Case No: OCL10349
[2012] EWPCC 24
PATENTS COUNTY COURT
Rolls Building
7 Rolls Buildings
Fetter Lane
London EC4A

Date: Monday, 16 April 2012

BEFORE:

HIS HONOUR JUDGE BIRSS QC

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BETWEEN:

CONVERSE INCORPORATED
Applicant/Claimant
- and -

(1) CONLEY (UK) LIMITED
(2) MR HALLOCK ROBIN SATHASIVAM
(3) ASIA FREIGHT SOLUTIONS LIMITED
Respondent/Defendant

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MR G HARBOTTLE (instructed by Palmer Biggs) appeared on behalf of the Claimant

MR SATHASIVAM appeared in person

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Judgment

1.	JUDGE BIRSS:  I have before me an application to amend the pleadings in this action.  This is a trademark action brought by Converse Incorporated, a corporation with a number of well known trademarks in the field of footwear.  Mr Sathasivam, the second defendant, is a director of the first defendant, Conley (UK) Limited.  The third defendant, Asia Freight Solutions Limited is a freight shipping company.  The third defendant has settled these proceedings with the claimant.  The claim is based on a consignment of footwear which Converse alleges are counterfeit. 

2.	Mr Harbottle appears for the claimant instructed by Palmer Biggs.  Mr Sathasivam represents himself and his company.

3.	The circumstances are as follows.  The goods were brought into Southampton in about April or May of 2010.  There were marked for import into the United Kingdom for free circulation.  Mr Sathasivam’s position is that that was an error, that they were supposed to be kept in transit and were going to South Africa.  He applied to strike out the entire proceedings on that basis and also on the basis that he has a report from an expert, Ms Manlove, that these goods are not counterfeit.  I declined earlier this morning to strike the matter out.  It seemed to me that although it would be nice if one could resolve cases as quickly and cheaply as that, this is a case which will require a trial in order to decide the issues which arise.

4.	In summary, the issues are whether the goods were really intended to come into the United Kingdom and whether the goods are counterfeit.   The first issue involves considering whether marking the goods with the relevant Custom’s code was an error on the basis that the goods were really intended to be going to South Africa.

5.	The action will proceed.  In response to the defendants’ point that these goods were never intended to come into the United Kingdom but were intended to go to South Africa, the claimant has applied to amend the Particulars of Claim.  The amendment is unusual.  It is an amendment to add three allegations: first an allegation of infringement of South African trademarks; second, an allegation of passing off in South Africa; and third, perhaps less unusual, an allegation of passing off based on the instrument of fraud case law that starts with Johnston v Orr-Ewing (1882) LR 7 HL 219 in the House of Lords.  It is also described in paragraph 5-152 of the textbook Wadlow on Passing Off.

6.	That latter course of action causes no conceptual difficulty in this case and is plainly an amendment which Mr Harbottle’s clients are entitled to make.  It is an allegation based on UK law.  It does not relate to foreign law.  That, is in fact, the whole point of that deceptive goods tort, if I can call it that, and it seems to me that Converse are entitled to argue that point if they wish.  I will permit that amendment.  

7.	The other two are more significant.  They are an allegation of infringement under South African trademark law and an allegation of passing off in South Africa.  It is quite clear that prior to the decision of the Supreme Court in Lucasfilm Ltd & Ors v Ainsworth & Anor [2011] UKSC 39, the court would not have entertained that allegation, it being thought that allegations of infringement of such foreign, non-EU, intellectual property rights were not justiciable before the English Courts.

8.	One of the cases on which that proposition rests was Tyburn Productions Ltd v Conan Doyle [1991] Ch 7, a decision of Vinelott J.  Since then it had been regarded as clear that infringements of foreign, non-EU intellectual property rights could not be pleaded, would not be argued and were not justiciable.  In Lucasfilm v Ainsworth, in summary the Supreme Court decided that Tyburn was wrong and certainly not the law today.  Accordingly, infringements of foreign intellectual property rights are justiciable in the English courts.  The facts of Lucasfilm v Ainsworth are quite different from the facts in this case, but the issue was whether an infringement of a US copyright could have been decided in the English courts.  The Supreme Court decided that it was within the jurisdiction of the court.

9.	So Mr Harbottle submits that his clients should be entitled to contend that the goods in question in this case, if they were imported into and sold in South Africa would be infringements of South African trademarks and would amount to acts of passing off in South Africa.  On the merits of those points, I have a letter written by a firm of South African patent, trademark, copyright, commercial property and litigation attorneys, Adams and Adams, in response to questions from Mr Harbottle’s instructing solicitors.  It is clear from the letter, in summary, that South African trademark law is similar to United Kingdom law, such that the sale in South Africa of what could be called counterfeit goods, that is to say, goods branded with the claimant’s marks and made to look like the claimant’s goods but not, in fact, goods of the claimant, would be an infringement of the claimant’s South African trademarks.  It is also confirmed that the claimant has the sort of trademarks one might expect in South Africa.  

10.	An important difference between South African trademark law as it appears in the letter from Adams and Adams and the law in this country is that there does not appear to be a prohibition on parallel importing in South Africa.  Indeed, on the face of it, section 34(2)(d) of the South African Trademarks Act specifically permits the importation into a distribution, sale or offering for sale in the Republic of South Africa goods to which the trademark has been applied by or with the consent of a proprietor and according to Adams and Adams, broadly speaking parallel importation appears to be permitted.  That is perhaps not surprising since the basis of the European prohibition of parallel importing comes from European trade law and the Davidoff (Case C-292/00 ECJ) decision.

11.	Accordingly, it is a critical part of the allegation of infringement of South African trademark law and passing off that the goods are indeed counterfeit.  That is, of course, Converse’s case but it highlights a distinction between Converse’s case for South Africa and the position in the United Kingdom.  For the United Kingdom, Mr Harbottle makes the point that although his client’s case is that these goods are counterfeit, in fact, even if they are not, their importation and sale in the United Kingdom would still infringe his client’s trademarks under the Davidoff doctrine and particularly given that there is no evidence at all, nor is there any real suggestion, that his clients consented to their sale here.

12.	That latter limb of Converse’s case would not apply in relation to the position in South Africa.  However, that seems to me to be a distinction which, although important and something which would need to be kept in mind when considering these matters, on its own is not a reason not to allow these allegations to go forward.  

13.	The other thing I should say is that the law on passing off in South Africa is clearly somewhat different from the position here but, on the basis of Adams and Adams’ letter, I am not in a position where I could say at this stage that it is not an allegation which could not properly be made.  It may indeed ultimately bear fruit from the claimant’s point of view.

14.	It seems to me that on the basis of Lucasfilm v Ainsworth I should permit these allegations to be made in these proceedings.  They do not involve raising factual matters which are over and above the factual matters which are already an issue in this case.  The question of whether the goods are counterfeit is at the forefront of Converse’s case, although, as I say, Converse has an alternative case to put forward even if they are not.  It does bear repeating that Mr Sathasivam’s position on the basis of the evidence he wishes to put forward is that these goods are not counterfeit.  As I have already explained, that is a matter which will have to go to trial.  If it turns out these goods are not counterfeit then, on the basis of the material I have been given, their import into South Africa will not be unlawful but that is a matter that can be dealt with at the end. 

15.	It seems to me that the right thing to do is to allow these allegations to go forward.  At the moment, I do not have to decide whether the claimant’s allegation of South African trademark infringement or passing off is a good one.  I should consider whether it is properly arguable on the material before me in order to permit an amendment of this kind.  Also, bearing in mind this is the Patents County Court, I should bear in mind the cost / benefit question of whether the cost of adding an allegation like this is proportionate, having regard to the benefit the allegation would bring to the proceedings.  

16.	Mr Sathasivam explained that he suggested that if the buyer was willing to proceed with buying these goods in South Africa then that really is a matter for them and that is a reason why I should not permit this allegation to come in.  It seems to me that Mr Sathasivam’s argument about the buyer, while I understand it, is not a reason why this should not come in.  The benefit of this allegation being part of the case means that the whole dispute about this consignment of goods, which is after all in the United Kingdom, can be resolved in one go.  That will be done instead of splitting up the resolution of this dispute into two potential stages, one stage based entirely in the United Kingdom, where conceivably these goods could end up being released only to find themselves in South Africa being seized at the border.  That would seem to me to be an unnecessarily complicated and expensive way of proceeding when all matters can be dealt with here and now.  That is what I propose to do.