Millen v Karen Millen Fashions Ltd & Anor

In this introductory section of my judgment I will summarise the background and issues at a high level, in an attempt to improve readability. There is much more detail to the dispute, which I have taken into account and to which I return below.

The Claimant, Karen Millen, was one of the moving spirits (the other was her partner, Kevin Stanford) behind the founding and growth of a fashion business which traded under the mark KAREN MILLEN.

The business was founded in 1983; by a share purchase agreement of 25 June 2004 (“the SPA”) the Claimant and Mr Stanford sold their shares in the companies holding the business to an Icelandic consortium.

The Defendants derive such rights as they have in one way or another from the SPA, but there is a dispute about which Defendant has what rights, if any.

The SPA contained a number of restrictive covenants as to the Claimant’s future conduct. It also contained a further assurance clause and a jurisdiction clause.

In late 2011 the Claimant gave a press interview in which she stated an intention to return to the fashion business under the name KAREN. This led to litigation concerning her intentions in the UK (“the 2011 Action”), which was settled in February 2015. That settlement regulates the position between the parties in the UK and the EU as a whole and broadly speaking prevents the Claimant from using the marks KAREN or KAREN MILLEN there.

However, the settlement of the 2011 Action did not address the position worldwide, and in particular did not address the position in the USA or China; that is what this action is about.

This action was begun on 20 October 2014. From late 2011 up until then, and continuing since, the parties have been in dispute in the trade mark registries of the USA and China, with competing applications and cancellation and opposition proceedings over marks containing the words “KAREN”, “KAREN MILLEN” or “KM”. I give further details below.

In addition and as part of the battle over trade mark registrations, in June 2014 the Defendants brought a civil action against the Claimant in the Eastern District of Virginia (“the EDV Complaint”, “the EDV proceedings”), alleging breach by the Claimant of the SPA and declarations as to its effect on the parties’ various US applications. The Claimant asserts that the bringing of the EDV Complaint breaches the jurisdiction clause in the SPA.

By her claim, the Claimant seeks varied and extensive relief along the following lines:

The Defendants have counterclaimed for relief which in the main mirrors what the Claimant seeks against them. Thus they have claimed:

In addition, the Defendants claim two heads of relief which are relatively distinct from that which the Claimant has put in issue:

Mr Charles Graham QC and Ms Alaina Newnes presented the case for the Claimant. Mr James Mellor QC and Ms Lindsay Lane appeared for the Defendants.

I heard oral evidence from the Claimant herself. Also called to give oral evidence in support of her case were Ms Hung Yan Yan Bernie (the Claimant’s Hong Kong lawyer) who gave evidence via videolink in relation to trade mark applications in Hong Kong and China, and market conditions there, and Ms Sarah Jane Capp, who used to work for the KAREN MILLEN business and gave evidence about whether KAREN MILLEN cosmetics and beauty products were sold by the US stores prior to the SPA.

The Claimant also submitted a witness statement from her US lawyer Mr Louis Ederer, which was not challenged by the Defendants and which I therefore admit on that basis. This addressed factual matters concerning US trade mark registry proceedings and was distinct from the expert evidence of US law (which I address below).

For the Defendants I heard oral evidence from Mr Michael Shearwood, their former CEO, from Mr Simon Gaffey, the Defendants’ international director from 2009 onwards, from Ms Gemma Metheringham, who had a very senior design role in the KAREN MILLEN business from 1999 onwards, and from Mr James Walters, who was the managing director of the Second Defendant from 2008 until early 2016.

The Defendants also submitted a witness statement from Ms Michelle Marsh, its US lawyer and the counterpart of Mr Ederer. The Claimant did not challenge her statement and I likewise admit it.

Finally, the Defendants submitted a statement from Mr Ian Galvin, but withdrew it. So I will ignore that.

The parties made only fairly modest criticisms of the demeanour and manner of giving evidence of the opposing witnesses. The only criticism which I thought had any force was the Defendants’ suggestion that Ms Hung was a little prone to argue the Claimant’s case. But this was not particularly pronounced and was unsurprising given her role as the Claimant’s lawyer. I do not think it affected her evidence materially. That apart, I thought that all the witnesses were clear and fair in the way in which they gave evidence.

I should mention that I reject the Claimant’s submission that Ms Metheringham had only limited knowledge of the business; she was not on the commercial side and knew little about that, but she had a very good understanding of the design side and of the market positioning and perception of the KAREN MILLEN brand.

Two other matters were of more significance in relation to the evidence.

First, the Claimant submits that Mr Gaffey and Mr Walters each only joined the KAREN MILLEN business well after the SPA. They nonetheless purported to give evidence about circumstances in and around 2004, based on conversations with others and on their perspective on the KAREN MILLEN business from outside. This was a fair and important point (though not a personal criticism of the witnesses, who were entirely open about the basis of their knowledge) and I have taken it into account.

Second, at the outset of the trial the Claimant objected to aspects of the evidence of Mr Gaffey and Mr Walters on the basis that it was expert evidence for which permission had not been given. I was referred to the decisions of the Court of Appeal and of Birss J in Fenty v. Arcadia Group Ltd.[2015] EWCA Civ 3 and [2013] EWHC 1945 (Ch), in the course of oral submissions on the first day of trial.

The Defendants responded by saying that the evidence in question was not expert evidence on what is sometimes called the “ultimate question” (here, would the Claimant’s proposed activities be confusing in the sense of clause 5.1.7 of the SPA), but fact evidence of trade circumstances. They also pointed to parts of the Claimant’s evidence which they said (and I agree) were of the same nature of that to which the Claimant was objecting.

In the course of the discussion on the first day of trial, I made it clear that I did not propose to give any weight to evidence from either side on the ultimate question. Neither side disagreed with that, and Mr Graham did not seek to persuade me to exclude any of the other evidence. Rather, he submitted that I should take into account in assessing the weight of the trade evidence whether the witnesses had sufficient experience on which to base it. I have done this, and I firmly consider (subject to the point above about their lack of personal experience within the KAREN MILLEN business prior to their joining) that they did. They had long and detailed experience of the trade, with Mr Walters being more focused on the US and Mr Gaffey on the rest of the world, including the Far East.

Similarly, I consider that the Claimant had more than adequate experience on which to base her evidence about the trade, although in her case I must take into account that her involvement was reduced after 2002, and still further after 2004.

I found these witnesses helpful in relation to how fashion businesses present themselves, in relation to trade channels, and in relation to how such businesses expand. They did not really give much evidence about how consumers behave in relation to buying clothes and related goods in this sector of the market, and I conclude that there is nothing special about their behaviour that I have to take into account.

Finally in relation to the witnesses, I should mention that it was repeatedly put to the Defendants’ witnesses that there was a lack of documents to support their accounts of events. For example, it was put to Ms Metheringham that there was a lack of emails about proposals for new non-clothing products, and to Mr Gaffey that there was inadequate documentation about the exploration of a KAREN MILLEN fragrance. I was not very impressed by this approach by the Claimant. It is not surprising that the internal exploration of design choices by creative personnel was not documented in great detail. And to the extent that it was being suggested that documents existed but had not been disclosed, for whatever reason, I think that much more focus would have been required to make the point good. I would, for example, have expected to see that the Claimant had inquired about those documents in correspondence.

The parties helpfully agreed a detailed chronology which is Annex A to this judgment. I will not repeat all of it here, but it is necessary to expand on some of the main events and elements of the narrative.

For convenience, and without prejudging any of the issues as to the rights of the parties and the various corporate entities involved, I will refer to “the KAREN MILLEN business” to mean the whole of the business carried on under the KAREN MILLEN name from its first inception, anywhere in the world, including all the entities which have conducted it.

The Claimant started the Karen Millen business in 1983 in a small way, with her partner Mr Stanford, initially in Kent (the Claimant and Mr Stanford were in a personal relationship as well as being business partners, though they later separated). The number of shops increased steadily.

In 1991 the business was transferred from a partnership between the Claimant and Mr Stanford to a limited company, Karen Millen Limited (“KML”). In 1994 a company called Karen Millen Holdings Limited (“KMHL”) was formed to be the holding company for KML.

In the 1990s the business established its first presence in London by way of concessions in Harrods and Fenwick.

International expansion began in 1996/7, initially in Hong Kong, Japan and Canada (though these later faltered and the business had pulled out by 2004). Expansion was by way of franchising initially and then later by the business opening its own stores.

At the date of the SPA, there were Karen Millen stores or concessions in 9 countries (including the USA) and franchises in 15 more. There was no store, concession or franchise in China or Hong Kong. There were three stores in the USA, in Boston, Los Angeles and Atlanta. Meanwhile, in 2002 the business had acquired the Whistles clothing chain and earlier, in 1998, Press & Bastyan (which shut in 2003). The fact that Whistles was also owned by the business has some modest relevance to interpretation of the SPA, since it covered that business too.

Prior to the SPA, beginning in 2001, the business had a website at karenmillen.com. However, it was not possible to buy anything via that website until 2007.

As to the Claimant’s own role, she was in charge of all creative matters until about 2002, when she reduced her day to day involvement to spend more time with her family and in particular her youngest child. She had relatively little involvement with commercial aspects of the business; Mr Stanford played the main part there.

In 2001, a group of investors funded by the Icelandic bank Kaupthing hf, bought a minority stake in KMHL.

The Claimant scaled down her role in about 2002, as I have explained above, and then in 2004 a consortium again funded by Kaupthing hf and led by the Icelandic investment group Baugur, inquired about purchasing KMHL. Terms were agreed in due course and this led to the SPA.

Under the SPA, two companies acquired the entire issued share capital of KMHL. They were Noel Limited (referred to as the “Rollover Purchaser”) and Mohave Limited (referred to as the “Cash Purchaser”). The Claimant received consideration in a variety of ways, including cash and a substantial allocation of shares in the Rollover Purchaser, as a result of which she had a continuing interest in the success of the business.

As I will explain below, the Claimant argues that the scope of key terms under the SPA is to be assessed by reference to the state of the KAREN MILLEN business (in particular its goodwill) as it stood at the date of the SPA, and without taking account of any later development, either geographically or in terms of the range of products sold. As will also appear below, I reject this argument, but in case this action goes further, I must make the necessary factual findings as to the state of the business in 2004. Therefore, before moving on to the development of the business after the SPA, I will set out what had happened up until then.

The key focus is on what products the business had sold other than women’s clothes, and the general positioning and perception of the KAREN MILLEN brand.

As to what goods were sold, women’s clothes were clearly the fundamental basis of the business up until the SPA. However, it is also clear that for some years prior to the SPA, the business was also involved in trading in accessories and related goods of various kinds, either itself or in partnership with others. In particular I make the following findings:

The matter was put this way to the Claimant (Millen XX T2/265/21- 266/10):

21 Q. Taking a step back from the detail, the general point is that

22 everybody expected the Karen Millen business to expand in

23 terms of turnover, geographical extent and product range, did

24 they not?

25 A. Yes.

2 Q. And that process would have been accelerated with the greater

3 financial muscle behind the purchasers of the new business?

4 A. Correct.

5 Q. That is why, as part of the purchase price that you received

6 in the 2004 SPA, you were content to reinvest that in a

7 shareholding in the purchasers' business?

8 A. Yes.

9 Q. Because you expected them to make a success of Karen Millen?

10 A. Because I expected them to continue to do as well as we had.

I find that that accurately reflects the general state and intention of the KAREN MILLEN business at 2004.

In addition to the intention and desire to expand the range of goods offered, I find that there was an intention and desire to expand the geographical reach of the business by way of new stores, concessions or franchises in the UK, Europe and the rest of the world.

I turn to the perception and positioning of the KAREN MILLEN brand at the date of the SPA. This is a difficult issue to deal with or even articulate, if nothing else because of the lack of any precise vocabulary. It may help if I first explain where it fits into the parties’ arguments.

As I understand it, it is said by the Claimant that the perception of the KAREN MILLEN brand at the time of the SPA was such that consumers would not have considered it likely to expand beyond accessories (i.e. goods of the type already sold) and into homewares such as bedlinen. On the other hand, the Defendants say that the perception of the brand was such that consumers would have thought that kind of expansion, and others, to be likely. Each side then factors this argument into the consideration of the application of the provisions of the SPA and especially clause 5.1.7 with (as I explain below) its twin concepts of similar or competing business, and confusing similarity.

Then, to fortify and structure this part of their respective arguments, the parties seek to classify the KAREN MILLEN brand as of 2004 into one of a number of types. Thus, there was an extensive debate at trial about whether it was a “bridge luxury” brand, a “niche specialist retailer” brand, a “quintessentially British” brand, a “top end of the high street” brand, a “lifestyle” brand, and so on. I gained the impression that “niche specialist retailer” was the classification most urged by the Claimant, since it would carry with it the strongest association to businesses retaining a focus on clothing while diversifying the least. The category which would most favour the Defendants, on the other hand, was probably “lifestyle”, which tends to connote a very wide range of offerings “filling the customer’s world”, as Ms Metheringham put it. The Defendants’ witnesses such as Mr Gaffey also favoured “bridge luxury”.

Many of these descriptors were used in reports prepared by accountancy advisors to the purchasers in the SPA, and in the fashion and financial press. But they are not precise terms with any clearly understood meaning to the trade, and nor are they terms used in the SPA.

I acknowledge and agree that it is broadly relevant to the clause 5.1.7 and related issues to consider whether brands similar to the KAREN MILLEN brand had commonly undergone expansion from fashion into other products (whether one calls them accessories or homewares or something else), but I do not think it is helpful or even practical to try to do this by pigeonholing the KAREN MILLEN brand.

In addition to the lack of any precise vocabulary, the attempted exercise of classification was bedevilled by the complexity of the development of the KAREN MILLEN brand and the widely differing types of business with which it could be said to compete, or to which it might be said to be similar.

For example, some of the materials referred to HUGO BOSS being somewhat close to KAREN MILLEN. There are similarities in the sense that both dealt in some kinds of accessories, but there are huge differences too, in terms of scale, for example.

The parties compared and contrasted the KAREN MILLEN business with many other fashion-led businesses. These included DKNY, Ralph Lauren, Hugo Boss, Ted Baker, Calvin Klein, Paul Smith, Michael Kors, Tory Burch, Next, Zara, Oasis, Whistles, Reiss, Hobbs and many more. There was in general no real or material disagreement about what those companies did; the issue was always about how they compared to the KAREN MILLEN business. I have considered those materials carefully and to my mind what they show is the very wide variety of types of business, and for present purposes very wide variety of what goods they deal in, or branch out into. Few if any consumers would be familiar with all of them, but consumers who might buy KAREN MILLEN goods would be aware of a number of them; which ones would vary from consumer to consumer. I return to this below.

To take another example of the difficulty of this exercise, there is no doubt that some commentators referred to KAREN MILLEN being at the upper end of the high street. But it was also clear on the evidence that “the high street” is a concept which just does not exist in anything like the same way in the USA, or outside the UK generally.

Then again, KAREN MILLEN had certainly begun in locations which were physically on (UK) high streets, but had spread out into concessions in upmarket department stores.

Furthermore, it was not the case that only “bridge luxury” brands were known for dealing in a wide range of goods including homewares. Certainly brands like RALPH LAUREN at the top end had done so, but so had much more budget-friendly brands such as NEXT and ZARA.

I therefore agree with the Defendants’ witness Mr Shearwood who in his oral evidence (and in contrast to e.g. Mr Walters) rejected “top of the high street”, “accessible luxury” and “bridge brand” as having clear or distinct meanings.

Thus I think it is better to make findings specifically about the KAREN MILLEN brand at the date of the SPA, while trying to avoid unhelpful categories. I find:

I also find that consumers generally (not just of KAREN MILLEN goods) would be aware that fashion businesses of all kinds diversified into a wide and widely differing variety of associated products, at many different price levels.

I do not think the evidence supports any understanding on the part of consumers that certain kinds of fashion business would not diversify into certain, given kinds of goods. It is possible that any expectation of fashion businesses diversifying into furniture would be limited, since there were indeed few examples of that, but I do not think that is relevant to the present case.

I do not think consumers had any kind of rigid division in mind between, for example, accessories like belts on the one hand and homewares like towels or candles on the other. There was a wide variety of items that might be bought as an extra in the course of an ordinary shopping trip whose main purpose perhaps had started off as being clothes shopping, or might be specifically sought out.

Nor do I think that consumers would have a specific recollection of exactly what accessories and the like had been sold by a particular retailer over time. Rather, they would be likely to recall any that they themselves had bought, and to have a general notion of the scale and kinds of things sold by retailers they had visited or shopped with. So (for example) there would be a broad appreciation that Next sold a wide range of homewares, extending to crockery, cutlery and furniture, and a broad appreciation that KAREN MILLEN goods included a smaller range of wearable items like cosmetics, shoes and eyewear.

I agree with the Defendants that there is a natural connection between fashion and interiors in the sense that both are about colours and proportions. The Claimant agreed with this in evidence. Consumers would have some appreciation of this, which I take into account, but I think much more important to their view of product ranges would be their experience of businesses which covered both, such as Ralph Lauren, Next, or Zara.

I return to the narrative after the SPA.

The KAREN MILLEN business has expanded substantially since 2004. I will concentrate on the USA and China since those are the main points of focus of the dispute, but that is not to say that growth and development has not taken place elsewhere as well.

In the USA, there were seven stores by 2008, and there are now a further 29 stores and concessions, including a flagship store on 5^th Avenue. Many of the newer concessions are in Bloomingdale’s.

Products have been sold online to the US market since 2010, and the product range there has included jewellery, eyewear and watches.

Financial figures were given in the evidence. It is confidential and there is no need to set out the detail here, but turnover has been very substantial, as one would expect.

KAREN MILLEN has also expanded into China since the SPA. This was held up by a trade mark squatter, but after that was resolved (by purchasing the mark), a store was opened in October 2012 in Beijing, then a concession in Galeries Lafayette in Beijing in 2013, and an outlet store near Shanghai. Finally, a further concession was opened by a third party partner in Guangzhou in September 2015.

The business in China is smaller than in the US, but it was not suggested that it was not significant.

In mid-2015 the Chinese KAREN MILLEN business was reorganised so as to operate through a company called GRI International Limited, rather than under the direct control of the Defendants. It has maintained the Chinese concession arrangements, but these are now at one remove from the Defendants. I was not addressed in any great detail on the nature of the GRI arrangement; I think it is probably adequate to think of it in terms of being a distributor. The GRI arrangement goes to the claim under clause 5.1.6 of the SPA, since it is said by the Defendants to amount to a “concession” which is being damaged by the Claimant’s activities.

There was a good deal of discussion in the oral evidence, and in particular the cross-examination of Mr Gaffey, of how vigorous and successful the efforts of the KAREN MILLEN business have been in relation to product extensions.

In particular, his evidence that the business had come close to launching a perfume in conjunction with a company called Myridium was attacked, focusing on whether he had given an adequate account of why it ultimately did not come about. He had said that management resources were diverted by the (then) recent demerger (explained below), and Mr Graham suggested forcefully to Mr Gaffey that the demerger had been months earlier.

For what it is worth, I do not think there was any real reason to doubt the substance of what Mr Gaffey said, even if the dates and reasons for the perfume possibility falling through were not perfectly recalled by him. But I do not think it is worth much in the context of what I have to decide, since members of the public will have been completely unaware of those events.

I was shown other discussions with third parties about the possibilities of KAREN MILLEN products, some a good deal sketchier than the perfume discussions with Myridium. I do not think those are of any real relevance either, for the same reasons. Likewise, there was evidence that there had been occasional internal discussions about selling bedding and homeware. These varied in their seriousness, but I do not think that is surprising. One would expect that a range of ideas would be canvassed of which only some would be put into practice.

In terms of what was sold since the SPA, I heard specific evidence about the sale of lingerie and swimwear, particularly in the cross-examination of Ms Metheringham. Lingerie came and went between about 2008 and 2010; it was ceased for reasons to do with the business position of Odille, the supplier (which was a company in the Aurora group), rather than because it was unsuccessful.

My overall view, applicable to the US, China, and generally, is that the KAREN MILLEN business has, since the SPA, continued to sell a number of kinds of products, of a broadly similar nature to those prior to the SPA, but across a somewhat wider range, and on a large scale, consistent with the overall growth of the business. Individual products came and went (such as lingerie), and that is consistent with Ms Metheringham’s evidence that the KAREN MILLEN business (before and after the SPA) was “playful” in what it tried. She meant that the business would try things for a brief time, stick with some and discard others.

There was clearly no fundamental change in the type of goods sold after the SPA, and the Defendants did not say there was. For example, the business did not branch out into furniture.

I find that consumers’ perception of the range of goods sold by the KAREN MILLEN business post-SPA up until the beginning of the current dispute was very much the same as that at the date of the SPA, but with the further appreciation of a slightly wider variety, and the awareness that there were far more outlets.

There was also an issue, about which I heard quite a bit of oral evidence, about how the market positioning and perception of the KAREN MILLEN brand changed in the years after (about) 2010. It was argued by the Claimant that the business had some relatively unsuccessful years in financial terms, and that this was related to it having drifted away from its core values.

Specifically, it was said that the business drifted too much into “occasionwear” (which means glamorous party dresses) and away from separates and a fuller range of clothes more generally. This, it was said, was associated with a drift into a “footballers wives” image, and clothes which were “tight and tarty”. As a result (it was said), the business had to engage in a rebranding exercise in about 2013.

This issue was pursued mainly through the cross-examination of Mr Shearwood and Ms Metheringham, supported by a number of press interviews they had given, and other press commentary. They did not dispute that there had been some financially disappointing seasons (relatively at least), or that there had been a rebranding exercise. They did not, however, agree that the business had in fact lost its way in the range of designs that were produced, or at least not to the degree that the Claimant suggested. Mr Shearwood and Ms Metheringham were, I found, frank and honest about what had happened, although Ms Metheringham was understandably, but only slightly, defensive about the issue. That was quite understandable as this aspect of the Claimant’s case involved a significant criticism of her leadership of the selection of range of clothes offered.

As with the general debate about the positioning of the KAREN MILLEN brand, this issue was somewhat hard to pin down for want of accurate terminology and because it was rather UK-centric. However, I find that in the UK in particular there was a perception among consumers that the brand had shifted somewhat towards occasionwear with a more glitzy image than had previously applied. I find that any change in the range of clothes actually offered was minor at most, and separates and so on were actively produced and promoted. This all formed part, but not a dominating part, of the rebranding exercise.

I do not consider, however, that this had any material effect on the perception of the brand for the purposes of what I have to decide on the issues under the SPA. It was minor, and it did not affect the kinds of goods that consumers would expect or think the KAREN MILLEN business might branch out into.

In corporate terms, the period from 2004 until this litigation began was a turbulent one for the business, starting in 2008, when the Icelandic financial sector was in turmoil, and Kaupthing was taken into Icelandic state control. In 2009, Baugur’s UK arm went into administration, and administrators were appointed over the Cash Purchaser and Rollover Purchaser.

At the same time (2 March 2009), under a pre-pack arrangement, the business of KMHL (which still resided mainly in KML) was sold to companies in the Aurora group. The Claimant’s stake in the Rollover Purchaser became valueless. The agreement implementing these transactions was referred to at trial as the Asset Purchase Agreement (“APA”) and is the means by which the First Defendant acquired its interest in the KAREN MILLEN business. The APA did not affect the Second Defendant’s ownership or operation of its business in the USA.

KML, KMHL and the Cash Purchaser were later dissolved.

In complex transactions beginning in early 2011, various companies in the Aurora group including KMFL were demerged, and then brought back into the group. I do not think it is necessary to burden this judgment with the details which are of no direct relevance, and I mention them only because they formed part of the cross-examination of Mr Gaffey and Mr Shearwood, as part of the background to the period when the business tried and failed to bring out a KAREN MILLEN perfume.

Fashion businesses and brands such as KAREN MILLEN can be expanded and propagated in a number of ways, which have been known and appreciated since well before the events to which this litigation relates.

First, such businesses may open their own shops. This is how the KAREN MILLEN business started.

Second, such businesses may wholesale their goods. This is self-explanatory but has not been a feature of the KAREN MILLEN business.

Third, such businesses may franchise the opening of shops by others. Franchisees run the franchised businesses under the direction and with the control of the franchisor, and there are provisions for remuneration. Matters within the control of the franchisor typically include quality control, presentation in the shops, and control over how trade marks are used. The KAREN MILLEN business has done this extensively and has a methodology called “the System” which it shares with franchisees, although I was not told about it in detail.

Fourth, such businesses may operate by way of “concessions”. This means taking specified areas in department stores from which to sell goods. The KAREN MILLEN business has done this extensively as well, especially in Bloomingdale’s. Maintaining concessions successfully involves forming and keeping good relations with the department stores in question.

These various ways of operating have very different business implications. For example, the capital costs of launching a new store are quite different from those of undertaking a new concession. Expanding into new product lines is also capital-intensive, compared with expanding geographically by new concession agreements. Limited capital has hindered the KAREN MILLEN business from expanding product lines, to some extent.

While these business practices are critical to the success of fashion businesses, they are not necessarily known to consumers. Although some sophisticated shoppers may know whether a particular brand runs its own shops or uses franchising, I am sure that most do not.

On the other hand, I heard evidence (for example from Mr Walters) that as a result of this variety of business arrangement, not all of a brand’s goods are for sale in the same place or at the same time. It might well be that only a brand’s shoes are seen by particular consumers because, by arrangement, they are in a department store’s shoe department alongside other brands, whereas in that brand’s own shops they would be on display with all the brand’s other goods.

Similarly, a business might have only a small concession in, say, Selfridges and would have to choose a limited range of goods to sell there. Another possibility is that a highly diversified fashion brand might have shops which sell only its children’s or men’s clothes, or only homewares.

I consider that consumers are well aware that when they see goods bearing a fashion brand, there may well be other different kinds of goods, be it clothes, accessories or otherwise, on sale elsewhere with the same brand.

The practical effect of this is that when I consider the perceptions of shoppers who have previously seen the goods of the KAREN MILLEN business, they may only have seen part of the range (and will realise that), and when I consider what the Claimant proposes to do, consumers who see her, say, bed linen (if she does that) will not know whether or not it is the full extent of her range of goods.

Each side led expert evidence of US law. Provision of the reports was sequential. The Defendants led off with a report from Ms Zadra-Symes of Knobbe Martens Olsen & Bear. A reply report for the Claimant was filed by Prof McKenna of Notre Dame Law School, and Ms Zadra-Symes responded to that.

Those three reports were addressed primarily to the question of how US law would approach the question of confusing similarity in the event that clause 5.1.7 of the SPA required reference to the national law of the (or each) territory in which the Claimant proposed to trade.

At my suggestion the parties agreed that cross-examination of the US law experts would not be a good use of time and it was agreed that they would simply make their submissions on the basis of the reports and statute, case law, and textbook materials provided. I considered that that was sensible and workable when the materials were all written in English and concerned legal concepts generally familiar to UK trade mark law.

Since I have concluded that clause 5.1.7 does not require reference to any national law of trade marks, I will deal with this issue briefly. There were really only two points of disagreement.

In US trade mark law, there are two contexts in which confusing similarity has to be considered. The first is where registration of a mark is being applied for and there is an earlier mark with which it is said to be confusingly similar. The second is where a registered mark is said to be infringed. The first situation is addressed in a line of case law epitomised by In re E.I. DuPont de Nemours & Co., 476 F. 2d 1357 (C.C.P.A. 1973) (“DuPont”) and the second by AMF, Inc. v. Sleekcraft Boats, 599 F. 2d 341 (9^th Cir. 1979) “Sleekcraft”.

As one might expect, there is a very great degree of similarity between the two tests. Indeed, the Defendants’ position is that they are materially identical.

One difference between the tests which unquestionably does exist is a practical one: DuPont is regularly applied in circumstances where the later mark, the one applied for, has not yet been used and the tribunal therefore has to consider the broad scope of all notional likely use (as is the case in the UK). The Defendants submitted that this was a reason that clause 5.1.7 (if it invoked national law at all) brought in the DuPont test, since the Claimant has not yet traded. The difficulty I have with this submission is that it would mean that clause 5.1.7 brought in the DuPont test if the Claimant’s conduct was considered quia timet, but a (potentially) different test (Sleekcraft) if considered at a later time. Also, clause 5.1.7 has a strong “infringement” flavour to it.

So had it been necessary to decide the point, I would have preferred the Claimant’s position that the relevant test is that under Sleekcraft (the infringement test), albeit that I would have had to assess the potential or intended conduct of the Claimant before it happened. Consistently with my view as to the approach to negative declarations (see below) I would have considered that conduct across the range of possibilities within the scope of the claimed declarations.

I then would have to consider the factors applicable under the two tests. Nearly all of them are agreed by the parties to be the same. The only area of disagreement was as to the relevance of the “natural zone of expansion”, also referred to as “zone of natural expansion” and “natural business expansion”.

It was agreed between the experts that this concept exists and is applied in the registration context, where it connotes the perception of consumers of the likely expansion of use of the earlier mark into goods related to those for which it is registered (and/or already used). But it was said on behalf of the Claimant that the concept is not applied or applicable in the infringement context. The Defendants maintained that it is.

I agree with the Defendants. Ms Zadra-Symes’ second report dealt with this at paragraph 27 and in particular in footnote 5 where she pointed out that her first report had cited a number of authorities where the zone of natural expansion had been relied on in the infringement context. In addition, it does not in any event seem to me that Prof McKenna had actually said that the concept was not applicable to the infringement context; he had said (first report, paragraph 6) only that the concept is “much more prominent” in the registration context because the analysis there is “less focused on market conditions, more abstractly comparing goods without considering the context”. I accept why he says the factor is likely to have less practical prominence, but that is far from saying that it is not relevant. I find that it is.

I also note that in paragraphs 7 and 8 the Professor says that what matters in relation to related goods is consumer expectation and not the trade mark owner’s actual expansion plans or whether “expansion is in some abstract sense ‘natural’”. Since it seems to me that the Defendants’ case relies on consumer expectation and not actual expansion plans or the abstract, I would in any event conclude that Prof McKenna’s views provide no reason to exclude that on which the Defendants rely. The Claimant’s point is merely semantic.

Various of the factors in each line of authority are irrelevant to the present case (for example, presence or absence of actual confusion). The factors which are relevant on the conclusion I have as to the zone of natural expansion are (I have adapted this list from that submitted by the Claimant. It was phrased differently by the Defendants but not materially so):

These are all familiar considerations to English passing off law. And they are all common sense. None of them would mean that my conclusions under clause 5.1.7 would be different under US law.

A further point of US law which I have to consider arose during trial. At the start of the trial, the Claimant applied to amend her pleadings in various respects which on the whole I considered to be merely quite useful tidying up. The Defendants objected to a number of the proposed amendments, and in particular said that they disclosed for the first time a challenge to the First Defendant’s ownership of the goodwill in the KAREN MILLEN mark in the USA, and hence its title to sue. Specifically, the point seemed to be that use by the Second Defendant in the USA prior to the APA in 2009 was for its own benefit, not KML, so that the First Defendant did not acquire any US goodwill from KML. Since the upshot would be that the Second Defendant did own the US goodwill and could thereby maintain the counterclaim against the Claimant, this seemed a rather aimless point, and indeed Mr Graham for the Claimant more or less accepted in closing that it went only, and at most, to costs.

In any event, Mr Mellor for the Defendants indicated that their ability to deal with this aspect of the amendments at such a late stage would depend on whether they were permitted to adduce evidence as to the US law controlling whether a licensee under a trade mark owns goodwill which accrues, or whether the licensor does. I therefore permitted a further report from Ms Zadra-Symes. Her opinion was that under US law, “proper” use by a licensee is use attributable to the licensor trade mark owner.

This proposition of US law was unsurprising and was not contradicted by the Claimant. Rather, the Claimant sought to meet it by arguing that it only applied to use controlled by the trade mark owner, and that there was no evidence of control in the present case. The Defendants responded by pointing to the evidence of Mr Walters who had made clear that he was given direction and guidance from the UK, and I agree with the Defendants that to the extent there is a requirement of control, it is amply met in the present case. Quite apart from anything else, all the goods sold by the Karen Millen companies anywhere in the world were at all times designed centrally, in the UK.

Both sides referred me to the decisions of the Supreme Court in Rainy Sky S.A. v. Kookmin Bank [2011] UKSC 50 and Arnold v. Britton [2015] UKSC 36. Each cited (overlapping) passages from Arnold v. Britton emphasising the importance of the language chosen by the parties to the contract. Neither suggested, however, and nor could it be suggested, that Arnold v. Britton in any way overruled or modified Rainy Sky. In my view its relevance to the present case was to reiterate the importance of the language chosen and that the Court should not impose a different bargain from that which the language reflects, merely because it seems (more) reasonable. The Claimant castigated the Defendants for paying inadequate attention to the language of the SPA, and the Defendants argued that the Claimant had made no attempt to identify the relevant factual matrix. In my view, both positions were overstated.

In any event, I will proceed on the basis of the summary of the approach given by Lord Clarke in Rainy Sky at [14] and [21] to [23] with the further explanation given in the judgment of Lord Neuberger in Arnold v. Britton at [15] and in his five points at [17] to [21] (the sixth and seventh points are not relevant to the present case):

“[17] First, the reliance placed in some cases on commercial common sense and surrounding circumstances (eg in Chartbrook [2009] AC 1101, paras 16-26) should not be invoked to undervalue the importance of the language of the provision which is to be construed. The exercise of interpreting a provision involves identifying what the parties meant through the eyes of a reasonable reader, and, save perhaps in a very unusual case, that meaning is most obviously to be gleaned from the language of the provision. Unlike commercial common sense and the surrounding circumstances, the parties have control over the language they use in a contract. And, again save perhaps in a very unusual case, the parties must have been specifically focussing on the issue covered by the provision when agreeing the wording of that provision.

[18] Secondly, when it comes to considering the centrally relevant words to be interpreted, I accept that the less clear they are, or, to put it another way, the worse their drafting, the more ready the court can properly be to depart from their natural meaning. That is simply the obverse of the sensible proposition that the clearer the natural meaning the more difficult it is to justify departing from it. However, that does not justify the court embarking on an exercise of searching for, let alone constructing, drafting infelicities in order to facilitate a departure from the natural meaning. If there is a specific error in the drafting, it may often have no relevance to the issue of interpretation which the court has to resolve.

[19] The third point I should mention is that commercial common sense is not to be invoked retrospectively. The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language. Commercial common sense is only relevant to the extent of how matters would or could have been perceived by the parties, or by reasonable people in the position of the parties, as at the date that the contract was made. [..]

[20] Fourthly, while commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of wisdom of hindsight. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed. Experience shows that it is by no means unknown for people to enter into arrangements which are ill-advised, even ignoring the benefit of wisdom of hindsight, and it is not the function of a court when interpreting an agreement to relieve a party from the consequences of his imprudence or poor advice. Accordingly, when interpreting a contract a judge should avoid re-writing it in an attempt to assist an unwise party or to penalise an astute party.

[21] The fifth point concerns the facts known to the parties. When interpreting a contractual provision, one can only take into account facts or circumstances which existed at the time that the contract was made, and which were known or reasonably available to both parties. Given that a contract is a bilateral, or synallagmatic, arrangement involving both parties, it cannot be right, when interpreting a contractual provision, to take into account a fact or circumstance known only to one of the parties.”

In the light of these principles I make the following general remarks.

First, the factual matrix in the present case included the nature of the KAREN MILLEN business up to the date of the SPA and, in general terms, the intentions for its expansion as recognised by the Claimant in the quote above. By “nature of the business” I mean its geographical scope, shops, concessions and franchises, its general market positioning and goods sold. It included the role and importance of the Claimant and her name, and the trade mark significance of her name. It included the appreciation that the value of the name to the business would be eroded if she were to use the name in a competing business thereafter, and it included the appreciation that the obligations that could be imposed on her were limited by the doctrine of restraint of trade. I mention some other matters below.

It did not however include the various analyses of the KAREN MILLEN business of the kind prepared by KPMG since those were not known to both parties.

The factual matrix does not include the development of the KAREN MILLEN business after the SPA. This is probably too obvious to need saying, but I should make clear that my findings in relation to that later period are for the purpose of applying clause 5.1.7 (in particular) and not for the purpose of interpreting it.

Second, I do not think it is of any direct relevance that the purchase price was large. The Defendants prayed this in aid to argue for stronger, wider restrictions, the contention being that the purchaser would not have paid so much for weaker protection. This is not legitimate: it may simply be that the purchasers paid too much.

Third, it is evident that the structure of the agreement was that the purchaser gained control of the intellectual property of the KAREN MILLEN business. The contractual restrictions in clause 5 were additional: there would always be the potential to sue the Claimant for infringement in territories where she infringed, but the reader of the SPA would expect the contractual restrictions to have a different purpose (although potentially complementary). This is particularly relevant to clause 5.1.7.

Fourth, similarly, the contractual restrictions of clause 5 might well overlap with one another. There is no reason to think that they are mutually exclusive given that the SPA provides for them to be struck down individually and separately if void.

Fifth, given that the dispute between the parties that has actually emerged involves numerous trade mark registry proceedings, it is tempting to try to read the SPA to provide for regulating such an eventuality. This must be resisted unless the language reveals a relevant agreement. It would be wrong to impose a solution with hindsight just because it is desirable. To my mind this is especially important to the argument over clauses 5.1.4 and 5.1.6. I have found that clause 10 (further assurance) does regulate this kind of dispute to some extent, but I have been careful not to decide that merely because it is attractive to resolve that which the parties have fallen out over.

Sixth, one must not lose sight of the fact that the SPA did not just concern the KAREN MILLEN brand; the business included Whistles at the time, and clause 5 in general should be read with the protection of those brands in mind as well. The real point behind this is that clause 5.1.7 provides specific additional protection for the KAREN MILLEN brand.

Seventh, the relevant provisions of the SPA are not models of clarity but nor are they especially difficult to understand. The context behind clause 5.1.6 is elusive as I explain below, but its words are not especially problematic.

It is clear (and unsurprising) that the parties to the SPA had in mind that the restrictive covenants of clause 5 might at some later time be attacked as being in unreasonable restraint of trade. This is evident on the face of clause 5.4 which states that the parties considered the terms reasonable for the protection of the purchaser’s legitimate interests in the goodwill of the KMHL Group, but that if they were found partially not to be, then the parties desired the valid parts to remain in force.

The Claimant did not, however, plead that any clause of the SPA was in fact in unreasonable restraint of trade. This was not pleaded either outright, or conditionally, on the basis that if the terms of the SPA meant that which the Defendants asserted, then they were void.

Nonetheless, the Claimant’s skeleton for trial as served, invoked restraint of trade on the latter (conditional) basis in a number of places. This was objected to by the Defendants, as being a serious matter (if made good), and unpleaded. I agree that it would have been a serious matter. The Defendants argued that had there been a pleading, they would or at least might have directed evidence to show that clauses of the kind objected to are common, or justified by the premium paid.

Since clause 5.4 had always been in play and required very similar if not identical issues to be considered, I was not very impressed by the Defendants’ assertion that they would have led additional evidence. I thought that the seriousness of the allegation was considerably tempered by the fact that the Claimant was not alleging that the SPA was void, and Mr Graham said that he sought no such decision.

I therefore ruled on the first day of trial that the Claimant could not positively allege unreasonable restraint of trade, but could invoke clause 5.4 as an aid to construction of the rest of clause 5. Realistically, it had to be recognised that this would involve many of the same considerations, so it was not a perfect solution, but I did not think that it would really take the Defendants by surprise. Indeed it may be noted that during the opening submissions Mr Mellor actively relied on clause 5.4 in support of an argument about the interpretation of clause 5.1.6. When I asked him whether, on his rather literal interpretation of clause 5.1.6 (that anything which damaged the Defendants’ business generally would necessarily harm its concessions too) it would prevent the Claimant from competing at all, he said that it might be cut down from that by clause 5.4. I should say that I accept that submission, although I would have reached the same conclusion on clause 5.1.6 in any event.

I have therefore considered the arguments advanced by the Claimant in this way throughout my judgment, although in the end I think they did not have a major part to play. The main argument was that if the “frozen in time” point did not succeed, the Defendants would be able to inhibit the Claimant’s ability to compete by the later acquisition or adoption of different trade names or intellectual property, so as to supervene anything she attempted. I found this fanciful, and in any event it has little relevance since I have decided that although the parties intended that the goodwill in the KAREN MILLEN name would develop over time and was not “frozen in time”, in general the KMHL IPR was limited to that which existed at the date of the SPA.

The specific issues of construction concern various sub-clauses of clause 5, and clauses 10, 11, 20 and 21. I will set them out here for convenience, but of course they arise in the context of the SPA as a whole, and where other provisions are relevant to take into account, I will set them out separately below.

In most instances what I have to decide follows more or less directly from the proper meaning of the terms of the SPA. Where that is the case I have included my conclusion in the same section with interpretation. Clause 5.1.7 requires separate and longer consideration because it is very fact dependent.

The material parts of clause 5 are as follows:

“5.1

In consideration of the Rollover Purchaser and the Cash Purchaser entering into this Agreement, [Karen Millen and Kevin Stanford] (and the other sellers for the purposes of clauses 5.1.4 and 5.1.5 only) hereby severally undertake with the Rollover Purchaser and the Cash Purchaser and for the benefit of the Rollover Purchaser’s Group and each Group Member (and their respective successors in title) that, except with the express prior written consent of the Rollover Purchaser (and except in pursuance of their respective duties and obligations owing to the Rollover Purchaser’s Group from time to time) they will not and shall procure that none of their Connected Persons shall, whether on their own behalf or with or on behalf of any person, and whether directly or indirectly and in whatever capacity:-

…

5.1.4

at any time after the date of this Agreement, use or attempt to use in the course of any business, any KMHL IPR (as defined at Schedule 2);

…

5.1.6

at any time after Completion carry out any act or omit to do any act, the effect of which is to adversely affect any Group Member’s concession or other similar arrangement with any third party (including department stores) where such effect could reasonably have been avoided by virtue of the party in question acting differently; and

5.1.7

at any time after Completion in any connection with any business which is similar to or competes with the business of the KMHL Group (not only in the United Kingdom but anywhere in the world) use the name “Karen Millen” or any other name confusingly similar thereto (including names which use, as a prefix or suffix, “KM” or “K.Millen”).

…

5.3

Each of the undertakings in clause 5.1 shall be construed as a separate and independent undertaking and if one or more of the undertakings is held to be void or unenforceable, the validity of the remaining undertakings shall not be affected.

5.4

[Karen Millen and Kevin Stanford] (and the other Sellers for the purposes of clauses 5.1.4 and 5.1.5 only) agree that the restrictions and undertakings contained in clause 5.1 are reasonable and necessary for the protection of the Rollover Purchaser's Group's legitimate interests in the goodwill of the KMHL Group, but if any such restriction or undertaking shall be found by any court or other competent authority to be unenforceable ("Invalid Restriction") but would be valid and enforceable if some part or parts of such Invalid Restriction were deleted or amended, such Invalid Restriction or undertaking shall apply with such modification as may be necessary to make it valid and enforceable.”

Clause 10, under the heading “FURTHER ASSURANCE” is in the following terms:

“Each party shall, from time to time on being reasonably required to so by any other party, now or at any time in the future, do or procure the doing of all such acts and/or execute or procure the execution of all such documents as may reasonably be necessary to give full effect to this Agreement.”

Clause 11 (“ASSIGNMENT”) is as follows:

“This Agreement shall be binding upon and enure for the benefit of the personal representatives permitted assigns and successors in title of each of the parties and every other person with enforceable rights under this Agreement but shall not be assignable nor shall any party or any other person with enforceable rights under this Agreement be entitled to deal in any way with any interest it has under this Agreement, save that the Rollover Purchaser and/or the Cash Purchaser may, at any time, assign all or any part of their respective rights and benefits under this Agreement, to any transferee of the share capital of any Group Member provided that such transferee remains within the Group, or to any institutional funder of the Rollover Purchaser and/or the Rollover Purchaser's Group from time to time for so long as such assignee remains an institutional funder PROVIDED THAT any Seller shall have no greater liability to an assignee or assignees in aggregate than such Seller would have had to the assignor.”

Clause 20 (“THIRD PARTY RIGHTS”) is as follows:

“20.1

Nothing in this Agreement is intended to confer on any person any right to enforce any term of this Agreement which that person would not have had but for the Third Party Right Act except that:

20.1.1

clause 5 (restrictive covenants) confers on the third parties expressly identified therein rights which are, respectively, directly enforceable by them subject to and in accordance with the terms of this Agreement; and

20.1.2

(without prejudice to all other relevant terms) the benefits conferred by clauses 7 (indemnities), 9 (announcements), 10 (further assurance), 11 (assignment), 12 (entire agreement), 13 (waiver, rights and release), 16 (set off), 17 (default interest) and 18 (notices) are also directly enforceable by those third parties, respectively, insofar as the rights referred to in clause 20.1.1 are concerned.”

Clause 21 (“GOVERNING LAW AND JURISDICTION”) is as follows:

“21.1

This Agreement shall be governed by, and construed in accordance with, English law.

21.2

In relation to any legal action or proceedings to enforce this Agreement or arising out of or in connection with this Agreement ("Proceedings") each of the parties irrevocably submits to the jurisdiction of the English courts and, waives any objection to Proceedings in such courts on the grounds of venue or on the grounds that the Proceedings have been brought in an inconvenient forum.”

These related points concern both clause 5.1.4 and clause 5.1.7.

As can be seen from the clauses themselves, as set out above, clause 5.1.4 concerns “use” of “any KMHL IPR”, and clause 5.1.7 concerns use of the name KAREN MILLEN and other names confusingly similar to it, in a business which is similar to or competes with “the business of the KMHL Group”.

The Claimant contends that “KMHL IPR” is limited to intellectual property rights held at the time of the SPA. It also contends that “the business of the KMHL Group” requires that the business be held by a company in the KMHL Group; that if the business were to pass outside the KMHL Group, it would no longer have the benefit of the clauses.

As I understood it, the limitation on the meaning of KMHL IPR was the Claimant’s primary case, and the limitation on “the business of the KMHL Group” was a fall back.

The consequences of these arguments, the Claimant said, were that clause 5.1.4 could not apply to registered trade marks, or applications or rights to apply for registered trade marks obtained after the SPA, and that clause 5.1.7 had to be assessed against the backdrop of the KAREN MILLEN brand in 2004, when it had more limited goodwill, geographically and in terms of the goods sold.

To support the Claimant’s argument, Mr Graham referred me to a number of provisions of the SPA.

“KMHL IPR” is defined in Schedule 2. First, it is provided that “Intellectual Property Rights”:

“means all patents, trade marks, copyright, moral rights, rights to prevent passing off, rights in designs, know how ("Know-How") and all other intellectual or industrial property rights (including in relation to Software), in each case whether registered or unregistered and including applications or rights to apply for them and together with all extensions and renewals of them, and in each and every case all rights or forms of protection having equivalent or similar effect anywhere in the world”

Perhaps curiously, this definition does not expressly refer to “goodwill”, but I agree with Mr Mellor that the reference to rights to prevent passing off accomplishes the same goal, especially taken with the reference to goodwill in clause 5.4 of the agreement and the context where so much stress was placed on the KAREN MILLEN name and brand.

The definition of “Intellectual Property Rights” is then invoked in clause 8.1 of Schedule 2, which says:

“8.1

Details of all Intellectual Property Rights relating to the business of the KMHL Group ("KMHL IPR") which the Warrantors believe are material to the business of the Group are listed in the Disclosure Letter.”

The KMHL Group is defined back in the definitions section of the SPA itself. I need not quote it, as there is no dispute that it means KMHL and 13 subsidiaries identified in Part II of Schedule 1.

It will be observed that the definition of KMHL IPR refers to the business of the KMHL Group, and so does clause 5.1.7. This is one reason why the frozen in time argument bridges the claims and counterclaims under both clauses.

Mr Graham accepted, as I consider is correct, that clause 8.1 of Schedule 2 does not limit KMHL IPR to that which is in the Disclosure Letter. Rather, the definition of KMHL IPR is simply all Intellectual Property Rights relating to the business of the KMHL Group, and clause 8.1 is saying that those which the Warrantors (the Claimant and Mr Stanford) believed to be material were in the Disclosure Letter. There might be other rights which existed but were not in the Disclosure Letter because the Warrantors were unaware of them, or did not consider them material.

The fact that there might be other such rights does not cut across Mr Graham’s argument however. He positively asserted that the nature of intellectual property rights included was broadly defined, so as to give the purchasers maximum protection under the warranties of Schedule 2. But he said the rights were nonetheless those which were held at the time of the SPA by the specifically defined companies in the KMHL Group. I agree with this general approach, and that there is no inconsistency between defining the nature of the rights broadly, but at the same time defining tightly by which entities they were held.

The Claimant also relies on clauses 8.2, 8.3, 8.4, 8.9 and 8.10 of Part I of Schedule 2. I agree that these are consistent with KMHL IPR being those rights which existed at the time of the SPA. I will not quote them in full but, by way of example, 8.4 says that none of the KMHL IPR “is the subject of outstanding disputes” and 8.9 that none of them “is subject to any Encumbrance”.

More generally, the Claimant argues that it would not make sense if her future conduct, long after the SPA, was constrained by the KAREN MILLEN business acquiring a completely new category of intellectual property. Various examples came up in argument, such as the Claimant going into food retailing, only to find the successor to the KMHL Group acquiring some kind of rights over cheese. I found these somewhat fanciful and I doubt that anything of the kind was (objectively) in the contemplation of the parties, but I do accept at a more general level that there is sense in the parties knowing what rights were the subject of the SPA.

I will come in a moment to the details of the Defendants’ arguments on this front, but essentially they are to the effect that “KMHL IPR” means all rights falling within the broad definition of “Intellectual Property Rights” held within the business of the KMHL Group, whenever acquired, even after that business had passed into another “receptacle” (to use Mr Mellor’s expression).

To that, Mr Graham replies that “the business of the KMHL Group” ceased to exist by December 2011 at the latest, when KMHL was dissolved. I think this mixes up two different things. There is no reason why, if the parties had meant “KMHL IPR” to extend to rights acquired after the SPA, they could not also have provided that the later rights might be acquired by the successor in title to the business.

In any case I also reject as Mr Graham’s argument that “the business of the KMHL Group” is limited to such a business while in the same corporate ownership. The ordinary meaning of the words is directed to the business rather than the corporate owner from time to time, and it would be uncommercial for the protection to lapse on a change of ownership.

I return to the Defendants’ arguments on this point.

The Defendants point to the following aspects of the SPA in general and of clause 5 in particular:

I think that many of the Defendants’ arguments are without force, or are circular. For example, it is completely natural and obvious that restrictive covenants would govern a future state of affairs, but that does not of itself mean their scope or the subject matter on which they operated would change. It is circular to say that because clause 5.1.6 concerned future concessions of the business, future intellectual property rights were covered by clause 5.1.4: that just raises the question of whether clause 5.1.6 covers future concessions.

However, I think the Defendants’ points that goodwill changes over time (as the parties must have contemplated, especially given that expected future expansion was part of the factual matrix), that it would be impractical to apply clause 5.1.7 by looking at the Claimant’s acts at some future time while measuring them against the KAREN MILLEN business as at 2004, and that clause 5.4 would require an assessment of the KAREN MILLEN goodwill at the time of application, all have considerable force.

In the light of all this, I do not believe the parties’ rival contentions are as far apart as may at first appear. I do not think that it is inconsistent to say that the various rights that were assigned as KMHL IPR and made the subject of e.g. clause 5.1.4 were those which existed at the date of the SPA, but that some of those and not others might develop over time.

Thus, for example, individual registered trade marks extant at the date of the SPA would be KMHL IPR, but later registrations (applied for after 2004) would not. Registered trade marks do not tend to change over time (although they can be cut down e.g. for non-use). They are relatively clearly and stably defined.

By contrast, other kinds of intellectual property rights do change over time. Goodwill is a very good example and, of course, the focus of this litigation. It may get more or less extensive, and stronger or weaker over time. Similarly, know how and confidential information may change over time, and often do. I do not think it is at all contradictory to say that the intellectual property rights falling within KMHL IPR as referred to in the SPA were limited to those categories of rights which existed in 2004, but that certain of the individual rights were changeable over time.

So, to illustrate the point, I think it would be a natural use of language for the Defendants to say “we own the worldwide goodwill in KAREN MILLEN, and we acquired it in 2004”.

Essentially the same considerations apply to clause 5.1.7. In short, I agree with the Defendants that in relation to goodwill at least, the SPA is not “frozen in time”. I will have to consider separately the Defendants’ arguments about clause 5.1.4 biting on the Claimant’s activities in the US and Chinese trade mark registries, because those do not necessarily relate to rights which existed in 2004 in the same way as the goodwill in KAREN MILLEN.

In case I am wrong on this central issue, I propose to decide the issue of whether or not the Claimant’s proposed activities would (or may) be a breach both on the interpretation I have decided, which looks to the position at the date of the alleged breach, and on the Claimant’s interpretation, that I must look to the position strictly as at the date of the SPA.

I have already decided above that “KMHL IPR” is limited to rights which existed at the date of the SPA, while recognising that some of those rights, goodwill in particular, might change over time.

I still have to consider whether the individual acts of which the Defendants complain constitute “use” in the relevant sense, what is meant by “attempt” and what is meant by “in the course of business”. I will deal with “attempt” and “in the course of business” and then return to “use”.

“Attempt to use” it is not the happiest use of language since it seems odd to restrict a party from merely trying to do something, in the absence of its actually having been done. The parties appeared to agree, and I accept, that the expression is better understood as meaning, or at least including, doing preparatory acts. This still seems of relatively little point, since without the “attempt” language one would have expected that the Defendants could bring a claim quia timet in the event that the Claimant made serious preparations to do that which would be a breach, but at least it clarifies that the preparations are themselves a breach and that the Defendants have a right to sue at the point when such preparations are undertaken.

As to “in the course of business”, Mr Graham submitted that the Claimant has not yet traded and therefore has not done the acts complained of “in the course of business”.

I do not agree that “in the course of business” necessarily requires sales to have been made. I interpret it as excluding private, non-commercial activities. The context in the present case is that the Claimant has (at least) engaged designers for her potential shops and packaging, and has engaged professional advisers to obtain trade marks. These are commercial activities and I think they are preparatory acts “in the course of business”. Since it is common ground that “attempt” includes preparations, there would be an unnecessary tension if something was not “in the course of business” merely because it was only preparatory.

The remaining issue of interpretation is what “use … any KMHL IPR” means. I must construe this in the context of the SPA as a whole (as is the case with all the interpretation issues, but particularly pertinent here, I think), and consistently with my decision on the “frozen in time” issue. I must also bear in mind the very broad definition of “intellectual property rights”.

I have found this aspect of clause 5.1.4 quite difficult. I take some comfort from the fact that the parties did not submit that it was easy.

A large part of the difficulty flows from the fact that while it is natural to speak of “using” some intellectual property rights (for example, know how), it is much less natural for others. For example, “using” copyright is not a straightforward concept to grasp. One might of course use a copyright work, but that is a different matter. One might use a copyright to sue an infringer, but only the proprietor can possibly do that, so it does not make obvious sense to have a covenant against it.

In my view, I should resolve this by giving “use” its ordinary English meaning. Where this would allow one to conclude that an act is “use” of an intellectual property right (as “intellectual property right” is defined), there would be a breach. I do not think it is necessary or consistent for there to be a way to “use” every single one of the intellectual property rights contained within the definition, still less to conclude that anything having anything to do with any of the rights must be “use”.

I will enlarge on this below when I address the allegations of breach.

I believe it is consistent with this approach (and I would have reached the same conclusion anyway) to reject the Defendants’ argument that “use” per se either means or necessarily includes infringement. The concepts are not the same, and I think this is a situation where the parties would have used the expression “infringement” had they meant it, or to include it. Further, and consistently with my view on clause 5.1.7, determining infringement would require reference to the foreign law of any and all non-UK territories where breach was alleged and I do not think the parties meant to do that.

I do however think that it is natural to talk about “using” goodwill, and as I have said above, I think goodwill is within the definition of intellectual property rights in the SPA, albeit by the clumsy reference to rights to prevent passing off. I consider that for the Claimant to use a confusingly similar name so as to make a misrepresentation that her new business was, or was associated, with the KAREN MILLEN business that she sold, would (mis)use its goodwill. In the event and on the facts, however, this adds nothing to the claim under clause 5.1.7.

The real significance of clause 5.1.4 to the Defendants’ case is, of course, not an alternative route to success on the question of the Claimant’s use of a confusingly similar name, but as a means to prevent and control her trade mark applications, and her opposition to the Defendants’ marks.

The Defendants’ arguments in this respect focus on the right to apply for a trade mark. They say that this is covered by the inclusion of trade marks in the definition of intellectual property rights in the SPA, along with the overarching reference, in respect of all the rights covered, to “applications or rights to apply for them”.

As the Claimant pointed out, however, it is not with all intellectual property rights (and one is considering here the worldwide position) that it makes sense to speak of “a right to apply”. In some systems there is a concrete and specific right to apply for a patent, which is enjoyed by the inventor.

In other systems, anyone can apply for a right. For example, with some very limited exceptions which are not of relevance to this case, that is the situation with trade marks under UK law.

In the former kind of case, it is conceivable that following the SPA the Claimant might have tried to usurp an application which was properly to be enjoyed by the business she had sold, and in that case there could have been a breach of clause 5.1.4.

Merely because the Claimant may have made an application for a trade mark, however, that does not mean she has used any right of the Defendants to do so. Still less does it follow that she has used a right which existed at the time of the SPA (as I have decided is a requirement of “KMHL IPR”). There is no evidence of US or Chinese law to show that the applications made by the Claimant involve the need for some substantive right to apply which might arguably belong to the Defendants.

The Defendants’ argument that applying to cancel the Defendants’ trade marks in the US was also use of KMHL suffers from the same flaw, but is weaker still. The Defendants expressed this in their skeleton argument (paragraph 185) as the Claimant using “KMHL IPR by asserting lack of consent – she was reserving the right to apply to herself and denying them to the Defendants”. I do not agree that asserting that the Defendants did not have her consent was anything to do with her using a right of the Defendants.

Although the procedural situation in China is a little bit different, in that the Claimant is opposing the Defendants’ marks rather than seeking cancellation for lack of consent, I hold that the same logic applies.

As I have said above, I think that if and to the extent there were a breach of clause 5.1.7, that would also be a breach of clause 5.1.4. I have held that many of the acts falling within the broad description of the Claimant’s pleadings would be a breach of clause 5.1.7.

My conclusions that the Claimant’s acts of seeking her own registrations and attacking the Defendants’ are not breaches of clause 5.1.4 do not imply that I am making any finding that she is right in the position she has taken in the trade mark registries of the US or China. On the contrary, the findings I have made as to the nature and scope of the goodwill in the KAREN MILLEN name, the likelihood of confusion across the scope of the acts described in her pleadings, and my conclusion on clause 10 as it relates to the Defendants’ applications (to which I find the Claimant is obliged to consent) strongly suggest that the Defendants have the better, earlier rights and may prevail.

Clause 5.1.6 relates to the concessions of the KAREN MILLEN business: that much is clear on its face. There is, however, little other context in the factual matrix by which to understand it. For example, it refers to the warrantors not omitting to carry out acts so as to adversely affect the concessions, but both sides accepted that they could not identify any positive act which at the time of the SPA it was anticipated that the Claimant (or Mr Stanford) might do.

Further, neither side was really able to give concrete examples of how the last part of the clause (reasonably avoiding the adverse effect by acting differently) might bite.

The main context which is available is what a concession is (I have addressed this above), the importance to the KAREN MILLEN business of concessions (which was considerable) and the sort of thing which is typically important to maintaining a concession, in particular a good relationship with the hosting department store.

Because concessions were extremely important to the KAREN MILLEN business as a whole at the date of the SPA, anything which impacted the business as a whole would be bound to have a knock-on effect on its concessions. And this is really how the Defendants invoke clause 5.1.6. They contend that, for example, the Claimant’s actions in the Chinese trade mark registry to prevent the Defendants obtaining trade marks in China will have an impact on the concessions there.

In my view this is far too indirect. If that is all that clause 5.1.6 required then it would mean that the Claimant was prevented for all time (since the clause is unlimited in duration) from doing anything which adversely impacted the KAREN MILLEN business, since such an effect would be felt by the concessions. That would extend to competing by any means.

As I have said in dealing with the question of the relevance of restraint of trade to the interpretation of the SPA, I put this to Mr Mellor and he did not contend that clause 5.1.6 was this broad. He suggested that clause 5.4 would work in favour of a narrower meaning.

I think that even without clause 5.4, common sense tells one that clause 5.1.6 is concerned with behaviour which is directly and specifically referable to concessions. Otherwise it is too broad to make sense of. Clause 5.4 simply reinforces this conclusion.

None of the conduct said by the Defendants to breach clause 5.1.6 has any real relationship to concessions specifically and therefore I reject that part of their case.

In case this matter goes further, I do however find that the Defendants’ relationship with GRI taken together with GRI’s arrangements with department stores in China amounts to “a concession or other similar arrangement”, since the effect at the point of interaction with the consumer is exactly in the nature of a concession, and since a key relationship with department stores is involved, albeit at one step removed.

I have dealt above with whether 5.1.7 is frozen in time or requires reference to the situation at the time of the conduct of the Claimant to be assessed, and I have concluded that it is the latter.

There are a number of other points about the interpretation of clause 5.1.7 which I must also address.

First, I have to resolve whether clause 5.1.7 requires reference to the law of the territory where the proposed activities would take place. This was not actively the preferred interpretation of either side, and the Defendants raised it as a possibility only to dismiss it. I reject it and consider that the test is a free-standing one defined by the parties in their own terms as a matter of contract. The wording bears no suggestion of foreign law.

If the parties had intended to import foreign law they would have chosen quite different language along the lines of the relatively common provisions in patent licence agreements to the effect that royalties must be paid if the licensee’s acts would infringe, but for the licence.

Foreign law would also have been costly and inconvenient to include by way of reference. It was objectively foreseeable that if a dispute arose then it might well be because the Claimant was proposing an international business, and evidence of foreign law under numerous systems would be cumbersome to deal with, and might not produce a single consistent result. It would undermine the desire, which is obvious on the face of the SPA, for a single decision from a single court.

I also do not think the parties intended to make clause 5.1.7 identical in scope to any English law test. It is not the English passing off test, or the test of infringement of a registered trade mark applicable in the UK. Again, it would have been possible to say that, but the expression used would have been very different. In addition, this was intended to be a test which could be applied to conduct by the Claimant anywhere goodwill existed, whether the KAREN MILLEN business’ right in that territory was registered or unregistered. No doubt the wording in clause 5.1.7 was chosen by advisers familiar with the concepts of English trade mark and passing off law, but in my view it was a freestanding test using words in their ordinary sense.

In my view the objective purpose of clause 5.1.7 was to provide a single standard and (with the jurisdiction clause) forum to determine whether a competing business launched by the Claimant would cause confusion detrimental to the goodwill in the KAREN MILLEN mark.

Second, I have to decide the right overall approach to “any business which is similar to or competes with the business of the KMHL Group” and “the name ‘Karen Millen’ or any other name confusingly similar thereto”. I should say that it was common ground that the words “(not only in the United Kingdom but anywhere in the world)” meant that the clause potentially covered use anywhere in the world and did not mean that only worldwide use could be a breach.

I consider I have very much to interpret them together, since they form part of the same clause, the same context and the same objective.

It was common ground that the first requirement, that the business be similar to or compete with the business of the KMHL Group required a comparison of the two businesses, each as a whole, the one with the other. I agree with this. “Competes” is a test directed to real events which emphasises that it should be assessed in the full, real context, and “similar” seems to me to connote the need for a contextual assessment.

However, there was disagreement about the assessment of confusing similarity. The Defendants argued that it should include consideration of the surrounding circumstances, while the Claimant argued that it should be done purely name-for-name. Thus, the Claimant said, I should assess whether the businesses were similar or competing as a first stage, in the context of the businesses as a whole, and if they were then I should move on as a separate exercise to compare names, the latter exercise based only on the names themselves.

I agree with the Defendants on this point, for two main reasons. First, I think it would be odd for the clause, by limiting the matters to be taken into account, either not to catch behaviour which in reality was causing confusion, or to prevent behaviour which, in reality, was not. Second, it does not make sense for the assessment of similarity/competition of the businesses to be undertaken with reference to context, and yet for the assessment of similarity of the name to be undertaken without such reference.

Further, Mr Graham positively suggested in the course of argument (day 5, pages 741-2) that the assessment of similarity of business could depend on whether there was passing off type confusion. This further emphasised that it would be artificial to apply different standards to them.

Mr Graham suggested that a reason for making a simple name-for-name comparison on the issue of confusion was that the parties wanted to avoided the complexity and cost of a full English-style passing off case. Although I have already concluded that the parties avoided the involvement of foreign law for reasons of simplicity, I do not think it necessarily follows from the fact that they wanted a single consistent standard that they also wanted that standard to be divorced from real life context. I think the practical difficulties and inconsistencies involved in the acontextual approach are much more telling.

I do accept, however, that the names themselves would be a central part of the consideration.

The Claimant also relied on the closing parenthetical words of the clause, “(including names which use, as a prefix or suffix, ‘KM’ or ‘K. Millen’)”, pointing out that neither supports “Karen” on its own being potentially confusing, and each involves some reference to the surname, if only by its initial. I think this is a point of some weight in favour of the Claimant and ties in with the reasons why it says that “Karen” on its own is not confusingly similar.

I also record that Mr Mellor’s position for the Defendants was that clause 5.1.7 only had application in territories where the KAREN MILLEN business had goodwill, and that it only bit on trade mark use, and hence did not in itself prevent the Claimant from making accurate descriptive statements about her former connection with the KAREN MILLEN business. I did not understand Mr Graham to disagree with either point; indeed it was a part of the Claimant’s case on the frozen in time point that there had to be goodwill in the relevant territory, as at the date of the SPA.

Finally, the Defendants argued that clause 5.1.7 was to provide “clear blue water” or a “penumbra” of protection to the business, its names, and geographic scope. I was unclear exactly what this meant, but it seemed to be to the effect that clause 5.1.7 should prevent the Claimant from doing things such that there was a zone of activity into which she could not enter even though the KAREN MILLEN business had not and would not foreseeably want to: a sort of (and I realise I am substituting one unclear label for another) cordon sanitaire or demilitarised zone. Mr Graham characterised this as seeking “excessive protection”. Whatever its precise ambit I reject it. It is nowhere to be found in the words of clause 5.1.7 and is inconsistent with the gist of clause 5.4 that there should be necessary protection for the goodwill of the business but no more.

Further assurance clauses are common in commercial contracts. I was not referred to any authority specifically concerning them, and therefore I propose to treat clause 10 according to the ordinary principles of contractual interpretation identified above.

First, I do not believe on its wording that clause 10 is limited to requiring the parties to complete further documentation. It may well be that in a transaction of the complexity of the SPA there would be further documentation that had not been foreseen but was required later. A board resolution or consent of some kind, or a notarised form of an existing document might be examples. Their completion would be one of the things covered by clause 10, but not exhaustive of it. This view makes sense but in any event is driven by the fact that completing further documents is mentioned specifically in addition to “do or procure the doing of all such acts”.

Second, the clause is limited by reasonableness (“reasonably required by the other party”, “reasonably necessary”). This is to be considered at large, but I consider that in general in the context of the agreement, where there must have been a very fair likelihood of further documentation and it is specifically mentioned, the mere completion of documents or formalities was highly likely to be reasonable.

Third, the clause requires everything that is necessary to give full effect to the agreement. It is broad in its scope.

The real dispute between the parties as to the interpretation of the clause lay in the approach to what kind of agreement the SPA was. So when I suggested to Mr Graham in argument that the clause did not merely require documentation but also action (if reasonably required), he agreed, but responded that the SPA is a share sale agreement. It is not, he pointed out, an assignment of intellectual property rights from one party to another, but a transfer of the ownership of the shares in companies owning intellectual property rights. The entities owning the intellectual property do not change.

Although I agree with this point as far as it goes, I do not think it tackles the task of identifying what would be “full effect” of the SPA. One object of the SPA, looking at it practically rather than formalistically, was to put the purchasers in control of the KAREN MILLEN business and, as key assets of it, in ongoing control of the KAREN MILLEN name and goodwill. It might well be that transfer of the shares would accomplish that entirely, but equally it might not, and since the name was the name of the Claimant it would have seemed entirely possible and predictable (judged as at the date of the SPA) that her consent to dealings in the name and mark would be required thereafter. I think that view is strengthened by the fact that the marks transferred were both registered and unregistered, and included applications.

I am also fortified in this view by the warranties that the Claimant (and Mr Stanford) gave in section 8 of Schedule 2, for example that the KMHL Group was the sole beneficial owner of the KMHL IPR (clause 8.2).

Since the intellectual property rights the subject of the SPA, and trade marks in particular, might be valid for a long time, clause 10 might be required to be invoked for many years after the SPA.

I would also observe that the sort of issue that has occurred in the USA illustrates the general kind of problem that would have been anticipated as possible. Hence the Claimant has said that although she consented to use of her name, she did not consent to registration of it. As it happens, that distinction has arisen in the context of an adversarial contest between the parties, but if one imagines that the USPTO had raised the like point of its own motion at the end of 2004, would that have been covered by the further assurance clause, clause 10, so that the Claimant had to execute a consent to registration? I think a reasonable onlooker would say “of course it is reasonable for her to have to consent, otherwise the SPA purchaser would lose a key asset for want of Karen Millen signing a piece of paper”.

I therefore consider that in principle clause 10 is capable of extending to the Claimant being required to execute documents to support KAREN MILLEN trade marks. Whether she is or not depends on reasonableness, as clause 10 requires.

I should record that reliance on the overall purpose of the SPA to transfer intellectual property, and on the warranties, was a secondary argument on the part of the Defendants. Their opening position was that clause 10 could be invoked as support for the enforcement of any breaches of clause 5 which it could prove. I found this hard to understand and do not accept it. I agree with Mr Graham that if there was a breach of clause 5 then the Defendants would have their remedies for breach of contract. By contrast, clause 10 is there to make the agreement work. Despite the fact that the Defendants raised their alternative argument rather late in the day, it was partially a response to Mr Graham’s point that the SPA was a share purchase agreement rather than a trade mark assignment, and anyway it is a point about interpretation of the SPA and depends on all the same factual matrix and general context that I have to consider anyway.

I turn to the application of clause 10.

Globally, the issue is whether the Claimant must consent to applications for registration by the Defendants, in the USA and in China. I think I should consider the two jurisdictions separately.

In the USA, the position is that at the time of the SPA, there was a single KAREN MILLEN registration (referred to at trial as the “908 Registration”) for leather and imitation leather goods and clothing. It was accidentally, and rather embarrassingly, allowed to fall off the register in August 2010, owing to inadvertence on the part of the Defendants.

Since the SPA a number of applications have been made by the Defendants. Details, with dates of application and registration, were given in exhibit KDM-41 and also appear in the agreed chronology. The marks are KAREN MILLEN, KAREN BY KAREN MILLEN and KM BY KAREN MILLEN.

The goods and services applied for are broad and generally similar to the Claimant’s negative declaration, i.e. a wide range of things that might be done as an extension of a fashion clothing brand.

I consider that they are goods and services which would have been in the reasonable contemplation of the parties at the date of the SPA as ones which the KAREN MILLEN business was offering, or might well want to offer in the future as part of the expansion of the general kind contemplated. They are based on the kind of use undertaken prior to the SPA, as it has, foreseeably, developed since.

In that sense the applications protect and reinforce the goodwill the subject of the SPA. This is especially the case since US law ultimately requires actual use for an effective registration (even though an application can be made based on intent to use).

I was told by Mr Graham that the Claimant’s signature on the application for what became the ‘908 Registration was regarded by the USPTO as consent to registration by the Claimant (whose consent was required because the mark was that of a real person) of that mark, for those goods. But that only applied to the ‘908 Registration and the Claimant has objected to all the other Defendants’ registrations on the basis that she does not consent to them. She says that the document which she signed in August 2000 is only a consent to use.

In China, the current battleground consists of two oppositions by the Claimant to KAREN MILLEN applications in classes 3 and 9. Currently, they stand dismissed but appeals are possible.

I find that the Defendants’ actions in making, seeking and maintaining these applications and registrations amount to an important, natural and foreseeable way of putting the SPA into effect. It would not have “full effect” if the Claimant were able to hinder registrations and applications for KAREN MILLEN marks by withholding her consent to them.

All that the Claimant is asked to do pursuant to clause 10 is to consent to the Defendants’ registrations. This is an extremely modest amount of effort of a sort which as a generality was clearly contemplated by the SPA. I find that it is reasonable within the meaning of clause 10. Of course, in the landscape of the litigation between the parties it may deprive the Claimant of a strategic advantage, but I do not think that is relevant. If what the Defendants require is reasonable then I do not think it ceases to be so because the Claimant strongly does not want to, or would like a litigation advantage from refusing. Of course, clause 10 would only ever kick in if one party refused an otherwise reasonable request.

As to the ‘908 Registration specifically, it is something of a side show given its limited specification of goods. The broader registrations are much more important. However, I should address it specifically. I do not think the fact that the Defendants accidentally let it slip matters. Clause 10 is there to cater for errors or shortcomings in documentation, among other things. So I do not think it materially affects reasonableness in the present situation. Perhaps if the Defendants were asking for something more onerous and the error was more egregious, or showed a disregard for the Claimant then it could play a part, but that is not this case.

I do not consider that the above would necessarily apply to marks containing KAREN and not MILLEN, given my findings as to the likelihood of confusion arising from such marks (that it is unlikely but cannot be ruled out with sufficient confidence across the scope of the declarations sought). But as I understand the registrations in issue at the moment, the point does not arise.

I therefore find for the Defendants in relation to clause 10.

I am not sorry to reach this conclusion. In general, the Claimant has acted responsibly (although largely unsuccessfully) in seeking a decision as to the parties’ rights before she begins trading. But blocking the Defendants from registrations for the very mark the rights in which were, in substance, bought under the SPA has been petty, and escalated the complexity of the worldwide dispute unnecessarily.

It is also beneficial that the application of clause 10 will probably prevent the lingering satellite litigation occurring in the US and China, and promote a single decision as a result of this trial.

I stress that I am especially conscious that when I consider clause 10 I must interpret the SPA to discern what the parties actually agreed by the words they chose. It is not my function to impose a regime which they did not agree just because it seems reasonable, or reduces lingering satellite disputes. I have therefore stepped back once more to satisfy myself that I am doing the former and not the latter. I believe that I am. Clause 10 is of quite general application and is there, as it says, to ensure that within the bounds of reasonableness, full effect is given to the SPA by the parties. To that specific extent and for that specific purpose I can and must consider reasonableness: the SPA requires it.

I now have to apply clause 5.1.7 as I have interpreted it to mean, to the issues between the parties. This requires an assessment of the facts, but there is also a very important matter of approach: I am not being asked to rule on anything the Claimant has already done, but on acts which she proposes to undertake if they are found to be lawful. I am being asked to grant negative declarations prior to action being taken. So I must identify the relevant principles. Before I do that, I will outline the Claimant’s approach.

The Claimant seeks a number of negative declarations. Some relate to marks which contain the words KAREN and MILLEN. The details do not matter and I will refer to them generally as KAREN MILLEN marks. Others relate to marks which contain the word KAREN but not the word MILLEN. In particular, they include a mark with KAREN in cursive script, and a stylised “X” which was referred to as a “kiss”. Again, I do not think the differences within this group matter (the weak distinguishing power of the font and the kiss are not material) and I will generally refer to them as “KAREN solus” marks.

The scope of goods covered by these marks is defined in the Claimant’s pleadings by reference to international classifications or broad terms such as “accessories” and “homewares”. Only the KAREN solus marks are relied on in relation to apparel and “accessories”.

Plainly, the Claimant seeks very broad clearance. Mr Mellor suggested that she was consciously or deliberately “sailing close to the wind”. I think what he meant was that she is avoiding the Defendants’ rights by the narrowest margin, using KAREN MILLEN marks for everything except clothes and accessories, and KAREN solus marks for those. I.e. trimming the name in relation to clothes and the goods in relation to the KAREN MILLEN name.

If it was intended to be suggested that the Claimant was in any way being less than honest (I do not think it was) then I reject the suggestion. If it was intended to be suggested that she was being reckless then I reject that too. She is an astute business person who has made a conscious decision (with her advisers) about the clearance she wants and I should assess it objectively.

There is one area where I suspect the Claimant does not entirely know her own mind yet, which is how she intends to explain and present her previous connection with the KAREN MILLEN brand and business. This (the use of a trader’s own name) is a notoriously tricky question but for my purposes the issue, as I explain below, is that the declarations sought do not specify what she intends. I can look at their scope objectively.

Similarly, it may seem odd that the negative declarations (if granted) would permit the Claimant to use the KAREN solus marks when it is part of her case on confusion that the name KAREN on its own has no distinguishing power because of all the other KAREN marks in the fashion industry. Again, I do not think it is necessary to inquire into whether she intends to use KAREN marks on their own: the declarations cover using them with a KAREN MILLEN mark, or without.

The parties are seeking a wide variety of relief, but at the heart of this dispute, and the real drive for its commencement, is the range of negative declarations sought by the Claimant to establish what she can do, before she starts to trade.

The power to grant negative declarations undoubtedly exists and has developed a good deal in recent years, juridically and in practical importance.

The applicable principles were recently helpfully summarised by His Honour Judge Hacon in Skyscape Cloud Services Ltd. v. Sky Plc and others [2016] EWHC 1340 (IPEC). I found the decision useful for its collation of the main authorities on the general principles, and for its application in the context of intellectual property rights.

By reference to the judgment of Lord Woolf in Messier-Dowty Ltd. v. SABENA SA [2001] WLR 2040, and Pumfrey J (as he then was) in Nokia Corp. v. InterDigital Corp [2006] EWHC 802 (Pat) (approved on appeal at [2006] EWCA Civ 1618), the Judge identified the following three principles (quoting from Pumfrey J):

I will apply those principles here. The second and third are the important ones from a practical purpose; the first establishes that the jurisdiction exists, which is important but not in issue in this case.

In relation to the second principle – whether the declarations sought would serve a useful purpose – I accept that they could, and (subject to what I will say about the third principle) probably would. The Claimant’s desire to know where she stands before she actually trades is understandable and, in a sense, laudable. No doubt it is in part motivated by a desire to avoid incurring a perhaps substantial financial liability in start up costs and damages to the Defendants, but there is nothing wrong with that. Importantly, a decision before she starts to trade would (if it were to turn out in due course that what she proposed was in fact a breach) avoid damage to the Defendants’ goodwill which would be hard to compensate, and allow her to choose a different name for her new business and get it off to a smoother start.

The grant of negative declarations might also avoid the need for the Defendants to seek interlocutory relief, which would be costly for the parties and use Court time. The Claimant’s course of action is also, by analogy, consistent with the well-established approach in patent litigation to “clearing the path”.

Therefore, I think that the second principle generally favours the Claimant’s approach.

The third principle is much more problematic.

As expressed by Pumfrey J, the issue was one of clarity. This is important and I will return to it.

I think that the third principle also requires consideration of the scope of the relief. The Court has to be put in a position to make a decision, with clarity, across the whole scope of the relief, and the defendant to a claim for a negative declaration has to be able to understand and address it in its full scope.

The problems that can arise are well illustrated by Judge Hacon’s decision in Skyscape. Broad declarations as to many possible behaviours were sought, and when it became apparent that there was a practical problem in relation to the Court’s ability to rule on all them with the information available to it, the Claimant sought to persuade the Court to consider the various different possibilities individually. Judge Hacon said this (at [12]-[15]):

“12 The final sentence of the skeleton argument of Ms Michaels, who appeared for Skyscape, was:

‘Obviously, it is open to the Court, if it sees fit, and depending upon the extent of any findings it makes, to grant a DNI in different terms to those sought.’

This seemed possibly to be not as innocuous as it looked. During Ms Michaels' opening speech I asked her to elaborate on Skyscape's idea of the correct approach by the court to an application for a DNI. It became clear that the real application being made by Skyscape, couched in reassuring and characteristically persuasive language by Ms Michaels, was that were I to decide that the declaration in Annex 1 was too wide in this or that regard, I should make a declaration in whatever narrower form I thought appropriate. Putting it bluntly (which Ms Michaels understandably did not), if I was not prepared to grant the DNI sought in full, Skyscape was willing to take whatever declaration it could get, at least pending any appeal.

13

To see where this would lead, the starting point was the specific order sought by Skyscape. It appears as Appendix 1 to this judgment. It is a DNI relating to (i) the sign SKYSCAPE in a variety of fonts, alternative colours and in upper and lower case, (ii) the sign SKYSCAPE CLOUD SERVICES in similarly various presentations, and (iii) 18 logos. For each of these signs the DNI is sought in relation to (a) 10 different types of service provided to the UK public sector in the UK and (b) the provision of services enabling transition to each of those 10 services. It can be seen that the DNI sought covers a very large number of combinations of signs and services.

14

Potentially all of these combinations had to be compared with the Cited Marks. The specifications of the five Cited Marks were long – in the case of four of them, spectacularly long. So the possibility of infringement would have to be assessed by comparing all the combinations of signs and services contemplated in the DNI with the Cited Marks across the range of goods and services specified in each of them. The logic of Skyscape's case was that in the event that I were not prepared to accept the proposed DNI in full form, I should ring fence all of the combinations of Skyscape's signs and services encompassed by the proposed order in respect of which I was prepared to grant a DNI.

15

I took the view that this would have been very unfair to Sky. Sky was entitled to direct my attention to what, from its standpoint, was the most vulnerable part of the DNI. It could point to a narrow range of Skyscape's signs when used for a narrow range of services, or even just one of each. In other words Sky could attempt to persuade me that Skyscape's sign X, when used for Y services, would infringe part P of the specification of Cited Mark Q. If I were convinced by Sky's argument, the DNI sought would be refused. It would be irrelevant that other combinations of Skyscape's sign and service within the draft Order would not infringe any part of the specifications of any of the Cited Marks.”

I agree with this. Mr Graham for the Claimant similarly asked me to use a “blue pencil” test and to grant declarations in relation to some of the goods and services covered, and not others. I reject this for the same reasons as Judge Hacon gave in Skyscape. I am sure there are cases where a minor tweak to the declarations sought would be appropriate. Possibly there are other cases where a small number of discrete aspects of a negative declaration are separately identified from an early stage and could fairly be ruled on separately without injustice to a defendant, but that is not this case.

I turn to consider the clarity and scope of the declarations sought in the specific context of this case.

The declarations are sought in a variety of terms. Some (for example 1(c) and 1(f) of the prayer) are defined in terms of KAREN MILLEN names and marks when used “in relation to the business of the sale of homewares and related goods and services not including women’s clothing or women’s fashion accessories”. In other words, both negatively and positively by reference to very broad descriptions of goods and services.

Others are still broader (for example 1(b) and 1(h)) and are to the effect that the use of the name KAREN alone (with or without stylised elements) for any goods or services would not be a breach of the SPA.

Others (for example 1(d) and 1(g)) are by reference to International Classification classes. This approach might have enabled a more specific focus, but the lists are so long that their overall coverage remains extremely broad. It was on the lists that Mr Graham’s invitation to use a blue pencil focused the most, but I do not think it would be workable and in any event it is just not realistic that the parties’ dispute could be resolved if I were able to separate, say, bed linens from cutlery.

It is also important what the declarations do not reference. They do not in any way stipulate what the Claimant’s intended business would be like, other than in the very broad sense of the goods and services mentioned above. There is no statement about where or how it would trade, its trade dress, or which of the various marks would actually be used, separately or in combination. For example, the declarations cover use of KAREN MILLEN for all conceivably relevant goods and services except women’s clothing or women’s accessories, and use of KAREN for everything including women’s clothing. It seems to me that it could make a very great difference to my assessment of the likelihood of confusion if the Claimant were to use KAREN on women’s clothes, and KAREN MILLEN on perfume, candles and eyewear.

Mr Mellor made a related point, which I accept, in relation to the Claimant’s suggestion that I apply a blue pencil test. He said that the declarations would extend to a business by the Claimant in the same mall in the USA as one where the Defendants currently trade, using KAREN for clothing, or KAREN MILLEN for goods such as linens (or, I would add, both). The Defendants were entitled to attack that, and did not have to focus on categories of goods which might be more remote from those the Defendants have dealt in, being sold somewhere geographically remote.

In addition, if and when the Claimant were to begin to trade, she is clearly going to want to make, and would intend to make, statements about her former connection with the KAREN MILLEN business. She is entitled to do this, since the Defendants accept (and I would have found in any event) that clause 5.1.7 is directed to trade mark use, and given clause 5.4, which I address above. But I am far from convinced that she will limit herself to factual, descriptive references, and the declarations are silent about this. This factor is an example of matters unspecified by the declarations sought and I refer to it to indicate the lack of clarity of what the Claimant intends. I do not regard it as decisive and my ultimate finding when applying clause 5.1.7 would have been the same had there been no possibility of the Claimant making any such statements.

In saying all this, I am not, as I hope I have made clear above, suggesting that the Claimant’s motives in framing the declarations have been in any way at fault, or that she has held back information about her intentions because she wants to conceal it. As I have already said above, her general desire to obtain a decision before trading is a laudable one, and part of the problem is simply that she has initiated it so early in the development of her plans. Nonetheless, I can only proceed on the information I have, and I have to be fair to the Defendants, too.

I should also, in fairness to her, acknowledge that the Claimant has provided some materials created in the course of planning her business. I was shown a number of possible shop designs, and materials in the nature of “mood boards” (for example in F2/44). They cover many different possibilities, and the relief sought is not defined in terms of them, so they are not of direct assistance. Ms Metheringham was cross-examined in relation to the mood boards, the suggestion being that they illustrated a difference between the image and presentation of the KAREN MILLEN business and that of what the Claimant proposes. However, my general impression was that while they illustrated differences, there was also a significant overlap. The Claimant’s materials could, as a whole, perhaps be seen to be more flashy and glamourous and more sexualised, but they also embraced more restrained and tailored clothes, and some of the Defendants’ materials leaned in a provocative direction.

To my mind the materials therefore emphasised the fact-sensitive nature of the question of confusion and the impracticality of determining it by reference only to such broad categories as “women’s clothing”.

I have not overlooked that when dealing with clause 5.1.7, the Claimant submits that the test of confusing similarity is to be assessed name-for-name and without reference to all the trappings of a passing off action, or surrounding context. Had I accepted that (which I have not), it might also have been argued that there was less need for detail in the declarations, but as I also say in relation to clause 5.1.7, the Claimant accepted that the other main limb (business which competes with or is similar to) requires a business-for-business comparison as a whole, not merely comparing individual categories of goods. The Claimant’s pleadings do not allow this to be done and the declarations sought do not correspond to it. To put it another way, had I accepted that the assessment of a competing or similar business was to be decided in isolation from the issue of confusing similarity, I do not see how I possibly have the materials to decide that the Claimant’s proposed business would not be similar, or (even harder) compete. It might be in exactly the same place, with identical pricing and range of clothing goods under the name “KAREN” pitched precisely against the Defendants’.

The upshot is that I do not think the declarations sought are clear or specific enough to be granted. I would not have been prepared to make them even if I had concluded that the Claimant was right about clause 5.1.7 (and clause 5.1.4 insofar as it has the equivalent effect). But in any event I have concluded that within the scope of what is proposed by the declarations there is much that would be in breach of clause 5.1.7. I do not think it is appropriate to attempt to apply a blue pencil test.

I have set out above what I consider to be the correct interpretation of clause 5.1.7. I concluded that the two limbs of the clause (similar or competing business, confusing similarity) have to be considered together and in the surrounding circumstances.

I have also set out in relation to the approach to negative declarations that the Defendants are entitled to rely on the best case for them. This would include, for example, the possibility of goods being sold under a KAREN solus mark in close physical proximity to one of the Defendants’ KAREN MILLEN stores or concessions.

I have to consider breach on a number of different bases. I have to consider it for China and for the USA, I have to consider it for marks containing KAREN MILLEN (but not on clothing or accessories) and for KAREN solus marks (on any goods including clothing and accessories), and I have to consider it as of 2004 and as of the date of these proceedings (although the former is only in case I am wrong on the interpretation of the clause).

As I have explained above, I consider that clause 5.1.7 looks to the state of the goodwill in KAREN MILLEN at the date of the Claimant’s proposed acts, and is not “frozen in time” at the date of the SPA in 2004. By the time of the Claimant’s renewed desire to trade that led to these proceedings, it is clear that the Defendants had relevant trade and goodwill in China and I therefore have to decide on the facts whether it was such as to lead to a likelihood of confusion in the sense of clause 5.1.7 (I should mention that the parties did not lead any evidence of Chinese law, so there is no equivalent to the DuPont/Sleekcraft dispute that arose on US law).

I return to that below. However, and as I have said, I think that I should also assess the parties’ arguments as to the position as of the date of the SPA in 2004, in case this action goes on appeal and my interpretation of clause 5.1.7 is overturned.

The assessment of the position in 2004 in China requires me to decide a point of law, and an issue of fact.

At the date of the SPA in 2004, there were no Karen Millen shops in China, and never had been. There had been shops in Hong Kong, but they had closed down earlier, as I have explained above.

In these circumstances, the Defendants argued their position in two stages: first, that there were significant numbers of wealthy Chinese consumers who travelled internationally to places such as Hong Kong, Singapore and the USA and there were exposed to the KAREN MILLEN brand; and second that there could as a result be legally relevant goodwill in China, in particular if those consumers became generally aware or desirous of KAREN MILLEN products, or if they intended to buy KAREN MILLEN products on subsequent visits to those places.

As to the factual position, there is very little evidence of the perception of the KAREN MILLEN brand or business in China in 2004. Such evidence as there was came from secondary sources, and from the evidence of Ms Hung. She herself produced some secondary documents such as press and internet reports touching on the international travel of Chinese nationals.

Thus, the Defendants extracted from Ms Hung that there were numerous destinations to which Chinese people would travel in 2004, including Singapore, and that it was possible that they bought KAREN MILLEN on their travels.

Similarly, she accepted that people in China could look at international fashion on the internet, including KAREN MILLEN, and that it was possible that travellers from China might seek out Karen Millen outlets abroad, based on residual memories of the outlets in Hong Kong.

None of this was really in the knowledge of Ms Hung, I felt, and it went no further than her accepting possibilities.

It was not suggested that the KAREN MILLEN business targeted any materials at China. I saw no publications which could be said actually to have been read in China.

All of this was thin to the point of non-existent. I accept that it is just possible that a very small number of people in China knew about the KAREN MILLEN brand or business, but I find that the Defendants have failed to prove that any material number of people there had bought KAREN MILLEN products, or intended or were likely to do so in the future. The KAREN MILLEN mark had no ability to draw in business in China, either there (there were no shops) or by people travelling abroad and purchasing there. Even in the most extended possible sense of goodwill (see below), I find that there was none in China in 2004.

This makes the point of law of no relevance, but since there was argument on the point I will address it briefly.

Mr Graham relied on the decision of the Supreme Court in Starbucks (HK) Ltd. v. British Sky Broadcasting Group [2015] UKSC 31. In that case, the issue was whether there was goodwill in the UK under the name NOW TV in relation to internet television services. The Claimant’s business was based in Hong Kong where it had paying customers. It had no actual customers in the UK, although it was possible to watch for free here. The free viewing in the UK was provided to promote the Hong Kong business. In addition, members of the Hong Kong community in the UK had experienced the paid service when in Hong Kong.

The Supreme Court held that this kind of knowledge of customers amounted to a reputation but not to goodwill and so held that no claim in passing off could succeed. Customers were required. See the judgment of Lord Neuberger at [48] and [52]. The Court referred, among many other cases, to Anheuser-Busch Inc. v. Budejovicky Budvar NP [1984] FSR 413, CA (beer only available at US Air Force bases in the UK, action failed) and Hotel Cipriani Srl. v. Cipriani (Grosvenor Street) Ltd. [2010] EWCA Civ 110. It is clear that the Supreme Court considered that the former case, which it considered quite extensively, was correctly decided and its principles seem to me to be applicable to the present case.

Mr Mellor, however, relied on the latter case. There, the claimant owned a hotel in Italy which used the name CIPRIANI; the defendant was a London restaurant also using that name. The claimant had no physical presence in London or the UK, but there were customers in the UK who stayed at the claimant’s hotel when in Italy. They placed bookings with the hotel in Italy from the UK and the Claimant directed marketing materials to the UK. This was held by Arnold J to be enough to found a reputation ([2009] EWHC 3032 (Ch)), and the Court of Appeal upheld his decision.

However, I consider it is clear that in relation to goods (which is what the present case is really about, although there are also trade mark applications for various retail services), the Court of Appeal in Cipriani did not differ from the decision in Budweiser that real sales in the UK are necessary (see [117]). And in any event, as I have said, the Supreme Court upheld Budweiser in the NOW TV case, as I have mentioned.

Cipriani concerned services, and it is clear from the fact that the Court of Appeal found for the claimant that different principles must apply, to some extent, than apply to goods. Jacob LJ considered to what extent, in [117] to [124]. In the circumstances of the case, he did not find it necessary or appropriate to decide the finer details. It was enough that the claimant had actual customers in the UK, that they placed orders from there with the claimant for its hotel services in Italy, and that there was marketing. It would be wrong of me to decide the finer details, since they do not arise in the present case either. It is clear that mere reputation was not considered enough by the Court of Appeal in any event, and as I have said, the present case is really about goods, for which it is plain that actual sales are required.

I turn to consider the USA in 2004. At the time the KAREN MILLEN business had only three stores and relatively modest turnover. It had sold only a few kinds of goods other than women’s clothing.

However, I consider that the KAREN MILLEN name is quite strongly distinctive. And at least in those areas where there was a shop (which the Defendants are entitled to focus on) I conclude that there was a really significant goodwill; no doubt there was a lesser degree of awareness in other parts of the country among consumers who had travelled to the stores at some point. I have no doubt that if the Claimant were intending to trade in women’s clothes under the name KAREN MILLEN there would be a certainty of confusion, and Mr Graham more or less accepted that. What then of the fact that the Claimant’s claim is limited to the use of KAREN MILLEN marks other than in relation to women’s clothes?

This is where the dispute about different categories of fashion businesses (bridge luxury and the like) came in. I have rejected that approach and focused on the KAREN MILLEN business specifically. My reasons are explained above.

In addition, I think it is important to recognise that the question is not what goods shoppers would have predicted that the KAREN MILLEN business was most likely to branch out into, if asked. The question is what the effect on them would be of encountering a business which is in fact selling KAREN MILLEN goods. For example, KAREN MILLEN customers might well not predict that the business was going to start selling rugs, but if they came across rugs in a shop branded KAREN MILLEN they could nonetheless conclude that they were from the same source as the KAREN MILLEN clothes they had purchased previously. Indeed I think they almost inevitably would so conclude.

My main reasons are:

Although I have agreed that the Defendants are entitled to focus on their best case in terms of physical proximity and so on, I do not think it is necessary for them to do so. The position under clause 5.1.7 would be even clearer if the Claimant, as well as a KAREN MILLEN shop selling, say, rugs, had another nearby shop selling clothes under the trade mark KAREN with similar trade dress. But I find it hard to see how any reasonable range of goods of the type pleaded, sold in any reasonable format under a KAREN MILLEN mark would not be confusing, so long as the sales took place where they were reasonably likely to come to the attention of customers of the KAREN MILLEN business.

I turn to consider the Claimant’s proposed activities under KAREN solus marks, i.e. without the word MILLEN or initial M in them. I can consider these together; I do not think the cursive script or “kiss” make any difference to what I have to decide.

The Defendants’ position is obviously a lot weaker here, and the Claimant’s correspondingly stronger. KAREN is an ordinary female first name, not the most common but not the least common either. MILLEN, the element which gives the combined KAREN MILLEN mark its distinctiveness (both because it is much less common and because it is tied to the repute of the KAREN MILLEN business), is not present in the KAREN marks per se. And there are a number of other marks in use in the fashion business with the first name KAREN (plus a surname), such as KAREN SCOTT. These were accepted to be real businesses, not just unused registrations, and their existence goes quite a lot further to undermine the distinctiveness of the name KAREN.

On the other hand, the Claimant does intend to use the KAREN solus marks in relation to clothing, so the issue about different goods does not arise.

Were the Claimant to have sought a decision that the use of the KAREN solus marks was not a breach, in circumstances where there was no possibility of any association with the name MILLEN, and if the declarations had defined her intended use more closely in terms of geographic positioning and the like, then I think this aspect of her claim might have succeeded. Mainly because of the weak and possibly non-existent distinctiveness of the first name alone, along with the other KAREN brands in the fashion industry, I think it is possible to conceive of uses, perhaps many uses, which would not cause confusion and would not be a breach of clause 5.1.7.

However, I have accepted the Defendants’ submissions that the breadth of the declarations sought is very great. It extends to the use of KAREN marks on clothes in close physical proximity to the Defendants’ stores, along with simultaneous use by the Claimant on other goods of KAREN MILLEN, and (potentially, although again I do not regard it as decisive) in connection with the Claimant attempting to explain and indeed exploit her past connections to the KAREN MILLEN business, which may or may not succeed in avoiding a trade mark type of association. If these factors were to be combined, which I think is a situation within the scope of the declarations, favourable to the Defendants but not artificially or ridiculously so, then I consider there would be confusion. The declarations therefore include acts which would be a breach of clause 5.1.7.

I turn to the position as of the date of these proceedings. The position in the USA is different from the position in 2004 in that the Defendants have far more outlets, a much greater turnover, and have expanded their range of goods a little. Evidently, the Defendants’ position can only have improved relative to matters in 2004 and I therefore find in their favour in relation to the KAREN MILLEN and KAREN solus marks.

Finally I turn to China as of the date of these proceedings.

In relation to the dispute about the admissibility of the evidence on trade circumstances and confusion, it was submitted to me by Mr Mellor that I might need help in putting myself in the position of consumers of women’s fashion (and associated goods) in China. But in the end, neither side really submitted that there was anything different about the trade there. The outlets I have to consider are in modern, high end shopping malls or department stores, and in this age of globalisation I feel able to assess the risk of confusion in such a setting even given that they are on the far side of the world; this is not a case where it is suggested that consumers there will not be able to read the trade marks, or that there is a translation issue, or that goods are displayed or promoted in a significantly different way. There was a minor debate about how common it is for Chinese people to take an anglicised first name in addition to their given Chinese name, but this was not developed in the evidence and in any case it was clear that very many western fashion brands with trade marks which are or include western names, do business in China and have done for years.

In those circumstances, I think that the position in China as of the date of these proceedings is relatively similar to the position in the USA in 2004: KAREN MILLEN is a successful and distinctive brand, albeit with relatively few outlets at the moment. But for those consumers in China who are aware of the brand, the likelihood of confusion is essentially the same, and I make the same findings as for the USA in 2004, both in relation to the KAREN MILLEN marks and the KAREN solus marks.

In its pleadings and written opening, the Claimant challenged the right of the First Defendant to sue at all, and asserted that the Second Defendant had the right to enforce clause 5.1.7 (and similarly 5.1.4, as I understand it) only in relation to territories where it had its own distinct interest and trade. In the case of the Second Defendant, that would limit its interest to the US.

This point was related to the interpretation of clause 11, on which the Claimant, until its written opening, was maintaining a case that a successor in title, as well as an assignee, could only take on the benefit of the SPA if it complied with the mechanism in the second half of the clause, concerning share capital and the transferee remaining in the Group. That case was dropped in the Claimant’s written opening.

I did not understand the Claimant to argue that the First Defendant was not a successor in title within the meaning of clause 11, and I find that it was, as a result of the APA. In general, therefore, and subject to the Claimant’s other points, the First Defendant has a right to sue.

The Claimant’s remaining objection to the status of the First Defendant was on the basis that it had no goodwill in the US, because that belonged to the Second Defendant. I have rejected that in dealing with the US law.

I also can see no reason why, as successor in title to the overall owner of the operating assets of the business, the First Defendant ought not to be able to enforce the SPA as it relates to China (or any other territory) under clauses 5.1.4 and 5.1.7. It would be doing so on behalf of the group as a whole.

Finally on this sub-topic, I understand the Claimant still to contend that the Second Defendant cannot enforce the restrictive covenants of clause 5 save in relation to the US, where it has goodwill. Since I have found that the First Defendant has the right to enforce the clauses in relation to China (and anywhere else) this is of no practical importance, but in any event I disagree with the Claimant. There is nothing in the SPA to limit which company can enforce the clauses or for what territories and it could well be in the interest of any of the identified third parties to prevent the Claimant from trading under a confusingly similar name in a territory which was close in geographical and/or commercial terms.

I have set out clause 21 above.

In the EDV proceedings in the US, three counts are relevant to my consideration. They are as follows (the precise words do not matter so I take this paraphrase from the Claimant’s trial skeleton):

Counts II and III are being pursued on appeal in the US.

It is quite obvious in my view that these fall within the type of “action or proceedings” covered by clause 21.2 and, realistically, Mr Mellor did not argue otherwise. Count I is a claim under the SPA and counts II and III necessarily require a decision as to its meaning and arise “out of or in connection with” it.

There was a brief attempt in the Defendants’ written opening (paragraph 204) to argue that clause 21.2 does not in fact provide for exclusive jurisdiction, but after I raised this with Mr Mellor in oral opening no more was said about it. I interpret it as having been (rightly) dropped, and in any event I reject it.

Hence the Defendants’ argument as to why the EDV proceedings were not in breach of clause 21.2 was based on the assertion that although they are seeking to enforce the SPA and hence take its benefit, they are not subject to the burden of clause 21.2.

This argument was not really addressed in any detail in the Defendants’ opening written submissions, but was expanded considerably in their written closing.

The Claimant relies on clause 11, which provides for the SPA to be “binding upon and enure for the benefit of” successors in title. This, it says, is how the First Defendant has title to sue and imposes the burden of the SPA, including the choice of jurisdiction under clause 21, on successors in title who seek to enforce the SPA.

As to the Second Defendant, the Claimant submits that it is an identified third party under clause 5, that it therefore in principle has the right to enforce clause 5, but that clause 20.1.1 says that such enforcement is “subject to and in accordance with the terms of this Agreement”.

The Defendants respond by saying that clause 11 is not specific as to which clauses of the SPA are binding on successors in title. As to identified third parties, they say clause 20.1.1 and 20.1.2 provide a list of clauses (5, 7, 9 etc) the benefits of which are enforceable by them. They point to the fact that all of the clauses listed in clauses 20.1.1 and 20.1.2 except clause 7, necessarily impose obligations on the relevant third parties. Clause 21 is not listed in clause 20.

However, I did not understand Mr Mellor to argue that the list of clauses in clauses 20.1.1 and 20.1.2 was an exhaustive list of the clauses creating obligations which would fall on an identified third party, and in the Defendants’ written closing they accepted that clause 21.1 (choice of English law), which is not listed in clause 20, would bind identified third parties. Mr Mellor accepted that it was all a question of interpretation of the SPA: if the SPA is properly interpreted to mean that clause 21.2 was intended to bite on successors in title or identified third parties when they seek to enforce it, then it would be effective to do so.

The SPA refers in clause 20.1 to the “Third Party Rights Act”, and it is common ground that this is a (slight) misnomer for the Contracts (Rights of Third Parties Act) 1999. The Defendants referred to this to bolster their argument on clause 21.2. The argument proceeded in stages.

First, the Defendants said that the 1999 Act does not make a benefitted third party a party to the contract. This is uncontroversial and Mr Graham did not dispute it.

Then, the Defendants referred to s. 1(4), which is as follows:

“This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract.”  

The Defendants accept that this does not in itself prevent a jurisdiction clause from being binding on a third party seeking to enforce an agreement if the clause is appropriately drafted, and they acknowledged that WPP Holdings Italy Srl v. Benatti [2007] EWCA Civ 263 was an example where that had happened (albeit they said the jurisdiction clause was different from clause 21.2 in the present case).

Mr Graham’s response in relation to s. 1(4) was that it implemented the basic principal of conditional benefit, which is to say that the third party is not privy to the contract, but, in the event that it chooses to take the benefit, must do so according to the terms of the contract. I agree.

The next stage in the Defendants’ argument depends on s. 8 of the 1999 Act, which is concerned with arbitration and is as follows:

“(1)

Where— (a) a right under section 1 to enforce a term (‘the substantive term’) is subject to a term providing for the submission of disputes to arbitration (‘the arbitration agreement’), and (b) the arbitration agreement is an agreement in writing for the purposes of Part I of the Arbitration Act 1996, the third party shall be treated for the purposes of that Act as a party to the arbitration agreement as regards disputes between himself and the promisor relating to the enforcement of the substantive term by the third party.

“(2)

Where— (a) a third party has a right under section 1 to enforce a term providing for one or more descriptions of dispute between the third party and the promisor to be submitted to arbitration (‘the arbitration agreement’), (b) the arbitration agreement is an agreement in writing for the purposes of Part I of the Arbitration Act 1996, and (c) the third party does not fall to be treated under subsection (1) as a party to the arbitration agreement, the third party shall, if he exercises the right, be treated for the purposes of that Act as a party to the arbitration agreement in relation to the matter with respect to which the right is exercised, and be treated as having been so immediately before the exercise of the right.”

The Defendants use s. 8 as a springboard for the following argument (from paragraph 189 of their written closing): “If the effect of the 1999 Act was to impose a contractual duty, as opposed to a procedural condition, upon a third party, then section 8 would have been completely unnecessary. So the very existence of section 8 confirms that the 1999 Act does not impose contractual duties upon third parties.”

I reject this. First, and as I have already said, s. 1(4) allows the operation of the conditional benefit principle and has the result that obligations under the contract in question bite on the third party when it seeks to take the benefit of the contract. The Defendants accept that.

Second, the position with s. 8 is clearly not, I believe, as the Defendants suggest. The issue which s. 8 had to address was this: the conditional benefit principle would require a third party wishing to enforce a contract to act in accordance with its terms. Normally, the third party would be able to act in accordance with them if it wanted to, for example by bringing an action in the High Court. But if the contract provided for arbitration, then the third party, even if it wanted to, could not enforce according to the terms of the contract, not being a party to the arbitration agreement. S. 8 resolves this by treating the third party as a party to the arbitration agreement. See the judgment of Ramsey J in Hurley Palmer Flatt Ltd. v. Barclays Bank Plc [2014] EWHC 3042 (TCC), with which I agree.

In other words, s. 8 does not impose an obligation on the third party to enforce in accordance with the terms of the contract in question. Rather, it enables the third party to do so. It is s. 1(1) and 1(4) of the 1999 Act together with the provisions of the contract in question, on their proper interpretation, which have the result that the third party must abide by the terms of the contract, if it seeks to enforce them.

Therefore s. 8 does not advance the Defendants’ position, and I turn to interpret the SPA to identify whether clause 21.2 is applicable to successors in title and/or to identified third parties.

The benefit of an exclusive jurisdiction clause is that it provides certainty to all sides about where disputes will be determined, and in general there is a very strong expectation based on practicality that it will apply to all sides equally. One ought therefore to be very slow to conclude that it was intended for such a clause to bind only some of the parties, or others who might seek to enforce.

In addition and for very much the same reasons, I think it would be odd and illogical for successors in title to be bound by clause 21.2, but not identified third parties having rights under clause 5 (or vice versa). I am fortified in this view by the fact that clause 11 says that the agreement is binding on successors in title “of each of the parties and every other person with enforceable rights under this Agreement”.

Clause 11 is to my mind clearly a very general clause which means that such successors in title step into the shoes of the original party in all possible respects. The fact that clause 21.2 says that “each of the parties” submits to the jurisdiction of the English courts is simply because the authors did not encumber the drafting by writing “or successors in titles and assigns” or the like every time they referred to the parties.

As to clause 20, I consider that clause 20.1.1 specifically identifies the instance of clause 5 providing rights to identified third parties, and in keeping with the 1999 Act (as mentioned in clause 20.1), makes it clear that enforcement is subject to the other terms of the SPA. Again, I think the reference to the terms of the SPA is general and not limited. It would very naturally extend to provisions as to the procedure of enforcement.

As to the Defendants’ reliance on clause 20.1.2, it is of course plain on the face of that provision that clause 21.2 is not included in the list of clauses set out, but I do not think that is at all surprising or helpful to the Defendants. Clause 20.1.2 does not purport to limit the generality of the closing words of 20.1.1 and is for a quite different purpose (as Mr Graham submitted), which is to identify other clauses of the SPA whose benefit is conferred on third parties as necessary and ancillary to the rights under clause 5 given by clause 20.1.1.

As with my analysis of clause 11, I think that the reference in clause 21.2 to “parties” does not exclude identified third parties whose right arise under clause 20.

I have already touched on the inconvenience and lack of sense and balance in an interpretation which bound only the original contracting parties to the jurisdiction of the English courts, and not successors in title. On the Defendants’ interpretation, even the original identified third parties would not be bound, and so from the very start of the SPA they, subsidiary participants, would be able to sue anywhere, while the original contracting parties would have to sue in England. That would mean that the Claimant would be tied to England, while the parties on the other side of the deal, broadly speaking, could choose to enforce clause 5 via the original parties, in England, or via the identified third parties, anywhere. None of this makes commercial sense in my view.

I therefore reach the clear conclusion that clause 21.2 is binding on the Defendants and the EDV proceedings were a breach of the clause.

I turn to consider relief. The Claimant seeks damages and an anti-suit injunction. As to damages, the Defendants respond that not all of the costs of the EDV proceedings are necessarily recoverable because, for example, had they brought proceedings in England first and so obeyed the requirements of clause 21.2, then they might still have needed to pursue proceedings in the USA to enforce the findings of the English Court. I make no comment on whether this argument is correct, but in view of my findings on clause 10 there is at least some basis for making it, so I will order an inquiry as to damages with the indication that the Defendants may run this argument in it.

The claim to an injunction is rather complex. There are two main aspects to it. The first is delay: the Defendants say that the Claimant should have sought an anti-suit injunction much earlier, rather than allowing the EDV proceedings to continue. The Claimant’s response is that she has always said that the EDV proceedings are a breach and has claimed as much in these proceedings even if she did not seek interim relief.

The second aspect is that there is a real likelihood that my finding (or if appealed, the decision of the Court of Appeal) will need to be given effect in the USA, unless the Claimant simply agrees to consent to the Defendants’ applications. There is an obvious need to craft an Order which accommodates this. Subject to further argument it might well be wrong to grant an injunction which merely led to the Defendants having to initiate fresh proceedings to enforce my judgment, with associated unnecessary and increased costs. This is all related to the delay argument because the passage of time is such that the English court is now giving judgment prior to any final disposition of the EDV proceedings.

A further practical difficulty is that the parties’ submissions on delay at trial were not very fully developed. I make no criticism of this, since their representatives presented the arguments on the main issues efficiently and within the trial estimate, and delay was a subordinate, contingent point. After the end of the trial, I was sent further submissions in the form of an email from the Defendants drawing my attention to the decision of Phillips J in ADM v. PT Budi Semesta Satria [2016] EWHC 1427 (Comm), and the Claimant retaliated with a detailed chronology of these, and the EDV, proceedings. The decision of Phillips J is relatively complex and so is the chronology of these proceedings. I do not think it is satisfactory or efficient to rule on this without further argument, and that is reinforced by the interplay between my findings on clause 10 and the EDV proceedings.

I will therefore, if necessary, hear further argument on whether there should be an anti-suit injunction and its possible scope, when I deal with the form of Order. If the parties are able to agree the point then so much the better.

I find for the Defendants in relation to clause 5.1.7 in relation to the USA and China, and in relation to both the KAREN MILLEN marks and the KAREN solus marks. Many of the acts falling within the negative declarations sought would breach the clause.

I find for the Claimant under clause 5.1.4, save that I find that the intended breaches of clause 5.1.7 would also be breaches of clause 5.1.4. I reject the Defendants’ claim that clause 5.1.4 is relevant to the Claimant’s trade mark applications, opposition or cancellation proceedings.

However, I find that the Claimant is obliged under clause 10 to consent to the Defendants’ registrations.

I find for the Claimant under clause 5.1.6. None of the matters complained of are sufficiently referable to the Defendants’ concessions.

I find that the Defendants acted in breach of clause 21.2 in bringing the EDV proceedings.

I will hear the parties on the appropriate Order to make, both on the jurisdiction clause and on my findings as to clause 5 and clause 10. I would be assisted by submissions as to whether any injunction is appropriate or whether appropriate declarations would be adequate or better, and if so in what form.