Vertical Leisure Ltd v Poleplus Ltd

JUDGE HACON: This is an application for summary judgment in an action for infringement of trade marks and passing off. The claimant, Vertical Leisure Limited, makes and sells pole exercise dance equipment, in particular poles used by pole dancers. The claimant is the proprietor of a number of United Kingdom community and international marks, consisting of or including the words “X-Pole”. As currently pleaded, the relief is sought only in relation to the United Kingdom marks, but at the start of the hearing I gave permission to amend to plead international and Community trade marks.

The claimant has supplied poles under the X-Pole name since 2004. These have been advertised and marketed throughout Europe, particularly in the UK, and significant sums have been spent on marketing, in particular since 2010.

In 2013 a new type of pole was developed which was given the name SILKii. This new pole received publicity at the Blackpool Winter Gardens at an exhibition known as the International Fitness Showcase held there at the Blackpool Winter Gardens between 20 and 24 March 2013. SILKii poles were not offered for sale at that exhibition. Several pole athletes sponsored by the claimant, known as the X-Pole athletes, attended the event with members of the claimant’s sales and marketing team. This comes from the evidence of Mr Stoughton, who is the head of finance operations for the claimant. Mr Stoughton says that the X-Pole athletes were keen to try out the SILKii as soon as possible, and he also says that the marketing team brought the SILKii product to the event, where the X-Pole athletes both used and demonstrated it. Mr Stoughton goes on: “During the course of the three days (inaudible) 2013 the claimant’s representatives explained the SILKii product to consumers using the name SILKii; they also told visitors to understand that the SILKii product would be officially launched at the FIBO exhibition in Cologne in Germany on 11 and 12 April 2013, and indeed the official launch of the SILKii launch did happen at FIBO in Cologne on 11 and 12 April.” There, according to Mr Stoughton, the pole received a good deal of publicity amongst prospective buyers, including prospective buyers from England and Wales.

There is a third witness statement from Mr Stoughton put in just before this hearing in which he says that the claimant took orders from SILKii at FIBO. However, as pointed out on behalf of the defendants, there is no evidence that any of these orders came from United Kingdom purchasers.

The claimant claims that by 12 April 2013 it had goodwill in England in its business and manufacturing its own poles and that this goodwill was associated in the mind of the relevant public not only with the trade name X-Pole but to some extent also with the trade name SILKii. I accept this; it seems to me there is no doubt at all that the goodwill of the business was attached to the X-Pole name and, on the evidence before me, also some of that goodwill was attached to the SILKii trade name, bearing in mind the activities carried on by the claimants at the Blackpool Winter Gardens and subsequently at FIBO. In the latter case, at least some of that publicity in Cologne must have come to the attention of potential purchasers in England and therefore goodwill subsisted by 12 April 2013.

The first defendant is a competitor of the claimant, although I understand in a much smaller way of business. It sells dance and exercise poles under trade names “Polesilks” and “Poleplus”. The second defendant, Mr Peter Bowley, was briefly a director of the first defendant and has worked with the first defendant, describing himself as a technical director. He is a former boyfriend, and now I understand fiancé, of Ms Sue Colebourne, who is now the sole director of the first defendant, Poleplus Limited.

I mentioned the date of 12 April 2013 a moment ago and this is relevant because on that date Mr Bowley registered, it appears, six domain names. Four of these are set out in the Particulars of Claim, namely SILKii.co.uk, SILKii.com, X-Pole SILKii.com and X-Pole SILKii.co.uk. I was told today by Mr Harris, who appears for the claimant, that two further domain names have been identified. I understand these were registered at the same time. They are the same as the third and fourth domain names I have just mentioned, except for the dash between the “e” and the “s” in each case – in other words, between “Pole” and “SILKii”. It appears that a number of other domain names have since been registered by Mr Bowley between 29 and July and 8 August 2013, all of them featuring the word “X-Pole” or the word “SILKii”.

The claimant alleges that the registration by Mr Bowley of those names must have been prompted by publicity given to the claimant’s new SILKii pole in Blackpool and also because X-Pole was a well-known trade name for the claimant.

On 7 August the claimant applied to the United Kingdom Intellectual Property Office to register SILKii as a UK trade mark and it was registered on 8 November 2013.

On 9 August 2013 Mr Bowley sent an email to Clive Coote, director of the claimant, offering to sell to the claimant seven of the domain names he had registered and two Twitter accounts relating to SILKii. In that email Mr Bowley said:

“Dear client,

I managed to get back earlier than expected and do not want to delay this any further than is necessary. In principle I agree to sell you the domain SILKii.com and will also be willing to sell you the following domains if you were interested [and then he lists seven further domain names, so in fact he appears to have been offering eight].

I also have two Twitter accounts that appertain to SILKii. Are you willing to put together a package all of the above? I await your reply.

Regards, Pete.”

Correspondence followed but the claimant declined to purchase of the domain names or the Twitter account offered. A claim form was issued on 27 November 2013 for infringement of the X-Pole and the SILKii trade marks and for passing off.

I begin first with the trade mark infringement. Articles 5(1)(b) and article 5(2) are relied on. The allegations are made against the defendants jointly, but it is not suggested that Mr Bowley trades on his own account, so it is not clear to me at the moment how the trade mark case is put against him personally. So far as passing off is concerned, again it is pleaded against both of the defendants; firstly on the basis that the registration of the domain names constitutes a misrepresentation that the defendants’ business is authorised, approved by or connected with the claimant’s business. Only the first defendant has a business and so it appears to be effectively an allegation against the first defendant only. Passing off is also put on the basis of the registration of the domain names’ generating instruments of deception. Again, it is pleaded against both defendants, but this is really a pleading against Mr Bowley since he was the one who registered the names. Among the relief sought in the particulars of claim is an order for the transfer by Mr Bowley to the claimant of all the domain names on which complaint is made.

In Mr Bowley’s Defence, he admits that he registered the domain names. He admits he offered to sell them to the claimant. He claims he wanted to make to some money from the claimant. He says he would not have sold the domain names to anyone else. He says he would not have suggested to the first defendant that the first defendant should use them and he says that he continued to register for the domain names to assemble a package of rights that the claimant would find worth purchasing. He denies that he used the domain names or threatened to do so.

I will begin with the case against Mr Bowley. This is an application for summary judgment, and so the principles set out by Lewison J, as he then was, in Republic of Nigeria v Santolina Investment Corporation [2007] EWHC (Ch) apply:

“4.

The courts have now given guidance on the principles to be applied in deciding whether or not to give summary judgment. For present purposes I summarise the relevant ones as follows:

i)

The court must consider whether the defendant has a ‘realistic’ as opposed to a "fanciful" prospect of success: Swain v Hillman [2001] 2 All ER 91;

ii)

A ‘realistic’ defence is one that carries some degree of conviction. This means a defence that is more than merely arguable: ED & F Man Liquid Products v Patel [2003] EWCA Civ 472 at [8]

iii)

In reaching its conclusion the court must not conduct a ‘mini-trial’: Swain v Hillman

iv)

This does not mean that the court must take at face value and without analysis everything that a defendant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED & F Man Liquid Products v Patel at [10]

v)

However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No 5) [2001] EWCA Civ 550;

vi)

Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v Bolton Pharmaceutical Co 100 Ltd [2007] FSR 63;

vii)

Although there is no longer an absolute bar on obtaining summary judgment when fraud is alleged, the fact that a claim is based on fraud is a relevant factor. The risk of a finding of dishonesty may itself provide a compelling reason for allowing a case to proceed to trial, even where the case looks strong on the papers: Wrexham Association Football Club Ltd v Crucialmove Ltd [2006] EWCA Civ 237 at [57].”

The claimant relies in particular on the judgment of the Court of Appeal in British Telecommunications Plc v One in a Million Ltd [1999] 1 WLR 103; [1999] FSR 1. The facts of that case, at least to some extent, were similar to these. The defendant in the BT case had registered a number of domain names which included the trading names of some very well-known businesses, including Marks & Spencer, Virgin and BT. Having done so, the defendants offered these domain names for sale for the owners of those businesses. Aldous LJ, with whom Stuart-Smith and Swinton Thomas LLJ agreed, upheld the order for summary judgment at first instance against the defendant.

So far as infringement of the trade mark was concerned, the Court of Appeal held that the defendants had no realistic prospect of success against the allegation of infringement under section 10(3) of the 1994 Trademarks Act 1994, in other words, the equivalent to article 5(2) of the trademark directive. I would be wary of concluding, at least beyond any doubt, that the law as set out in BT remains unaltered, bearing in mind in particular Case C-17/06 Céline SARL v Céline SA [2007] ETMR [2007] 1320 and Case C-407/07 L'Oréal SA v Bellure NV [2010] RBC 1; at least I would be wary of reaching that conclusion without further argument on the law for which there was no time today. That said, it was argued for the claimants that the offer for sale in the present case was an economic activity and that that economic activity affected the trade mark rights of the trademark proprietors in the present case.

Reference was also made to the judgment of Park J in Global Projects Management Ltd v City Group Inc & Ors [2005] EWHC 2663 (Ch). In that case the domain name which was registered and about which complaint was made was applied for before the relevant trade name of the claimant had been used in the UK. Park J pointed out, however, that there had been press coverage that gave rise to goodwill before actual trading began, and it was suggested to me that he also indicated that it was possible to bring an action for passing off even if there had been neither trading nor publicity, so there was no goodwill in England and Wales in relation to the relevant trade name. I am not convinced that is what Park J was saying. In any event it seems to me that even if this has application to the case under section 10(3), this further reinforces my view that, so far as the trade mark side of the action is concerned, I would not reach any conclusion today without further argument.

I turn therefore today to the allegation of passing off and I refer now to what was decided in BT v One in a Million. Plainly, so far as that side of the BT case is concerned, it is undoubtedly good law by which I am bound. As I read the judgment of Aldous LJ, essentially he was making two points. The first is that the placing on the register of the distinctive name makes a representation to persons who consult the register that the registrant is connected or associated with the name registered, thus with the owner of the goodwill, and that this erodes the goodwill in that name and causes damage to the owner of the goodwill. In other words, registering the domain name of itself gives rise to passing off of a conventional nature.

In relation to this it was argued for the defendant that this should no longer be followed because the public today are more sophisticated than they were in 1999 when the BT case was decided, and that the representation which Aldous LJ inferred would not necessarily follow today. There was no evidence at all to support this. It was said that this is an application for summary judgment and I should not blindly follow the law as stated in BTbecause the realities of the world have moved on. I do not accept that. It seems to me that if, as I have found, that goodwill subsists, then, in relation to the relevant pubic, the likelihood of a misrepresentation, as identified by Aldous LJ, will follow. It also seems to me that Mr Bowley must have thought the same, because he registered the names and openly offered them to the claimant, presumably expecting the public to assume that there would be a connection between the claimant and the domain names. In any event, I am bound by the judgment of Aldous LJ.

The second essential point made by Aldous LJ in relation to passing off was that domain names registered in the way he described were instruments of fraud. He ruled that use of them is liable to result in passing off. As in the BT case, the motive of Mr Bowley was to use the goodwill of the name to threaten to sell the names to another who might make use of it for passing off and thus to obtain money from the claimants. In other words, the threat of passing off essentially arose from the registration of a domain name which, thus created, was an instrument of fraud. It seems to me again that BT v One in a Million establishes a principle of the law by which I am bound, and I see no significant difference between the facts in that case and the facts in this case such as would give rise to a different conclusion.

So, taking first the case against Mr Bowley, I think that by registering the domain names Mr Bowley did trade in circumstances by which a misrepresentation would be made to the relevant public who consulted the register, and, secondly, he created an instrument of fraud. Mr Bowley offered, as I have mentioned, the domain names for sale to the claimant because, by implication, he realised the message that they would convey, which was the only reason they had any value for the claimant. He has no realistic prospect of defending the action. Therefore, essentially for the reasons given by Aldous LJ, I conclude the claimant is entitled to summary judgment against Mr Bowley.

I turn to the case against the first defendant, Poleplus Limited. The first defendant did not register any of the domain names. The case against the first defendant is only good if it is established that it was joint tortfeasor with Mr Bowley. In the claimant’s skeleton a number of points have been identified as the basis from which I am invited to conclude that unarguably a case of joint tortfeasance has been established as against both defendants. They are, in summary, that on its incorporation Mr Bowley was named as a director of the first defendant and that the defendants' characterisation of this as a mistake is not credible. Secondly, Ms Colebourne, the remaining sole director of Poleplus Limited, refers in her emails to Mr Bowley as the technical director. Thirdly, the Poleplus Limited website describes Ms Colebourne and Mr Bowley as a “legendary team” that runs the business. Fourthly, that Mr Bowley has access to the use of email addresses of Poleplus Limited and will soon have email access to Ms Colebourne’s email account. Fifthly, that Ms Colebourne and Mr Bowley have jointly represented Poleplus Limited at party events. In addition, it is said that Mr Bowley is responsible for the domain name registrations of Poleplus Limited. Finally, by way of what I took to be similar fact evidence, that Mr Bowley has also registered a domain name incorporating the name of a third party business. This third party trades under names which include Derby Pole Fitness and it appears that Mr Bowley has registered derbypolefitness@dance.co.uk as a domain name. I am invited to infer that this a further part of what he hopes to be a lucrative business in selling domain names to parties who otherwise would be the rightful proprietor of such domain names.

I can see that, on the evidence before me today, there is a compelling case that the first defendant is indeed jointly liable with Mr Bowley for the acts complained of. On the other hand Mr Bowley denies that Ms Colebourne knew about the registrations of the domain names complained of. She, as I have said, is now sole director of the first defendant, and essentially is the first defendant. I cannot say it is unarguable that the first defendant in the person of Ms Colebourne took no part in the acts complained of and was ignorant of the acts complained of. It seems to me at least arguable that she knew nothing about it and, if so, it would follow that the first defendant is not liable. Not only that, but the allegation of joint tortfeasance is not pleaded. The Particulars of Claim plead acts against both the defendants, but that does not constitute an allegation of joint tortfeasance, and proper reasons for alleging joint tortfeasance would have to be set out in the particulars of claim if this is to be pursued.

It seems to me that the first defendant was entitled to come to court today to resist the application for summary judgment in relation to the case as it is actually pleaded. It is not sufficient to raise the joint tortfeasance case for the first time in the skeleton argument of the claimant. There was also an allegation of vicarious liability on the part of the first defendant because of the acts of Mr Bowley. This has not been pleaded either, and I do not take it into account. Therefore I give the first defendant, Poleplus Limited, permission to defend.

I should conclude with this observation. It seems to me it would be very unsatisfactory for all concerned if this case were to go to trial just to determine the liability of the first defendant. I will hear submissions on the appropriate relief against Mr Bowley, but it seems to me bound to include an order that the domain names complained of are assigned to the claimant, so the main danger to the claimant will be adverted. The claimant may feel that it does not want to abandon the case against the first defendant if in so doing it risks paying for the defendant’s costs. I therefore strongly suggest to all the parties that settlement is attempted, and if settlement cannot be agreed it will be wise for each of the claimant and first defendant to make an appropriate Part 36 offer to safeguard their position as to costs in the event that this matter did go to trial merely on the question of joint liability for passing off.