Adobe Systems Inc v Netcom Distributors and Ors

This is an application within these trade mark proceedings in which application the claimant seeks a determination that the defendant is not entitled to counterclaim for the revocation of Community trade marks for non-use because, it is said, that counterclaim does not go to the defence in this case but is, so far as relief goes, freestanding. Mr. Michael Hicks appeared for the claimant; Mr. Jonathan Turner appeared for the defendant.

The claimants are proprietors of certain UK and Community trade marks. They are both word marks and device marks and are registered in relation to computer hardware and computer software. In relation to the Community trade marks the classes of each for which the marks are registered are much more particularised than they are in relation to their UK marks.

Proceedings started on or about 26th August 2011. The claimant, Adobe, claims that the defendants have infringed their marks by introducing parallel imports. The defendant has defended claiming, inter alia, an abuse of dominant position and taking resultant competition law points. There is also (and this is what is important for the present application) a counterclaim for the revocation or partial revocation of the marks, both United Kingdom and Community, on the basis of non-use, but the classes in respect of which the non-use is alleged do not include any of the classes in respect of which infringement is claimed. The counterclaim is, therefore, not one which even if completely successful would in any way enable the defendant to defend the trade mark claim. I am told that there are factual connections with the main defence, with some of the facts going to the identification of the market, and there will be facts going to non-use but there is no direct legal connection.

The defendant has applied for summary judgment on the counterclaim on the grounds that the claimant has no reasonable prospect of successfully defending the counterclaim. In the course of getting directions for the determination of that application the claimant took the point that this court has no jurisdiction to enter a counterclaim for revocation of a Community trade mark where that counterclaim does not also give rise to a defence to the infringement claimant.

There were also questions as to whether there should be a stay of the counterclaim pending the determination of the same counterclaim issues in an application to OHIM pursuant to the Community trade mark Regulation. Sales J made an order for directions providing:

It is certainly not the fault of Sales J, but the point, when it came to be argued, took more than one hour. It is those issues that were before me. As will be seen, the stay point was abandoned by the claimant. However, the jurisdiction point remains live and it is to that that this judgment principally relates.

The claimant relies on what it says is the proper effect of Article 96 of what I will call the Regulation. That article appears in the context of a regulation which provides that for the creation of regulation of community marks, OHIM, referred to as "the Office", has a key role in that regulation and its functions include proceedings for revocation. Appropriate national courts are given exclusive jurisdiction in relation to infringement actions, and the national courts ("Community trade mark courts") also have a jurisdiction to determine counterclaims for revocation. These are provided for by article 96:

Article 100 provides as follows:

These have to be read as well with articles 51, 52 and 53 which are similar in their effect and so far as material read as follows:

Mr. Hicks submits that when those provisions are read purposively and in the proper context of the Regulation one is driven to the conclusion that the relevant counterclaim referred to, in particular in articles 96 and 100, is one which goes to a defence in the action. If there is a counterclaim which, as in the present case, does not go to that defence because the revocation sought is not a part of the registration sued on then the national court has no jurisdiction to entertain the counterclaim.

Mr. Hicks starts with what he says is the proper purposive approach for construction of the regulation. He directs my attention to Davidoff & Cie SA v Gofkid Limited [2003] 1 WLR 1715. Paragraph 24 of the judgment appearing at page 1734 of the report states:

Although that is referring to a directive Mr. Hicks says the same principles should apply to the interpretation of a regulation such as the CTM regulation.

Mr. Turner does not dispute what Davidoff says, nor does he dispute the relevance of a purposive approach where appropriate, but he says that a purposive approach has no significant part to play where the words of the regulation are clear and where there is nothing like an absurdity which invokes the need for a more purposive approach. He points to a case involving Scotch whisky, namely Scotch Whisky Association v. Compagnie Financière Européenne de Prises de Participation (Cofepp) Case C-136/96 and in particular paragraph 18:

What the implication of these decisions demonstrates is that counsel can always find a formulation in the authorities for or against whatever form of interpretation process they are adopting in the case in hand. In this case neither dictum provides the complete answer by itself. They both describe aspects of the proper process. Words have their meanings and are not to be distorted, or at least not lightly but they exist in a context and that context includes the purpose of the legislation. They have to be viewed in that context. One man's distortion is another man's interpretation, so these slightly loaded words do not assist much.

I shall consider the Regulation with the normal use of the words in mind, but bearing in mind the scheme of the legislation to ensure that they are not used over-literally or over-purposively. Of course, that analysis itself builds in suppositions in the use of the prefix "over-", so in the end I shall confine myself to saying that I shall try to ascertain what the Council meant in its choice of words in the context in which they appear.

Mr. Hicks took me to certain parts of the pre-history of the regulation to show me the development of apparent thinking about counterclaims and defences in national courts where Community trade marks are concerned. First he took me to a DTI publication from 1973 entitled, "Proposed European Trade Mark" in which paragraph 158 anticipated that counterclaims would not be permissible in relation to "European trade marks". This is far too early, far too unconnected with the ultimate form of the regulation, and far too vague to be of any assistance in my view.

Next he took me to the, "Memorandum on the Creation of an EEC Trade Mark", a Commission paper dated 6th July 1976. Although this was more of a precursor to the regulation it does not have the quality of travaux préparatoires, so its status it more lowly than that.

In paragraph 123 it was suggested that the defendant should have the right to raise the defence of non-user without having to counterclaim for a declaration of invalidity. Paragraph 133 under heading "Cancellation and invalidity proceedings" advocated keeping proceedings relating to invalidity in "the EEC Trade Mark Office". It was a "matter for further consideration" whether the national courts "within the framework of a trade mark infringement action and with inter partes effect" should decide on the legal force of an EC trade mark. Then:

Mr. Turner relied on this as demonstrating an awareness of the possibility of factual links between the trade mark dispute and other heads of dispute which might make it appropriate to try the issues together. The remaining parts of the paragraph are more consistent with Mr. Hicks' case. Paragraph 157 proposed consideration of the extent to which national courts might have jurisdiction to decide on the validity of an EEC trade mark in terms which suggested that such points would arise in the context of a defence.

Again I did not find this document of much assistance because in so far as it was a precursor of the regulation it was couched partly in terms of a discussion paper, not in terms of a description of a regime which can clearly be seen to be the current regime. It is also again somewhat historic, as Mr. Turner correctly pointed out.

Last, Mr. Hicks took me to a Bulletin of the Commission entitled, "New trade-mark system for the Community -Proposed Directive and Regulation". This had the merit of apparently being more closely connected with the ultimate form of the regulation. Draft Article 78 reads:

There is a commentary to that paragraph which reads as follows:

That is said by Mr Hicks to suggest that a counterclaim should be invokable by way of defence only. Mr. Turner comments that that is dealing with a special class of cases. I do not agree with that. I think it does carry the thrust suggested by Mr. Hicks. None the less that is only commentary and the limitation to counterclaims by defence is by way of suggestion only not by way of specific reference. This document does little more than provide some overall background which is probably available anyway. Nonetheless it does not suggest that there was any real proposal to allow what I will call non-defensive counterclaims.

Neither counsel has found any other authority or other material which has any bearing on the point which I have to decide. One is, therefore, thrown back on the regulation itself and a contest that comes down to the literal versus the purposive. The purposive argument reduces itself to a form of an absurdity argument. It is said it will be very strange if national courts suddenly acquired a jurisdiction which they would otherwise not have had merely because a claim is started into which a revocation claim can be made by counterclaim even if legally unconnected with the claim. It makes sense to allow a counterclaim which, if established, goes to the claim based on the mark. It makes no sense to allow it if it does not go to that defence.

There are very few pointers within the regulations themselves which provide strong clues to assist in resolving this conflict. The recitals do not assist. So far as the body of the regulations is concerned counterclaims are referred to elsewhere than in article 96. For example, as I have pointed out, articles 51, 52 and 53.

Article 99(2) requires the national court to presume validity unless it is put in issue. Article 99.2 prevents an original jurisdiction in an action for a declaration of non-infringement. There is, however, a limited retraction from that in article 99(3).

Mr. Hicks relied on some of these provisions in support of his thesis. While they do not in terms refer to counterclaims which go to the defence in the sense of going to the parts of the mark sued on they are more likely, he says, to have been intended to refer to that situation. Mr. Turner said that they made sense in the context of a scheme in which an unconnected counterclaim was permitted in the sense of a non-defensive counterclaim because what they were doing was to make sure that any challenges to the trade mark took place on a counterclaim and not merely in a defence which would merely operate inter partes with the effect that the registration itself was challenged and ruled on. He pointed out, correctly, that an over-wide effect which would permit a counterclaim whenever a defendant wished to challenge anything on any matter, the counterclaim being irrespective of the claim which is brought against it, was ruled out by the terms of article 96 which required a counterclaim to be in relation to "the" mark, i.e. a mark which is it itself already in suit, albeit not necessarily the parts of which are in suit.

The wording of the regulation is capable of sustaining either line of reasoning. There is nothing express which limits the counterclaim in the manner contended for by Mr. Hicks. Mr. Turner certainly has literalism on his side to that extent. There is one provision at least which presupposes a defensive counterclaim or similar plea, (article 99), but a non-defensive counterclaim could still, as a matter of literal application, be provided for.

So the answer comes down to a choice between a literal construction and a construction which tries to identify the purpose of allowing counterclaims in in the first place. Mr. Hicks' case is that the latter is appropriate. I do indeed prefer the latter interpretation. The scheme prevents a national court from exercising an original jurisdiction over the validity of marks and the underlying importance of OHIM is obvious. It is the registering body and it has full jurisdiction to entertain challenges to the mark. National courts have jurisdiction in relation to infringement.

Into that mix comes the question of counterclaims. What is the policy underpinning that introduction? It is easy to see the policy which underpins it so far as they are defensive counterclaims. In that event there is a policy choice. The scheme could still require that challenge to be taken in OHIM, in which case the fate of the national court infringement action would have to be catered for. There are various other possible solutions but I do not need to consider them because that policy expedient was not adopted. Counterclaims in the national court were allowed in the national courts but that makes policy sense in relation to defensive counterclaims. The national court can then deal with everything. In so far as the mark is successfully attacked the infringement claim is equally affected. All that is disposed of in one court and on one occasion. This makes sense where the counterclaim is linked to the main claim in the sense of its being a defence to it.

It is not possible to identify any plausible policy objectives behind allowing a national court a wider jurisdiction; nor did Mr. Turner really advance one. In the context in which the national courts are kept out of any jurisdiction to revoke marks by way of original jurisdiction why should they suddenly acquire it in relation to a given mark just because the mark is made the object of an infringement claim even though, on this hypothesis, the revocation would have no effect on that claim?

There is no satisfactory answer to that question. True it is that in some cases there might be factual links with some of the issues raised in the claim, but it is not going to be the case in all cases and it is highly unlikely that catering for that situation is the intention underlying the regulation. It is most unlikely that the draftsman can have intended that all counterclaims should be allowed in because some of them had factual links with other aspects of the case.

I bear in mind that the point here is a jurisdictional one. To grant the national court jurisdiction in such cases and on that factual possibility would be a strange course to adopt. I therefore prefer the interpretation which avoids that consequence and which proceeds from a clearer policy premise. The counterclaim which can be brought is one which, if successful, is capable of being a defence to a claim. That is a sensible encroachment on the regime which would otherwise leave validity matters to OHIM.

Article 100(7) provides perhaps a small piece of supporting material. I have set it out elsewhere in this judgment. It is capable in its wording of applying to the situation of a non-defensive counterclaim. Mr. Turner would say that it did so apply. But if that were the case why would the claimant seek to stay his own proceedings, which ex hypothesi do not depend on the fate of the counterclaim, in order to have the validity of another aspect of the mark decided at OHIM? Mr. Turner would respond that the claimant did not have to adopt that course and in the event posited would not actually choose to do so, but he might do so for a defensive counterclaim which he would rather have determined in OHIM and in that event he would apply for the stay. I agree that there is a logic about that, but stepping back a little and taking an overview I think this provision is a demonstration that the regulation that it was talking about counterclaims that went to the defence in the action. In those circumstances the important issue of revocation could be referred to OHIM and in the meanwhile the effective claim would be stayed.

In the circumstances I think that Mr. Hicks' arguments are right, and sufficiently plain and right for me not to have to remit the question to the European Courts.

Mr. Hicks also had an application for a stay under regulation 100(7) that he advanced in the alternative to his challenge of jurisdiction, but the application he sought to make was to stay the counterclaim not his own proceedings. He said that if he were wrong on jurisdiction he would seek a stay of the counterclaim under article 100(7). However, when it was pointed out that "proceedings" in that article seemed to mean his own claim he withdrew his application.

In those circumstances I rule only on the jurisdiction to entertain the counterclaim based on non-use. The order of Sales J does not define a question that I am to address but I think that the logical relief that I should grant is to strike out the provisions in the counterclaim which seek to revoke the Community trade mark for non-use. Counsel can doubtless prepare a draft with appropriate wording and I will rule on any dispute about it.