence Mr Ware agreed that 32Red is a way of describing a particular result in a roulette game when the ball lands in the 32 slot. People bet both on numbers and on colours, and the croupier in a live casino will often shout out “32 red” if that is where the ball comes to rest. This evidence was confirmed by Mr Bartlett, who said that this has been the practice “since time began”. The allusion to roulette is strengthened on 32Red’s homepage, at any rate in its present form, which contains an animation of a spinning roulette wheel, with the ball eventually landing in the 32 slot. Despite these allusions, however, it remains the case that many people do not make the connection between the name 32Red and roulette. Even with the homepage in its present form, Mr Ware still finds that he surprisingly often has to explain to partners and suppliers exactly why 32Red is so-called.

Apart from the connection with roulette, the colour red, like black and gold, is commonly used for online casino brands. Numbers are also popular, but 32 has no special gambling connotation. In an interview with Casinomeister in October 2002 Mr Ware told Mr Bailey that “32Red is one of the most popular numbers in a brick and mortar casino (if 32Red has come up several times during the evening, the manager knows they will have less money to count than usual!).” Since that date, this statement has featured prominently on Casinomeister’s website; but Mr Ware explained in his oral evidence that he never intended it to be taken seriously, and he had no grounds for saying that 32 is a lucky number in roulette. There is no evidence before me that 32 has any reputation as a lucky number, in roulette or any other game, and I am satisfied that Mr Ware’s statement to Mr Bailey was indeed no more than a promotional ploy.

A further relevant factor in choosing the name 32Red was the perceived importance at the time of the far eastern market. It is Mr Ware’s understanding that “red is by far the luckiest colour of all for Chinese players and has deep meaning in the Chinese community”. Consistently with this, Mr Bartlett points out that the figures in the 32Red logo look more like brush strokes, and it appears to have been designed with Asian markets in mind.

I have already referred briefly to the extent of 32Red’s business in 2009: see paragraph 1 above. In a little more detail, the business grew steadily from 2003 until 2009, apart from a slight decline in revenues in 2007 which reflected general economic conditions. Net casino revenue grew from £2.105 million in 2003 to £8.929 million in 2005 and £11.704 million in 2008. Throughout this period the United Kingdom and Ireland accounted for approximately 75% of revenue. The number of bets struck grew from 30 million in 2004 (with a value of £209 million) to over 130 million in 2009 (with a value of about £370 million). The number of active players (that is to say, players who have actually deposited money and played at some point during the year) grew from around 5,000 in 2003 to around double that number by the end of 2004, and 25,000 by 2009. 32Red currently has about 630,000 registered players, but in common with the rest of the industry only a small proportion of them are active. Furthermore, about 80% of the active players are lost each year. Despite this, Mr Ware’s evidence, which I accept, is that losses of active players of this order of magnitude compare very well with most other online casinos. It is a very competitive market, and customer loyalty is difficult to establish. Many customers will be attracted by an initial bonus, and once they have exhausted it will depart elsewhere. Mr Ware recalled that when he was at Ladbrokes about 95% of revenue came from casino players who signed up to play for a single day and never returned.

Because of the importance of bonuses in attracting customers, by far the largest part of 32Red’s annual expenditure on marketing has been devoted to the provision of “free bets”. The figures are set out in a confidential exhibit to Mr Ware’s first statement. The next highest expenditure each year has been on the affiliates programme, followed by expenditure on various forms of advertising and sponsorship. Mr Ware summarises the position by saying that for the last four years 32Red has spent approximately £2 million per annum on marketing, in addition to the provision of free bets by way of bonuses or other promotions to an annual value of between £2 million and £3 million.

Affiliate websites provide 32Red with approximately 25% of its new players, and 32Red pays them a total of around £50,000 to £90,000 per month. This usually accounts for between 20% and 30% of 32Red’s monthly marketing expenditure. I have already recorded that 32Red has approximately 14,000 affiliates.

Other forms of online marketing include special promotional offers. These will often incorporate the number 32 in some way, for example by an offer to buy 32 chips and get 32 free, or by offering a special prize of £320. New offers are made at least once a month, and they are often complemented by at least one additional promotion.

Other marketing activities over the last four years have included sponsorship of Premiership and Championship football clubs, television advertising campaigns, the use of advertising hoardings at other football clubs, numerous sponsorships of horse racing events, sponsorship of the UK flat jockey championship, newspaper advertising, advertising both in the interior and on the exterior of London black cabs and buses, and sponsorship of televised sporting events. In particular, 32Red was the main club sponsor of Aston Villa football club for the 2006-2007 and 2007-2008 football seasons. During this period Aston Villa was in the Premier League and attracted average attendances for home games of approximately 36,000 and 40,000 spectators respectively for the two seasons. The team featured weekly during the season on both terrestrial and satellite television, and the name of 32Red, as the club’s main official sponsor, was printed on team shirts and perimeter advertising hoardings inside the stadium, together with logos on all official clothing and merchandise and prominent exposure of the brand in a number of other ancillary contexts.

32Red has not sponsored any other Premier League football team, but after a year’s gap it now sponsors, at considerably less expense, Swansea City football club, which is one of the top teams in the Football League Championship with an average attendance of around 15,000 per game.

Further particulars are given by Mr Ware in his statement of some of the other forms of marketing which I have mentioned. None of this evidence is controversial, and I need not set it out. In my judgment it fully bears out his conclusion that the combination of 32Red’s marketing activities has given its business “a significant visual presence in at least the UK market”. I also see no reason to differ from Mr Ware’s evidence that 32Red has succeeded in building up a reputation as one of the UK’s leading providers of high quality online gaming. It has always been an important part of 32Red’s strategy to develop and maintain such a reputation, and I am amply satisfied that it has done so. 32Red has won a number of awards, apart from those lavished upon it by Casinomeister, and Mr Beveridge has a high opinion of it. Even Mr Bartlett accepted that 32Red is a well-known site, and that the complaints about 32Red unearthed by Linklaters were insignificant. Mr Ware’s evidence is that during the eight years of 32Red’s operation only nine complaints have been referred to the GRA, eCOGRA or IBAS by a total of eight complainants. Eight of those nine complaints were dismissed outright by the relevant regulatory body, and one was resolved to the complainant’s satisfaction. 32Red does not maintain a separate file of complaints which never proceed as far as reference to an external body; but nothing which I have seen or heard leads me to suppose that such initial complaints were of any greater significance than those which proceeded further.

The alleged infringing signs consist of three text signs and three devices. It is admitted in paragraph 2 of the Defence that each of these six marks (“the Vegas signs”) has been used by William Hill Online in the course of trade, although not before 31 December 2008. It is further admitted, in paragraph 6(a), that the Vegas signs have been so used in relation to casino, gaming and gambling services provided by means of the internet.

The three text signs are “32vegas.com”, “32vegas” and “32v”.

The largest of the three devices displays the 32Vegas mark running obliquely across a black and white bordered rhomboid or lozenge shape. The “32” is written in large bold characters with a gold star between the teeth of the figure 3. “VEGAS” is written in smaller white capital letters, with the “v” interlocking with the “2”. The interior of the lozenge is coloured bright red on the left, where it sets off the 32; the shading then becomes progressively darker, and is almost black at the right hand end. The general impression, I would say, evokes a neon sign of the type one might expect to see on the Strip in Las Vegas.

The other two devices are smaller in size and display the gold 32 and interlocking white “V” from the larger device, including the gold star. In one of the devices the “32V” is placed diagonally across a thin white square and slightly overlaps it. The interior of the square is shaded red at the bottom verging into purple at the top. In the other device the “32V” is placed obliquely across a thin gold circle, and again slightly overlaps it. The interior of the circle is coloured a uniform black. The strong visual impression created by both of these signs is of the gold 32 set against, respectively, a red/purple and a black background. The interlocking white V, although clearly visible, is smaller in size (as it is in the larger device) and much less prominent.

I will begin by considering whether the use by William Hill Online of the Vegas signs has infringed 32Red’s two Community marks. I will assume at this stage that the Community marks are valid. I will also leave until later all issues of infringement and validity in relation to the UK or 32 mark.

There was no real disagreement between the parties about the law which has to be applied in relation to the alleged infringement of the Community marks. The dispute was about the application of the law to the facts.

Article 9 of the CTMR provides materially as follows:

The following provision in Article 12 is also relevant:

Despite the use of the words “not similar” in Article 9(1)(c), the Court of Justice of the European Union (“the ECJ”) has held that the paragraph also applies to the use of signs which are identical or similar to those for which the mark is registered: see Case C-292/00 Davidoff v Gofkid, [2003] 1WLR 1714. This ruling has been reflected in an amendment to section 10(3) of the Trade Marks Act 1994, although the wording of Article 9(1)(c) itself remains unaltered.

In their opening written submissions counsel for 32Red summarised the task that the court has to undertake in this way:

On the basis of these and other leading authorities a compendious summary of the principles to be followed has been developed by the Trade Marks Registry. One such summary is quoted in the written submissions of counsel for William Hill Online. I propose to quote the very similar, but more recent, summary adopted by Geoffrey Hobbs QC sitting as the Appointed Person in La Chemise Lacoste SA v Baker Street Clothing Ltd (O/330/10), which has itself been cited with approval by Arnold J in Och-Ziff Management Europe Limited and another v OCH Capital LLP and others [2010] EWHC 2599 (Ch), judgment in which was handed down on 20 October 2010 (the last day of the hearing before me) at [73]:

Counsel for William Hill Online also rely on the guidance given by the Court of Appeal in Reed Executive Plc v Reed Business Information Ltd [2004] RPC 40, where the leading judgment was given by Jacob LJ (with whom Rix and Auld LJJ agreed). Jacob LJ said this at [82] to [86]:

In relation to propositions (d) to (f) in the Trade Marks Registry summary, counsel for William Hill Online also cautioned me against assessing the similarity and likelihood of confusion on the basis of a comparison of only one component of a composite mark. As the ECJ has more than once emphasised, the comparison must be made by examining the marks in question as a whole, even if the overall impression conveyed by a composite mark may be dominated by one or more of its components.

The goods and services covered by the Vegas signs are identical, or at any rate virtually identical, to those covered by the Community marks: in each case, the goods and services are those provided by an online casino, and the signs or marks are used to brand the casino. This is an important initial point, because in such circumstances a lesser degree of similarity between the marks may suffice to establish a likelihood of confusion (proposition (g) in the Trade Marks Registry summary).

That the Vegas signs are similar to the Community marks is in my judgment undeniable. In both their written and their graphic forms, there is an initial figure 32 followed by a single word (or in the case of the 32v signs, followed by a single letter which in its context plainly alludes to the word “vegas”). The figure 32 does not of itself denote anything to do with online gaming: it is just a number, and not even a number with obviously lucky (or unlucky) connotations, such as 7 or 13. Furthermore, the single word “vegas”, like the colour “red”, is agreed to have a gaming association. Thus the use by William Hill Online in 2009 of the inherently specific number 32 in conjunction with the single word “vegas”, to identify and brand an online casino, clearly satisfied the test of similarity. The critical question, therefore, is whether the similarity was such as to give rise, in all the circumstances, to a likelihood of confusion on the part of the public, including a likelihood of association in the sense of engendering the mistaken belief that the two casinos were operated by the same or economically-linked entities.

In answering this question I must look at the matter through the eyes of the average consumer of online gaming services, whom it is convenient to call an “online gambler” for short, while remembering that for many customers the activity is essentially a recreational one, and not all customers play for real money. I must also make due allowance for the fact that the average online gambler will rarely have had the opportunity to make direct comparison between the Community marks and the Vegas signs, and will have had to rely on the imperfect picture of them retained in his mind. It is material to note in this context that the online gambling market is a crowded and volatile one, with a large number of brands competing for customers’ attention, and generally very low levels of customer loyalty and retention.

I think it is also relevant to have in mind the difference between the marketing models of 32Red and 32Vegas. By January 2009 32Red was a strong brand with an excellent reputation, and from its inception in 2002 it had been promoted alone, not as part of a family of brands in common ownership. By contrast, 32Vegas had always been marketed on the “carousel” model, and as Mr Cole-Johnson frankly acknowledged the reputation of individual casinos was never of any particular importance to William Hill Online, any more (I infer) than it had previously been to Crown Solutions. In these circumstances it seems to me reasonable to conclude that the Community marks are likely to have made a rather stronger and more positive impression on members of the online gambling community than the Vegas signs.

The next point I would make is that the Community marks are, and were in 2009, highly distinctive in character. The distinctiveness lay in the combination of the specific number 32 (which in itself has no obvious gambling connotation) with the word or the colour red, which is agreed to have a general gambling connotation. Some, but by no means all, online gamblers will also have picked up the specific allusion to roulette, and will have recognised the marks as making a verbal or visual reference to the result that a croupier would be likely to call out when the ball lands in the 32 slot. This allusion, I would stress, is not directly descriptive of the game of roulette, or of any particular feature of the game; but, for those who recognise it, the allusion gives a much stronger and more specific gaming flavour to the Community marks than the mere use of the word or colour red could do by itself. In a similar way, the red colouring of the script and of the circle in the graphic Community mark reinforces the effect of the word “red”, but those who recognise the allusion to roulette may also see the circle as a stylised representation of a roulette ball.

I now turn to the Vegas signs. The three text signs all begin, like 32Red, with the figure 32. In two cases this is then followed by the word “vegas” which, because of the obvious allusion to Las Vegas, has a strong (but still general) gambling connotation. In the third case, the single letter “v” will, as I have already said, naturally be read as an abbreviation of “vegas”. There is no allusion to roulette or to any other specific game offered by an online casino, and the number 32 has no connection of any kind with Las Vegas. Read or recalled as a whole, the text signs are in my view devoid of any descriptive character beyond the generalised reference to gambling inherent in the word “vegas”. The main visual sign is reminiscent of a neon casino sign, and the gaming message is reinforced by the red and gold colouring and the star. The two smaller visual signs focus on the gold 32 and star with the interlocking white “V”, and in one case the red background is also similar to that of the main sign; in the other case the background is black, another colour with a generalised gaming connotation (for example the suits of playing cards are either black or red).

As a matter of overall impression, the dominant feature of all the Vegas signs is in my view the figure 32. It comes first, whether one is examining the verbal, visual or aural impact of the signs, and in the graphic signs the 32 is notably larger and more brightly coloured than the white “Vegas” or “V”. An online gambler would naturally gain the impression, perhaps at a subliminal level, that the “Vegas” component of the signs is in some way subordinate in impact and importance to the “32”, although he would also recognise that the “Vegas” is connected with and part of the “32” (a connection visually reinforced by the interlocking of the “2” and the “V”).

Was there, then, a likelihood of confusion on the part of the average online gambler in 2009 between the Vegas signs and the Community marks? In my judgment there was. It is simplest to begin with the online gambler who did not pick up any allusion to roulette in the Community marks. For such a person, the overall impression created by the Community marks and the Vegas signs would have been very similar: in each case the name of the casino consists of the same number (32) in the dominant position (verbally, visually and aurally), followed by a single word with a general gaming flavour. A natural conclusion to draw would have been that the two casinos were under common ownership or economic control. In addition, the likelihood of an association between the two casinos might well have been reinforced, consciously or unconsciously, by the red background to two of the three graphic Vegas signs, including the main sign where the figure 32 is prominently displayed in gold against a bright red background. The combination of the figure 32 and the colour red could hardly be more striking, and in view of the established reputation of 32Red in 2009 the link to 32Red would have been an obvious and easy one for many online gamblers to make. In a world where stables of thematically-linked online casinos were familiar, there would have been nothing surprising in a burgeoning family of “32” casinos. What would have been surprising, given the highly specific nature of the number 32 and its lack of any intrinsic gambling association, is for two unconnected casino operators to have hit on two such similar names independently.

I must now consider those online gamblers, perhaps the majority, who would have picked up an allusion to roulette in the Community marks. For them, the 32Red name and brand will have had a special extra significance, and they may have agreed in substance with Mr Bailey’s perception that the name “seemed a clever play on words … it was a breath of fresh air” (paragraph 138 of his report), even if they would not have expressed themselves in quite such enthusiastic terms. But, to return to a point which I have already made, the allusion does not turn the marks into purely, or even partly, descriptive ones. It just gives an added layer of reference, and increases the distinctiveness and memorability of the marks, for those who pick it up. It does not alter the basic form and structure of the marks in any way, nor in my view does it detract significantly from the features discussed above which give rise to a likelihood of confusion with the Vegas signs. The position is, rather, that online gamblers who were alive to the allusion might also have supposed there to be an association between 32Red and another casino which called itself (say) 8Black or 28Even.

For these reasons I have come to the conclusion that 32Red’s infringement claim under Article 9(1)(b) succeeds in relation to the Community marks, and does so in relation to all of the Vegas signs. I reach this conclusion without needing to rely on any evidence of actual confusion, although a certain amount of such evidence was tendered by 32Red and I will consider it in the next section of this judgment. The test laid down by Article 9(1)(b) does not require evidence of actual confusion, and if such evidence is available it is likely to be of a confirmatory nature rather than an essential ingredient of the value judgment that, in the words of Jacob LJ in the Reed case, the court has to draw from all the circumstances.

I would also add that in a case of the present type I would not necessarily expect much evidence of actual confusion to be forthcoming. Only a very careless online gambler would have supposed that he was playing with 32Red when he was playing with 32Vegas, or vice versa. The real, and far more insidious, risk in the present case is that people may have decided to play with 32Vegas because of a supposed association with 32Red, or may have become disenchanted with 32Red because of a bad experience with 32Vegas. Here the confusion lies in the mistaken association between the two casinos, and the person who suffers from the confusion is unlikely to leave behind him any documentary trace that he has done so.

32Red sought to bolster its case on the issue of likelihood of confusion with evidence from a number of sources that confusion had actually occurred. This evidence mainly consisted of (a) various forms of documentary evidence uncovered by exhaustive searches and enquiries carried out by 32Red, (b) further documentary evidence disclosed by William Hill Online, and (c) the evidence of a number of witnesses, some of whom were cross-examined.

Much of this evidence related to periods before the alleged infringement by William Hill Online in 2009, but I agree with the submission for 32Red that this does not in itself make the evidence irrelevant. The issue to which it goes is the likelihood of confusion, and that likelihood may in principle be established at any time after 32Vegas began to operate in 2006. The 32Vegas casino was taken over by William Hill Online as a going concern, and no significant changes were made to its mode of operation. By continuing to run the casino in its existing form, William Hill Online were in my view taking the risk that any previous likelihood of confusion would also continue, and no steps were taken by William Hill Online to lessen or dispel any such risk until August 2009 when the 32Vegas brand was replaced by 21Nova.

Most of the documentary evidence relied on by 32Red is exhibited to Mr Ware’s first statement, and he also says that he is aware anecdotally “that customers have been confused by the presence of 32Vegas and 32Red online casinos and they often consider that 32Red is in some way linked with 32Vegas”. Mr Ware’s personal awareness of such alleged confusion was not challenged, although it was put to him that much of it came from a small number of sources (notably Mr Bailey and Casinomeister) whose impartiality could not be depended upon. It was also submitted by William Hill Online that much of the evidence was uncertain, trivial or open to various interpretations; that its cogency could not fairly be assumed or tested without oral evidence; and that in view of the massive research exercise undertaken by 32Red’s lawyers it was anyway so paltry in nature and extent as to be virtually negligible in its impact.

There is some force in these points, but after making all due allowances I remain of the opinion that the documentary evidence, taken as a whole, does provide some support for the conclusion that I have already reached on likelihood of confusion, and that it cannot be dismissed as insignificant. In nature and extent the evidence is broadly what I would have expected to find, and as I have already explained the more damaging types of confusion (as opposed to momentary or careless lapses) are of a kind that is unlikely to have left a documentary footprint.

In the circumstances I do not intend to review the documentary evidence at any length, but I will give a number of examples to indicate its nature.

In paragraph 110 of his first statement Mr Ware gives eleven examples of apparent confusion occurring within the online gaming trade. As far as I can see, none of these examples is derived from Mr Bailey or Casinomeister. They include a review of the 32Vegas casino on the website “playersadviser.com” which referred to a bonus being provided by 32Red, and erroneously featured screen shots from the 32Red website. Another review website, called “extremecasinobonus.com”, referred to a non-existent casino called “32Red Vegas”, while displaying the 32Red logo next to it. Again, an article about 32Vegas dated 13 November 2008 on the site “donorschoosenc.org” provided a laudatory review of the 32Red casino under the heading “32Vegas Casino”. The third paragraph of the review compounded the confusion by saying “32RED Casino is licensed in Gibraltar and is part of 32Vegas Plc”.

Mr Ware goes on to give 17 instances of 32Red being contacted by customers who had apparently confused 32Red with 32Vegas. Many of these instances take the form of “chat logs”, that is to say records of instant messaging conversations between a customer and a member of 32Red’s online support staff. The first of these is not untypical. A customer called Francisca, who had been registered with 32Red for 164 days and played in US dollars, contacted a member of 32Red’s support staff in connection with a claim for a bonus. She said she had received a message from “security@32vegas” who told her that everything was correct, but she had not seen her bonus. She therefore asked “Could you do something?”, to which the member of staff replied “We are not 32vegas, we are 32red”. Francisca then said “Yes sorry I know that”, and when asked to supply her account number gave a 32Red number and details of the bonus she wished to claim. The likeliest explanation of this particular exchange is in my view that Francisca intended to contact 32Red, and mistakenly referred to the earlier message she had received as having come from 32Vegas. Whether this was a mere slip of the tongue, or whether she thought that 32Red and 32Vegas were in some way connected, is not apparent; but the mere fact that the mistake was made does in my view provide some evidence of a possibility of confusion.

Similarly, there is a chat log record of another customer called Stilianos, registered for 81 days and playing in euros, contacting 32Red to ask for his account identification details at the 32Vegas and Dash casinos. Dash was a casino associated with 32Red, but 32Vegas, of course, was not. This was pointed out to Stilianos, who replied “Sorry I meant 32 Red”. Although the mistake was immediately cleared up, it is the fact that it was made in the first place which is potentially significant. A further example is provided by James, a long-standing customer who had been registered with 32Red for more than two and a half years and played in sterling. He contacted 32Red’s support staff to claim a monthly match bonus, and gave details of his 32Red account number, but was then told that his name was not on the invitation for that month so he did not qualify. James replied that he had been notified of his entitlement to receive a bonus, and then forwarded an email which he had received from 32Vegas. This elicited the response “James we are 32Red not 32Vegas”, and it appears that James then logged off.

As one might expect, chat log records disclosed by William Hill Online also reveal a few instances of similar confusion, although they are of course confined to the period after 1 January 2009. For example, an Italian player named Massimo was under the impression that 32Red and 32Vegas were the same thing and had to be corrected with the statement “No, we are 32Vegas, I don’t know 32Red”. Again, a customer called John Scott contacted the 32Vegas online support team in connection with a 320% sign up bonus, which he said he had heard about from a 32Red newsletter. He also said that an online search engine, followed by a link, had taken him to 32Vegas’ sign up page. The operator appears to have taken no steps to inform Mr Scott that 32Vegas was nothing to do with 32Red, and instead told him that a minimum deposit of £20 would be required before he could get a bonus. Unsurprisingly, he decided not to proceed.

I will take first the two witnesses who were cross-examined, Dr Doreen Thompson and Mr Christopher Cosmas.

Dr Thompson is a psychologist, having been a member of the profession for some 25 years. She has been a regular online player for about four years, and in early 2006 she joined both the 32Red and 32Vegas casinos, playing on both of them to a similar extent. In her statement she says that she remembers receiving a promotional email from 32Vegas in May 2006, which offered her a 100% bonus to match the next deposit she made to her account and saying that a bonus of £50 had already been credited to her account because she had now become a VIP member. Dr Thompson says that she thought the email was from 32Red, so she subsequently deposited some money into her 32Red account in order to claim the bonus. Shortly after, she noticed that she had not received the bonus so she contacted the 32Red online customer support. It was only after their conversation that she realised the promotion had in fact come from 32Vegas. Her statement continues:

The impression given by this statement is that Dr Thompson forwarded the promotional email from 32Vegas to 32Red in the mistaken belief that they were connected in some way, and they were both to blame for the sense of frustration which she experienced. However, the picture which emerged in cross-examination was rather different. Dr Thompson accepted that she had joined 32Vegas on 8 May 2006, when she was already a member of 32Red, and that the date of the promotional email from 32Vegas was 15 May 2006, one week after she had joined. The email clearly identified itself, at the top and the bottom, as coming from 32Vegas, but she nevertheless understood it to come from 32Red, which is why she approached 32Red in the first instance. When she looked at the email again, as a result of her conversation with 32Red, she realised her mistake. She knew they were separate casinos, and was upset with herself, not with the casinos, because she had embarrassed herself. As she frankly said, “I felt it was really embarrassing because I had contacted a different casino and alluded to an email which was not from them, so I felt an idiot”.

In the light of this evidence, the most that can be said is that the similarity between the names of the two casinos may have contributed to Dr Thompson’s initial mistake, but she was at all times aware of their separate identity, and the feelings of frustration and embarrassment which she experienced were directed at herself, not the casinos. It may therefore be thought that any suggestion of lasting damage to 32Red as a result of the episode is fanciful. The point remains, however, that but for the similarity of the names the initial mistake would probably never have been made, and the result was that Dr Thompson, having once made a fool of herself with 32Red, never played with them again. By contrast, she has continued to be a regular and satisfied customer of William Hill Online, playing roughly 25,000 games a year on either 32Vegas or 21Nova. The case therefore provides an illustration of the rather unexpected ways in which an initial possibility of confusion can cause lasting damage.

Mr Cosmas is an IT technician who lives and works in Australia. He gave his oral evidence by video-link. It has to be said at once that accuracy is not his strong suit. In his first statement, dated 17 June 2010, he said that he had been playing on online casinos for approximately six years, and he first became aware of 32Vegas in about 2006 “which is when I became a member and played my first game”. In reply to this evidence, Mr Green said he had been unable to find any record of Mr Cosmas as a customer of 32Vegas, although he appeared to have a number of accounts with related William Hill casinos. An account had, however, been opened by a Susan Mair at 32Vegas on 10 July 2006, and on one of her accounts she had used the same telephone number as Mr Cosmas. I should add that she was the author of certain emails referred to by Mr Cosmas in his statement as coming from himself, and she also appeared to be the customer in an online chat that Mr Cosmas said he had with 32Vegas. In his second statement, dated 7 October 2010, Mr Cosmas explained that Susan Mair has been his common law wife for about six years, that they both have a number of accounts with different online casinos, and if they are playing together they will sign in with one of their names. He admitted that he had been “a bit loose with the language that I used” when describing what had happened in his first statement, and he could “well believe” that there was no account at 32Vegas in his own name. He also said that it was about eight to ten years ago when he first started gambling in online casinos, apparently not noticing the difference from the period of about six years mentioned in his first statement.

These inaccuracies, together with others which were exposed by Mr Carr in cross-examination, mean that I have to treat Mr Cosmas’ evidence with very considerable caution, although I readily acquit him of any conscious intention to mislead. For present purposes the most important part of his evidence is in paragraph 2 of his first statement, where he says that shortly after he first became aware of 32Vegas, he read about 32Red on Casinomeister.com, but:

The gist of Mr Cosmas’ evidence is that he and Susan Mair then played on 32Vegas until October 2008 when they encountered problems in withdrawing substantial winnings of approximately A$45,000. They were told that they could withdraw only A$9,000 per month until all of their winnings had been paid, and that this was in accordance with the terms and conditions applicable to their account. This left him feeling upset and frustrated, and he complained by email to the Antigua Ombudsman and various other authorities, but did not receive a response to any of his complaints. Since then he had not played with 32Vegas, and had become sceptical about the honesty and trustworthiness of online casinos in general. He recalled reading various positive comments and articles about 32Red, but in view of his belief that 32Red and 32Vegas were part of the same group he assumed that those comments were posted by people who worked for the two casinos.

On 30 October 2008 Mr Cosmas contacted the 32Red customer support team, with the aim of proving that 32Red was in fact part of the same casino group as 32Vegas. He asked whether he had an account with them, knowing from past experience that if he had an account with another casino from the same group the support team member would inform him that this was the case. He therefore expected the 32Red support team to tell him that, although he did not have an account with them, he did have an account with 32Vegas. Mr Cosmas exhibits a copy of the relevant chat log, in which he said he would like to check if he had an account with 32Red “as the name seems familiar”. When informed that he did not, Mr Cosmas said: “I’ll sign up now. I think confusion comes from 32Vegas casino”. Mr Cosmas says it was only at this point that he realised 32Vegas and 32Red were not part of the same group, and since that date he has been a satisfied customer of 32Red.

It is difficult to know what to make of this evidence, and in general I find Mr Cosmas too unreliable a witness to attach much weight to what he says. His complaint about the withdrawal of winnings in 2008 is difficult, if not impossible, to reconcile with an email sent by Susan Mair herself to 32Vegas on 23 September 2008, which acknowledged receipt of the initial withdrawal of A$9,000, and said “You have given me faith that playing with you in the future will be more assuring and enjoyable. I will be back to play again”. What seems to have happened is that Susan Mair and Mr Cosmas played with, and lost, the remainder of their winnings, being unwilling to wait for the period of five months which would enable them to withdraw the winnings in full. To what extent, if at all, this had happened before Susan Mair sent her email of 23 September 2008 is unclear. But there is no doubt that she remained a customer of 32Vegas and 21Nova, and according to Mr Green her level of betting historically has made her a VIP. There is nothing to suggest that she made any subsequent complaints, and she has not given evidence in the present proceedings. Mr Cosmas’ attempt to elicit a connection between 32Red and 32Vegas is also difficult to take seriously, if only because his strategy made no sense given that the account with 32Vegas was in Susan Mair’s name, not his own.

Despite all these reservations, however, I see no reason to doubt Mr Cosmas’ simple and basic point that he originally assumed 32Red and 32Vegas to form part of the same group of casinos because of the similarity between their names. It is also clear that the possibility of confusion was in his mind, at a time long before he can have known anything about the present dispute, when he contacted the 32Red support team on 30 October 2008 and said “I think confusion comes from 32Vegas casino”. This evidence is not much, to be sure, but it adds something to the overall picture.

The two remaining witnesses were Mr Mikkelsen and Mrs F. Like Mr Cosmas, Mr Mikkelsen lives and works in Australia, and he was originally scheduled to give oral evidence by video-link on the same morning (in England) as Mr Cosmas. In the event, however, he was half an hour late for his appointment, with the result that Mr Cosmas’ evidence was taken first; and when he did arrive at the video-conferencing suite he seems to have lost patience and left the building saying that he was not prepared to give evidence. No attempt was made by 32Red to fix an alternative time, and I must therefore assume that Mr Mikkelsen’s refusal to testify was definitive. In those circumstances, although his statement has been admitted as hearsay evidence, I think it would be wrong for me to attach any weight to it. He is an affiliate and enthusiastic supporter of 32Red, and like Mr Bailey he has a strong financial interest in the success and prosperity of 32Red. Moreover, his statement displays an element of hostility to Playtech and casinos which use Playtech software. For example, he says that in general he only promotes casinos that use Microgaming software, but does not explain his reasons for this predilection beyond saying that he has in the past had “some negative experiences with Playtech casinos … particularly in relation to payouts”. He also refers to a thread of internet postings on the subject of possible confusion between 32Red and 32Vegas, to which he had responded by saying “Like we all need another dodgy Playtech casino”. Mr Carr would naturally have wished to cross-examine Mr Mikkelsen about these, and other, features of his evidence, and since he has been deprived of the opportunity of doing so I think the safest course is for me to disregard it.

I come finally to Mrs F. As I have already explained (see paragraph 15 above) she was unwilling for personal reasons to give evidence in court and 32Red put in her statement as hearsay evidence. The researches of Mr Green reveal that a lady of the same name, who also lives in Edinburgh, and who is therefore presumably the same person, is a member of a social networking site on which she appears to play online poker and to have other gambling interests. In the light of this evidence, counsel for William Hill Online invite me to infer that her professed reasons for being unwilling to give oral evidence are suspect, and the likelihood is that she was simply unwilling to be questioned on her evidence. That is not an inference which I am willing to draw. There is all the difference in the world, it seems to me, between revealing chosen details about oneself on a social networking site and exposing one’s gambling habit to public exposure in the witness box. Nevertheless, the fact that Mrs F has not been cross-examined means that the weight I can attach to her evidence is very considerably reduced.

In her statement Mrs F says that she has been a customer of 32Red for about five years. She plays on 32Red almost every day, placing only small, real money bets, and does not hold any accounts with any other online casino. She first became aware of 32Vegas in or around February 2009, when she kept receiving pop-up advertisements on her computer from 32Vegas offering a promotional bonus. She says that she remembers the incident because she had recently lost some money while playing on 32Red, and she assumed 32Red had monitored her losses and passed her details on to one of their partner companies in an attempt to make her lose more money to the partner company. She was “quite annoyed”, and decided to contact the 32Red online support team to ask why she was receiving the pop-up advertisements. When she did so, it was explained to her that 32Red and 32Vegas were not associated. She continues:

On the face of it, this evidence appears to provide a clear example of a customer wrongly assuming there to be a business connection between the two casinos, and moreover doing so after the acquisition of 32Vegas by William Hill Online. The pop-ups appear to have led Mrs F to draw the natural conclusion that the two casinos were operated on the carousel model, and had she not been sufficiently annoyed to contact the 32Red support team it is quite possible that she would have accepted the promotional offer from 32Vegas and switched her custom from 32Red. It is only fair to point out, however, that counsel for William Hill Online would have wished to probe this evidence in cross-examination. They point out that the chat log of her conversation with 32Red shows that the primary purpose of her communication was to ask about a 32Red survey and promotions, and it was only when the operator asked her whether he could do anything else for her that she referred to the pop-ups “from a 32 red vegas casino” and asked “is this casino a partner of 32 red?” Furthermore, when the operator told her that the two casinos were not linked, he added that the most common reason for her experience “is at some point you must have visited the site or similar site and they have tracked you”. If that is indeed what happened, it would appear to contradict her statement that she first became aware of 32Vegas when she received the pop-ups. I agree that these points would have been legitimate ones to pursue in cross-examination, and I cannot speculate about the answers that Mrs F would have given. Nevertheless, the fact remains that she did take the initiative in asking 32Red in February 2009 whether there was a connection between the two casinos, and it is perhaps revealing that she referred to 32Vegas as “a 32 red vegas casino”. Furthermore, there are a number of ways in which the pop-ups could have appeared on her screen without her having consciously visited the 32Vegas website. I find Mrs F’s written evidence coherent and plausible, and although I can attach only limited weight to it, it does seem to me to provide a helpful example of one kind of confusion that the similarity of names was likely to cause.

In view of the conclusions which I have reached about infringement under Article 9(1)(b), 32Red’s secondary case based on Article 9(1)(c) becomes comparatively unimportant. The reason for this is that infringement under Article 9(1)(c), assuming it to be established, adds nothing (as far as I can see) to a successful claim under 9(1)(b). If the similarity between the marks is such as to give rise to a likelihood of confusion on the part of the relevant public, the claimant’s case of infringement under Article 9(1)(b) will be made out and the claimant will be entitled to relief accordingly. On the face of it, there is nothing to be gained by going on to attempt to satisfy the much more specific and stringent requirements of Article 9(1)(c). Indeed, one might be forgiven for thinking that it was precisely for this reason that the scope of Article 9(1)(c) was expressly confined to cases where the allegedly infringing goods or services are not similar to those for which the Community trade mark is registered. Since, however, the ECJ has held that Article 9(1)(c) also applies to cases where the goods or services are identical or similar to those for which the mark is registered (see paragraph 88 above), overlapping claims are naturally advanced in order to cover all eventualities, and the cost and complexity of litigation, in what is already a complex and difficult area, are correspondingly increased as a result.

With these considerations in mind, I propose to deal with 32Red’s case under Article 9(1)(c) in fairly short order. Given the findings which I have already made, the requirements of similarity between the marks, and the existence of a link between them in the mind of the relevant public, are clearly satisfied: see in particular Case C-252/07 Intel Corporation Inc v CPM United Kingdom Limited [2009] Bus LR 1079, [2009] R.P.C. 15, at paragraph 57 of the judgment of the Court. It is equally clear that the Community marks had an established reputation in (at least) the UK. The critical question is therefore whether use by William Hill Online of the Vegas signs took unfair advantage of, or was detrimental to, the distinctive character or the repute of the Community marks. Article 9(1)(c) also includes the words “without due cause”, but the onus of establishing any due cause would lie on William Hill Online and it has not attempted to do so.

The decision of the ECJ in Intel was concerned with equivalently worded provisions relating to the registration and invalidity of trademarks in Article 4(4)(a) of Council Directive 89/104/EEC. Both sides accept, and I see no reason to doubt, that the reasoning of the Court is equally applicable to the issue of infringement of Article 9(1)(c) of the CTMR. In paragraph 27 of the judgment, the Court divided the types of injury against which protection is provided into three categories: first, detriment to the distinctive character of the earlier mark; secondly, detriment to the repute of that mark; and, thirdly, unfair advantage taken of the distinctive character or the repute of that mark. It seems to me that the third of those categories could just as well have been expressed as two further categories, making four in all, because unfair advantage may be taken of either the distinctive character or the repute of the earlier mark. The Court then said, in paragraph 28, that any one of the three types of injury is enough for the provision to apply. Indeed, this would seem to follow from the disjunctive manner in which the provision is worded, and again this was common ground between the parties.

In paragraph 68 the Court held that the likelihood of one of the types of injury “must be assessed globally, taking into account all factors relevant to the circumstances of the case”, including the criteria listed in paragraph 42 of the judgment. Those criteria are:

The Court also had this to say about the first type of injury, namely detriment to the distinctive character of the earlier mark:

Leaving aside the requirement of a change in economic behaviour, it seems to me clear, on a global assessment, that the introduction and use of the Vegas signs was detrimental to the distinctive character of the Community marks, and that the detriment was still continuing during the period of alleged infringement in 2009. The 32Red brand was highly distinctive, and it enjoyed a strong reputation in the online gambling community. The goods and services covered by the Vegas signs were identical, and the degree of similarity between the signs and the Community marks was high, including in particular the initial 32. There was, as I have already found, a likelihood of confusion on the part of the public, and there is some evidence of actual confusion as well. Other uses by third parties of marks including the number 32 were commercially insignificant and not of such a character as to dilute the 32Red brand. The detriment to the distinctive character of the Community marks lay in the risk of a false association with 32Vegas, a brand with an inferior reputation which operated in the same market place.

Is there evidence of a change in economic behaviour brought about by the use of the Vegas signs? In the nature of things, direct evidence of such a change is likely to be hard to find in cases of the present type, although Mrs F provides a suggestive example of a customer who was nearly persuaded to change her allegiance as a result of a perceived connection between 32Red and 32Vegas. However, I see no reason why I should not have regard to the inherent probabilities of the situation, and in particular to the contrast between the marketing models of the two casinos. The similarity of their names, and the fact that 32Vegas was always operated as one of a number of linked casinos on the carousel model, lead me to conclude that an average online gambler would have been far readier to switch his allegiance from 32Red to 32Vegas, or to play with 32Vegas in the first place, than he would have been in the absence of such similarity. These are changes in economic behaviour, and I am satisfied on the balance of probabilities that such changes are likely to have occurred to a significant extent.

For these short reasons I consider that injury of the first type under Article 9(1)(c) is established, and that 32Red’s secondary claim of infringement therefore succeeds. Similar considerations, coupled with the evidence of Mr Brear concerning the unprecedented level of complaints about 32Vegas received by the GRA in 2009, lead me to the same conclusion in relation to injury of the second type, namely detriment to the repute of the Community marks. In these circumstances it is unnecessary for me to consider whether injury of the third type, often referred to as “tarnishing”, is also made out, and I prefer to leave the question open.

William Hill Online’s challenge to the validity of the Community marks, as pleaded in the Amended Grounds of Invalidity, is based on the following provisions of the CTMR:

It is convenient to begin with the absolute grounds of invalidity in Article 7(1)(b), (c) and (d). As Article 52(1)(a) makes clear, the question must first be considered as at the date of the applications for registration of the Community marks, which were 16 August 2002 and 18 October 2002 respectively. However, even if invalidity on those dates is made out, the challenge will still fail if the relevant trade mark has subsequently become distinctive (through use) of the goods or services for which it was registered: see Articles 7(3) and 52(2). This saving for acquired distinctiveness helps to make the point that the basic function of a trade mark is to serve as a badge of trade origin, not as a mere description or name of a product. Thus, if a mark which originally lacked distinctiveness has subsequently acquired a sufficiently distinctive character through use of it by the relevant sector of the public, the original deficiency will be made good. The date at which the issue of acquired distinctiveness falls to be considered is the date of the counterclaim seeking a declaration of invalidity, namely 11 August 2009.

The ground which William Hill Online plead first, and therefore presumably the one on which they place most reliance, is Article 7(1)(c). In the “Postkantoor” case (Case C-363/99 Koninklijke KPN Nederland NV v Benelux Merkenbureau [2006] Ch.1) the ECJ gave the following guidance on the interpretation of the identically worded Article 3(1)(c) of First Council Directive 89/104/EEC on trade marks:

Similar guidance was again given by the Court in the “Doublemint” case (Case C-191/01 P, OHIM v Wm Wrigley Jr Co (DOUBLEMINT) [2004] R.P.C. 18) at paragraphs 29 to 32. In particular, the Court held in paragraph 32 that a sign must be refused registration “if at least one of its possible meanings designates a characteristic of the goods or services concerned”. Further, in determining the question of lack of distinctive character or descriptiveness, it is necessary to take into account the perceptions of the trade and average consumers of the goods or services in the territory in respect of which registration is applied for: see Case C-421/04 Matratzen Concord AG v Hukla Germany SA [2006] E.T.M.R. at paragraph 24 of the judgment of the Court.

Applying these principles, it seems clear to me that neither of the Community marks infringed Article 7(1)(c) at the dates when the applications for their registration were made in 2002. The combination “32Red” does not describe or designate any feature or characteristic of the goods or services supplied by an online casino. There is an allusion to a possible result in roulette, but in my judgment that allusion did no more than to create an association with roulette, which was itself no more than one of the games offered by the 32Red casino. Furthermore, the evidence shows that the association is far from obvious and was not picked up by many members of the relevant public. In short, I agree with and accept the submission for 32Red that a mark which can be read as describing a particular result in roulette does not designate a characteristic of the game of roulette, let alone a characteristic of the whole range of goods or services provided by an online casino. Nor, looking at the matter more broadly, can I find any indication of the kind of detriment to the public interest which underpins the absolute grounds in Article 7. It seems to me that the combination “32Red” is inherently distinctive, precisely because it does not describe or designate any part or feature of the business of an online casino. The allusion to roulette gives the mark a gaming flavour, and no doubt helps to make it memorable for that reason; but that is a very different matter from saying that it infringes Article 7(1)(c).

I now turn to Article 7(1)(b), and the contention that the Community marks were in 2002 “devoid of any distinctive character”. The test under this heading is separate from the test under Article 7(1)(c), because although a mark that is descriptive will necessarily also lack distinctive character, the converse is not true: a mark may not be descriptive, but may nevertheless fall foul of Article 7(1)(b) (see the Postkantoor case at paragraph 86). In the present case, however, the considerations which have led me to conclude that there was no breach of Article 7(1)(c) are in my judgment equally applicable to Article 7(1)(b). As the ECJ said in Joined Cases C-53/01 to C-55/01 Linde AG v Deutsches Patent-und Markenamt [2003] R.P.C. 45 at paragraph 40 of the judgment, for a mark to possess distinctive character within the meaning of this provision “it must serve to identify the product in respect of which registration is applied for as originating from a particular undertaking, and thus to distinguish that product from products of other undertakings”. The Court went on to say that the question of distinctiveness must be assessed by reference to the goods or services for which registration is sought, and the perception of consumers of the relevant goods or services. Applying these criteria, I am entirely satisfied that the two Community marks have at all material times functioned as a badge of origin in the online gaming community, and that the combination of “32” and “Red” had from the beginning a clear distinctive character.

The challenge under Article 7(1)(d) is in my view equally hopeless. As the ECJ explained in Case C-517/99 Merz & Krell GmbH & Co [2002] E.T.M.R. 231 at paragraphs 32 to 41 of the judgment, the focus of the equivalent provision in Article 3(1)(d) of Council Directive 89/104 is on current usage in trade sectors covering trade in the goods or services for which the marks are sought to be registered, and it is for the national court to determine in each case whether the signs or indications which comprise the mark have become customary in the current language or in the bona fide and established practices of the trade to designate the relevant goods or services. It is immaterial, for this purpose, whether the signs or indications are of a descriptive nature. The evidence in the present case comes nowhere near establishing the existence of any such customary usage for either “32” or “Red” in isolation in 2002, let alone for the two of them in combination. The most that can be said is that the colour red, like black or gold, had a gaming connotation; but the word “Red” is not used in isolation in either of the Community marks, and in any event the evidence does not establish that it was used to designate online casino services. The most it could do, in combination with another sign or indication, was to impart a generalised gambling flavour.

In view of the conclusions which I have reached, the question of acquired distinctiveness does not arise. If necessary, however, I would have held without hesitation that by 2009 the use by 32Red of the Community marks had been sufficiently extensive for the necessary degree of distinctiveness to be acquired, even if it was originally absent. It is revealing to note, in this context, that both Mr Cole-Johnson and Mr Bartlett readily accepted in cross-examination that “32Red” is generally known and understood in the online gaming community to refer to the claimant’s casino.

I come finally to the alternative ground for revocation under Article 51(1)(c). The question here is whether the Community marks, or either of them, are liable to mislead the public as a consequence of the use made or consented to by 32Red of the marks in respect of online casino services. The thrust of William Hill Online’s pleaded case under this head is that 32Red has created confusion in the minds of the public by the use of other signs incorporating the figure 32, including 32Vegas, 32royal and Spin32, as Google Adwords connected to 32Red’s own website. The way in which Google Adwords work is that any internet user who types the relevant adword into the Google search engine will immediately be presented with a sponsored link to the 32red.com website. Having bid for an adword, 32Red then pays a fee to Google based on the number of times when a user clicks on the 32Red advertisement.

The purpose of 32Red’s adword campaign, as Mr Ware said in both his oral and his written evidence, was to protect the name and reputation of 32Red and to pre-empt possible confusion on the part of internet users who might have supposed that there was no difference between 32Red and the adword site when they typed the latter’s address into their search engine. That may be so, submit William Hill Online, but the effect of the campaign, whatever its subjective motivation, was to cause precisely the confusion that 32Red says it hoped to avoid, and also to render the Community marks non-distinctive. By its own conduct, 32Red has sought to create a trade connection in the minds of the average consumer between 32red.com and the adwords and has thereby caused the Community marks to become deceptive.

There is some superficial attraction in this submission, but in my judgment it must be rejected. Adwords are a familiar feature of life on the internet, and the reaction of the average consumer, when the sponsored link to 32red.com came up on his screen, would I think be one of indifference or irritation, but not of confusion. If the consumer then clicked on the 32Red site, its clear branding could have left no room for reasonable doubt about the identity of the casino whose services were on offer. If the consumer did not click on the site, he will presumably have continued with the search which he originally intended, and is most unlikely to have supposed that there was any business connection between 32Red and the site which he originally sought to access. In a very few cases, the customer may have been grateful for the reminder that there was another online casino called 32Red, but in such cases confirmation or clarification would have been the result, not confusion. I am therefore wholly unpersuaded that the effect of 32Red’s adword campaign was to mislead the public.

Even if that is wrong, the evidence indicates that the campaign has been too insignificant in extent to generate any significant degree of confusion. Mr Ware’s evidence is that bidding on 32royal as an adword has not resulted in a single user clicking on the 32Red advertisement. Bidding on Spin32 has resulted in only 8 users clicking on the 32Red advertisement, yielding a fee to Google of £13.70. None of those users subsequently signed up as a member. Bidding on 32Vegas as an adword resulted in a total of 251 users clicking on the 32Red advertisement, at a cost to 32Red of £884.04. Of those users, 20 signed up as members of the 32Red site, and 10 of them played for real money, generating a “gross win” of £1,795.44. Furthermore, the total number of “impressions” generated by the campaign, that is to say the number of occasions when the 32Red advertisement was published alongside the search results for the adword, has been very modest. Over a period of some 20 months the total number of impressions for adwords including “32Vegas” in various combinations was about 22,500. Not only is this a relatively small number, but it can also be seen that only a tiny proportion of the customers to whom the 32Red advertisement was displayed in this way actually then chose to click on it.

For these reasons I conclude that the challenges to the validity of the Community marks all fail, and that 32Red’s case on infringement therefore succeeds.

I now come on to the UK mark, which consists of the figure 32 alone. The application for its registration was made on 27 February 2009, a few days before the issue of the claim form in the present action: see paragraph 11 above.

I will consider first the validity of the UK mark, which is challenged by William Hill Online on no fewer than six separate grounds: the same four grounds as those relied upon in relation to the Community marks, plus two others. The relevant legislation is contained in the Trade Marks Act 1994, but does not differ in any material respects from the parallel provisions in the CTMR. The equivalent provisions to Article 7(1)(b) to (d) are to be found in section 3(1)(b) to (d) of the 1994 Act, while the saving for acquired distinctiveness is in the proviso to section 3(1). The equivalent of Article 51(1)(c) is section 46(1)(d).

The two further grounds relied upon are:

Section 3(6) provides that:

Section 46 provides that:

I will now consider the grounds in turn.

My initial and intuitive reaction to the proposition that a mark consisting of no more than a two digit number could have a sufficiently distinctive character to be registrable as a trade mark was, I confess, one of scepticism, if not disbelief. However, counsel for 32Red have satisfied me that there is no reason in principle why a two digit number cannot be sufficiently distinctive to act as a badge of origin of a specific category of goods or services, and consistently with this the UK Trade Marks Registry accepts in its published guidance that two digit numbers may be distinctive for certain goods and services (such as “77” for estate agents or soft drinks). It was presumably in reliance on this guidance that the UK mark was registered in 2009, so far as I am aware without objection.

William Hill Online rely on a number of points in support of their argument that the sign 32 lacks the necessary degree of distinctiveness, but having heard the evidence I am not persuaded that any of them is made good. The main points were the following:

The same considerations which have led me to reject these grounds in relation to the Community marks apply with even greater force to the UK mark. I am therefore satisfied that there is no substance in these grounds.

The particulars pleaded in support of this ground are as follows:

Detailed guidance on the interpretation and application of the equivalent provision in Article 52(1)(b) of the CTMR has recently been given by Arnold J in Hotel Cipriani SRL v Cipriani (Grosvenor Street) Ltd [2009] EWHC 3032 (Ch), [2009] R.P.C. 9 at paragraphs 165 to 190 and by the ECJ in the Lindt case (Case C-529/07 Chocoladefabriken Lindt & Sprüngli AG v Franz Hauswirth GmbH [2010] Bus LR 443) at paragraphs 37 to 53 of the judgment. It was, I think, common ground that the reasoning in these judgments applies with equal force to section 3(6) of the 1994 Act, and that the illuminating discussion by Arnold J in the Cipriani case must now be read subject to the guidance subsequently given by the ECJ in Lindt. Since the challenge on the ground of bad faith in the present case is a relatively subordinate one, and did not seem to me to be pursued with any great enthusiasm by William Hill Online, it would be disproportionate for me to cite or discuss this guidance at any length. It is enough to say that I have read it and done my best to take it into account, bearing in mind in particular that the question whether the applicant is acting in bad faith “must be the subject of an overall assessment, taking into account all the factors relevant to the particular case” (Lindt at paragraph 37).

Looking at the matter in the round, I do not consider that 32Red’s application to register the UK mark was made in bad faith. I have little doubt that the application was made with a view to strengthening 32Red’s position in the forthcoming litigation against William Hill Online, and with a view to obtaining a monopoly for online casinos and related services under the 32 mark. But considerations of this nature are not necessarily indicative of bad faith, as the ECJ was at pains to stress in Lindt (see in particular paragraphs 47 to 49) and as Arnold J recognised at the conclusion of his discussion in Cipriani:

What I have said so far is mainly directed at the first of the pleaded particulars of bad faith. The second of the particulars is based on the fallacy that the figure 32 denotes “a roll on the roulette wheel”, and therefore cannot be properly registered as a trade mark. This contention adds nothing to the case under section 3(1)(b) to (d), which I have already rejected. That leaves the third of the particulars, namely lack of any genuine intention to use the UK mark. It is clear, I think, that 32Red had not by February 2009 made any use of the figure 32 in isolation to designate its online casino, and that promotional offers of, for example, 32 free chips for new players were always accompanied by the name 32Red. Moreover, the use of the figure 32 in a broken circle as a sort of bullet point would naturally be understood by users as an abbreviation or part of the 32Red graphic sign; and the same goes, in my view, for the use of a similar sign as a computer-screen icon. In each case the user will make an immediate, and probably subconscious, connection in his mind with 32Red. Nevertheless, I see no reason to doubt that such uses of the figure 32 may in due course provide a springboard for increasing use of the figure 32 alone, and having heard Mr Ware give evidence I am not prepared to find that 32Red had no genuine intention to use the UK mark. As he said in response to a question in cross-examination,

The contention that, in consequence of the acts or inactivity of 32Red, the sign 32 had become the common name in the trade for the provision of online casino products or services is in my view a hopeless one. As counsel for William Hill Online made clear in their written submissions, the “act” relied on is the adword campaign, and the “inactivity” relied on is the alleged failure by 32Red to take steps to prevent others from using “32” signs in relation to casino services. I have already explained why the adword campaign did not in my view create confusion or turn the 32 sign into common currency. I am equally satisfied that the figure 32 has never become the common name in the trade for online casino services, whether or not 32Red could have tried harder than it did to stamp out instances of apparent infringement.

This ground too must be rejected, for essentially the same reasons as those which have already led me to reject the equivalent challenge to the Community marks under Article 51(1)(c).

It follows that I reject all the challenges to the validity of the UK mark, and I accordingly hold (a) that it was validly registered, and (b) that the application to revoke the registration fails.

The UK mark was registered on 5 June 2009, less than two months before William Hill Online ceased trading under the Vegas signs and re-branded the 32Vegas casino as 21Nova. Thus the period of potential infringement of the UK sign was very short. Partly for that reason, and partly because I have already held that the infringement claim in relation to the Community marks succeeds, I propose to deal with the issue shortly. The relevant statutory provisions are contained in section 10 of the 1994 Act, subsection (2) being equivalent to Article 9(1)(b), and subsection (3) to Article 9(1)(c).

The critical distinction from the position with the Community marks is that 32Red had not by the end of July 2009 (and so far as I am aware still has not) made any, or any significant, use of the 32 mark in isolation. Such uses as it did make of the figure 32 would in my view all have been naturally understood in their context as alluding to, or as truncated versions of, one or other of the Community marks. In these circumstances, I am satisfied that 32Red had not yet acquired any separate reputation in the 32 mark, so for that reason alone the claim for infringement under section 10(3) must fail. For the same reason, it also seems to me that there cannot have been any likelihood of confusion under section 10(2), because in the absence of any separate use of the 32 mark to distinguish the services offered by 32Red and act as a badge of their origin there can have been no factual basis for the alleged confusion. I can well understand that there was a possibility of confusion in the future, if and when 32Red made significant independent use of the 32 mark; but focussing, as I must, on the position in June and July 2009, I am not satisfied that the claim for infringement under section 10(2) is made out.

The claim for infringement of the UK mark therefore fails.

In relation to the Community marks, the claims by 32Red for infringement succeed under both Article 9(1)(b) and Article 9(1)(c) of the CTMR. Further, the claims succeed in respect of all six of the Vegas signs used by William Hill Online.

The challenges of William Hill Online to the validity of the Community marks all fail, and must therefore be dismissed.

In the relation to the UK mark, the challenges to its validity again all fail, but the claim by 32Red for infringement of the mark also fails.