When justice needs to be seen to be done

Summary

All clients want their legal team to be clever and creative in solving a problem faced by the client. But sometimes the tactics adopted while seemingly legitimate, nevertheless call into question the fairness of the problem solving action.

In trade mark matters, it is not uncommon for there to be two marks on the register, many years apart, which have overlapping specifications of goods or related fields. Neither proprietor considers the other to be a threat: they may operate in a different technical field; the goods are aimed at a different market; or one of the proprietors has simply stopped using the mark. In some situations, when faced with, for example, an opposition action by a different third party for a new mark, it is a legitimate tactic to purchase the older registration in order to ward off the newcomer’s attack, as the newcomer may now infringe that older mark.

Yet it sometimes occurs that the older mark may itself be vulnerable for non-use. Is this going to be of any use if the third party finds out? How, then, tactically could this be avoided? And this is where the clever and creative lawyer steps in: but have they gone too far in avoiding detection of the vulnerability? 

ABP Technology Ltd v Voyetra Turtle Beach Inc and anor [2022] EWCA Civ 594

Case background

The Claimant (‘ABP’) sold in the UK computer game accessories under the marks STEALTH and STEALTH VR registered for ‘audio headsets for playing video games’. The Defendants (‘Voyetra’) also sold, on a global basis, audio headsets for various gaming platforms under the mark STEALTH.

Voyetra sought, unsuccessfully, to invalidate ABP’s marks before the UKIPO based on Voyetra’s earlier rights in the UK dating from October 2014. Voyetra’s appeal also failed. Shortly after, in November 2020, ABP brought proceedings for infringement pursuant to s 10(1) Trade Marks Act 1994 (identical mark/identical goods).

Unbeknownst to ABP, on 28 January 2021 a shell company (‘NCL’) purchased from another company, an earlier STEALTH mark registered on 17 May 1996 for ‘Hi-Fi apparatus, instruments and loudspeakers; parts and fittings..’ (the ‘Mark 250’)). At the time of purchase, the mark was vulnerable for non-use.

On 2 February 2021, Voyetra filed a defence in which they claimed honest concurrent use. Of importance was paragraph 4, which effectively accepted that the UK second defendant used the marks of the US parent first defendant, making them joint tortfeasors. The defence contained a statement of truth signed by the US company’s CEO.

In March 2021, NCL granted an exclusive, royalty free licence to Voyetra US, which backdated the start of use to 28 January 2021. On 31 March 2021, ABP applied for a summary judgement hearing. Before that hearing, on 15 June 2021, the Mark 250 was assigned in full to Voyetra US, and once assignment was noted on the UKIPO register, Voyetra applied to amend the defence relying on its use of Mark 250 and seeking to invalidate ABP’s marks. The key amendment was to plead use of the Mark 250 under licence. By using the Mark 250 without ABP’s knowledge of the licence and assignment until June 2021, Voyetra avoided a potential revocation application for non-use of Mark 250. Voyetra also sought to rely on s11(1B), in that the use of the earlier mark is not an infringement of the later mark, even though the earlier mark may no longer be able to invalidate the later mark.

The amendment application and the summary judgement were heard together.  The judge allowed the amendments and dismissed the summary judgement application. The claimant appealed.

Decision

The appeal considered whether the exercise of the judge’s discretion to allow the late amendment, was done so properly. The main issue for consideration was whether the application to amend was late. This is because it effectively deprived ABP of the opportunity of revoking Mark 250 for non-use, and preventing Voyetra’s defence and counterclaim.

Birss LJ considered that the application was late, because the amendment to raise the s11(1B) defence could have been made in March 2021 shortly after the licence had been granted by NCL. The timing of the actual date of the amendment therefore required evidence as to why this was justified. There was none, and Voyetra’s counsel accepted in his submissions that it was to ensure ABP did not make any revocation application for non-use of Mark 250.

Of more concern was the misleading paragraph 4 and the CEO’s statement of truth. At the date of the defence, the UK company was not using a mark owned by the US parent: it was still owned by NCL and the licence had not yet been entered into (hence the backdating of the use). The CEO’s subsequent apology had no positive effect. Indeed, Birss LJ speculated that the wording of paragraph 4 (relating to joint tortfeasors but stating all marks were the parents’ marks) was deliberate knowing the tactic that was to be followed.

The judge concluded that amendment was late, no proper justification had been provided, and the entire approach was to cause prejudice to ABP. Accordingly, he regarded the judge had been wrong to allow the amendments and upheld the appeal. The amendments have now been rejected.

Implication

Litigation is as much about strategy as it is about facts and the merits of either side’s case. In this instance, while one can admire the creativity of the legal team that devised that strategy, the implementation of it left something of a bad taste in the mouth. This comes across too from Birss LJ’s commentary in his judgement.

What this means is that a party’s litigation strategy will be the subject of close scrutiny where discretion of the judge is sought. Failure to justify fully reasons where the making of a specific application prejudices the other party, are likely to be given short shrift. All the more so where a misleading statement of truth is in play. The penny is now beginning to drop that signing a statement of truth is not simply an exercise of completing a mere formality, but putting the signatory’s integrity on the line, and the potential for contempt proceedings.

Being ‘economical with the truth’ is sometimes a tactic: how that affects the other party’s position may well be justifiable in some circumstances. However, in a court, particularly where the equitable jurisdiction of a judge’s discretionary power is in play, this is unlikely ever to get to second base, although in this case it clearly got past first. Judges like to do justice and in this decision not only was that done, it was seen to be done.