September 27, 2021
Her Honour Judge Melissa Clarke described this case as “a cautionary tale” to potential claimants who are considering trade mark infringement proceedings. The moral of this story is, Ms Clarke said, “simple and seemingly obvious”: a potential claimant should, before issuing a letter before claim or a claim alleging trade mark infringement, check that: (i) the suspect goods are, in fact, infringing and not legitimate branded goods; and (ii) it has the legitimate right to register the trade mark it alleges has been infringed.
The claimant, Fox Group International Ltd, is a UK-based supplier of aesthetic and cosmetic products. At the relevant time it supplied a hyaluronic acid dermal filler branded REVOLAX manufactured by Across Co. Ltd, a Korean company, and sold internationally. Fox supplied this product pursuant to a Distributorship Agreement (the DA) with Across dated 1 December 2017, which gave Fox the exclusive right to market, sell and distribute REVOLAX to customers in the UK for a three-year term. Article 13.1 of the DA stated that all trade marks and other IP belonged to Across and that Fox had no rights in the IP, nor did it have any right to acquire such rights.
Despite Article 13.1, in January 2018, Fox applied in its own name to register REVOLAX as a UK trade mark in classes 3, 5, 10, 35 and 44. The mark was registered in April 2018.
The defendant, Teleta Pharma Ltd, is a long-established wholesale trader in a range of third-party pharmaceutical, cosmetic, aesthetic and medical device products. It is part of a group of companies, which includes BR Pharma International Ltd.
It came to Fox’s attention that Teleta was offering for sale and selling REVOLAX branded dermal fillers in the UK, which Fox believed were infringing goods. Fox sent a letter of claim to Teleta in November 2018 requesting undertakings from Teleta. Teleta believed it was selling legitimate branded REVOLAX dermal fillers, manufactured by Across, which had been put on the market in the EU by or with the consent and licence of Across, but it gave interim undertakings (without admission) and ceased selling REVOLAX while it checked the position. Nonetheless, four days later, Fox issued a claim against Teleta for trade mark infringement and passing off.
Two days later, Fox applied to register REVOLAX as an EU trade mark and as a German national mark, despite the DA giving it exclusive rights for the UK only and despite Article 13.1.
Teleta denied infringement or passing off. It relied on the defence of exhaustion of rights, identifying a Polish company as its supplier. Teleta also counterclaimed for: (i) a declaration of invalidity of the UK trade mark on the grounds of bad faith under s 3(6) of the Trade Marks Act 1994; and (ii) damages for unjustifiable threats under s 21A of the 1994 Act.
Fox discontinued its claim in February 2019, but the counterclaim proceeded.
Bad faith — s 3(6)
Ms Clarke found that Fox was aware of and understood Article 13.1 when it signed the DA, as this was the evidence of one of Fox’s directors.
Fox’s main argument was that, despite Article 13.1, Across had given its consent to Fox applying for the UK trade mark. Mr Foxley, the CEO of Fox, said that the consent was provided verbally on the telephone and in email correspondence with Mr Seo from Across. Mr Foxley also said that the inclusion of Article 13.1 in the DA was “an oversight by Across”.
Ms Clarke did not find this evidence credible. She accepted that Mr Foxley had had conversations and correspondence with Mr Seo about applying for a UK registration, but found that they did not show that express consent had been given. Further, she did not accept that Fox, through its directors, genuinely believed that it had approval. In addition, documentary evidence showed that Mr Seo had sought and obtained CEO approval before sending the draft DA to Mr Foxley to sign, and that the CEO had made comments on the document, resulting in a revised draft. It was therefore inherently unlikely that the CEO, who had read the draft DA, would have approved a document incorporating Article 13.1 if he knew that he had approved Fox making a UK trade mark application in its own name.
Overall, on the balance of probabilities, Ms Clarke found that, on the application date:
- Fox knew that Across supplied Revolax branded product into the territories of the EEA;
- Fox knew that it was not the owner of the rights in REVOLAX; it had received pertinent and clear legal advice about trade mark rights as between a manufacturer and a distributor, which one of the directors of Fox had read and understood:
- Fox had acknowledged this by signing the DA which, in Article 13.1 reserved all rights in trade marks, including the REVOLAX mark, to Across;
- although Fox had the opportunity to comment on, negotiate and obtain specific advice in relation to Article 13.1 before signature of the DA, it did not do so;
- Fox did not copy the DA or Article 13.1 to its lawyers when it instructed them to apply for the UK trade mark registration on the very same day that it signed the DA;
- Fox did not have the consent of Across to make the UK trade mark application and it was not reasonable for Fox to believe that it had such consent; and
- Fox applied for the UK trade mark to prevent any other UK company, including legitimate traders such as Teleta, from advertising for sale or selling Revolax in the UK, without consideration of the free movement of goods across the EU.
Judged by the ordinary standards of honest people, Ms Clarke also found that Fox’s intention in applying for the mark was dishonest and its actions were not consistent with good faith. By obtaining the UK registration, Fox had undermined, and had intended to undermine, the purposes of the system for registration of trade marks in the UK: (i) by taking for itself rights that it knew belonged to Across; and (ii) by preventing UK consumers from identifying the true origin of Revolax products. In addition, by doing so Fox had sought to distort competition by intending to prevent even legitimate sales of Revolax in the UK by third party sellers seeking to benefit from the free movement of goods across the EU.
Ms Clarke concluded that Fox had applied for the UK trade mark in bad faith within the meaning of s 3(6) of the 1994 Act. Accordingly, the registration was invalid pursuant to s 47(1).
Threats – s 21A
Fox did not argue that its letter of claim did not contain unjustified threats of trade mark infringement proceedings, nor that in relation to those threats Teleta was a person aggrieved. The only issue was whether the threats were not actionable because Teleta was an importer.
Teleta’s evidence was that BR Pharma, the principal trading company within the Teleta group, had bought and imported Revolax products into the UK before transferring them to Teleta for onward sale to retail customers.
Fox submitted that although the actions were carried out in BR Pharma’s name, the person ultimately responsible for causing the goods to be imported was Teleta. Ms Clarke noted, however, that s 21A is not concerned with who caused the goods to be imported, but who was the importer.
Ms Clarke also rejected the argument that BR Pharma had acted as an agent for Teleta. Although BR Pharma bought what Teleta told it that it wanted, that was not sufficient to conclude that BR Pharma Teleta’s agent. The financing arrangements between the companies, where BR Pharma made all up-front payments for the goods and costs of importation and was reimbursed by Teleta when the goods were in the UK and title passed from BR Pharma to Teleta, did not support Fox’s agency argument.
Ms Clarke also rejected Fox’s argument that BR Pharma was more akin to a carrier. Because title passed to BR Pharma in Poland and it remained with BR Pharma until the goods were in the UK and Teleta had paid for them, the argument did not stand up.
Ms Clarke found that BR Pharma was the importer and Teleta was not. Therefore, she held that the letter of claim contained actionable unjustified threats of trade mark infringement proceedings against Teleta under s 21A of the 1994 Act in relation to which Teleta was a person aggrieved. Damages should be determined at a quantum trial if not agreed. (Fox Group International Ltd v Teleta Pharma Ltd  EWHC 1714 (IPEC) (23 June 2021) — to read the judgment in full, click here).