Court of Appeal partially overturns High Court decision relating to passing off and cybersquatting

The first claimant, Media Agency Group Ltd, is an advertising agency providing media planning advice and delivering integrated advertising campaigns. At the date of its incorporation, its name was Transport Media Ltd.

The second claimant, Transport Media Ltd, which was connected to MAG, was incorporated later, originally as Agency Media Group Ltd. TML was associated with the domain name transportmedia.co.uk. It remained dormant since incorporation.

In February 2013 the two claimants swapped names to the names that they currently hold.

The defendant, Space Media Agency Ltd, which was set up by a former employee of MAG, is an independent advertising agency.

MAG discovered that SMA was using the trading style “Transport Media Agency” and that it had acquired the internet domain name transportmediaagency.co.uk. In 2014, MAG registered the trade mark TRACCOUNTABLE for a product that was under development for outdoor media. SMA then registered the domain name trackaccountableadvertising.com.

MAG and TML claimed that SMA had passed off its business as that of MAG and TML.

At first instance, SMA admitted cybersquatting. The judge found that any goodwill in the names “Transport Media” and the product “Traccountable” was held by MAG, not TML. He also found that, pursuant to British Telecommunications plc v One in a Million Ltd [1999] 1 WLR 903, “registration of a domain name is capable of amounting to an actionable passing off”. He concluded that the passing off claim based on both “Transport Media” and the “Traccountable” word had been made out.

SMA appealed arguing that: (i) it was not open to the judge to find that MAG succeeded in its claim to passing off, as the pleaded case was that TML had had the goodwill to bring the claim. Further, the judge’s conclusion that MAG owned the goodwill on the basis that it had been incorporated with the name “Transport Media”, and attracted business through a website with that name, was contrary to the evidence, because MAG had transferred the name to TML in February 2013, before SMA acquired the domain name www.transportmediaagency.com, and the website transportmedia.co.uk was owned by TML, not MAG; (ii) the judge failed to deal with the defence that the domain name was descriptive; and (iii) the judge’s finding of passing off based on the “Traccountable” name was not made out on the evidence. Further, the trade mark was owned by TML.

Giving the lead judgment, Lord Justice Floyd found that it was clear from the outset that the passing off claim had been brought by both TML and MAG. Further, the judge was entitled to find that the way MAG and TML do business, which involves customers seeking services via the TML transportmedia.co.uk website being channelled to MAG, resulted in the relevant goodwill in the “Transport Media” name vesting in MAG rather than TML. It was MAG who contracted with the customer and MAG’s services which were supplied. The first ground of appeal was rejected.

As for the second ground, Floyd LJ said it was “trite law” that a descriptive name or mark can nevertheless support an action for passing off if it has acquired distinctiveness through use. Further, it was “obvious” that the name “Transport Media”, whilst having a descriptive component, was not so descriptive that it was incapable of supporting a claim to passing off on the basis of significant use. The pleadings did say that the name was descriptive, but understood in context, that meant “has a descriptive element”. The judge was entitled to find by implication that the use of the name by MAG was sufficient to give rise to a protectable goodwill.

SMA admitted that it had registered the domain name transportmediaagency.co.uk in order to take advantage of MAG’s goodwill in the name “Transport Media”. In other words, the judge found that SMA was itself using the name in its secondary meaning in order to attract business rather than to allow it to go to MAG. It was not being used in any ordinary descriptive sense. Although intention to pass off was not a necessary component, it was “plainly relevant”. The second ground was rejected.

As for the third ground, Floyd LJ found that there was no pleaded or factual base for a finding that the word “Trackaccountable” had acquired any goodwill or reputation. It was an unused trade mark that was incapable of supporting an action for passing off. The judge appeared to have treated cybersquatting as a comprehensive basis for an allegation of passing off. In doing so, he misinterpreted the decision in One In A Million Ltd, in which the question was whether the cybersquatters, simply by registering well-known domain names, were using or threatening to use a trade mark. Floyd LJ accepted the principle established by that case, but said that it does not dispense with the need to show, in the case of a passing off action, relevant reputation and goodwill in the name or mark relied on. SMA’s evidence made clear that no use had been made of the name, thereby expressly demolishing any possible claim to have acquired goodwill. This third ground of appeal was therefore allowed. (Media Agency Group Ltd v Space Media Agency Ltd [2019] EWCA Civ 712 (12 March 2019) — to read the judgment in full, click here).