ON APPEAL FROM THE HIGH COURT OF JUSTICE
MR JUSTICE ARNOLD
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE LLOYD
LORD JUSTICE STANLEY BURNTON
| (1) HOTEL CIPRIANI SRL
(2) HOTELAPA INVESTIMENTO HOTELEIRO SA
(3) ISLAND HOTEL (MADEIRA) LTD
|- and -
|(1) CIPRIANI (GROSVENOR STREET) LTD
(2) GIUSEPPE CIPRIANI
(3) CIPRIANI INTERNATIONAL SA
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7404 1424
Official Shorthand Writers to the Court)
(instructed by Withers LLP) for the Appellants
Iain Purvis Q.C. and Benet Brandreth
(instructed by Walker Morris) for the Respondents
Hearing dates: 13-15 January 2010
Crown Copyright ©
Lord Justice Lloyd:
The relevant facts
"3.1. You agree that the Company may retain its current name and that the Hotel Villa Cipriani di Asolo may retain its current logo and, in general, that the Company and the Hotel Villa Cipriani will have the right to use the name 'Cipriani' on an exclusive basis, even after any participation by you or your family in the capital of the Company has come to an end, and even in the event that you or your son cease to be on the Company's board of management. You also agree to refrain, and to see to it that every member of your family refrains, for a period of five years from today, from starting new businesses with the name 'Cipriani', or new businesses that are apt to divert customers from the Company or Hotel Villa Cipriani, except with our consent. It is, however, understood that you and your successors in interest may continue to use the name 'Cipriani' for the Locanda Cipriani in Torcello.
3.2 We agree to refrain, for a period of five years from today, starting new businesses with the name 'Cipriani', except with your consent.
3.3 We agree to use our best efforts to insure that in future the current outstanding quality of services offered by the Company and the Hotel Villa Cipriani to their respective clienteles is preserved."
"100. The dispute between the parties is as to the meaning and effect of the first part of clause 3.1, and in particular the words "and in general the Company and the Hotel Villa Cipriani will have the right to use the name 'Cipriani' on an exclusive basis". The Defendants contend, in short, that these words merely mean that the Company and Hotel Villa Cipriani have the exclusive right to use the name Cipriani in relation to those hotels (i.e. as part of the names Hotel Cipriani and Hotel Villa Cipriani). The Claimants contend, in short, that they mean that the Company and Hotel Villa Cipriani will have the exclusive right to use the name Cipriani (meaning names including the word Cipriani) in relation to any hotel or restaurant business (subject to the permission to use the name Locanda Cipriani conferred on Giuseppe Senior by the third part of clause 3.1). Although the limitation to any hotel or restaurant business is not explicit, the Claimants say it is implicit.
101. In my judgment the Claimants' interpretation is to be preferred. The Defendants' interpretation is inconsistent with the fact that it is the name 'Cipriani' which the Company and Hotel Villa Cipriani can use on an exclusive basis, not their respective full names. Furthermore, on the Defendants' interpretation the third part of clause 3.1 would be redundant. There is no inconsistency between this interpretation of the first part of clause 3.1 and the third part, which gives SOP additional protection during the five year period."
The trade marks
"Hotels, hotel reservation, restaurants, cafeterias, public eating places, bars, catering; delivery of drinks and beverages for immediate consumption."
The claims and counterclaims
The issues concerning the Cipriani CTM
i) The Defendants challenge the validity of the registration on the absolute ground afforded by article 51(b): "where the applicant was acting in bad faith when he filed the application for the trade mark".
ii) Alternatively, the Defendants rely on article 12(a) of the CTMR:
"A community trade mark shall not entitle the proprietor to prohibit a third party from using in the course of trade:
(a) his own name or address;
Provided he uses them in accordance with honest practices in industrial or commercial matters."
Issues concerning the UK trade mark
"A trade mark shall not be registered if, or to the extent that, its use in the United Kingdom is liable to be prevented-
(a) by virtue of any rule of law (in particular, the law of passing off) protecting an unregistered trade mark or other sign used in the course of trade."
The claim under section 56
Reputation and goodwill
Is the Cipriani CTM invalid as having been applied for in bad faith?
"Having regard to all the foregoing, the answer to the questions referred is that, in order to determine whether the applicant is acting in bad faith within the meaning of Article 51(1)(b) of Regulation No 40/94, the national court must take into consideration all the relevant factors specific to the particular case which pertained at the time of filing the application for registration of the sign as a Community trade mark, in particular:
– the fact that the applicant knows or must know that a third party is using, in at least one Member State, an identical or similar sign for an identical or similar product capable of being confused with the sign for which registration is sought;
– the applicant's intention to prevent that third party from continuing to use such a sign; and
– the degree of legal protection enjoyed by the third party's sign and by the sign for which registration is sought."
The "own name" defence to infringement of the Cipriani CTM
What is a person's "own name"?
"As the judge said, the defence has never been held to apply to names of new companies as otherwise a route to piracy would be obvious. For the same reason a trade name, other than its own name, newly adopted by a company, cannot avail it. Further, as the judge also pointed out, because a company can choose to adopt any trading name, there could be an own name defence in almost every case if Mr Bloch were right. In my judgment he is not."
"Any fear that dishonest people might form companies with misleading names so as to take advantage of the defence is easily removed by the use of the proviso - such a deliberate attempt to avail oneself of another's mark would not be an honest practice".
"33. The Court has held that the condition stated in Article 6(1) of the directive that use be 'in accordance with honest practices in industrial or commercial matters' is, in essence, an expression of the duty to act fairly in relation to the legitimate interests of the trade-mark proprietor (Anheuser-Busch, Case C-245/02,  ECR I-10989, paragraph 82).
34. In that regard, it must be noted that, in assessing whether the condition of honest practice is satisfied, account must be taken first of the extent to which the use of the third party's name is understood by the relevant public, or at least a significant section of that public, as indicating a link between the third party's goods or services and the trade-mark proprietor or a person authorised to use the trade mark, and secondly of the extent to which the third party ought to have been aware of that. Another factor to be taken into account when making the assessment is whether the trade mark concerned enjoys a certain reputation in the Member State in which it is registered and its protection is sought, from which the third party might profit in marketing his goods or services (Anheuser-Busch, paragraph 83).
35. It is for the national court to carry out an overall assessment of all the relevant circumstances in order to assess, more specifically, whether Céline SARL can be regarded as unfairly competing with Céline SA (see, to that effect, Anheuser-Busch, paragraph 84).
36. In the light of all of the above considerations, the answer to the question referred must be that the unauthorised use by a third party of a company name, trade name or shop name which is identical to an earlier mark in connection with the marketing of goods which are identical to those in relation to which that mark was registered constitutes use which the proprietor of that mark is entitled to prevent in accordance with Article 5(1)(a) of the directive, where the use is in relation to goods in such a way as to affect or be liable to affect the functions of the mark.
Should that be the case, Article 6(1)(a) of the directive can operate as a bar to such use being prevented only if the use by the third party of his company name or trade name is in accordance with honest practices in industrial or commercial matters."
Use in accordance with honest practices
"I conclude from Gerri/Kelly [Gerolsteiner Brunnen v Putsch Case C-100/02] that a man may use his own name even if there is some actual confusion with a registered trade mark. The amount of confusion which can be tolerated is a question of degree – only if objectively what he does, in all the circumstances, amounts to unfair competition, will there also be infringement. In practice there would have to be significant actual deception – mere possibilities of confusion, especially where ameliorated by other surrounding circumstances (mere aural confusion but clearly different bottles) can be within honest practices. No doubt in some cases where a man has set out to cause confusion by using his name he will be outside the defence (cf. the English passing off cases cited above) – in others he may be within it if he has taken reasonable precautions to reduce confusion. All will turn on the overall circumstances of the case."
"157. Fourthly, if the Defendants had taken competent legal advice, they would have been advised that there was at least a serious risk of infringement of the CTM. The Defendants have not disclosed any advice that was taken. Arrigo claimed in evidence that Giuseppe had consulted Marshall Bernstein of Robinson Brog Leinwand Greene Genovese & Gluck P.C., the Cipriani Group's US lawyers about the use of the company name Cipriani (Grosvenor Street) before the Restaurant opened. Giuseppe was not called to substantiate this claim. It is not clear from Arrigo's evidence that Mr Bernstein was told what the trading name of the Restaurant was intended to be, let alone that it would be called just Cipriani. So far as the evidence goes, Mr Bernstein has no expertise in European trade mark law. If he had been consulted about the trade mark position, which I doubt, he would have been bound to tell Arrigo that advice should be sought from a lawyer or attorney specialising in European trade mark law. No evidence has been adduced that the Defendants were advised by a properly qualified person with proper instructions that they would not infringe the CTM."
"163. Finally, I do not consider that the Defendants had sufficient justification for their actions in using the name Cipriani London, and still less so the name Cipriani, given the consequences for HC and for consumers. I accept that Arrigo and Giuseppe had an eminently understandable reason for wanting to call the Restaurant by a name which included their family name. Nevertheless, this is not a strong factor in the Defendants' favour given that, with the sole rather obscure exception of Cipriani Porto Cervo from 2000, they had not called any of their European restaurants by such a name up to that point. Indeed, their Venetian restaurants were called quite different names. The fact that many customers of those restaurants knew of the Cipriani family's involvement in them does not alter this, nor does the increasing use over the years of Cipriani branding on bills and the like. Nor does the fact that some of the customers of the Restaurant may have been aware of the US restaurants. I am prepared to accept that Arrigo and Giuseppe subjectively believed that they were entitled to call the Restaurant Cipriani London, but I consider that they failed to take proper advice, failed properly to address their minds to the likelihood of confusion and the likelihood of damage to the reputation of Hotel Cipriani, failed properly to react to the evidence of actual confusion when it did emerge (for example, they did not take steps to ensure that the Restaurant was always referred to as Cipriani London and never as just Cipriani) and failed properly to consider the consequences for HC's own exploitation of the CTM. I am not convinced that even subjectively they believed that they were entitled to call the Restaurant just Cipriani."
The UK trade mark
Protection of well-known trade marks: Trade Marks Act 1994 section 56
"What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation, and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start. The goodwill of a business must emanate from a particular centre or source. However widely extended or diffused its influence may be, goodwill is worth nothing unless it has power of attraction sufficient to bring customers home to the source from which it emanates."
"I do not accede to the view that the goodwill is affixed or attached to the manufactory. Supposing that the products of the manufactory were all exported to England and sold to English customers, I should find it difficult to hold that the goodwill was out of England merely because the manufactory was. The application of the words "locally situate" would then present a different question, requiring, I should think, a different answer. Again, if the facts as to the distribution of the products were more complicated, as, for example, if the trade were diffused over England and other countries, then the location of the goodwill would be a more complex, although I do not by any means think an insoluble, problem.
I confess I find no repugnancy in affirming of the goodwill of a business that it is locally situate somewhere. It is, I should say, locally situate within the geographical limits which comprehend the seat of the trade, and the trade. That sounds like a very cautious statement, and fortunately it is enough for the present question. It seems to me that in the statute the distinction drawn is between what from a British point of view we should call British property and foreign property; and the goodwill of a business which begins and ends abroad is, I think, property locally situate outside the United Kingdom."
"Goodwill regarded as property has no meaning except in connection with some trade, business, or calling. In that connection I understand the word to include whatever adds value to a business by reason of situation, name and reputation, connection, introduction to old customers, and agreed absence from competition, or any of these things, and there may be others which do not occur to me. In this wide sense, goodwill is inseparable from the business to which its adds value, and, in my opinion, exists where the business is carried on. Such business may be carried on in one place or country or in several, and if in several there may be several businesses, each having a goodwill of its own."
"A passing-off action is a remedy for the invasion of a right of property not in the mark, name or get-up improperly used, but in the business or goodwill likely to be injured by the misrepresentation made by passing-off one person's goods as the goods of another. Goodwill, as the subject of proprietary rights, is incapable of subsisting by itself. It has no independent existence apart from the business to which it is attached. It is local in character and divisible; if the business is carried on in several countries a separate goodwill attaches to it in each. So when the business is abandoned in one country in which it has acquired a goodwill the goodwill in that country perishes with it although the business may continue to be carried on in other countries. (See: Inland Revenue Commissioners v. Muller & Co.'s Margarine Ltd.  AC 217, per Lord Macnaghten at p. 224; per Lord Lindley at p. 235.) Once the Hong Kong Company had abandoned that part of its former business that consisted in manufacturing toothbrushes for export to and sale in Singapore it ceased to have any proprietary right in Singapore which was entitled to protection in any action for passing-off brought in the courts of that country."
"How far is it an essential ingredient of a successful claim in passing-off that the plaintiff should have established in this country a business in which his goods or services are sold to the general public on the open market?"
"Now Mr. Kentridge has, throughout his clear and helpful address to the court, repeatedly referred to goodwill in the words of Lord Macnaghten in the Muller's Margarine case as "the attractive force which brings in custom." But one asks oneself "what custom in this country in 1973 was brought in by the knowledge of members of the indigenous British public of the plaintiffs' Budweiser beer?" And the answer must be that there was none, because however attractive they may have found the idea of drinking the plaintiffs' beer, they could not get it. In so far, therefore, as anyone was misled by the defendants' use of the name "Budweiser," the plaintiffs could suffer no damage either by loss of sales, for there were none at that time and none were contemplated, nor by loss of reputation, because if there was any such loss (which seems highly improbable) the reputation was quite unconnected with either an ability or a willingness to supply."
i) The first is Sheraton Corporation of America v Sheraton Motels Ltd  RPC 202. This was a motion to restrain passing-off, before Buckley J. The plaintiff owned, ran and promoted a chain of hotels in the USA and elsewhere, but not including any hotel in the UK. Bookings for rooms in their hotels were frequently made from the UK, through an office which the plaintiff maintained in London or via travel agencies. The defendant was a company set up in this country which intended to establish hotels here, though with none in being at the time and none in prospect for some time to come. The judge granted an interim injunction pending trial. He looked ahead to the position as it might be at trial, envisaging that the plaintiff might be able to show that it had a reputation and goodwill which would be exposed to risk from confusion between their business and that of the defendant, even though they were carrying on business in different parts of the world. He did not place specific reliance on the fact of direct bookings or on the plaintiff having an office in this country.
ii) Next, also on motion, Pennycuick J decided Alain Bernardin & Cie v Pavilion Properties Ltd  RPC 581, (which I call the Crazy Horse case) in which the proprietor of the Crazy Horse Saloon in Paris sought to restrain the carrying on of a business in London under the same name. The plaintiff publicised its business extensively in the UK but carried on no other activities here. The judge rejected the application for an injunction on the grounds that the plaintiff had a reputation but no goodwill, which it could not have without some business activities here other than merely placing or distributing advertising material. He distinguished Sheraton on the basis of the office in this country and the direct bookings, for which there was no equivalent in his case. He said at page 584:
"It may well be that the owner of a foreign hotel or restaurant acquires in this country a reputation for the name of his hotel or restaurant in the wide sense, that the travel agents or other persons to whom he sends advertisements know of his establishment. Again he may acquire a reputation in a wide sense in the sense of returning travellers speaking highly of that establishment, but it seems to me that those matters, although they may represent reputation in some wide sense, fall far short of user in this country and are not sufficient to establish reputation in the sense material for the purpose of a passing off action. It is very clear that in such circumstances the foreign trader has not acquired anything which in law could be described as goodwill in this country."
iii) That decision was not followed by Graham J on an application for judgment in default (the defendant not being represented) on behalf of another Parisian establishment, in Maxim's Ltd v Dye  FSR 364 when he granted an injunction against a restaurant in Norwich called Maxim's. The allegations in support of the claim included that the Parisian restaurant had an extensive fame and goodwill, that it is extensively patronised by persons resident in England and that there had been some direct bookings from England to reserve a table there. The judge considered the Crazy Horse case but declined to follow it. He said that the existence and extent of the plaintiff's reputation and goodwill in every case is a question of fact, however it may be proved and whatever it is based on.
"This is a very important passage for three reasons. First, it shows that the importance of the plaintiff showing he has a business here is essentially linked to the presence of customers here. Secondly, it adverts to the possibility that in some cases the relevant area may not be limited by national boundaries."
"A. As a matter of principle, the existence of a severable English goodwill attached to a place of business in this country is not the basis of a right to complain of passing off in this country. What is necessary is for the plaintiffs to show they have a trade connection here which will normally consist of customers forming part of their goodwill, wherever that goodwill is situate, which goodwill is being invaded by the acts of the defendant in this country;
B. The approach which I have set out at A above is not open to me as there is binding authority to the effect that the basis of plaintiffs' claim must be a goodwill locally situate in England; but
C. The presence of customers in this country is sufficient to constitute the carrying on of business here whether or not there is otherwise a place of business here and whether or not the services are provided here. Once it is found that there are customers, it is open to find that there is a business here to which the local goodwill is attached;
D. To the extent that the Crazy Horse case is authority to the contrary, I prefer not to follow it."
"216. Fifthly, it is sufficient for goodwill to exist in the United Kingdom that the claimant has customers or ultimate consumers for his goods here, and for this purpose it is immaterial whether the claimant (a) has some branch here or (b) trades directly with customers here without having any physical presence in the jurisdiction (for example, by mail order) or (c) trades through intermediaries such as importers and distributors (provided that the circumstances are not such that the goodwill is owned by the intermediary) …
217. Sixthly, in the case of claimants who provide services which are physically performed abroad, it is sufficient for goodwill to exist in the United Kingdom that the services are booked by customers from here …"
"It is now suggested that a service business operating from a place or places abroad has customers and therefore goodwill in England to the extent that persons from England consciously seek out and make use of its services in preference to those available from competitors in England or elsewhere. So the foreign business has goodwill here if English residents are prepared to go to it (literally or figuratively) to avail themselves of its services, or if the availability of those services abroad is a material factor in their travelling to wherever the services can be acquired or experienced."
Lord Justice Stanley Burnton
Lord Justice Jacob