BUDEJOVICKY BUDVAR NARODNI PODNIK v ANHEUSER-BUSCH INC

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1 480 [2008] R.P.C. 21 BUDEJOVICKY BUDVAR NARODNI PODNIK v ANHEUSER-BUSCH INC HIGH COURT OF JUSTICE (CHANERY DIVISION) (Norris J.): February 14 and 19, [2008] EWHC 263, [2008] R.P.C. 21 H1 Trade mark Application for declaration of invalidity Earlier mark Both marks BUDWEISER for same goods Earlier right by virtue of earlier application Later mark registered under previous provisions of honest concurrent use Application for declaration made one day within 5 year statutory limitation period Later mark declared invalid Appeal to High Court Date from which statutory period of five year acquiescence runs Whether VITALITE Trade Mark 2 decision wrong Later mark in use since 1973 Whether invalidity application barred by common law estoppel by acquiescence Whether application an abuse of process Partial invalidity H2 Trade Marks Act 1938, ss.11, 12(2) Trade Marks Act 1994, ss.5(1), 6(1), 47(2), 48 H3 This was an appeal by the registered proprietor, Budejovicky Budvar Narodni Podnik, against a declaration of invalidity in respect of Registered Trade Mark No BUDWEISER granted by the Trade Marks Registry on the application of the respondent, Anheuser-Busch Inc. H4 The appellant had commenced use of the mark BUDWEISER in the United Kingdom in The trade mark was applied for on 28 June 1989 and was registered on 19 May 2000 in Class 32 in respect of beer, ale and porter; malt beverages; all included in Class 32, but not including any such goods for supply to, or sale in, the United States of America s Embassy and PX stores in the United Kingdom. The application had proceeded to registration on the basis of honest concurrent use by reason of special circumstances under s.12 of the Trade Marks Act H5 The respondent had applied to register the same mark BUDWEISER in Class 32 for beer, ale and porter on 11 December 1979 and its mark achieved registration on 19 May Both the appellant and respondent had opposed each other s registration of BUDWEISER and in February 2000, the Court of Appeal had held that although the appellant s use of the mark might cause confusion and was thus objectionable under s.11 of the Trade Marks Act 1938, its use nevertheless fell within the provisions of s.12(2) of that Act because of the appellant s honest concurrent use since 1973 and/or special circumstances arising from earlier litigation 3 between the parties, which had established shared entitlement to the goodwill and shared entitlement to the trade mark BUD. 4 1 Paragraph numbers in this judgment are as assigned by the court. 2 [2007] R.P.C. 29, Ch.D. 3 Anheuser-Busch Inc v Budejovicky Budvar Narodni Podnik [1984] F.S.R. 413, Ch.D, CA and BUD Trade Mark [1988] R.P.C. 535, TM Regy, Ch.D. 4 BUDWEISER Trade Marks [2000] R.P.C. 906, CA

2 [2008] R.P.C H6 H7 H8 H9 H10 H11 The respondent commenced the present application for a declaration of invalidity on 18 May 2005, one day within the five year limitation period set out in s.48 of the Trade Marks Act It argued that its BUDWEISER trade mark was an earlier trade mark by virtue of s.6(1) of the 1994 Act as its mark had the earlier filing date, that its mark and that of the appellant were identical and covered the same goods and that under s.47(2) of the Act, the appellant s BUDWEISER mark was liable to be declared invalid. The hearing officer acting on behalf of the Registrar of Trade Marks granted the declaration sought. He held that he was bound by the decision in Vitasoy International Holdings Ltd v The Sunrider Corporation (VITALITE Trade Mark) 5 which held that the statutory period of acquiescence for the purposes of s.48 began with the date of registration of the mark; that the existence of the statutory defence precluded the application of a defence of common law acquiescence or estoppel by acquiescence; and that it was not an abuse of process as the invalidity application was not an attack upon or an attempt to relitigate the substance of a previous decision but was instead the exercise of a fresh right. The appellant appealed to the High Court. It submitted that there had been statutory acquiescence within s.48 of the 1994 Act because the respondent had acquiesced for a continuous period of five years in its use of the registered trade mark in suit, being aware of that use. It argued that the focus of s.48 was upon the use of the later mark and acquiescence in that use, and that if the focus was upon use in the market place then there was no reason why the period of acquiescence should run only from the date of completion of the registration procedure in May 2000 (rather than from the date of the application for the appellant s mark in June 1989, made in support of its then existing use). It argued that the decision in VITALITE Trade Mark was wrong and ought not to be followed. The appellant also argued that the respondent s acquiescence in its use of the mark BUDWEISER gave rise to a common law estoppel by acquiescence and submitted that the hearing officer had erred in holding that the statutory provisions of s.48 ousted any defence of common law acquiescence. There was no direct evidence filed by the appellant addressing its state of belief or the reason why it had acted or not acted in a particular manner. It argued that such evidence was unnecessary as it was apparent from the uncontentious circumstances that the relevant governing mind of the appellant must have held a particular belief. It submitted that the respondent had stood by without complaint for 20 years during which time the appellant had plainly sought to increase its business in the United Kingdom and that at no time since the judgment of the Court of Appeal in March 1984 had the respondent made any attempt to prevent such use. The appellant also argued that the failure by the respondent to issue the application until the very last day of the statutory limitation period and where it could be inferred that service on the appellant would take place outside that period amounted to a representation that the right to apply for a declaration of invalidity would not be exercised and that the manner in which it was exercised made it unconscionable for the respondent to seek to resile from its representation. The appellant submitted that the respondent s application was an abuse of process, that the hearing officer s reasoning had been flawed, and that the court should make a broad merits-based judgment which took account of the public and private interests involved. 5 [2007] R.P.C. 29, Ch.D.

3 482 BUDEJOVICKY BUDVAR NARODNI PODNIK v ANHEUSER-BUSCH INC H12 H13 H14 H15 H16 H17 H18 H19 H20 Held, dismissing the appeal, save in respect of malt beverages : (1) The natural meaning of s.48 of the Trade marks Act 1994 was that the proprietor of the earlier mark had to acquiesce in the use of a registered trade mark (being aware of that use), not the use of an unregistered trade mark for which an application to register had been made. ([26(a)]) (2) The decision in VITALITE Trade Mark was of persuasive authority. There were no arguments of substance which had not also been addressed to the court in that earlier decision. It was right to follow VITALITE Trade Mark in the interests of consistency at the first instance. The conclusions in that case were, in fact, correct and the period of acquiescence by the proprietor of an earlier mark for the purposes of s.48 began with the date of registration of the later mark. ([27]) (3) The hearing officer had erred in holding that the statutory defence provided by s.48 of the Trade Marks Act 1994 precluded the application of the English doctrine of estoppel by acquiescence, if made out on the facts. ([29]) (4) The decision of the Court of Appeal in 1984 related to passing off and thereafter rights to trade marks had been hotly contested. The present right which the respondent sought to enforce had not existed prior to the coming into effect of the Trade Marks Act 1994 and could not have been pursued until the respondent itself became the proprietor of its earlier mark. It could not be said that the respondent had allowed the appellant to use its mark without complaint when just such a complaint had been before the court until February ([32]) (5) The failure to issue the invalidity application, notwithstanding the continuing hostility between the parties, did not amount to a representation that no such application would be issued and there was no evidence that the respondent s failure was so seen by the appellant s governing mind. ([33]) (6) The hearing officer s reasoning as to whether the invalidity application was an abuse of process was sound and betrayed no error of principle. Invalidity under the 1994 Act could not have been raised in the earlier opposition proceedings under the 1938 Act. Insofar as similar questions of law and fact had been considered, the Court of Appeal had found that there was an identical mark, identical goods and (at that time) a risk of confusion, matters on which the respondent currently relied, but refused to allow the opposition because of honest concurrent use and special circumstances. The present proceedings were not an abuse of process. ([37]) Special Effects Ltd v L Oréal SA [2007] R.P.C. 15, CA, Johnson v Gore-Wood [2002] 2 A.C. 1, HL and BUDWEISER Trade Marks [2000] R.P.C. 906, CA referred to. (7) The hearing officer had erred in holding that the specification of the respondent s earlier mark covered the entirety of the appellant s specification. It was necessary to decide whether malt beverages could only be, and were thus identical with, beer, ale and porter. No evidence had been filed on this point and the application to declare the appellant s registration of BUDWEISER invalid in relation to malt beverages had not been made out. [41]-[43] Cases referred to: Anheuser-Busch Inc v Budejovicky Budvar Narodni Podnik [1984] F.S.R. 413, Ch.D., 448, CA Case C-245/02, Anheuser-Busch Inc v Budejovicky Budvar Narodni Podnik, [2005] E.T.M.R. 27, ECJ BUD Trade Mark [1988] R.P.C. 535, TM Regy, 547, Ch.D. BUDWEISER Trade Marks [2000] R.P.C. 906, CA Johnson v Gore-Wood [2002] 2 A.C. 1, HL Published by Oxford University Press for the UK Intellectual Property Office

4 [2008] R.P.C Perlman v Rayden [2004] EWHC 2192 (Ch), Ch.D. Special Effects Ltd v L Oréal SA [2007] R.P.C. 15, CA Vitasoy International Holdings Ltd v The Sunrider Corporation (VITALITE Trade MARK) [2007] R.P.C. 27, Ch.D. H21 James Mellor Q.C. instructed by Marks & Clerk, Solicitors appeared for the appellant/registered proprietor. Michael Bloch, Q.C. instructed by Macfarlanes appeared for the respondent/applicant for declaration of invalidity. JUDGMENT 1 Anheuser-Busch Inc ( AB ) is a Missouri brewer that has since about 1875 sold beer under the name Budweiser. Budejovicky Budvar Narodni Podnik ( BB ) is a brewer in the town of Ceske Budovice (formerly Budweis ) which has since 1895 also sold beer under a name consisting of or including Budweiser. Disputes over the right to use the word Budweiser in connection with such beer have existed since at least The current appeal is the latest round of such disputes in this jurisdiction. 2 BB first actively entered the UK market in AB gradually entered the UK market in the period 1974 to Apart from the common use of the word Budweiser there was no similarity of taste or appearance between the two beers and their containers were different. But the use of the identical mark Budweiser in connection with identical categories of goods (albeit that the goods themselves were distinctive) has continued for over 30 years. 3 In November 1976 BB applied to register the mark Bud in script as a trademark in Class 32. The application was opposed by AB. 4 In 1979 AB commenced passing-off proceedings against BB claiming an injunction to prevent BB from selling or dealing in beer by the name of Budweiser. BB counterclaimed for the same relief against AB. The trademark application was stayed to await the outcome of the passing off proceedings. The decision of Whitford J. at first instance is reported as Anheuser-Busch Inc v Budejovicky Budvar Narodni Podnik [1984] F.S.R He held that neither brewer could be disentitled to use the word Budweiser since neither was employing it improperly. AB appealed that decision and BB cross-appealed. The decision of the Court of Appeal dismissing the appeal is reported at [1984] F.S.R Dillon L.J. pointed out (at page 476) that the right of property for the invasion of which a passing-off action is a remedy, is a right of property, not in the mark or 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. The Court held that AB had no goodwill capable of being damaged, so that the trial judge had correctly concluded that there was a dual reputation in the name Budweiser which a neither party could claim had been improperly achieved. 5 Following the decision of the Court of Appeal the trademark application was revived. S.11 of the Trade Marks Act 1938 provided:- It shall not be lawful to register as a trademark... any matter the use of which would by reason of its being likely to deceive or cause confusion... be disentitled to protection in a court of justice. The registrar (whose decision is reported as BUD Trade Mark [1988] R.P.C. 535) decided that AB s evidence did not disclose a sufficient degree of confusion, and the s.11 ground

5 484 BUDEJOVICKY BUDVAR NARODNI PODNIK v ANHEUSER-BUSCH INC of opposition to BB s application to register Bud as a mark failed. S.12(2) of the 1938 Act provided:- In case of honest concurrent use, or of other special circumstances which in the opinion of the Court or of the registrar make it proper so to do, the Court or the registrar may permit the registration of trademarks that are identical or nearly resemble each other in respect of the same goods...by more than one proprietor The registrar found that there was honest concurrent use and would have registered BB as proprietor of the mark Bud also on that basis. 6 AB appealed this decision. The decision of Walton J. is reported at [1988] R.P.C He affirmed the registrar s decision on both the principal and the alternative grounds. His reason was that if the substantive mark of Budweiser could be freely used by BB, and if (as was the case) customers in fact contracted this to Bud, then there could be no question of the Court saying that BB was not permitted to use the way in which its customers were actually going to describe its product. As a further ground Walton J. was in no doubt that there had been honest concurrent use, and in no doubt that there were special circumstances; so he would have registered under s.12(2) of the 1938 Act as well. Following this victory for BB, AB itself also successfully registered Bud as a mark. 7 It had now been judicially established that neither AB nor BB was, as against the other, exclusively entitled to the goodwill attaching to the name Budweiser : and that BB was entitled to register the mark Bud because it could freely use the name Budweiser of which the mark was simply a contraction (in respect of which there was in any event honest concurrent use) and that AB was likewise so entitled. This left outstanding trademark applications relating to the mark Budweiser. On the 11 December 1979 AB had applied to register the mark Budweiser for beer, ale and porter, which application was opposed by BB. On the 28 June 1989 BB itself applied to register the mark Budweiser for beer ale and porter; malt beverages, which application was in turn opposed by AB. 8 AB s application of the 11 December 1979 and BB s application of the 28 June 1989 were eventually judicially determined in February 2000 and both marks were put on the register on the 19 May These dates are crucial to the present application. 9 The process of determining AB s and BB s respective rights to the mark Budweiser had taken so long that the Trade Marks Act 1938 had been repealed and replaced by the Trade Marks Act 1994, but it was common ground that the proceedings having begun under the provisions of the 1938 Act had to continue to be dealt with under that Act. (There was apparently no suggestion that the terms of the 1994 Act had rendered the battle entirely without point). The battleground therefore remained the competing provisions of s.11 and s.12(2) of the 1938 Act. The Court held (BUDWEISER Trade Marks [2000] R.P.C. 906 at 916) that the outcome of the passing off action was not determinative of the trademark applications then before it (passing off being a matter of private right between AB and BB and the registration of a mark being a matter between the applicant and the public), but that s.12(2) required a consideration of the actual use made of the mark (ibid 914) and that the situation covered by s.12(2) was analogous to that considered in the passing off action. Peter Gibson L.J. noted at p. 918 that There is no doubt but that Walton J. thought that this Court had decided that both AB and BB were entitled to use the name Budweiser of which both were proprietors. His decision was based on that premise. His conclusion that BB was entitled to obtain registration of the trade mark BUD as a contraction of Budweiser, Published by Oxford University Press for the UK Intellectual Property Office

6 [2008] R.P.C if correct, necessarily entails that BB is also entitled to obtain registration of the unabbreviated trade mark Budweiser. There was no appeal by AB from that decision and [counsel for AB] does not dispute that it is binding on AB. The Court decided that AB had made out its objection under s.11 (that BB s use of the Budweiser mark might cause confusion) but that the case also fell within s.12(2) of the 1938 Act because of BB s honest concurrent use since 1973 and/or special circumstances arising from the earlier litigation (which had established shared entitlement to the goodwill and shared entitlement to the trademark Bud ). Accordingly both AB and BB could register the mark. In dismissing the appeal judge L.J. commended the decision below as focused on the practical realities, at least in part consequent upon the sensible application of the previous decisions of the Court of Appeal and Walton J.. 10 Any hope that judicial determination of the passing off claim and of the right to register the mark Budweiser in its full form and in its contracted form Bud would put an end to the litigation was shortlived. The Trade Marks Act 1994 afforded further possibilities. 11 S.5(1) of the 1994 Act provides that a trademark shall not be registered if it is identical with an earlier trademark and the goods or services for which the trademark is applied for are identical with the goods or services for which the earlier mark is protected. S.6(1) of the 1994 Act defines an earlier trademark as a registered trademark... which has a date of application for registration earlier than that of the trademark in question, taking account (where appropriate) of the priorities claimed in respect of the trademarks. In this case it was not suggested that the qualification had any application to the issues on appeal: accordingly AB s registration of Budweiser is an earlier trademark in comparison with that of BB for the purposes of the 1994 Act (even though both were actually registered on the same day). 12 S.5(2) of the 1994 Act enlarges upon the preceding subsection and provides that a trademark shall not registered if (because it is identical with an earlier trademark and is to be registered for goods similar to those for which the earlier mark is protected) there exists a likelihood of confusion on the part of the public, including the likelihood of association with the earlier trademark. 13 If a mark is registered then s.40(3) of the 1994 Act provides that it shall registered as of the date of filing of the application for registration; and that date shall be deemed for the purposes of [the] Act to be date of registration. 14 S.47(2) of the 1994 Act then provides that the registration of a trademark may be declared invalid...on the ground that there is an earlier trademark in relation to which the conditions set out in s.5(1) [or] (2) obtain... unless the proprietor of that earlier trademark... has consented to the registration. But s.48 imposes a form of statutory limitation period in respect of such applications for declarations of invalidity by providing that where the proprietor of an earlier trade mark... has acquiesced for a continuous period of five years in the use of a registered trade mark in the United Kingdom, being aware of that use, there shall cease to be any entitlement on the basis of that earlier trade mark... to apply for a declaration that the registration of the later

7 486 BUDEJOVICKY BUDVAR NARODNI PODNIK v ANHEUSER-BUSCH INC trademark is invalid... unless the registration of the later mark was applied for a bad faith. 15 Before I take up the narrative of events again I should note that (as is apparent from the preamble to the Trade Marks Act 1994) the Act implements the EC First Council Directive 89/104 ( the TM Directive ) (and in particular, in relation to the sections which I have cited, Arts.4 and 9). I should further record that my attention was drawn to no relevant transitional provisions (though passing reference was made to para.18(2) of Schedule 3 in connection with a subsidiary argument). 16 Pursuant to BB s application dated 28 June 1989 it was registered as proprietor of the mark Budweiser on the 19 May Although AB was also registered as proprietor of the identical mark that same day, its mark is an earlier trade mark under s.6(1) of the 1994 Act because it applied for the registration of its mark on the 11 December On the 18 May 2005 (four years and 364 days after the registration of Budweiser as BB s mark) AB applied for that registration to be declared invalid under the provisions of s.47(2) of the 1994 Act (a) pursuant to s.5(1) in respect of the registration of the mark in relation to beer, ale and porter and (b) pursuant to s.5(2) in respect of registration of the mark in relation to malt beverages. The timing of the application was such that although it was issued within the five year period, it was not served on BB until after the five-year period had expired. BB was thereby disabled from making its own crossapplication under s.47(2) seeking a declaration as to the invalidity of AB s registration of the mark Budweiser based on BB s earlier trademark Bud. 17 AB s case is of the utmost simplicity. Under s.6(1) its mark Budweiser is undoubtedly an earlier trade mark. It is indisputable that BB s mark Budweiser is identical to AB s earlier trademark. It is not in dispute that in so far as both marks are registered in respect of beer ale and porter they cover identical goods. Under s.47(2) of the 1994 Act the registration is therefore liable to be declared invalid. The fact that BB s registration of the mark Budweiser was the result of a judicial determination is irrelevant, because the basis of entitlement to register was honest concurrent use and special circumstances neither of which finds any place in the TM Directive or the 1994 Act. 18 This argument succeeded before the hearing officer, Mr Mike Foley, who expressed a certain unease at the position in which I find myself. As he pointed out:- The Court of Appeal issued a decision that on the facts, allowed the status quo in the reality of the market to continue. In concentrating on the legal issues the parties have left me in the position of having to determine these proceedings on the thinnest of evidence, and I must now decide this on essentially a notional basis. Adopting the global approach advocated by the case law I do not see that there can be any other finding other than in favour of [AB]. 19 That decision is before me on appeal. My present task is not to rehear the application, but to review the decision of the hearing officer with the object of correcting any errors of principle in it, and not with the object of substituting my view for that reached by him without error. In approaching that task I have been reminded that I must be careful not to find that the hearing officer has committed an error of principle simply because he could have better expressed his decision. 20 Before dealing with the grounds of appeal I should deal with certain matters which this appeal has not been about. Published by Oxford University Press for the UK Intellectual Property Office

8 [2008] R.P.C (a) This appeal has not been about whether AB can immediately prevent BB using Budweiser as a mark in selling its beer. As is conveniently summarised in s.2 of the 1994 Act, a registered trademark is a property right obtained by the registration of the mark under the Act, and the proprietor of the registered mark has the rights and remedies provided by the 1994 Act. AB s application is obviously designed to deprive BB of the rights and remedies provided by the 1994 Act, but whether AB is itself able to enforce those rights and remedies as against BB (even if it successfully deprives BB of its defence to an infringement claim under s.11(1) of the 1994 Act) remains to be determined another day. Such a day will surely come. But AB s application and this appeal are purely concerned with the question of the registration of BB s mark (and the property rights which derive from that registration). (b) It has not been argued on this appeal that either the hearing officer had or I have any discretion whether to grant or withhold relief. Although the language of the section is on its face permissive (... the registration of a trade mark may be declared invalid... ) the case has been argued on both sides on the footing that if AB establishes its right (by bringing itself within the statute and by BB failing to make good any substantive defence to the statute) then there is no separate discretion to be exercised judicially in relation to the remedy. I raised the point at the conclusion of argument and was referred by both sides to para of Kerly s Law of Trade Marks and Trade Names (14th edition) which notes a former debate and states There is no residual discretion in proceedings for invalidity... With the benefit of hindsight, it is perhaps surprising that this was considered a serious issue. Thus admonished I bow to the inevitable for the purposes of this appeal (though recording the view that I am unconvinced by the argument, such as it is). (c) S.47(2) says that application may be made to invalidate a later mark unless the later mark was registered with the consent of the proprietor of the earlier mark. It has not been argued on this appeal that for the purposes of s.47(2) of the 1994 Act the judicial dismissal of an objection to registration is to be treated on the same footing as consent to registration, so that no application can be made under s.47(2) at all. A trade mark is a property right. If AB is right then anyone who has the benefit of a registered mark because of honest concurrent use or other special circumstances under the 1938 Act was, upon the commencement of the 1994 Act, at risk of being deprived of that accrued property right. It might be argued that (with or without the assistance of s.3 of the Human Rights Act 1998) a construction of s.47(2) which avoided the expropriation of a legally established right was appropriate: it was not so argued, possibly because the point may be a bad one. (d) It was accepted for the purposes of argument before me that the registrations were in respect of identical goods ( beer, ale and porter ) even though it was also common ground before me that for 30 years the two beers bearing the Budweiser name had existed in the market as distinct products. I therefore turn to the points that were argued before hearing officer and on appeal. 21 BB in essence accepted AB s starting point, but said that it had substantive and procedural defences.

9 488 BUDEJOVICKY BUDVAR NARODNI PODNIK v ANHEUSER-BUSCH INC 22 The first limb of BB s case was that there had been statutory acquiescence within s.48 of the 1994 Act because AB had acquiesced for a continuous period of five years in the use by BB of the registered trademark Budweiser, being aware of that use. The argument of Mr Mellor Q.C. was that the focus of s.48 is upon the use of the later mark and acquiescence in that use, and that if the focus was upon use in the market place then there was no reason why the period of acquiescence should run only from the date of completion of the registration procedure in May 2000 (rather than from the date of the application for BB s mark in June 1989, made in support of its then existing use). In that connection he relied upon (a) S.40(3) of the 1994 Act (which says that the date of filing the application is to be deemed for the purposes of the Act to be the date of registration of the mark), which he said indicated that actual registration was not significant: (b) Art.4 of the TM Directive (which fixes priorities expressly by reference to the date of application for registration, subject to the registration being completed): (c) Art.9 of the TM Directive (which refers to the proprietor of the earlier mark acquiescing for a period of five successive years in the use of a later trade mark... while being aware of such use, a later trade mark simply being a trade mark with a date of application for registration after that of the earlier mark (see Art.4.2) (which again indicated the insignificance of the date of registration): (d) The preamble to the TM Directive (which explained that it was important for reasons of legal certainty and without inequitably prejudicing the rights of a proprietor of an earlier trademark to provide that the latter may no longer request a declaration of invalidity nor may he oppose the use of a trademark subsequent to his own of which he has knowingly tolerated the use for a substantial length of time ) which demonstrated the significance of use and the relative insignificance of registration: (e) The contrast between the language of Art.9 (with its simple reference to acquiescence in the use of a later trade mark) and Art.10 (with its specific reference to an application for revocation being made within a period of five years following the date of the completion of the registration procedure ). Deploying this material he submitted that where s.48 refers to acquiescence in the use of a registered trade mark it requires only toleration of the use of a mark for which application has been made and which is ultimately registered, so that the period of the earlier proprietor s acquiescence commences with the date of application for the registration of the later mark, not with the date of completion of the registration procedure for the later mark. He buttressed this argument with the submission that (as is apparent from the references in s.48(1) to [an] earlier trademark or other earlier right ) statutory acquiescence applies not only to the proprietor of an earlier registered mark but also to the holder of an earlier right (including rights acquired by use such as under the law of passing off), and deprives the holder of the earlier right of the ability to oppose the use of the later mark. To such a situation registration had no application. The entire focus of the section was accordingly upon use not upon registration, 23 The consequence of this argument is, of course, that AB lost its right to apply for a declaration of the invalidity of BB s mark before it had ever acquired that right. That is because AB only became the proprietor of an earlier mark when it was registered as such on the 20 May 2000, by which time BB had been using its later mark for the 11 years since it applied for registration. This would be a surprising construction of Published by Oxford University Press for the UK Intellectual Property Office

10 [2008] R.P.C the section: but perhaps no more surprising than the conclusion for which AB contends (viz. that a mark registered in consequence of an order of the Court of Appeal and based on 30 years concurrent use is nonetheless invalid ). 24 But what stands directly in the way of an acceptance of Mr Mellor Q.C. s submission is the decision of Warren J. in Sunrider Corporation v Vitasoy International Holdings Ltd [2007] EWHC 37 (Ch), [2007] R.P.C. 29. Sunrider was the registered proprietor of the mark Vitalite, for which it had applied in 1993 and of which it became proprietor by registration in December In October 2004 Vitasoy applied to have that registration declared invalid because the mark was similar to its own mark Vita (for which application had been made in 1991 and which was registered in November 2000) and registered in respect of identical or similar goods. Vita was therefore actually registered after Vitalite, but the application for the registration of Vita pre-dated that for Vitalite ; so Vita was the earlier mark under s.6 of the 1994 Act. Vitasoy became the proprietor of an earlier trade mark when it was registered as such in November Its application for invalidity of the Vitalite mark was brought within 5 years of the registration of Vitalite as a mark, but 13 years after Sunrider s application to register Vitalite. Sunrider therefore argued that for the purposes of s.48 Vitasoy s fiveyear period of acquiescence in the use of a registered trade mark started to run from the date of date application for registration of the Vitalite mark (as the deemed date of registration), not from the date of the actual registration itself (relying in particular on s.40(3) and upon s.9(3) of the 1994 Act, which says that the rights of the proprietor have effect from the date of filing of the application for registration). 25 This argument was rejected by Warren J. after considering the effect of ss.9(3) and 40(3) of the 1994 Act, and the terms of the Preamble to and Art.9 of the TM Directive, because (a) the more natural meaning of the expression acquiesced...in the use of a later trade mark registered in [any] Member State whilst being aware of such use is that the acquiescence relates the use of a registered mark; (b) restricting acquiescence to a period commencing with the registration of a mark was consistent with the parallel provisions of the TM Directive relating to opposition to registration (why should five-years acquiescence in the use of a mark pending registration bar the right to seek invalidity if it is ultimately registered, but the same acquiescence not bar the right to oppose registration?) (c) the policy of the TM Directive is to protect registered marks, and whilst it is possible to understand why in the interests of legal certainty there should be a derogation from the protection afforded to the proprietor of an earlier mark who acquiesces in the use of a later registered mark, there is no compelling policy reason to derogate from the protection in respect of the use of an unregistered later mark (there is an apparent mistake in para.99 of the judgement where an intended reference to a later unregistered mark appears as a reference to an earlier unregistered mark). 26 Mr Mellor Q.C. accepted that the hearing officer was bound by that decision but he submits that I am not so bound, and that the decision is wrong:- (a) He submits that the construction of statutory provisions by reference to their natural meaning is simply the statement of a conclusion rather than the giving of a reason. I disagree. Giving effect to the ordinary meaning of words is a tool of construction, the application of which supports a legal conclusion. I agree

11 490 BUDEJOVICKY BUDVAR NARODNI PODNIK v ANHEUSER-BUSCH INC with Warren J. that the natural meaning of s.48 is that the proprietor of the earlier mark must acquiesce in the use of a registered trademark (being aware of that use), not the use of an unregistered trademark for which an application to register has been made. (b) He submits that Warren J. failed to take into account the fact that some Member States do not have any machinery for opposing the registration of a mark, registration being a purely administrative process. In such states no long period will elapse between application and registration, and the TM Directive (and the 1994 Act which implements it) should be construed with that in mind (making a policy that time runs from the date of the application perfectly understandable). I accept that the 1994 Act must be construed by reference to the TM Directive, and that the TM Directive should itself be construed against the background that some Member States do and some do not have a machinery for opposition. But of itself that consideration seems to me to be neutral; policy can no more be discerned (and the appropriate construction accorded) by reference to one set of Member States than by reference to the other. (c) He submitted that Warren J. did not have the relevant policy considerations drawn sufficiently forcefully to his attention, in particular that everything in the TM Directive revolves around the date of application. Instead his attention was focused upon s.9(3) (which is a domestic or homegrown provision not derived from the TM Directive). I do not agree. The point (whether derived from s.9(3) or the provisions of the TM Directive) is that for some important purposes the system works by reference to the date of application: and Warren J. had that well in mind. Moreover, the submission that the TM Directive revolves around the date of application overstates the position. Registration of a mark (not the making of an application) governs the right (for example) to seek a declaration of invalidity or to bring an action for infringement. (d) He submitted that a comparison between the right to seek a declaration of invalidity and the right to oppose registration was unhelpful because the latter was in fact subject to a self-limiting mechanism. Mr Mellor Q.C. argued that opposition to a later mark had to be assessed at the date of the application for the later mark, and the longer the proprietor of the earlier mark left it before seeking to prevent the use of the later mark, the longer the public had to get used to both marks being in existence, and the harder it would be to establish the requisite confusion upon which opposition to registration would be founded. There was therefore no need to address the possibility that acquiescence may bar the right to oppose registration. I cannot be sure that this argument was addressed to Warren J.: but I do not in fact accept it. Confusion (and risk of being unable to establish it) would appear to be relevant only where the opposition to registration was founded on s.5(2) of the 1994 Act, so the selflimiting mechanism could not operate where the later mark was identical to the earlier mark and was registered in respect of identical goods. Thus the whole edifice is erected upon the very slender foundation, and is I think a speculation. Like Warren J. I think that a consideration of acquiescence in the context of an application for a declaration of invalidity and of an application in opposition to registration is helpful: and like him, in my judgement it points to the period of acquiescence commencing with the date of registration of the later mark. Published by Oxford University Press for the UK Intellectual Property Office

12 [2008] R.P.C The decision in Sunrider is of persuasive authority; I am not satisfied that there are any arguments of substance that have been addressed to me that were not addressed to Warren J. and I would on that ground follow it in the interests of consistency at first instance. In fact I fully agree with Warren J. s conclusions. The period of acquiescence by the proprietor of the earlier mark for purposes of s.48 begins with the date of registration of the later mark. On that footing AB s application is brought in time. 28 In the event that he failed to persuade me of AB s statutory acquiescence Mr Mellor Q.C. sought to persuade me of AB s common law acquiescence. By this he meant (in the words of Patten J. in Perlman v Rayden [2004] EWHC 2192 (Ch) at para.73) the type of conduct which is sufficient to give rise to an estoppel in the defendant s favour. The citation continues:- What is required to be shown is that the person with the legal right has stood by in knowledge of the infringement so as to cause the defendant to believe that he assents to what is being done. Conduct of this kind is sometimes described as giving rise to an implied representation that the legal right will not be enforced, but a representation as such is not a necessary ingredient of the equity. What the court is looking to identify is conduct which resulted in the defendant, to the claimant s knowledge, proceeding to expend money or otherwise act to his detriment in the belief that there would be no objection to what he was doing. In such circumstances it would be unreasonable for the claimant to be allowed subsequently to assert his legal rights. Acquiescence giving rise to an estoppel bars the enforcement of the legal right. 29 In paras.26 to 28 of his decision the hearing officer rejected BB s case on common law acquiescence. The heart of his reasoning is found in these words:- That there is an Article in the Directive specifically relating to the issue of acquiescence indicates this to be a circumstance that those engaged in its drafting considered could directly affect the functioning of the internal market. Whether or not they turned their minds to any non-statutory remedies contained within national law, the authors of the Directive saw fit to include a statutory provision. As I see it acquiescence under English common law cannot mean more than Art.9(1) of the [TM Directive]. I therefore dismiss the defence based on the non-statutory defence of acquiescence. I entirely agree with the hearing officer that the concept of acquiescence in the TM Directive as carried into effect in the 1994 Act is not to be equated with the common law concept of acquiescence. The term must be construed in the context of the T M Directive, not in the context of the national law of one Member State. But I respectfully disagree that the mere existence of the statutory defence precludes the application of the English doctrine of estoppel by acquiescence if made out on the facts (and Mr Bloch Q.C. did not so argue). In my judgement the hearing officer made an error of principle (and did not simply use infelicitous language). 30 It is therefore necessary to consider the possibility of an estoppel by acquiescence. Mr Bloch Q.C. for AB submitted (and Mr Mellor Q.C. for BB accepted) that there was no direct evidence filed by BB addressing its state of belief or the reason why it had acted or not acted in a particular manner. Mr Mellor Q.C. argued that it was unnecessary. 31 BB had pleaded that the existence of acquiesence had been judicially determined in the course of the earlier litigation to which I have referred. Mr Mellor Q.C. rightly did not make that submission on appeal. Instead the argument below was recast as an

13 492 BUDEJOVICKY BUDVAR NARODNI PODNIK v ANHEUSER-BUSCH INC argument that the court could see from the uncontentious circumstances that the relevant governing mind of BB must have held a particular belief, as to which direct evidence was unnecessary. 32 In his skeleton argument Mr Mellor Q.C. submitted that AB had stood by without complaint for 20 years during which time BB had plainly sought to increase its business in the UK, promoting and selling its beer under the Budweiser mark relying on the absence of any opposition by BB to that use, and that at no time since the judgement of the Court of Appeal in March 1984 had AB made any attempt to prevent such continued use. That is not a version of history that I recognise. The decision the Court of Appeal in 1984 related to passing off : rights to trademarks were thereafter hotly contested. The present right which AB seeks to enforce did not exist before the coming into effect of the 1994 Act, and could not be pursued until AB itself became proprietor of its earlier mark. It cannot be said that AB allowed BB to use the Budweiser mark without complaint when just such a complaint was before Court until February Mr Mellor Q.C. s oral submissions had a different emphasis. He submitted that the failure to issue the application now before the Court until the very last day of the statutory limitation period, and in circumstances where it must be inferred that AB knew that its application would be served upon BB outside the statutory limitation period (and that accordingly BB would be disabled from making an identical cross application), amounted to a representation that the right to apply for a declaration of invalidity would not be exercised, and the manner in which it was eventually exercised made it unconscionable for AB to seek to resile from its representation. I regret that in my judgement this strong appeal to the merits lacks a legal or evidential foundation. I do not consider that the failure to issue the invalidity application (notwithstanding the apparent all-out war) amounts to a representation that no such application would be issued, and there is no evidence that AB s failure was so seen by BB s governing mind. The events are equally consistent with the present position simply having never occurred to BB s management. 34 In my judgement there is no estoppel by acquiescence which prevents AB from asserting its right under the 1994 Act to which it became entitled in May Mr Mellor Q.C. then advanced an argument based on abuse of process. His room for manoeuvre was cramped by the decision of the Court of Appeal in Special Effects Ltd v L Oréal SA [2007] EWCA Civ 1, [2007] R.P.C. 15. The defendant opposed the registration of the mark Special Effects, but did so unsuccessfully. When proceedings were brought against it for infringement it counterclaimed for a declaration of invalidity of that very registered mark. The counterclaim was met with a charge that it was precluded by cause of action estoppel or issue estoppel and that it represented an abuse of process. The Court of Appeal held that an application for registration (and opposition to it) did not amount to a cause of action the determination of which gave rise to res judicata; and that the coexistence of the provisions for opposition to registration with those for a declaration of invalidity of registration demonstrated that a decision to register despite opposition was not a final decision so as to be capable of being the basis for an issue estoppel. On that analysis, and taking account of the circumstance that proceedings in the Trade Marks Registry were designed to be economical and expeditious with limited cost recovery for the successful party, it was held wrong to regard the counterclaim as abusive of the Court process. The Court added (para.77):- We are told that sometimes opposition proceedings are conducted in a manner similar to that of High Court litigation, with counsel representing the parties and with disclosure and cross examination. We could imagine the possibility that, if the Published by Oxford University Press for the UK Intellectual Property Office

14 [2008] R.P.C issues had been fought in that way in the Registry on and opposition, it might then properly regarded as an abuse to fight the same issues again in Court. 36 The hearing officer held (paras.46 to 50):- (a) that the decision in Special Effects confirmed that an application for invalidation could be made without it being an abuse of process notwithstanding earlier opposition proceedings; (b) that the assertion of invalidity was not an argument that could have been properly advanced in earlier proceedings; (c) that if (as in Special Effects) a party could bring invalidation proceedings under the 1994 Act having opposed registration under the 1994 Act there must be even less reason to find abuse here, where the application is made under different legislative provisions (the 1994 Act) from those under which registration was originally opposed (the 1938 Act); (d) that the present application was not in any sense an attack upon or an attempt to relitigate the substance of a previous decision, rather it was the exercise of a fresh right (apparently made available as the result of a positive decision not to protect registrations made under the old law compare the protection from allegations of infringement given to registrations made under the old law by para.4 of Schedule 3 to the 1994 Act). 37 Although this reasoning was attacked by Mr Mellor Q.C., in my judgement it is sound and betrays no error of principle. It is not sufficient simply, as Mr Mellor Q.C. invited me to do, to step back and make a broad merits-based judgment which takes account of the public and private interests involved (per Lord Bingham in Johnson v Gore-Wood [2002] 2AC 1 at 31d). It is necessary (as the passage from which that quotation is extracted makes clear) to [focus] attention on the crucial question whether in all circumstances a party is...abusing the process of the Court by seeking to raise before it the issue which could have been raised before (emphasis supplied). Invalidity under the 1994 Act could not have been raised in the earlier opposition proceedings under the 1938 Act: and insofar as similar questions of law and fact were considered and ruled upon it seems to me that the Court of Appeal found that there was an identical mark, identical goods and (at that time) a risk of confusion (i.e the matters on which AB now relies) but refused to allow opposition to the mark because of honest concurrent use and special circumstances. However much I seek to focus upon the practical realities and to achieve a sensible application of previous decisions, I do not consider that I can properly regarded the present proceedings as an abuse of process. 38 I therefore hold that there is no statutory acquiescence under s.48, no estoppel by acquiescence and no abuse of process. The appeal on these grounds must be dismissed. 39 Mr Mellor Q.C. addressed a subsidiary argument based upon TRIPS (Annexe 1C to the Agreement establishing the World Trade Organisation entitled Trade Related Aspects of Intellectual Property Rights which became a Community Treaty on the 1 January 1995). Art.16 of TRIPS provides that the owner of a registered trademark shall have the exclusive right to prevent all third parties not having his consent from using, in the course of trade, identical signs for goods which are identical or similar to those in respect of which the mark is registered, where such use would result in a likelihood of confusion. It concludes The rights described above shall not prejudice any existing prior rights, nor shall they affect the possibility of Members making rights available on the basis of use