General Nutrition Investment Company v Holland and Barrett International Ltd (formerly known as Nbty Europe Ltd) and Another

JurisdictionEngland & Wales
JudgeMr Justice Warren
Judgment Date07 April 2017
Neutral Citation[2017] EWHC 746 (Ch)
Docket NumberCase No: HC-2014-000862
CourtChancery Division
Date07 April 2017

[2017] EWHC 746 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

CHANCERY

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

Mr Justice Warren

Case No: HC-2014-000862

Between:
General Nutrition Investment Company
Claimant
and
(1) Holland and Barrett International Limited (formerly known as Nbty Europe Limited)
(2) Health & Diet Centres Limited
Defendants

John Baldwin QC, Gerard Rothschild and Henry Ward (instructed by Carpmaels &

Ransford LLP) for the Claimant Michael Bloch QC and Shane Sibbel (instructed by Eversheds Sutherland (International) LLP) for the Defendants

Hearing dates: 12, 13, 14, 17, 18, 21, October 2016

Judgment Approved

Mr Justice Warren

Introduction

1

The central issue in this case is whether the claimant (" GNIC") has validly terminated a trade mark licence agreement dated 6 March 2003 (" the Licence Agreement" or " LA") which permits the Defendants (" H&B" and " H&DC") to use certain "GNC" trade marks in the UK.

2

As will become clear, the identity of the licensor under the LA is matter of importance. The contracting party as licensor is (or rather was, since it has now been dissolved) a company bearing the same name as the Claimant. This company (" GNIC Arizona Oldco") was, and the new GNIC is, incorporated in Arizona.

3

GNIC is part of a group of companies which itself carries on business under the GNC brand in the United States and elsewhere across the world or licenses or franchises others to do so.

4

The LA was granted as part of a sale (through the mechanism of a share sale) by Royal Numico NV to H&B of that part of the GNC business being carried on in the UK. Following the sale, Numico's GNC group withdrew from the UK market. GNIC claims to have become the successor to GNIC Arizona Oldco as licensor under the LA. GNIC accordingly claims to have the rights to terminate the LA which are conferred on the licensor under its terms.

5

GNIC alleges that H&B is in breach of the LA. It has served a number of notices purporting to terminate the LA pursuant to those rights of termination (together " the Notices", as to which see paragraph 88 below). H&B contends that the acts complained of are either not breaches at all or, if they are, they are not material breaches warranting termination of the LA and have, in any case, been remedied. The issue is whether any of the Notices was effective to terminate the LA.

6

Some of the licensed GNC trade marks (" the Unused Marks") have not been used by H&B for over 5 years. Under clause 5.6 of the LA (see paragraph 15 below), the licence in respect of them has been purportedly terminated. GNIC claims that it may now use these marks in the UK. H&B contends otherwise.

7

Before describing the issues in more detail, it is helpful to set out the relevant provisions of the LA.

The Licence Agreement

8

The LA was made on 6 March 2003 between GNIC Arizona Oldco (whose principal office was stated to be at 1002 South 63 rd Avenue at Buckeye, Phoenix, Arizona) (called "the Licensor") and Holland & Barrett Europe Limited (called "the Licensee"). The Licensee is in fact the first Defendant, H&B, which has undergone name changes since the date of the LA.

9

Recitals A to D state:

A. The Licensor is the owner of the Trade Marks (defined later in the LA).

B. The Licensee has entered into an agreement of the same date with Nutricia International BV, a company in the same group as the Licensor for the sale and purchase of the entire share capital of the Health & Diet Group.

C. On completion, the Licensee will acquire Health & Diet Group Ltd being a part of the Health & Diet Group (also defined later in the LA) which "produces, manufactures, distributes, promotes, markets and sells the Products under the Trade Marks and uses the Trade Marks as a retail brand in the Territory".

D. The Licensor has agreed to grant to the Licensee the rights to use the Trade Marks and/or sublicense the use of the Trade Marks to the members of the Health & Diet Group in respect of "producing, manufacturing, distributing, promoting, marketing in so far as such rights are required for the purposes of retail sale, and selling the Products wholesale or through retail outlets or by means of the internet or by mail order only under the Trade Marks and using the Trade Marks as a retail brand in the Territory….".

10

The LA contains the following definitions:

i) "Domain" means www.gnc.co.uk.

ii) "Health & Diet Group" has the meaning given to it in the share sale agreement which I have referred to.

iii) "H&B Group" means the Licensee and all companies incorporated in the Territory which from time to time directly or indirectly are subsidiaries or subsidiary undertakings of the Licensee and any subsidiary holding company incorporated within the Territory. It is to be noted that this does not include a parent company of the Licensee.

iv) "Products" means vitamins, minerals, nutritional supplements and any similar products. It does not matter who the manufacturer or distributer is. Thus, items in this list which do not bear the GNC mark are nonetheless within the definition.

v) "Use or Used" means use of the Trade Marks in a variety of ways as set out in the lengthy definition. It includes retail sale (including by the internet and/or mail order) and, subject as provided later in the LA, wholesale sale of Products bearing the Trade Marks (referred to as the "Sale of Products"). It also includes the manufacture, distribution and marketing of Products and the use of packaging or marketing material bearing the Trade Mark in the production, manufacture, distribution and marketing of Products "all in relation to the Sale of Products and in each case by or on behalf of the Licensee or any Sub-licensees". It also includes the use of the Trade Marks on retail shop fascias "where the business of such retail outlets is the promotion, marketing and sale of the Products". Notwithstanding the above, such use shall not include any use over the internet unless such use is targeted at UK Purchasers and it is stated that orders cannot be accepted from outside the UK; nor shall it include wholesale sales outside the H&B Group.

vi) "Unregistered Trade Marks" means any unregistered trade marks or service marks or get ups used by and owned by or licensed to the Licensor, the Health & Diet Group Limited and/or the GNC Group in relation to Products sold under the Trade Marks as of Completion.

vii) "Sublicensees" means all companies within the H&B Group and all distributors of the Products and all subcontractors used by the H&B Group to manufacture or package the Product.

viii) "the Territory" means the UK.

ix) "the Trade Marks" means the GNC trade marks details of which are set out in Schedule 1. Schedule 1 specifies seven trade marks of which the ones which are material for present purposes are "GNC" and "GNC LIVE WELL".

11

The LA contains the following substantive provisions of relevance:

i) Under clause 2.1.a, the Licensor grants to the Licensee

"the exclusive right to Use the Trade Marks during the term of this Agreement (as provided for under clause 5 below): (a) within the Territory…."

ii) Under clause 2.2, the Licensee

"shall be entitled to grant sub-licences of the rights granted under clause 2.1 above to the Sublicensees but shall have no other right to sub-license the rights granted hereunder without the prior written consent of the Licensor (not to be unreasonably withheld or delayed).

12

Clause 2.7, provides the following prohibition:

"The Licensee shall not, [ sic] use the Trade Marks or seek customers or otherwise solicit orders outside the Territory…. for Products bearing or promoted using the Trade Marks but the Licensee shall be entitled to sell such Products within the European Union (as its membership may from time to time vary) in response to unsolicited orders for such Products."

13

Clause 3 is headed "Manner of use" and provides as follows:

"3.1 The Licensee:

(a) shall use the Trade Marks substantially in the form stipulated in Schedule 1 and shall observe all reasonable directions by the Licensor;

(b) shall not use the Trade Marks in a manner that is derogatory or will cause a material dilution of the Licensor's rights in the Trade Marks;

(c) [concerns confusion and is not relevant for present purposes];

(d) shall not incorporate any alpha, numeric or graphic additions to the Trade Marks; and

(e) subject to clause 2.2, shall not sub-licence, assign or transfer this Agreement or any rights granted hereunder.

3.2 The Licensee acknowledges the Licensor's ownership of the Trade Marks and agrees that any goodwill accruing as a result of the Use of and attributable to the Trade Marks by the Licensee shall be for the benefit of the Licensor."

14

Clause 4 is headed "Trade mark protection and proceedings. Clause 4.4 provides:

"The Licensee shall not represent that it has any title in, or right of ownership to, any of the Trade Marks or do any act or thing which substantially impairs the rights of the Licensor in any of the Trade Marks, or brings into question the validity of their registration……., and shall ensure that any its agreements [ sic] with any Sublicensee relating to use of the Trade Marks contain equivalent obligations."

15

Clause 5 is headed "Term and termination". The LA is to continue in full force and effect unless and until terminated in accordance with any of sub-clauses 5.2 to 5.6. Clauses 5.2 and 5.6 are material for present purposes and provide as follows:

"5.2 The Licensor may terminate this Agreement immediately by notice in writing if:

(a) The Licensee materially breaches this Agreement or any other member with the H&B Group commits an act which would amount to a material breach of this Agreement or (without prejudice to the Licensor's other rights to terminate under this Agreement) otherwise infringes the Licensor's rights under the Trade Marks to an extent...

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