Today, in the eagerly anticipated judgment in Special Effects v L'Oreal the Court of Appeal has reversed a controversial decision reached by the High Court that a party who had raised certain arguments in an opposition to the grant of a trade mark in the Trade Mark Registry would be prevented from raising the same arguments when later disputing the validity of the trade mark. In a significant and welcome ruling, the Court of Appeal decided that the right to contest the validity of a trade mark in accordance with s47 of the Trade Marks Act 1994 (the Act), be it at the Registry or in Court, would not be denied, just because the mark had been opposed pre-grant, as the Registry' s decision to register a trade mark 'is not a final decision'. The right to challenge a trade mark post-grant is expressly provided for in the Act and should not be hindered by issue estoppel, cause of action estoppel or abuse of process arguments.

The decision will come as a welcome relief to those looking to challenge new trade marks, as the previous High Court decision left them in a position whereby they were uncertain as to whether or not to oppose registrations in the Registry for fear of preventing themselves challenging a trade mark's validity at some later stage, even if raising validity as a defence to an infringement claim. The ruling takes us back to the status quo before the High Court decision - parties will be free to challenge validity or raise invalidity as a defence to infringement, regardless of whether or not they opposed the original grant.

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Today, in the eagerly anticipated judgment in Special Effects v L'Oreal the Court of Appeal has reversed a controversial decision reached by the High Court that a party who had raised certain arguments in an opposition to the grant of a trade mark in the Trade Mark Registry would be prevented from raising the same arguments when later disputing the validity of the trade mark. In a significant and welcome ruling, the Court of Appeal decided that the right to contest the validity of a trade mark in accordance with s47 of the Trade Marks Act 1994 (the Act), be it at the Registry or in Court, would not be denied, just because the mark had been opposed pre-grant, as the Registry' s decision to register a trade mark 'is not a final decision'. The right to challenge a trade mark post-grant is expressly provided for in the Act and should not be hindered by issue estoppel, cause of action estoppel or abuse of process arguments.

The decision will come as a welcome relief to those looking to challenge new trade marks, as the previous High Court decision left them in a position whereby they were uncertain as to whether or not to oppose registrations in the Registry for fear of preventing themselves challenging a trade mark's validity at some later stage, even if raising validity as a defence to an infringement claim. The ruling takes us back to the status quo before the High Court decision - parties will be free to challenge validity or raise invalidity as a defence to infringement, regardless of whether or not they opposed the original grant.

In a continuing battle between Special Effects, (a small cosmetics operation run by Mr and Mrs Jones) and the larger entity, L'Oreal secured the right to plead invalidity as a defence to Special Effects' claim for trade mark infringement.

Sir Andrew Morritt, Chancellor, sitting in the High Court, had decided that L'Oreal should be estopped from raising invalidity as a defence to an infringement claim, because they had already run similar arguments when opposing the grant of the trade mark in the Registry, by virtue of 'cause of action estoppel' and 'issue estoppel'. The Chancellor also ruled that if these operated they should extend to the second defendants L'Oreal UK Limited, as they were in the same group of companies as L'Oreal SA and hence were effectively privy to the initial opposition.

The Appeal raised the following issues in relation to trade marks:

(1) Does participation in an opposition to an application for registration before the Registry prior to grant preclude challenges to validity by the opponent in respect of the granted registration?

If so, does this bar extend:

  1. to prevent defendants to infringement actions from putting validity in issue by way of defence to infringement?
  2. to all other companies in the same group as the opponent who are named as defendants in the infringement action but who were not parties to the opposition?
  3. does this bar extend to prevent both defendants from advancing a statutory defence to infringement which was not in issue before the Hearing Officer or to a claim to passing off in a different context to that considered by the Hearing Officer in the opposition?

Lord Justice Chadwick, Lord Justice Lloyd and Lord Justice Leveson disagreed with the Chancellor's ruling.

The answer to the first question was a resounding 'no', rendering subsequent questions (a),(b) and (c) unnecessary to answer.

Cause of Action Estoppel

With respect to cause of action estoppel the Court of Appeal's judgment read:

"it seems to us that to describe the applicant for registration as having a cause of action for registration would be an inappropriate and artificial use of language. The same is true of the opponent, who does not, it seems to us, have a cause of action at that stage for preventing the registration applied for."

In the circumstances, the Court of Appeal did not consider that cause of action estoppel should apply.

Issue Estoppel

Issue estoppel was described by the judges as a more flexible doctrine than cause of action estoppel. However, like cause of action estoppel it requires a final decision by a competent judicial tribunal. Under s 47 of the Act, if one party opposed the grant of a trade mark, a separate and unrelated party to which no estoppel arguments apply, could challenge the mark post grant, and the Registrar or court would have to consider all the issues, regardless of whether they had been considered before, with the possibility that the mark be declared invalid and removed from the register. The Court of Appeal concluded "the co-existence of the provisions for opposition and for a declaration of invalidity has the result that opposition proceedings are inherently not final.....the decision of the Registry on opposition proceedings...is not a final decision so as to be capable of being the basis of an issue estoppel". The Court of Appeal ruled this was correct for both an invalidity action and also for a passing off claim.

Abuse of Process

The Court considered whether it would be an abuse of process for L'Oreal to rely on grounds when pleading invalidity which were, or could have been, relied upon when the issue of validity was in question when the mark was opposed pre-grant at the Registry. The principle behind abuse of process is that there should be finality in litigation and that a party should not be vexed twice in the same matter.

It was relevant to consider what was at stake in each stage of proceedings. At opposition proceedings in the Registry the consequence of failure of an opponent would be that the trade mark is registered though subject to a possible later declaration of invalidity under s 47, at the suit of either the opponent or another party. However an infringement action could lead to financial liability and an injunction to stop the use of the opponent's marks. The judgment continued:

"In those circumstances it seems to us that the potential opponent could reasonably take the view that more limited resources should be deployed on opposition proceedings as compared with that which would be involved in court proceedings for infringement with a counterclaim for invalidity. That would also be consistent with the attitude that proceedings in the Registry are designed to be economical and expeditious, with limited costs recovery for the successful party."

The Court of Appeal considered that given that opposition proceedings in the Registry were, by nature, preliminary and given the way in which they were conducted, it would be wrong to regard it as an abuse of process for L'Oreal to seek to raise by way of counterclaim the ground of invalidity on which it relied in the opposition proceedings.

A Sensible Decision

The decision effectively returns us to the position before the original High Court judgment in the case. While the Registry provides an expeditious and economic forum for registering and opposing marks, it cannot be regarded as issuing final judgments beyond challenge in the courts. This is good news for trade mark holders; where parties feel it is necessary to challenge trade marks, be it as a defence to an infringement claim, or in a separate action, they will not be prevented from doing so just because they opposed the original grant of the disputed mark.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 12/01/2007.