Intellectual Property Enterprise Court

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY ENTERPRISE COURT

		Royal Courts of Justice, Rolls Building Fetter Lane, London, EC4A 1NL
		02/11/2015

Judge Hacon :

Introduction

1. The First Claimant ("Mrs Helme") bought a jewellery business in 2007 for £1,000 from a friend who was emigrating. Not long afterwards her daughter, the Second Claimant ("Laura Helme"), joined her in the business and it has since operated as a partnership. The partnership is the Third Claimant.
2. Much of the jewellery offered for sale was placed in display cabinets which were located in hair salons and beauty parlours in the North West of England. Customers could select items and pay into a cash box. Mrs Helme and her daughter between them regularly visited the relevant premises to check the receipts, empty the cash box and restock the jewellery. An alternative outlet for the jewellery took the form of direct sales through a website and the Claimants also made some sales at parties, wedding fairs and charity events.
3. In about August 2008 Mrs Helme commissioned the creation of the following logo which was used in the advertising and promotion of the Claimants' business ("the Logo"):


It was common ground, at least by the time of the trial, that copyright subsists in the logo and that pursuant to an assignment from its creator the copyright is owned by Mrs Helme.

4. In 2008 Mrs Helme commissioned the taking of photographs of some of the jewellery which the Claimants had on offer. This included a photograph of a double heart pendant set ("the Photograph"). It is not now in dispute that by virtue of an assignment from the photographer, Mrs Helme owns the copyright subsisting in the Photograph.
5. The Claimants say that by reason of their business conducted under the 'Hidden Gem' trade name and by reference to the Logo, by late 2008 there was goodwill in the business associated with that name and the Logo. This, too, is common ground.
6. In late 2008 and early 2009 Mrs Helme and the Defendants entered into negotiations for a joint venture. The idea was that the JV would exist alongside the Claimants' business and it would grant franchises to conduct similar businesses elsewhere in the UK under the 'Hidden Gem' trade name. During 2009 and possibly into 2010 preparations for the JV progressed, but in the end the idea fell apart. At the latest this must have happened by 9 April 2010 when the Claimants' letter before action was sent.
7. Preparations on the Defendants' part included the incorporation of a company called 'Hidden Gem Jewellery Company Limited' and the registration of a domain name owned by them, 'thehiddengemjewellerycompany.co.uk', which was used to set up a website. The Defendants also began to advertise jewellery for direct sale to customers, both in print advertisements and via the website, in all cases by reference to the 'Hidden Gem' trade name and the Logo. One of the products offered was the double heart pendant set featured in the Photograph and the Photograph was used to promote those sales. It is acts of this nature of which the Claimants now complain: the Particulars of Claim list 10 acts which are said to have constituted passing off and/or infringement of copyright on the part of the Defendants.
8. The Defendants say they were at all times licensed by Mrs Helme and her licence covered all acts now complained of. They do not dispute that absent the licence those acts constituted passing off and/or infringement of Mrs Helme's copyrights in the Logo and Photograph. So the first issue for me to resolve is whether there was such a licence.
9. The second issue arises out of a meeting between Mrs Helme and the Defendants at the National Exhibition Centre in Birmingham on 8 September 2010. The Defendants say that even if, contrary to their primary argument, the Claimants' case in passing off and copyright infringement were sound, the dispute was settled by agreement at that meeting. They say there was accord and satisfaction and the Claimants are now contractually prevented from pursuing this claim.

Background in more detail

10. The discussions between the parties regarding the proposed franchising venture were mainly between Mrs Helme and Mr Maher. They began in late 2008 and by this time the two had known each other for about 15 years. Mrs Helme was employed by an estate agent called The Purple Willow Estate Agency ("Purple Willow") which was part owned by Mr Maher's sister-in-law. Mr Maher had met Mrs Helme when he was asked to look into whether Purple Willow could secure properties to offer for sale which were more expensive than those on offer at the time.
11. Mrs Helme told Mr Maher of her jewellery business. Mr Maher floated the idea of expanding the business by means of offering franchises to other parties who would use the business model in parts of the country other than North West England and of course pay for doing so. Mrs Helme was enthusiastic. Mr Maher introduced her to Mr Green as a collaborator in the enterprise. Mr Maher and Mr Green owned a company called Healthcare-Europe Limited ("Healthcare-Europe") and their business at that time was in the sale of healthcare products. Mr Maher said that from the outset the idea was that he, Mr Green and Mrs Helme would be fully involved in the development of the business and that each would have an equal share in it.
12. It was agreed that a company should be set up to operate the franchise business. It was common ground that at the end of 2008 and for much of 2009 the atmosphere was one of co-operation among friends rather than being purely a hard nosed commercial arrangement. Mrs Helme said that she took Mr Maher to be an experienced and astute businessman whom she knew and in whom she could place a degree of trust. Around December 2008 Mrs Helme shared with Mr Maher proposals for a website and stationery to be used by the franchise business, both featuring the Logo.
13. On 21 January 2009 Mrs Helme, Mr Maher and Mr Green met at Mrs Helme's house. Mr Green subsequently provided a note of what had been agreed at that meeting in an email dated 27 January 2009. The note suggests that all were agreed on the incorporation of a company to run the business and Mrs Helme accepted in cross-examination that this and other matters had indeed been agreed at the meeting. Such other matters included that publicity for the business would be sought by placing newspaper advertisements. A margin structure, i.e. a pricing arrangement, for the dealings of the business with franchisees was settled. It was agreed that Messrs Maher and Green would take responsibility for sales of jewellery by the business other than through franchise outlets. By way of an indication of the attitude of the parties at this stage, Mrs Helme said that all three were enthused by the franchise project at the meeting.
14. The Hidden Gem Jewellery Company Limited was incorporated on 28 January 2009 ("Hidden Gem Co"). Of the 99 £1 shares, Mr Maher held 50 and Mr Green 49. Mrs Helme was not informed about the incorporation until later – Mrs Helme thought in about February or March. However she did not object when she found out about the company and was content with the franchise business being conducted under the name 'Hidden Gem'. Email exchanges continued between Mrs Helme and Mr Maher regarding detailed steps for moving the project forward. As Mrs Helme said, she, Mr Maher and Mr Green were working as a team.
15. On 3 March 2009 Mrs Helme provided Mr Maher with a monthly breakdown of how many display cabinets her business had operated in the year 2008 and the income from them. This had been requested by Mr Maher to assist in the preparation of the franchise business and Mrs Helme was happy to provide the information. Further sales figures for January and February 2009 followed on 4 March 2009.
16. There was another meeting on 31 March 2009. It is clear from notes of the meeting that the proposed franchise business was still at a formative stage with a projected date of 1 May 2009 for the completion of the business plan. One of the items discussed was Mr Maher's and Mr Green's offering the jewellery products to non-franchise outlets by retail or by sale through newspapers or TV. Mrs Helme accepted in cross-examination that she knew this was being done to promote the Hidden Gem brand in advance of the launch of the franchise business under that name, but said that she had not agreed to sales via a website.
17. Mr Green approached Timscris Readers Offers Ltd ("Timscris") for help in promoting the Hidden Gem name. He informed Mrs Helme and Mr Maher at the meeting of 31 March 2009 that Timscris was to be used as a vehicle to advertise and market Hidden Gem goods in order to get free advertising for the business. There was no dissent.
18. Since Mrs Helme had acquired the business, its principal supplier of jewellery had been a wholesaler called Rukhsana Ebrahim. The jewellery came, or so Mrs Helme believed, from Swarovski AG, an Austrian manufacturer of glass crystal products. One of the points of discussion on 31 March 2009 concerned the need to get confirmation from Swarovski that the franchise business could use the Swarovski name in its marketing. Swarovski was approached with samples of what the business intended to sell. In an email dated 14 April 2009 their London representative of Swarovski informed Mrs Helme that the samples supplied were not genuine. She and the Defendants had to sort out the problem and gain Swarovski's approval of future marketing using genuine Swarovski products.
19. In cross-examination Mrs Helme said that there had been discussions between her, Mr Maher and Mr Green about national advertising of Hidden Gem jewellery. On 15 April 2009 a proposed advertising layout promoting the double heart pendant set featured in the Photograph was sent by Mr Maher to Timscris, Mr Green and Mrs Helme. The layout included the Swarovski name and the Swarovski logo. On 5 May 2009 Swarovski authorised the placing of an advertisement in this form in the Daily Mail 30 May 2009. The advertisement as published also featured the Logo and the Photograph. Mrs Helme accepted that she knew of this and that it marked the launch of the project. In her view it was putting the cart before the horse because the franchise business as such had still not been set up, but she accepted that for better or worse at this stage she, Mr Maher and Mr Green had decided to promote the 'Hidden Gem' brand by advertisements in the national press. Sales were to be through Timscris. The franchisees would be sorted out in due course.
20. By 12 May 2009 the difficulties of the authenticity of the jewellery supplied by Ms Ebrahim had been sorted out, in remarkably short order. It seems that there was agreement to continue to buy from Ms Ebrahim and so she supplied a price list for genuine Swarovski products. This required funds and Hidden Gem Co had none. Although Mrs Helme raised an invoice to Hidden Gem Co, she was aware that the sums needed were paid by the Defendant's company, Healthcare-Europe. Healthcare-Europe also paid Timscris, as was confirmed by invoices.
21. On 18 May 2009 Swarovski gave authorisation for advertisements to be placed in OK! magazine on 2 June 2009. There followed approval for advertisements in the Daily Mail and Daily Telegraph. Mrs Helme was not informed about these. She continued to develop the website for Hidden Gem Co's business.
22. On 27 May 2009 Mr Maher purchased the domain name thehiddengemjewellerycompany.co.uk in his own name. Mrs Helme was not told.
23. In an email dated 8 June 2009 Mrs Helme indicated to Mr Maher that she had seen the advertisement in OK! magazine but she did not complain about it. In fact she never complained about any of the advertisements using the Hidden Gem name placed in the national press. Email exchanges continued between the parties in a form which suggest no change in the atmosphere of willing co-operation. Significantly, on 17 July 2009 Mrs Helme emailed the password for the Hidden Gem website she had been developing to Mr Maher. She expected that Mr Maher would need such access in order to modify the website. The advertisements for Hidden Gem jewellery in the national press continued.
24. A friend of Mr Maher's was recruited to make an unpaid contribution to the planned jewellery franchise business. This was Brian Maudsley. One of Mr Maudsley's voluntary tasks was to try to recruit potential franchisees. A pilot to test the franchise concept was carried out, at his expense, at Macclesfield rugby club in September 2009. As it turned out, the rugby club showed no interest and there was no take up of any franchises.
25. For one reason or another, towards the end of 2009 the enthusiasm for the project seems to have waned on all sides. According to Mr Maudsley he attempted to contact Mrs Helme in November 2009 and found it difficult to do so. He said that there were two meetings but Mrs Helme now showed little interest.
26. According to Mrs Helme the important event around this time, specifically November 2009, was that she discovered she could no longer access control of the Hidden Gem website because the password had been changed. She said she then found that the website had been changed to promote only online sales, as opposed to the franchise business, and featured new contacts for viewers who were interested. So far as she was concerned, the website had been hijacked by the Defendants. Her main objection was that the business in direct sales conflicted with the planned franchise business. She said she contacted Mr Maher by phone to discuss her concerns and that there was a meeting on 18 November 2009. Mrs Helme said the position of Mr Maher and Mr Green was that the franchise business was not working and that Mrs Helme should join in the direct sales project.
27. It is clear that there were further meetings and some effort at co-operation over then next two months or so, but they came to nothing. In early February 2010 Mrs Helme contacted her solicitors. There followed a delay and then the letter before action was sent on 9 April 2010.
28. Mr Maher's version of events at the end of 2009 and beginning of 2010 was that Mrs Helme was missing planned meetings and was hard to get in touch with. The Hidden Gem direct sales business was not doing well. Overall sales though Timscris amounted to £6,474 plus VAT and just two items were sold directly through the website. No franchises were ever sold. Mr Maher said that all concerned lost interest in the proposed new Hidden Gem project as a whole. According to him the first indication he and Mr Green had that Mrs Helme harboured any complaint about their conduct in relation to the failed project was upon receipt of the letter before action of 9 April 2010.
29. Mr Maher said that the last purchase by Timscris of Hidden Gem jewellery was in February 2010. By this time, as Mrs Helme was aware, the style of advertising copy used by Timscris had been approved by Mr Green. Advertising and sales by Timscris after February 2010 were by way of disposal of stock they had already purchased and did not involve any further dealings with the Defendants. Mr Maher also said that to his knowledge no goods had been sold under the name 'Hidden Gem' by the Defendants since well before the letter before action.

The licence

30. Mr Cook submitted that from late 2008 Mrs Helme granted to the Defendants a licence to use the 'Hidden Gem' trade name, the Logo and the Photograph in any way they saw fit. By way of a secondary argument, he said the licence was limited to any use which a reasonable person would have believed to have been in the contemplation of Mrs Helme.
31. Mr Smith submitted that the licence was limited to any use of the trade name, Logo and Photograph which was objectively reasonable for the promotion of the joint enterprise. There is little to distinguish this from Mr Cook's secondary characterisation of the licence.
32. Certainly Mrs Helme agreed to the use of the trade name, Logo and Photograph by Mr Maher and Mr Green – for instance on the website set up for Hidden Gem Co and in at least some of the advertisements placed in the national press by Timscris. This was in law a licence, but what was its scope? I do not think it would be a fair reflection of the evidence of the relationship between her and Mr Maher and Mr Green to suppose that the licence was micromanaged by Mrs Helme so that each particular use by Mr Maher or Mr Green was separately licensed. Undoubtedly at the end of 2008 and for a good part of 2009 Mrs Helme enthusiastically endorsed the efforts of Mr Maher and Mr Green to promote the joint enterprise to the best of their ability. It is relevant that the relationship between them at this point was one of friendship and trust. I think that the licence they enjoyed during this period was to use the 'Hidden Gem' trade name, the Logo and the Photograph for any purpose which they might reasonably consider to be for the advancement of the joint enterprise. Mrs Helme may now regret such a licence. Her trust in and friendship with Mr Maher has entirely cooled, if not vanished altogether, and there may be sound reasons for that but it cannot retrospectively affect the nature of the licence granted to him and to Mr Green at the time.
33. The licence was terminable, so it came to an end no later than 9 April 2010. Did the licence terminate before then or, if not, was its broad scope narrowed at some point? I was shown no evidence to support either of those things. By the end of 2009 Mrs Helme may well have been disillusioned and by February 2010 she was sufficiently disapproving of the activities of Mr Maher and Mr Green to contact her solicitors. There was a dispute of evidence about the degree to which Mrs Helme communicated her dissatisfaction. But I was shown nothing which suggests that Mrs Helme made it clear to the Defendants before 9 April 2010 either that their use of the 'Hidden Gem' trade name, the Logo and the Photograph should come to an end or that such use should be modified. In my view, the licence persisted until 9 April 2010.

Acts complained of

34. I turn to the acts by the Defendants of which complaint is made.

Transfer of hosting of the website and its development for direct online sales

35. Mrs Helme gave Mr Maher the password to allow him and Mr Green to control the Hidden Gem Co website. She allowed the use of the 'Hidden Gem' name and the Logo on the website. She may have had misgivings about the offer of online sales from the website but did not object before 9 April 2010. Mrs Helme objected to what she regarded as the hi-jacking of the website, that is to say the change of password so that she had no control over it. That may have been a ground of legitimate complaint in November 2009 but Mrs Helme did not inform Mr Maher or Mr Green that their use of the trade name and Logo were therefore at an end or somehow restricted.
36. The website promoted online sales, not the sale of franchises which was to be the subject of the joint enterprise, but in cross-examination Mrs Helme accepted that, reluctantly or otherwise, she had agreed to the promotion of direct sales under the 'Hidden Gem' name, and presumably the Logo, in order to promote the brand. In my view the acts complained of were licensed.

The distribution of a flyer featuring the trade name and Logo

37. The flyer in question had a contact email address which was owned by Mr Maudsley. Mrs Helme does not complain of the efforts of Mr Maudsley, at his expense, to promote the joint enterprise, in particular by running a pilot at Macclesfield rugby club to seek potential franchisees. It is not clear that Mrs Helme knew about this pilot, at least not in advance, but the use of the trade name and Logo for that purpose in my view fell within the broad terms of the licence. It must follow that Mr Maudsley's distribution of the flyer, which offered franchises under the 'Hidden Gem' name and logo, would likewise have been within the licence – technically by way of a sub-licence from Mr Maher.

Registration of the domain name 'thehiddengemjewellerycompany.co.uk'

38. This ground of complaint was not pursued. It was not pleaded or suggested that the domain name in question had ever constituted an instrument of fraud or otherwise gave rise to a complaint of passing off.

Advertisements in the national press or online

39. The fourth to tenth pleaded acts of the Defendants are the placing of advertisements either in a national newspaper: the Daily Express or the Daily Mail, or on websites: www.lifestyleathome.co.uk, www.cosmoshop.co.uk and www.allaboutyoushop.com, or on eBay. Three of the advertisements took the form of advertising runs that began before the letter before action on 9 April 2010 and four were placed afterwards.
40. Taking first the advertisements that must have been arranged before 9 April 2010, Mrs Helme knew about the advertising in the Daily Mail and in OK! magazine. She also participated in general discussions about national advertising of Hidden Gem jewellery before any was arranged and apparently went along with the idea. She may not have been told in advance of all the advertisements relied on now, but it is not suggested that any of them was materially different from the national advertising she did know about or, to the extent they came to her attention, that she complained about them at the time.
41. Mr Smith submitted that the position regarding the advertisements placed after 9 April 2010 is simple: on any view the licence from Mrs Helme was terminated upon receipt of the letter before action, so the placing of advertisements after that date was passing off and, where the Logo and Photograph were used, infringements of Mrs Helme's copyrights. Mr Cook submitted that any advertisement placed by Timscris was licensed.
42. Mr Maher's evidence was that jewellery had been sold to Timscris no later than February 2010 and thereafter all advertising by Timscris to enable sales of that stock had nothing to do with the Defendants. This was not challenged. The Defence, at paragraph 17(e) pleads that all of the advertisements complained of, both before and after April 2010, were placed by Timscris and thus fell within the licence of the Claimants. The Defence is signed by Mr Green and in this court stands as part of Mr Green's evidence. It was not challenged.
43. I must therefore conclude that the Defendants had nothing directly to do with the placing of any of the advertisements, including those placed after 9 April 2010. Sales of 'Hidden Gem' jewellery to Timscris before April 2010 were licensed and therefore the subsequent advertising and sale of the jewellery by Timscris must have been licensed. It is no part of the Claimants' case that after receiving the letter before action the Defendants were obliged to terminate what was, in effect, a sub-licence to Timscris or that Mrs Helme asked them to. Consequently, all advertisements arranged by Timscris were sub-licensed by the Defendants. The granting of such a sub-licence was within the scope of the broad licence granted by Mrs Helme to the Defendants to use the 'Hidden Gem' trade name, the Logo and the Photograph. Such use included, as was agreed, the promotion of the 'Hidden Gem' brand by means of direct sales of jewellery through Timscris.
44. Overall I think Mrs Helme's real complaint is that she trusted Mr Maher and Mr Green to take the lead in developing the franchise project for the joint benefit of all three of them and she now believes that her trust was misplaced. That may or may not be right, but it is not what I have had to decide. Mrs Helme gave the Defendants fairly free rein to make use of the 'Hidden Gem' name, the Logo and the Photograph. That is what they did and the use was not in my view unlawful.

Accord and satisfaction

45. Mr Cook did not press his argument on accord and satisfaction in closing. I will take the point briefly. I am prepared to accept the evidence of Mr Maher and Mr Green that they thought they had done a deal with Mrs Helme at the meeting of 8 September 2010 to dispose of this litigation, or at least that is what they now believe. I also accept Mrs Helme's evidence that she did not understand that any settlement had been agreed, though she was content to take Mr Maher's and Mr Green's assurance that the Hidden Gem Co website would be transferred to her and that the company's name would be changed. Both of those have happened. I do not believe there was a meeting of minds at the NEC regarding a settlement of these proceedings. There was no accord and on Mrs Helme's side not much satisfaction.

Conclusion

46. The claim is dismissed.