HomeInsightsCourt of Appeal overturns High Court decision allowing amendments to Defence and Counterclaim in trade mark infringement case, as there was no explanation or justification as to why the application to amend had been made late

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Facts

ABP Technology Ltd is a UK company that sells computer gaming accessories and is the proprietor of two trade marks for STEALTH (word) and STEALTH VR (in stylised form), which are both registered in relation to ”audio headsets for playing video games”.

Voyetra Turtle Beach Inc is a US company which is a global gaming accessory manufacturer that designs, manufactures, markets and sells gaming headsets for multiple platforms. Turtle Beach Europe Ltd is a UK company that distributes Voyetra’s gaming headsets and accessories in the UK and Ireland.

In November 2020, following an unsuccessful challenge by Voyetra to one of ABP’s trade marks, ABP issued trade mark infringement proceedings against Voyetra and Turtle Beach under ss 10(1) and 10(2) of the Trade Marks Act 1994. Voyetra relied on the defence of honest concurrent use of the STEALTH mark.

On 28 January 2021, Voyetra instructed Name Creations Ltd (NCL) to acquire, on its behalf, a UK registered trade mark for STEALTH that had been registered in the name of REL Acoustics Ltd in May 1996 for ”Hi-fi apparatus, instruments and loudspeakers; parts and fittings for all the aforesaid goods” (the REL Mark). NCL acquired the REL Mark on 28 January 2021, by which time it had not been used for over five years. In March 2021, NCL granted Voyetra an exclusive, royalty-free licence to use it, with a term commencing on 28 January 2021. On 15 June 2021, NCL assigned the REL Mark to Voyetra by deed.

ABP applied for summary judgment of the entire claim. In response, Voyetra applied for permission to amend its pleadings to:

  • add that, as a result of its acquisition on 28 January 2021 of the REL Mark, Voyetra’s use of the STEALTH sign, which ABP claimed was infringement of its registered marks, was in fact use of an earlier registered mark under s 11(1B) of the 1994 Act;
  • plead acquisition of the REL Mark as part of its case on honest concurrent use; and
  • add in a counterclaim that ABP’s registrations were invalid under s 47 of the 1994 Act as a result of the earlier registration of the REL Mark, and that ABP’s use of the STEALTH marks amounted to infringement of the REL Mark.

At first instance, ABP’s main submission opposing Voyetra’s amendments had been that they could and should have been made earlier, while ABP still had the opportunity to apply for revocation of the REL Mark for non-use within the three-month period following the end of the five-year non-use period. ABP said that the timing had deprived it of that ability thereby causing it irremediable prejudice.

At first instance, Mr Justice Miles refused ABP’s application for summary judgment. He also refused Voyetra’s application to amend to add the counterclaim for invalidity against ABP’s marks on the basis that it had no real prospect of success. There was no appeal of these decisions.

Miles J did, however, give permission to amend to allow Voyetra to introduce the defence under s11(1B) and to introduce its counterclaim for infringement of the REL Mark. He found, inter alia, that: (i) the amendment application was not late, as argued by ABP, because it had been made at an early stage in the proceedings as a whole, before pleadings were closed or a case management conference had taken place; (ii) Voyetra had not been obliged to reveal its plan; and (iii) overall, he did not consider that the prejudice, which he recognised would be caused to ABP, arose from any unjustified delay on the part of Voyetra. ABP appealed these findings.

Decision

The main issue for the Court of Appeal was Miles J’s approach to the exercise of his discretion to allow the amendments. ABP argued that Miles J had failed to consider a relevant matter, which was that the amendment was late and that, as a result, important consequences followed that were not considered properly or at all. It also said, as a subsidiary issue, that Miles J had considered an irrelevant matter, which was ABP’s failure to check the trade mark register for other STEALTH marks before NCL had acquired it.

Giving the lead judgment, Lord Justice Birss (with whom the other Justices agreed) noted that late amendments must be explained and justified (CIP Properties v Galliford Fry [2015] EWHC 13454 (TCC)) so that the court can work out whether, despite the prejudice caused to the other party by the lateness, the balance comes down in favour of allowing the amendment.

ABP argued that Voyetra’s tactics amounted to deliberate concealment to ensure that ABP remained unaware of Voyetra’s interest in the earlier mark until the revocation opportunity under s 46(3) of the 1994 Act had passed. Voyetra said that it was entitled to do this in order to make a ”meaningful amendment” to its Defence, i.e. one that could not be stymied by ABP using s 46(3) to revoke the REL Mark.

In response to Voyetra’s argument, Birss LJ said that the fact that an amendment might advance a case was obviously relevant, but it was not determinative. The amendment could still be refused if its unjustified lateness was prejudicial to the other party.

As for prejudice to ABP, Voyetra admitted during the appeal that NCL had always acted on behalf of Voyetra, meaning that the s 11(1B) defence was in fact available to it from the date NCL had taken the assignment of the REL Mark, i.e. 28 January 2021, which was before Voyetra had filed its original Defence. Therefore, Voyetra could have pleaded it from the outset. This had not been put before Miles J.

In any event, on the information available to Miles J at the time, which was that Voyetra had notified ABP of the amendments in July 2021 and that the s 11(1B) defence had been available to Voyetra since March 2021, Birss LJ found that Miles J had erred by not finding that the amendment was late. Lateness is a relative concept, Birss LJ said. An amendment made early in the absolute frame of reference of the proceedings might nevertheless be late when its timing is considered relative to the date on which it could have been raised, taking into account the consequences of the time difference, which were that ABP had been deprived of a defence.

As for justification for lateness, Birss LJ noted that Voyetra had not adduced any evidence to explain the lateness of the amendments and Miles J had not questioned this on the basis that the tactic employed by Voyetra was not prohibited by the Trade Marks Act 1994. However, in Birss LJ’s judgment, ”Voyetra’s conduct will not do”.

Birss LJ had ”little doubt” that the true reason no evidence was produced was because to have written it down honestly would have looked deeply unattractive. Although Voyetra’s counsel was relatively frank before the  Court of Appeal about its motives, the story had never been explained properly or fully. The fact that Voyetra accepted that its objective in not telling ABP about the amendment until it did was to avoid tipping off ABP to bring a revocation action, was no excuse.

Birss LJ held that finding that Voyetra had proposed the amendments in good faith, as Miles J had done, was not a conclusion that had been open to him in the circumstances, without evidence in the form of a witness statement explaining and justifying why they were late. The absence of any justification should have been fatal to its application to amend. The fact that Voyetra’s conduct could be taken to be legitimate under the Trade Marks Act did not absolve it as a litigant in civil proceedings from addressing the timing of the step taken in the litigation. The right conclusion was that the lateness of the application to amend had been deliberately calculated to cause prejudice to ABP and no good reason had been provided for that lateness.

As for checking the register for the REL Mark, which Miles J had criticised ABP for not doing, Birss LJ held that this was not relevant to the exercise of discretion in this case. As stated in Walton v Verweij [2018] EWHC 1608 (Ch), a party does not have a duty to search the register before marketing its goods and then to apply to revoke any unused marks it finds there.

In conclusion, Birss LJ said that Voyetra had attempted to take advantage of the process of civil justice itself. To permit the application to amend the defence and to add the counterclaim would be to sanction an act of deliberate concealment by Voyetra. Accordingly, the judge had been wrong to permit the amendments and the appeal was allowed. (ABP Technology Ltd v Voyetra Turtle Beach Incorporated [2022] EWCA Civ 594 (4 May 2022) — to read the judgment in full, click here).

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