September 1, 2014

Hearst Holdings Inc. & Anr -v- A.V.E.L.A. Inc. and others [2014] EWHC 1553 (Ch) (19 May 2014)

Introduction

The English court has refused applications to decline jurisdiction or to stay the English proceedings in favour of earlier filed proceedings in Italy between the same parties concerning the same Community trade marks (and equivalent national trade marks) on the basis that the applications were made far too late (i.e. after judgment in the English proceedings).

Background

This decision is the latest in the hard fought battle over the rights to the ‘Betty Boop’ character.  In February 2014, Mr Justice Birss in the High Court (sitting as a Community trade mark court) held that AVELA and its UK licensees had infringed Hearst’s UK and Community trade marks for the word and images of the ‘Betty Boop’ character and dismissed certain counterclaims seeking to invalidate the trade mark registrations.  The relief to be granted was held over to a later hearing, and some other aspects of the case had previously been split to be heard a later date still.

Prior to the hearing on the relief to be granted, AVELA made an application for the High Court to stay or decline jurisdiction on the basis that, prior to the commencement of the English proceedings, proceedings had been commenced in the Italian courts between AVELA and Hearst concerning infringement of the same Community trade marks, and in which AVELA had counterclaimed for invalidity of the Community trade marks.

AVELA relied on both the provisions in the Council Regulation 207/2009 on the Community trade mark (the “CTMR”) relating to jurisdiction and related actions as well as similar provisions in the Council Regulation 44/2001 (the “Brussels I” regulation) which apply to actions within the EU.  The underlying policy behind all of these provisions is the aim of avoiding or reducing the risk of irreconcilable decisions being handed down by different courts within the EU.

The Decision

Unsurprisingly, Birss J roundly criticised both parties for having failed to bring the existence of the Italian proceedings to the attention of the court at an earlier date. The Judge inferred that each party wanted to allow the English court to rule on the matter first, but made clear that that did not excuse the behaviour of either of the parties. Having lost in the UK, AVELA then wished to rely on the Italian proceedings to try to salvage its position.  But, since judgment had already been given in the UK, declining jurisdiction or granting a stay would not have furthered the policy objectives of avoiding irreconcilable decisions. Accordingly, the applications were refused.

Article 109 CTMR

Under Article 109(1)(a) CTMR, a court shall stay its proceedings for infringement if there are prior proceedings in another court in the EU between the same parties and for the same cause of action, where the trade marks are identical and for identical goods or services.

It was common ground that the proceedings in Italy were between the ‘same parties’, Hearst and AVELA being party to them both. However, it was disputed that Article 109 was engaged because Hearst argued that the two sets of proceedings did not concern the same ‘cause of action’.  Birss J considered the authorities, in particular the UK Supreme Court decision in The Alexander T [2013] UKSC 70, in which Lord Clark had summarised the approach to applying Article 27 of Brussels I, and Birss J applied those principles to determining the Article 109 issue. The phrase ‘same cause of action’ has a special meaning in EU law which is different to the meaning traditionally understood in English law. Under EU law, the phrase requires that proceedings in different jurisdictions must (a) be based on the same facts, (b) depend on the same rule of law, and (c) have the same end in view.

The Judge accepted that both cases were about the sale to European consumers of Betty Boop merchandise apparently licensed by AVELA and so in one sense the proceedings were both about the same issues.  However, the Judge agreed with Hearst that the cases were not concerned with the same facts: the actors were different (different licensees) and the representations of the Betty Boop character were different.

The Judge also considered, obiter, that the ‘end in view’ was different because, although the relief from each court could overlap (due to the pan-European scope of the injunction being sought), the objective of each court was to grant relief concerning the alleged acts of infringement before it, which were different.

Article 104 CTMR

Under Article 104 of the CTMR, a court shall, unless there are special grounds for continuing the hearing, stay its proceedings where the validity of the Community trade mark concerned is already in issue before another Community trade mark court (or before OHIM).

Following the Court of Appeal guidance on Article 104 in Starbucks v BSkyB [2012] EWCA Civ 1201, it is clear that there is a strong presumption in favour of a stay and it would be a “rare and exceptional case” where there are “special grounds” to not grant a stay. In Starbucks itself, “special grounds” were made out where the impending launch of BSkyB’s ‘Now TV’ could potentially swamp the defendant’s own ‘NOW’ television service.

Birss J held that in this case there were clearly “special grounds” and refused to grant a stay: the court had already heard the trial and given judgment on infringement and on certain invalidity attacks. The Judge said that to raise this point after judgment was “wholly unprecedented and is certainly “rare and exceptional”, and said that “it would be absurd to stay the English proceedings. The proceedings have more or less finished.”

Article 28 Brussels I

Article 27 of the Brussels I regulation essentially captures the same principle as Article 109 of the CTMR. Article 28 of the Brussels I regulation provides that a court may stay its proceedings where there are “related proceedings” pending before the courts of another Member State. It was agreed that the proceedings in the High Court were ‘related proceedings’ to those in Italy but, having already decided that the court was not deprived of jurisdiction under Article 109 and having decided not to stay the case under Article 104, the Judge also refused to exercise his discretion to stay the proceedings under Article 28.

Comment

While the facts and timing of the applications made in this case might be considered to be at an extreme end of the spectrum, this decision makes it clear that challenges to jurisdiction or applications for a stay must be made in a timely fashion and, as the Court of Appeal said in Starbucks, “it is a matter for the court which should be addressed at the earliest opportunity in the proceedings”.

This case also raises a wider question of the instruments used to achieve the policy objectives behind Article 104 in particular and the administration of invalidity attacks made against Community trade marks.  The clear policy objective is to seek to avoid inconsistent decisions on the validity of a Community trade mark and to avoid duplication of proceedings.

While both parties were heavily criticised for not drawing the existence of the Italian proceedings to the attention of the English court at a much earlier stage, the ‘system’ also seems to have failed.  Under Article 100(4) CTMR, Community trade mark courts in which a counterclaim against a Community trade mark is filed are required to notify OHIM, who shall record an entry in the Register. If each court reported the counterclaims in the respective proceedings in this matter to OHIM, and had OHIM notified the English court that the validity of the marks had already been put in issue in proceedings in Italy, the English court would, at an early stage, have been able to invite the parties to make submissions and then “of its own motion” (as contemplated by Article 104) decide whether to stay the English proceedings in favour of the Italian proceedings.  It is not clear why the system did not work in this case.

Published with minor alterations in Intellectual Property Forum, Issue 98, September 2014