COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
THE CHANCELLOR OF THE HIGH COURT
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE LEVESON
| SPECIAL EFFECTS LIMITED
||Claimant / First Part 20 Defendant /
|- and -
|(1) L'OREAL SA
(2) L'OREAL (UK) LIMITED
|Defendants / Appellants
|- and -
|SPECIAL EFFECTS (a partnership of JENIFER ANN JONES and DAVID CHARLES JONES)
||Second Part 20 Defendant
|INTERNATIONAL TRADEMARK ASSOCIATION
WordWave International Ltd
A Merrill Communications Company
190 Fleet Street, London EC4A 2AG
Tel No: 020 7421 4040 Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Richard Meade (instructed by Pinsent Masons) for the Respondent
Emma Himsworth (instructed by Slaughter & May) for the Intervener
Crown Copyright ©
Lord Justice Lloyd:
The proceedings in the Trade Marks Registry
i) The words SPECIAL EFFECTS were not distinctive in relation to the goods and services in question, because they would be understood as meaning make-up used to produce a special effect such as is used in films and television. Section 3(1)(a) of the Trade Marks Act 1994 (the Act) was relied on in this respect.
ii) The words were not distinctive as they would be understood as laudatory. Alternatively if the products do not produce a special effect the public would be deceived by the use of the mark. This was said to attract sections 3(1)(a) and 3(3)(b) of the Act.
iii) L'Oreal had made extensive use of the letters FX in the UK in relation to hair products and had a substantial goodwill and reputation in those letters. They had also used the trade mark in the form SPECIAL FX. Use of the mark SPECIAL EFFECTS would be liable to be prevented by an action for passing off based on L'Oreal's reputation in the letters FX. The relevant provision here was section 5(4)(a).
iv) L'Oreal had three UK registered trade marks (which we will call the earlier marks), one for FX and a device, and the others for FX STUDIO LINE and a device, for similar or identical goods and services to those in relation to which the application for SPECIAL EFFECTS was made. The earlier marks were similar to SPECIAL EFFECTS because they include the letters FX, phonetically and conceptually identical to the word EFFECTS. Accordingly, the subject of the pending application was similar to the earlier marks and was to be registered for similar or identical goods and services, and there was therefore a likelihood of confusion including a likelihood of association with the earlier marks. This provided the basis for reliance on section 5(2)(b).
"19. It is, of course, the case that descriptiveness can be assessed by reference to the ordinary meanings of words, which can be found in dictionaries. An opponent does not have to show that a mark is already generic in a trade in the goods or services in order to make out an objection under section 3(1)(c). However, the trade mark SPECIAL EFFECTS does not to my mind convey any specific information about the quality or the intended purpose of the goods or services listed in the application. It is an ambiguous term open to various interpretations. In my view it is more likely that the average consumer would regard it as a fanciful use of a term normally associated with film making."
"21. Taking the best view I can of the matter on the basis of the sparse material before me, my judgment is that the trade mark Special Effects is not an indication which may serve, in trade, to designate the quality or intended purpose or other characteristics of the goods or services."
"51. Mr Castle accepted that there was no supporting evidence for Mr Monteiro's claim that L'Oreal launched the product under the name Special FX on 1 June 2000. In the absence of any request to cross-examine Mr Monteiro he invited me to accept the claim at face value. It is for the opponent to make good its claim to have established a goodwill and reputation under the mark Special FX by the relevant date in these proceedings. In order to do so the opponent was required to provide sufficient material from which such a finding could properly be drawn. Unsupported general assertions, even provided under oath, cannot provide sufficient support for the claim that has been made. This is all the more so when some of the material put forward to support the claim actually contradicts it.
52. I conclude that there is no established use of the trade mark Special FX prior to the relevant date. It follows that the ground of opposition under section 5(4)(a) must fail for the reasons already given."
L'Oreal's Community Trade Mark application
"Furthermore, it must be noted that there are important visual differences between the marks which clearly outweigh the phonetic similarities. As stated by the Court of First Instance in connection with the goods in class 3, i.e. the goods in question in the present proceedings, the degree of phonetic similarity between the two marks is of less importance in the case of goods which are marketed in such a way that, when making a purchase, the relevant public usually also perceives visually the mark designating those goods Hence, the visual aspects of the marks in dispute are predominant over the phonetic ones in the perception of the marks by the relevant public.
As it has been found above, there is nothing original about the idea of referring to "special effects" in connection with the goods at hand. Thus, the consumers are likely to pay more attention to a specific way of representation of that idea in the marks. Namely, the contested sign "SPECIAL FX" will be perceived more as a word-play which will be remembered as such."
The infringement proceedings
"L'Oreal SA has adopted a practical and proportionate approach to handling oppositions, and prepares evidence for such oppositions by reference to an assessment of the proximity of the opposed mark to the core brand in issue. L'Oreal SA devotes significantly greater resources to maintaining its own trade mark portfolio and also to infringement issues involving registered trade marks before the court. "
"37. Examination of application
(1) The registrar shall examine whether an application for registration of a trade mark satisfies the requirements of this Act (including any requirements imposed by rules).(2) For that purpose he shall carry out a search, to such extent as he considers necessary, of earlier trade marks.(3) If it appears to the registrar that the requirements for registration are not met, he shall inform the applicant and give him an opportunity, within such period as the registrar may specify, to make representations or to amend the application.(4) If the applicant fails to satisfy the registrar that those requirements are met, or to amend the application so as to meet them, or fails to respond before the end of the specified period, the registrar shall refuse to accept the application.(5) If it appears to the registrar that the requirements for registration are met, he shall accept the application.
38. Publication, opposition proceedings and observations
(1) When an application for registration has been accepted, the registrar shall cause the application to be published in the prescribed manner.(2) Any person may, within the prescribed time from the date of the publication of the application, give notice to the registrar of opposition to the registration.The notice shall be given in writing in the prescribed manner, and shall include a statement of the grounds of opposition.(3) Where an application has been published, any person may, at any time before the registration of the trade mark, make observations in writing to the registrar as to whether the trade mark should be registered; and the registrar shall inform the applicant of any such observations.
A person who makes observations does not thereby become a party to the proceedings on the application.
(1) Where an application has been accepted and(a) no notice of opposition is given within the period referred to in section 38(2), or(b) all opposition proceedings are withdrawn or decided in favour of the applicant,the registrar shall register the trade mark, unless it appears to him having regard to matters coming to his notice since the application was accepted that the registration requirements (other than those mentioned in section 5(1), (2) or (3)) were not met at that time.(3) A trade mark when registered shall be registered as of the date of filing of the application for registration; and that date shall be deemed for the purposes of this Act to be the date of registration.(4) On the registration of a trade mark the registrar shall publish the registration in the prescribed manner and issue to the applicant a certificate of registration."
"47. Grounds for invalidity of registration
(1) The registration of a trade mark may be declared invalid on the ground that the trade mark was registered in breach of section 3 or any of the provisions referred to in that section (absolute grounds for refusal of registration).Where the trade mark was registered in breach of subsection (1)(b), (c) or (d) of that section, it shall not be declared invalid if, in consequence of the use which has been made of it, it has after registration acquired a distinctive character in relation to the goods or services for which it is registered.(2) The registration of a trade mark may be declared invalid on the ground(a) that there is an earlier trade mark in relation to which the conditions set out in section 5(1), (2) or (3) obtain, or(b) that there is an earlier right in relation to which the condition set out in section 5(4) is satisfied,unless the proprietor of that earlier trade mark or other earlier right has consented to the registration.(3) An application for a declaration of invalidity may be made by any person, and may be made either to the registrar or to the court, except that(a) if proceedings concerning the trade mark in question are pending in the court, the application must be made to the court; and(b) if in any other case the application is made to the registrar, he may at any stage of the proceedings refer the application to the court.(6) Where the registration of a trade mark is declared invalid to any extent, the registration shall to that extent be deemed never to have been made:Provided that this shall not affect transactions past and closed."
"2. Registered trade marks
(1) A registered trade mark is a property right obtained by the registration of the trade mark under this Act and the proprietor of a registered trade mark has the rights and remedies provided by this Act.(2) No proceedings lie to prevent or recover damages for the infringement of an unregistered trade mark as such; but nothing in this Act affects the law relating to passing off."
"9. Rights conferred by registered trade mark
(1) The proprietor of a registered trade mark has exclusive rights in the trade mark which are infringed by use of the trade mark in the United Kingdom without his consent.The acts amounting to infringement, if done without the consent of the proprietor, are specified in section 10.(2) References in this Act to the infringement of a registered trade mark are to any such infringement of the rights of the proprietor.(3) The rights of the proprietor have effect from the date of registration (which in accordance with section 40(3) is the date of filing of the application for registration):Provided that(a) no infringement proceedings may be begun before the date on which the trade mark is in fact registered; and(b) no offence under section 92 (unauthorised use of trade mark, &c in relation to goods) is committed by anything done before the date of publication of the registration."
"72. Registration to be prima facie evidence of validity
In all legal proceedings relating to a registered trade mark (including proceedings for rectification of the register) the registration of a person as proprietor of a trade mark shall be prima facie evidence of the validity of the original registration and of any subsequent assignment or other transmission of it."
Proceedings in the Trade Marks Registry
" where an opposed application for registration becomes the subject of opposition proceedings under section 38(2) of the 1994 Act, hearings are conducted before the Assistant Comptroller or a Principal Hearing Officer (acting in either case as the authorised delegate of the Registrar). Hearing officers are usually very experienced in the practicalities of trade mark registration but are not normally qualified lawyers. Under sections 69 and 78 of the 1994 Act and the Trade Mark Rules 2000 evidence in opposition proceedings is given by affidavit or statutory declaration. Orders for cross-examination of deponents are permissible but have been rare in the past (although counsel suggested that there may be a trend towards their becoming rather less rare)."
The decision of the Chancellor
"(1) Whether either or both Defendant(s) is/are precluded by cause of action estoppel, issue estoppel, or abuse of process from challenging the validity of the Claimant's registered trade mark No. 2,237,923 on some or all of the grounds relied upon by them;
(2) Whether either or both Defendant(s) is/are precluded by cause of action estoppel, issue estoppel, or abuse of process from alleging use of the marks complained of herein before the application for the said registered trade mark (a) as part of the basis for a defence under section 11(3) of the Trade Marks Act 1994; (b) as part of the basis for a counterclaim for passing off;"
"The Defendants are precluded by cause of action estoppel and issue estoppel from relying on the allegations made by them in [certain paragraphs of the Defence and Counterclaim, subject to a specific proviso not now relevant];
The Defendants are precluded by issue estoppel from asserting use of the mark SPECIAL FX before 30 June 2000 whether for the purpose of their defence under section 11(3) or their counterclaim for passing off."
The paragraphs of the Defence and Counterclaim specified in the order were those relying on absolute grounds of invalidity under section 3(1)(b), (c) and (d), and on relative grounds under section 5(2)(b) and 5(4)(a).
The issues on the appeal
"On the other hand, the Office is an administrative body and opposition proceedings, in particular, are not conceived as the only and last recourse for the owner of a prior right to protect his rights against a later Community trade mark. On the contrary, opposition proceedings before the Office constitute a particular expression of the so called "right of opposition", as it is recognised in various countries in trade mark matters. It is generally accepted that, if the opponent fails in his attempt, he can nevertheless file a cancellation action before the Cancellation Division or bring a counter claim in an infringement action before a national court.
In other words, opposition proceedings do not produce res judicata effect for any further action that might be taken by an owner of an earlier right, even if he may have lost, for one reason or another, in opposition proceedings. Therefore the aim of the opposition proceedings before the Opposition Division of the Office is not to establish which of the two parties has the best right, this task is reserved for the judicial courts, but to give third parties a swift, expeditious and low cost procedure for preventing the registration of a Community trade mark."
That was also confirmed by the Cancellation Division of OHIM in Visionaire, decision of 1 August 2003. By contrast, a decision of the Cancellation Division may have the effect of an estoppel on the parties involved under regulation 96 of the Community Trade Mark Regulation, to which we refer below (paragraph ).
"The doctrine of res judicata rests on the twin principles which cannot be better expressed than in terms of the two Latin maxims "interest reipublicae ut sit finis litium" and "nemo debet bis vexari pro una et eadem causa". These principles are of such fundamental importance that they cannot be confined in their application to litigation in the private law field. They certainly have their place in the criminal law. In principle they must apply equally to adjudications in the field of public law. In relation to adjudications subject to a comprehensive self-contained statutory code, the presumption, in my opinion, must be that where the statute has created a specific jurisdiction for the determination of any issue which establishes the existence of a legal right, the principle of res judicata applies to give finality to that determination unless an intention to exclude that principle can properly be inferred as a matter of construction of the statutory provisions."
Cause of action estoppel
"Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter."
"cause of action estoppel prevents a party from asserting or denying as against the other party, the existence of a particular cause of action, the existence or non-existence of which has been determined by a court of competent jurisdiction in previous litigation between the same parties. If the cause of action was determined to exist, i.e. judgment was given on it, it is said to be merged in the judgment. If it was determined not to exist, the unsuccessful plaintiff can no longer assert that it does: he is estopped per rem judicatam."
"Before the Opposition Division of the European Patent Office, the cause of action, if it be a cause of action, was whether the patent should be maintained or revoked pursuant to the jurisdiction given to the Opposition Division by articles 100 to 102 [of the European Patent Convention]."
He went on to hold, more fundamentally, that the decision in the opposition proceedings was not final. We will revert to that point.
"The second species, which I will call "issue estoppel," is an extension of the same rule of public policy. There are many causes of action which can only be established by proving that two or more different conditions are fulfilled. Such causes of action involve as many separate issues between the parties as there are conditions to be fulfilled by the plaintiff in order to establish his cause of action; and there may be cases where the fulfilment of an identical condition is a requirement common to two or more different causes of action. If in litigation upon one such cause of action any of such separate issues as to whether a particular condition has been fulfilled is determined by a court of competent jurisdiction, either upon evidence or upon admission by a party to the litigation, neither party can, in subsequent litigation between one another upon any cause of action which depends upon the fulfilment of the identical condition, assert that the condition was fulfilled if the court has in the first litigation determined that it was not, or deny that it was fulfilled if the court in the first litigation determined that it was."
"For an estoppel to arise the judgment of the earlier Court, in this case the decision of the Opposition Division of the European Patent Office, must finally and conclusively decide the validity of the patent. That it did not do. Validity is finally decided in revocation proceedings by the Courts of the Contracting States. It follows that no cause of action estoppel arises from the decision of the Opposition Division of the European Patent Office."
"An unsuccessful opponent would always have the opportunity to bring an expungement proceeding if the opposition proceeding fails. In an expungement proceeding, the validity of the trade mark can be fully explored."
(An expungement proceeding appears to be the equivalent of proceedings for a declaration of invalidity.) In Clinique Laboratories Inc v Luxury Skin Care Brands Pty Ltd  FCA 1517 Gyles J commented on the reasoning in this and other decisions as follows at paragraph 13:
"It appears to be a consequence of this reasoning that a party can oppose the grant of a patent or a trade mark, including appeal to the court, causing considerable expense and delay and, even if unsuccessful, then bring expungement or revocation proceedings based upon precisely the same ground as relied upon in the opposition proceedings. The opportunity for oppression of an applicant at the hands of a well-resourced commercial opponent is obvious."
Mr Meade made that very point on the facts of this case.
"However, the effect of what was said in Lomas is that under the statutory scheme which relates to opposition proceedings, the decision cannot be said to be final. Because of the nature of opposition proceedings, a decision in an appeal under section 56 of the Act cannot, as a matter of law, finally determine the rights of the parties."
There were questions as to the standard of proof on opposition proceedings, and there may have been other factors which do not arise under the UK legislation. The cases are not relied on as authoritative but as illustrative, showing the position in relation to a similar legislative regime.
"A decision of the comptroller or on appeal from the comptroller shall not estop any party to civil proceedings in which infringement of a patent is in issue from alleging invalidity of the patent on any of the grounds referred to in sub-section (1) above, whether or not any of the issues involved were decided in the said decision."
That is part of the section dealing with proceedings for revocation of a patent. There is no equivalent to opposition proceedings under the UK patent legislation. Mr Meade submitted that the fact that a need was perceived for this provision in relation to revocation proceedings as regards patents showed that, but for it, an unsuccessful attempt to revoke would estop the losing party from raising the same arguments again in infringement proceedings, and that the same would also apply in trade mark proceedings, by reference both to proceedings for a declaration of invalidity under section 47 and opposition proceedings.
"An application for revocation or for a declaration of invalidity shall be inadmissible if an application relating to the same subject matter and cause of action, and involving the same parties, has been adjudicated on by a court in a Member State and has acquired the authority of a final decision."
Regulation 96.2, by contrast, provides:
"A Community trade mark court shall reject a counterclaim for revocation or for a declaration of invalidity if a decision taken by the Office relating to the same subject matter and cause of action and involving the same parties has already become final."
These form part of the structure whereby decisions as to validity or invalidity of a community trade mark reached by the competent court in a Member State have binding effect and, correspondingly, decisions in OHIM on opposition proceedings do not, as was recognised in Budweiser, cited at paragraph  above, whereas decisions in the Cancellation Division of OHIM do have binding effect on the parties.
"There is no obligation to take opposition proceedings, nor in the later proceedings is the registrar or court bound to reconsider the decision of the Registrar in opposition proceedings."
"I think it is obvious on the face of it, that a judgment for the revocation of a Patent would in effect put an end to the injunction, because the question whether a Patent has been infringed or not is a question to be tried at the date of the alleged infringement, and, if there is no Patent at that date because it was revoked, that would not be an infringement; so that in effect an Order for revocation of a Patent would in every case put an end to the injunction."
Abuse of process
"But Henderson v. Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in early proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus while I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particularly if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party's conduct is an abuse than to ask whether the conduct is an abuse and then, if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice."
"The principle to be applied is that formulated by Sir Robert Megarry in Gleeson v Wippell and approved by the House of Lords in Johnson v Gore Wood . What must be ascertained is whether there is a sufficient degree of identity between the First Defendant and the Second Defendant to make it just that the decision in the opposition proceedings should be binding on the Second Defendant in these proceedings. In my judgment the answer to that question is in the affirmative. The Second Defendant could have been joined as a party to the opposition proceedings. In his evidence in the opposition proceedings M. Monteiro evidently regarded the First and the Second Defendants as one person; hence his references to 'my company' in contexts which can now be seen to refer to the Second Defendant alone. Both are concerned with marks which are owned by the First Defendant and used by the Second Defendant in its business in the UK, the former as owner the latter as licensee. The dispute with the claimant concerns the validity and use of their rival marks. Both defendants are members of the same group. Even accepting that the First Defendant is not entitled to give directions to the Second Defendant there is no reason to think that the ultimate holding company cannot give directions to both of them. In my view, prima facie, each company in a group is to be regarded as the privy of every other company in the group unless it demonstrates the contrary. Otherwise the principles of estoppel will become largely inoperable in a corporate structure."
The decision in Hormel