Phones 4u Ltd v Phone4u.Company uk Internet Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Jacob,Lord Justice Carnwath,Lord Justice Tuckey |
| Judgment Date | 19 May 2006 |
| Neutral Citation | [2006] EWCA Civ 244 |
| Docket Number | Case No: A3/2005/0726/0727 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 May 2006 |
[2006] EWCA Civ 244
Lord Justice Tuckey
Lord Justice Carnwath and
Lord Justice Jacob
Case No: A3/2005/0726/0727
HC04 C00516
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Deputy Judge Richard Sheldon QC
Royal Courts of Justice
Strand, London, WC2A 2LL
Richard Miller QC and Michael Hicks (instructed by Messrs Eversheds) for the Appellants/Claimants
Ms Lindsay Lane (instructed by Messrs Bird & Bird) for the Defendants/Respondents
This appeal is from a judgment of 9 th March 2005 ( 2005 EWHC 334 (Ch)) of Mr Richard Sheldon QC, sitting as a Deputy Judge of the Chancery Division. He held that the claimants' (whom I will collectively call Caudwell) action for passing off and infringement of registered trade mark failed. The complaint is about the first and second defendants' (whom I will collectively call Mr Heykali) registration and use of the domain name and email address "phone4u.co.uk". Mr Heykali has registered other similar names (as domain names and as a company name), but I do not think they fall to be considered separately. If the defendants cannot use "phone4u.co.uk" then it is not suggested they can use any of the others.
Background facts
Caudwell own and operate a nationwide chain of shops called "Phones 4u". The shops sell mobile phones, accessories and arrange customer contracts with mobile phone service providers. Caudwell first adopted the trading name "Phones 4u" in May 1995 and registered the domain name phones4u.co.uk in May 1997, from which date that address was used for email.
Caudwell's business grew successfully and fast. By the end of 1999 (just 4 months after the date of Mr Heykali's registration of the domain name phone4u.co.uk on 23 rd August 1999) "there was a Phones 4u shop in most major towns and cities in England", (Judgment [89]). In 1999 alone Caudwell sold 185,000 phones. The details of the growth and annual turnover are set out at the judgment, [6].
The Judge found that:
"[6] The trading style "Phones 4u" adopted by the First Claimant was originally a logo in magenta and black and white. It incorporated the phrase "Phones 4u" in stylised form. The logo appeared on the First Claimant's shop fascias (other than on some three shops which were Vodafone sites) and on the First Claimant's advertising and promotional material.
[7] In about February 1997, the logo was changed to its current red, white and blue logo which contains the words "Phones 4u" in stylised form. [The Judge set it out as an annex. I set it out here. The "box" is red, the oval, blue]:
Thereafter, when new shops were opened or existing shops resited, the fascias would show the new logo. I was told that up to about 17 of the then existing shops (including the three Vodafone sites) retained their old logos until they were resited. In 2001 the last shop bearing the old logo closed. By about early 1999, the First Claimant's advertising and promotional material used the new coloured logo."
Caudwell advertised extensively. The Judge was critical of the evidence as to the amount of advertising spend, (see [94] – [106] where he goes into much detail). I think the precise or exact amount of advertising spend, which in other contexts might matter, is not in itself of great significance in a passing off action. What a passing off claimant needs to do is to establish that he has built up a goodwill which the defendant is invading by a misrepresentation. So what really matters at bottom is what the claimant actually did to create a goodwill, not how much it cost him to do it.
Here there is no doubt that by August 1999 Caudwell not only had a substantial high street presence with Phones 4u shops, but had advertised extensively in the national press, both broadsheet and redtop. Mr Miller QC for Caldwell took us through a lot of the advertisements. All use the logo, albeit in monochrome. Sometimes the words "Phones 4u" appear in small print. Also, as Miss Lane, for Mr Heykali, pointed out some give greater prominence to something else (e.g. "WOW We just made the 1p a minute Orange deal better"). But there can really be no doubt whatever that the business was widely advertised by reference to the logo, a prominent part of which is the name, Phones 4u.
On 23 rd August 1999 Mr Heykali registered the domain name "phone4u-co.uk". From 28 th November of that year if you went to the site you would be told that it would be "going mobile soon" and that it would be "up and running by 1 st January 2000." It is not clear when it actually became active for trade – by March it was "currently under construction." The first sale via the web, according to a letter of Mr Heykali's solicitors, was on 24 th March 2000. By then two letters of complaint had been sent by Caudwell's trade mark agents (on 19 th January 2000 and 15 th March), though they were not received. (Quite why such a long time elapsed between the two letters was never explained). During March 2000 a Caudwell agent, Mr Butler, was in discussion with Mr Heykali about the grant by Caudwell of a Vodaphone dealership, which was granted a little later. In April or May Mr Heykali offered to sell the domain name for a large sum of money: he untruthfully said he had been offered £100,000 for it by a third party.
The trade mark agents wrote for a third time on 6 th April 2000. This time the letter was received and replies were sent and received denying liability both from Mr Heykali and his solicitors. It is an extraordinary fact that despite battle being joined then, these proceeding were not issued until 16 th February 2004. It was in 1879 that James LJ observed that "the very life of a trade mark depends on the promptitude with which it is vindicated", Johnston v Orr-Ewing (1879) 13 Ch.D 434 at p. 464. Nothing has changed. Like gardens trade mark cases always get worse with neglect – even if rights are not actually lost, delay is apt to turn what would be over in a few weeks by a quick application into a mini State Trial. As here.
Passing off – the principles
It is well settled that the action for passing off lies to protect deceptive invasions of goodwill, goodwill being a species of property (see Spalding v Gamage (1915) 32 RPC 723). Perhaps the most famous judicial definition of the kind of goodwill protected by passing off is that of Lord Macnaughton in IRC v Muller and Co's Margarine [1901] AC 217 at 223:
"What is goodwill? It is a thing very easy to describe, very difficult to define. It is the benefit and advantage of the good name, reputation and connection of a business. It is the attractive force which brings in custom. It is the one thing which distinguishes an old-established business from a new business at its first start."
The leading speech (that of Lord Oliver) in the most recent House of Lords case on the subject, Reckitt & Colman v Borden [1990] 1 WLR 491, (the Jif Lemon case), summarised the law this way (p 499D – H) :
"It has been observed more than once that the questions which arise are, in general, questions of fact… The law of passing off can be summarised in one short general proposition – no man may pass off his goods as those of another. More specifically, it may be expressed in terms of the elements which the plaintiff in such an action has to prove in order to succeed. These are three in number. First, he must establish a goodwill or reputation attached to the goods or services which he supplies in the mind of the purchasing public by association with the identifying 'get-up' (whether it consists simply of a brand name or a trade description, or the individual features of labelling or packaging) under which his particular goods or services are offered to the public, such that the get-up is recognised by the public as distinctive specifically of the plaintiff's goods or services. Second, he must demonstrate a misrepresentation by the defendant to the public (whether or not intentional) leading or likely to lead the public to believe that goods or services offered by him are the goods or services of the plaintiff. Whether the public is aware of the plaintiff 's identity as the manufacturer or supplier of the goods or services is immaterial, as long as they are identified with a particular source which is in fact the plaintiff. For example, if the public is accustomed to rely on a particular brand name in purchasing goods of a particular description, it matters not at all that there is little or no public awareness of the identity of the proprietor of the brand name. Third, he must demonstrate that he suffers or, in a quia timet action, that he is likely to suffer damage by reason of the erroneous belief engendered by the defendant's misrepresentation that the source of the defendant's goods or services is the same as the source of those offered by the plaintiff".
So, three questions: (a) reputation, i.e. goodwill? (b) misrepresentation? (c) damage or its likelihood?
It must be noted that Lord Oliver does not limit damage to a particular sort of damage, particularly direct diversion of sales caused by misrepresentation. If that were so, passing off would fail in one of its key purposes – protection of the property in the goodwill. The books are full of cases where the action has succeeded where there has not been, and even could not be, direct loss by diversion of sales.
A good example is Ewing v Buttercup Margarine [1917] 2 Ch 1. The plaintiff had an...
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