Holland and Barrett International Ltd v General Nutrition Investment Company
| Jurisdiction | England & Wales |
| Judge | Lord Justice Kitchin,Lady Justice Arden,Mr Justice Birss |
| Judgment Date | 04 July 2018 |
| Neutral Citation | [2018] EWCA Civ 1586 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A3/2017/1908 |
| Date | 04 July 2018 |
[2018] EWCA Civ 1586
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY
Mr Justice Warren
HC-2014-000862
Royal Courts of Justice
Strand, London, WC2A 2LL
Lady Justice Arden
Lord Justive Kitchin
and
Mr Justice Birss
Case No: A3/2017/1908
Michael Bloch QC and Shane Sibbel (instructed by Eversheds Sutherland (International) LLP) for the Appellants
John Baldwin QC and Henry Ward (instructed by Carpmaels & Ransford) for the Respondent
Hearing dates: 20th June 2018
Approved Judgment
Lady Justice Arden, Lord Justice Kitchin and
This is the judgment of the court.
This is an appeal from the order of Mr Justice Warren made on 21 st June 2017 following judgment given on 7 th April 2017 ( [2017] EWHC 746 (Ch)) after a trial in October 2016. The case concerns a United Kingdom trade mark licence agreement dated 6 th March 2003. The original licensor was the predecessor of the respondent (“GNIC”). The licensees are the appellants (“Holland and Barrett”). The main dispute at trial was whether GNIC had validly terminated the licence. The judge dealt with that issue comprehensively and held in favour of Holland and Barrett. GNIC has not sought to appeal that finding. Between paragraphs 289 and 305 of the judgment the judge addressed a separate question concerning unused trade marks. That question was decided in favour of GNIC. Holland and Barrett appeal on two grounds: one ground, labelled Ground II, is pursued with the permission of the judge and the other (Ground I) is pursued with the permission of Kitchin LJ. As the argument developed only Ground II needs to be considered in this court.
The various trade marks in question all comprise the text “GNC” either alone or with additions of various kinds. They are all registered inter alia for vitamins, minerals, nutritional supplements and similar products in Class 5.
The trade mark licence is exclusive and contains no running royalty. It forms part of a wider agreement whereby a business selling nutritional supplements and the like which was then being conducted in the UK under the GNC brand was sold to Holland and Barrett from the group of which GNIC was a part. In fact the transaction consisted of Holland and Barrett buying the entire share capital of the relevant UK operating company. Holland and Barrett paid just over £8 million for the business.
At clause 2.1 the trade mark licence contains a conventional clause granting an exclusive licence to the licensee. The licensed marks are set out in Schedule 1 to the licence. There are seven licensed marks; three are Community Trade Marks (CTMs) and the other four are United Kingdom marks. They are:
i) CTM no. E183533 (“the GNC word mark”)
ii) UK Trade Mark no. 1468996 (“the Silhouette mark”);
iii) CTM no E183475 (“the Center mark”).
iv) UK Trade Mark no. 2263388 (“the Herbal Plus mark”);
v) CTM no E940981 (“the GNC Live Well word mark”).
vi) UK Trade Mark no. 1468832 (“the Oval mark”);
vii) UK Trade Mark no. 2101307 (“the Centres Live Well mark”)
The GNC word mark consists simply of “GNC”. The Silhouette mark consists of the letters G and C with a lower case “n” in between those letters, in which the space under the “n” has the shape of a person holding up their arms. The Center mark is a device consisting of GNC above the words “GENERAL NUTRITION CENTER”. The Herbal Plus mark is a device in which the words “GNC HERBAL PLUS” appear. The GNC Live Well word mark consists simply of the words “GNC LIVE WELL”. The Oval mark is a device with GNC in the background and “GENERAL NUTRITION CENTERS” in an oval in the foreground. The Centres Live Well mark is a device with GNC above “GENERAL NUTRITION CENTRES” above “LIVE WELL” all in a box at a slanted angle.
Aside from the GNC word mark CTM no. E183533, all the other licensed marks will be referred to as auxiliary marks because they all include GNC but also include further additions.
Once the business was purchased, Holland and Barrett ran it in the UK, selling the relevant nutritional supplement products under the brand GNC. They continue to do so. There is no dispute that Holland and Barrett have used both the GNC word mark and the GNC Live Well word mark since 2003.
However there was also no dispute that, at least in the form in which they were registered, Holland and Barrett had not used any of the five other marks in Schedule 1 for a period of five years before trial. The judge had to decide whether use of GNC alone amounted to use of any of those auxiliary marks for the purposes of clause 5.6 of the licence and for the purpose of the non-use provisions in trade mark law, which he held were the same. This is dealt with in the judgment at paragraphs 291–294. The relevant provisions in trade mark law are s46(1)(a) and (2) of the Trade Marks Act 1994 (the 1994 Act) and what is now Art 58(1)(a) of Council Regulation 2017/1001 (the Regulation). The Regulation came into effect after the judgment was given but nothing turns on that. Under these provisions use of a trade mark includes use of the mark in a form differing in elements which do not alter the distinctive character of the mark in the form in which it was registered. The judge decided that use of GNC alone did not satisfy that test in relation to the five auxiliary marks. Ground I of the appeal seeks to reverse that finding.
The relevance of the question was that if a licensed trade mark had not been used, then GNIC was entitled to invoke clause 5.6 of the licence, as follows:
“If the Licensee ceases to Use the Trade Marks or any of them in respect of the Products for a continuous period of 5 years or more the Licensor shall be entitled to terminate this Licence in respect of such Trade Mark or Trade Marks.”
The terms Use, Trade Marks and Products are defined in the licence. “Use” is defined to include acts such as the sale of Products under the Trade Marks. Trade Marks means the licensed marks. Products means vitamins, minerals, nutritional supplements and similar products.
GNIC had purported to exercise the right to terminate the licence for the five unused trade marks under clause 5.6 and the second question the judge had to decide was what the effect of that termination would be. GNIC contended that once the licence had been terminated for a given trade mark, the licensor was entitled to use that trade mark in the United Kingdom and Holland and Barrett had no legal right to prevent that activity. So, for example, GNIC could start selling nutritional supplements under the GNC Herbal Plus mark in the UK, and Holland and Barrett had no right to stop it. Holland and Barrett argued to the contrary, contending that termination of the licence in relation to an unused mark did not give the licensor a right to do acts which breached the exclusivity of the licence of the marks in respect of which the licence continued in force. Since the exclusive licence of the GNC word mark was continuing, Holland and Barrett had the right under the contract to prevent GNIC from using any mark confusingly similar to that mark. That would prevent GNIC from using, for example, the GNC Herbal Plus mark.
The judge ruled in favour of GNIC. He decided that once the licence of an unused mark was terminated GNIC was entitled to use it and there was nothing in the licence agreement which prevented its future use by GNIC. Holland and Barrett therefore had no right to prevent the use of such a mark either in an action for breach of the agreement or for trade mark infringement or passing off.
Holland and Barrett appeal that finding. That is Ground II of the appeal. Holland and Barrett explained in opening the appeal that if they succeed on Ground II they do not press Ground I.
The licence
In addition to clause 5.6 which has been set out above, the only other term of the licence which needs to be set out is clause 2.1. By that clause 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….”
The Territory is the United Kingdom. The term “exclusive” is defined as follows
“‘Exclusive’: means that only the Licensee (including Sublicensees) have the right to use the Trade Marks in the Territory […] as contemplated in this Agreement to the exclusion of all other persons including the Licensor”
The judgment
The section of the judgment which addresses the unused marks starts at paragraph 289. The judge summarised the general issues in paragraphs 289–290, decided the point relating to Ground I of the appeal in paragraphs 291 to 294, and turned to Ground II at paragraph 295. In paragraphs 295 and 296 the judge summarised the parties' submissions. In paragraph 297 the judge explained that in his view there was a tension between clause 2.1 and clause 5.6 and decided that the tension had to be resolved in GNIC's favour. His reasons for doing so followed.
In paragraphs 298 and 299 the judge considered the scope of the exclusive licence itself and the impact of clause 5.6. Since they represent the core of the judge's reasoning, we set them out in full:
“298. Clearly an exclusive licence over a mark (whether a mark originally licensed or an additional mark) would preclude GNIC from using it during the currency of the exclusive licence. But this is not because there would be any trade mark infringement or passing off as a result of such use but because it is necessarily implicit in the grant of an exclusive licence that the licensor will not itself use the licensed mark. When the licence over a particular mark is terminated,...
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