Court of Appeal considers “earlier right” defence and invalidity ground


In Caspian Pizza Ltd & others v Maskeen Shah & another the Court of Appeal (“CoA”) considered the effect of an “earlier right” both in the context of sections 5(4) and 11(3) of the Trade Marks Act 1994 (“TMA”).
Section 5(4) TMA provides that a trade mark shall not be registered where someone else could rely on an earlier right (typically a right under the law of passing off but also copyright and design rights) to prevent its use. In addition to being a relative ground for invalidity prior to registration, section 5(4) is also referred to in section 47(2)(b) TMA as a basis for declaring a registration invalid after it has been granted.
Section 11(3) TMA is a somewhat convoluted provision but in simple terms it provides an ‘owner’ of a unregistered trade mark protected by the law of passing off which has been used prior to use/registration of a registered trade mark with a defence to an infringement claim by the owner of such a registered trade mark.
This was an appeal by the Claimants from an order of Judge Hacon in the Intellectual Property Enterprise Court (“IPEC”) dismissing their claims for trade mark infringement and passing off and declaring that the Claimant’s UK trade mark for the word CASPIAN was invalidly registered.
The Claimants operated a pizza business in Birmingham from 1991 under the name “Caspian Pizza”. Their business expanded in and around Birmingham and acquired goodwill associated with the Caspian name and a logo. The Claimants registered trade marks for CASPIAN (from 8 July 2005) in respect of restaurants and related services and for a logo (from 21 September 2010) in respect of certain specified foodstuffs including those suitable for making pizzas.
The Defendants operated pizza restaurants in Worcester using the Caspian name, the first of which was opened in 2002 and traded until 2005, the second in Worcester from 2004 (using the ‘Caspian Pizza’ name) and further outlets elsewhere thereafter. The IPEC proceedings concerned only the restaurant in Worcester.
The Claimants alleged that the First Defendant had entered into an oral franchise agreement with them under which they were allowed to use the Caspian Pizza name, with any goodwill generated by his use of the mark vesting in or being assigned to the First Claimant and with monthly royalty payments. The Claimants alleged that they had not been paid and therefore terminated this agreement. Since the Defendants continued to trade using the Caspian name, the Claimants claimed infringement of both of its registered trade marks.
The Defendants:
• joined issue on whether they had operated under a franchise agreement as alleged and averred that since 2002/2003 they had acquired goodwill at least in Worcester from the use of the name Caspian Pizza;
• conceded at trial that their Worcester restaurant used signs similar to the registered trade marks in relation to similar goods or services (so the Judge was not required to consider likelihood of confusion) but relied on three defences to the trade mark infringement claim, including section 11(3): and
• counterclaimed for a declaration under section 47(2)(b) TMA that both the CASPIAN word mark and logo were invalid for being registered in contravention of section 5(4)(a).
The section 11(3) defence
Section 11(3) states:
“A registered trade mark is not infringed by the use in the course of trade in a particular locality of an earlier right which applies only in that locality.
For this purpose an “earlier right” means an unregistered trade mark or other sign continuously used in relation to goods or services by a person or a predecessor in title of his from a date prior to whichever is the earlier of
(a) the use of the first-mentioned trade mark in relation to those goods or services by the proprietor or a predecessor in title of his, or
(b) the registration of the first-mentioned trade mark in respect of those goods or services in the name of the proprietor or a predecessor in title of his;
and an earlier right shall be regarded as applying in a locality if, or to the extent that, its use in that locality is protected by virtue of any rule of law (in particular, the law of passing off).”
The Claimants contended that “the use” of the trade mark by the proprietor referred to in section 11(3)(a) meant use anywhere in the UK, rather than use in the locality in which the Defendants had established goodwill in the same mark (i.e. Worcestershire). If that was correct, then although the Claimants had not used the Caspian name in Worcestershire, they could nevertheless rely on their use of the Caspian name elsewhere in the UK (which predated the Defendants’ use) with the effect that the Defendants would not satisfy the conditions in section 11(3) and the defence would not be available to them.
Judge Hacon did not accept this contention and the CoA agreed with him. Referring to Article 6(2) of the Trade Mark Directive 2008/95/EC (with which section 11(3) TMA needed to be interpreted consistently) the CoA found no indication that an “earlier right” of a defendant should be defined by reference to pre-registration use by the proprietor of a mark anywhere in the UK. This means that the proprietor of a mark can only rely on its own earlier use in the same particular locality as that of the defendant to knock out the defence in section 11(3).
Invalidity under sections 5(4) and 47
Section 5(4) 1994 states:
“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, or
(b) by virtue of an earlier right other than those referred to in subsections (1) to (3) or paragraph (a) above, in particular by virtue of the law of copyright, design right or registered designs.
A person thus entitled to prevent the use of a trade mark is referred to in this Act as the proprietor of an “earlier right” in relation to the trade mark.”
In IPEC, Judge Hacon had
1. found that the CASPIAN mark was invalidly registered because by the filing date of 8 July 2005 the Defendant had already established goodwill in the use of the Caspian name in Worcester sufficient to found action for passing off, and

2. declined to grant a declaration of invalidity in respect of the logo as the Defendants had failed to make good their allegation that a third party owned an earlier right (copyright) in the logo.
The Claimants appealed (1) and the Defendants cross-appealed (2). The issue that the CoA had to decide was whether Judge Hacon had taken the correct approach in applying sections 47 and 5(4)(a).
In doing so, the CoA cited the different approaches taken to section 5(4) in the SWORDERS and Redd decisions:
• In SWORDERS Trade Mark dated 28 July 2006 (O-212-06), an opposition to a trade mark application was upheld on the basis of section 5(4)(a) where the Opponent had demonstrated a reputation within a particular locality and the Applicant had not restricted the scope of the territory covered under section 13(1)(b) TMA.

• In Redd Solicitors LLP v Red Legal Ltd, the First Defendant had used the sign RED LEGAL prior to the registration of the Claimant’s RED trade mark and made a counterclaim for invalidity under section 5(4)(a) in infringement proceedings. Whilst accepting that RED LEGAL had acquired sufficient goodwill and therefore an earlier right which entitled them to rely on a section 11(3) defence, given the small scale of the Defendant’s trade up to the relevant date and crucially given its clearly localised nature, the Judge rejected the counterclaim for invalidity under section 5(4).
Both Judge Hacon and, subsequently, the CoA had difficulty with the approach in Redd and the Appellants’ contention that the reference in section 5(4) to the trade mark’s “use in the United Kingdom” must be construed as referring to a wider geographical area than the “particular locality” referred to in section 11(3). In the CoA’s view, that approach took no account of the words “or to the extent that” in section 5(4) and that it was implicit that opposition under section 5(4) based on earlier use of the mark does not have to be use throughout the UK (or alternatively in a geographical area which overlaps with the applicant’s place of business using the same or a similar mark). Neither did the CoA see any reason why the same should not also apply under section 47(2)(b) where the challenge based on an earlier right is made after registration rather than in opposition.
During the course of appeal, the Appellants sought to contend that any declaration of invalidity should be restricted to preserve the validity of the registration of both marks so far as they apply to areas other than Worcester. However, the CoA concluded that it had no power to make such an order. Accordingly, the appeal against the declaration of invalidity in respect of the CASPIAN mark was dismissed but the cross-appeal was allowed and the logo declared to be invalidly registered on the basis that there was no reason for the Judge to have distinguished it from the CASPIAN word mark, given that it featured the word ‘Caspian’.
The CoA’s decision represents a departure from and disapproval of the approach in the Redd case where the Judge appeared to have drawn a dividing line between the scope of the “earlier right” in sections 11(3) and 5(4). Section 11(3) refers to an earlier right “by virtue of any rule of law (in particular, the law of passing off)” in a “particular locality”. That would appear to render the defence unavailable to someone with a reputation in the whole of the UK rather than a particular locality: such persons would have to oppose the registration under section 5(4) or seek to invalidate it under section 47(2). While an applicant can protect itself from an invalidity challenge by limiting the territorial scope of its application under section 13(1)(b), from a practical perspective an applicant is unlikely either to want to do so or to spend the time and money in ascertaining who else might have acquired localised goodwill in the relevant mark.
The different approaches to section 5(4) can be summarised as follows:
Case Section 5(4) Section 11(3) Section 47(2)(b)
SWORDERS An opponent to registration can rely on local goodwill to challenge registration (absent any territorial limitation by the Applicant under s13(1)(b). Prior local use protectable by passing off provides a defence to infringement. Not in issue.
Redd A defence of prior local use under s11(3) does not necessarily also establish a ground for invalidity under s5(4). Prior local use protectable by passing off provides a defence to infringement. See s5(4).
Caspian Pizza The only requirement is that the opponent should have established goodwill in mark over an identifiable geographical area that would qualify for protection in passing off proceedings. The goodwill would be capable of preventing registration of countrywide mark. Prior local use protectable by passing off provides a defence to infringement. See s5(4). Reliance on s13(1)(b) not available.

Toby Headdon


Related Articles