HomeInsightsCourt of Appeal allows reverses estoppel finding and reinstates defences in “Love/Luv Injection” band name passing off case

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Background

The claimant, Ian Thomas, and the defendant, Winston Thomas, are half-brothers. Between about 1986 until 2016 they (and others) were members of a band (or “sound”) known as LOVE INJECTION or LUV INJECTION. The band split in 2016, following which Ian started to perform along with others under the name “Love Injection” and less frequently “Luv Injection” and Winston started to perform under the name “Luv Injection Sound”.

In 2017, Winston applied to register LUV INJECTION SOUND and LOVE INJECTION SOUND as UK trade marks in Class 41. One of the applications resulted in registration. Ian then opposed the second application and challenged the validity of the first, alleging bad faith under s 3(6) and claiming an earlier right to prevent use of the marks by virtue of the law of passing off under s 5(4).

The dispute resulted in a hearing at the IPO. The Hearing Officer found that the sound was “an unincorporated association and a partnership at will” and that therefore the goodwill resided with the changing members of the band, meaning that up until the band split in 2016, Ian was an owner of the goodwill as well as Winston. Given that Ian’s interest was not transferred when the band split, at that point in time Ian still owned that interest for the purposes of s 5(4). The Hearing Officer said that it was not necessary for him to consider what happened to ownership of the goodwill after that point in time, i.e. following the split.

Having established that Ian had the requisite goodwill, the Hearing Officer also found that the use of Winston’s registered mark would amount to misrepresentation leading to damage. Therefore, the opposition under s 5(4) succeeded, as did Ian’s application to revoke the registration. The Hearing Officer also decided that the mark had been registered in bad faith under s 3(6) and it was revoked on that ground as well. The opposition on that ground also succeeded. Winston did not appeal the Hearing Officer’s decision.

In October 2019, Ian issued proceedings for passing off against Winston in relation to the right to use the sound’s name.

In his Defence, Winston asserted that the name was his trading name, as a sole trader. His primary case was that the goodwill belonged to him, that he was entitled to continue to use it, and that, on the contrary, it was Ian who was passing off.

Winston also pleaded two alternative cases: (i) that: (a) the Hearing Officer had decided that the band was a partnership at will; (b) at the date of the split in 2016 the goodwill belonged to the partnership; (c) both parties had continued to trade under the name after the split; and (d) therefore, by the date of the claim form, the name had ceased to designate the partnership, but designated the separate businesses of both brothers; and (ii) that: (a) the name continued to designate the partnership; (b) if the partnership had not already been dissolved it should be declared to be dissolved on just and equitable grounds; (c) the goodwill was an asset of the partnership; and (d) the partnership should be wound up and its assets, particularly the goodwill, disposed of and the proceeds divided between the partners.

In his Reply, Ian said that it was unclear whether the Hearing Officer had found that the band was a partnership or an unincorporated association and that it could not have been both. Further, if the band was a partnership then the goodwill was a partnership asset, but there should be no further disposal of assets because when Winston left the group he did not claim any share in the goodwill and had therefore abandoned any claim to it.

In June 2020, on Ian’s application, Her Honour Judge Melissa Clark struck out most of Winston’s Defence on the basis of estoppel and granted an injunction preventing Winston from using LOVE INJECTION or LUV INJECTION as a band name.

HHJ Clark said that the split would have caused a dissolution of the partnership at will and that neither Ian nor Winston was entitled to dispute that. She also found that there was no res judicata and no cause of action estoppel as a result of the opposition and invalidity proceedings. Considering issue estoppel, she found that both Ian and Winston were estopped from denying the findings of the Hearing Officer in the invalidity proceedings and that there were no special circumstances which would disapply that estoppel. She said that Winston’s submission that Ian was not entitled to bring passing off proceedings because the goodwill belonged to the partnership ignored Ian’s pleaded case that when Winston left the band, he had abandoned any claim to a share in the goodwill. The Hearing Officer had not determined who owned the goodwill after the split in 2016, therefore it remained in issue and the burden of proof was on Ian.

As a result, HHJ Clark struck out most of Winston’s Defence, including the two alternative cases. Winston appealed.

Court of Appeal Decision

Considering issue estoppel (following Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2013] UKSC 46), Lord Justice Lewison (giving the lead judgment) noted that Ian had succeeded before the Hearing Officer on his objections under both ss 5(4) and 3(6). Winston could not challenge the s 5(4) decision on the basis of Articles 2 and 5 of the Trade Marks (Relative Grounds) Order 2007 (which essentially provides that a person can only apply for a declaration of invalidity if they are the proprietor of the earlier mark) because that would have left the bad faith decision under s 3(6) intact, as any person can oppose under s 3(6).

There were therefore two questions: (i) where a decision is made on more than one ground, which (if either) creates an issue estoppel? And (ii) if no appeal is possible on one only of those grounds, does that bear on the question whether there are special circumstances which would permit a party to challenge what would otherwise amount to an estoppel?

Lewison LJ noted that, In Spencer Bower and Handley on Res Judicata (5th ed) the editors state that a useful test is “whether, given a right of appeal, the losing party could effectively appeal against the determination. If there can be no effective appeal against a determination this normally indicates that it was not fundamental.”

Lewison LJ said that the fact that Winston could not have appealed separately against the Hearing Officer’s decision on s 5 (4) was at least a pointer to the conclusion that no estoppel had been created. Therefore, even if a “twin reason” decision can create an estoppel in relation to both reasons, an inability to appeal may be one of the special factors which persuade a court to permit a challenge to at least one of the reasons.

In Lewison LJ’s view, it was of considerable importance that in this case the goodwill in the name was partnership property and that partners are not entitled individually to exercise proprietary rights over partnership assets. Further, they are collectively entitled to each asset in which they each have an undivided share. Where a partnership is dissolved, the partners are entitled to have the assets realised and divided between them according to their respective shares, but none of them will “own” the assets. Therefore, in this case, on the basis of the Hearing Officer’s findings of fact, at the date the band split, both Ian and Winston were entitled to ask for the partnership assets to be realised and divided between them. Neither of them was solely entitled to the goodwill. Therefore, Ian could have prevented Winston from using the mark on the basis of passing off.

However, the only finding that the Hearing Officer expressly made about the ownership of the goodwill following the split was that it did not belong to Winston alone. Anything else that he had decided was collateral to that fundamental finding.

Lewison LJ found that it was at least doubtful whether the Hearing Officer’s decision created an issue estoppel. But if it did create an issue estoppel, despite being based on two separate grounds, there were special circumstances that would entitle Winston to challenge Ian’s standing to bring proceedings in passing off otherwise than for the benefit of the partnership, which were:

  • the lack of any opportunity for Winston to mount an effective appeal against the objection based on s 5(4)(a);
  • the Hearing Officer’s failure to appreciate that the partnership had been dissolved;
  • the Hearing Officer’s failure to consider how partnerships (as opposed to other unincorporated associations) are regulated on their dissolution; and
  • the continuing impact on Winston’s future ability to trade under the name.

Accordingly, the appeal was allowed and Winston was permitted to advance the alternative defences set out in his original Defence. (Ian Thomas v Luv One Luv All Promotions Ltd [2021] EWCA Civ 732 (20 May 2021) — to read the judgment in full, click here).