Praesidiad Holding Bvba (previously Betafence Holding BVBA) v Zaun Ltd

Hearing date: 7 May 2024

Introduction

The first claimant, formerly known as Betafence Holding BVBA, (“Betafence”) is a designer and manufacturer of high security fencing and perimeter systems. It is the owner of Registered Community Design 000127204-00001 (the “RCD”) which protects the design of its “Bekasecure” fence posts.

In March 2018, Betafence, concerned that the defendant (“Zaun”) was infringing the RCD, warned Zaun of its intention to commence proceedings for infringement. Zaun's response was to seek a declaration of invalidity (the “Invalidity Action”) in respect of the RCD at the EU Intellectual Property Office (“EUIPO”).

The claimants commenced their infringement action in the UK on 24 July 2018 (the “Infringement Action”). By Article 91(1) of the Community Designs Regulation (EC 6/2002), this court, as a Community design court, was required to stay the Infringement Action.

By order of Deputy Master Hansen dated 23 October 2018, by consent the Infringement Action was stayed pending final determination of the Invalidity Action. At that time, the terms on which the UK would depart from the EU had not been established. The consent order contained a liberty to apply to lift the stay in the event that the departure from the EU impacted on the position with the regard to the RCD, the Invalidity Action or the Infringement Action.

The agreement on the withdrawal of the UK from the EU (the “Withdrawal Agreement”) was agreed on 17 October 2019, but did not come into force until 1 February 2020. IP Completion Day (the end of the Brexit implementation period) was 31 December 2020.

The Invalidity Action proceeded in the EUIPO. Zaun contended that the RCD lacked novelty and/or individual character over a number of prior designs and/or was solely dictated by its technical function. The EUIPO Invalidity Division handed down a decision on 19 July 2019, rejecting each of Zaun's arguments and finding that the RCD was valid. Zaun's appeal – on the ground of solely technical function – succeeded before the Board of Appeal of the EUIPO on 2 March 2021. That decision was then overturned by the General Court of the EU on 19 October 2022. Permission to appeal to the CJEU was refused on 17 April 2023. On 12 June 2023, the Board of Appeal of the EUIPO then issued a confirmatory decision, upholding the validity of the RCD, and finally disposing of all of the invalidity challenges.

The stay of the Infringement Action then fell away, and Betafence served an amended particulars of claim on 7 July 2023. On 7 August 2023, Zaun served a defence and counterclaim, seeking a declaration of invalidity in respect of the RCD (and in respect of the equivalent re-registered UK Design (the “Re-registered Design”) which, as described below, automatically came into existence following IP Completion Day).

The grounds on which Zaun contends – in its counterclaim in the Infringement Action – that the RCD and Re-registered Design are invalid differ slightly from the grounds it relied on before the EUIPO. It is common ground, however, that if the doctrine of res judicata applies at all, then Zaun is precluded from pursuing its claims of invalidity in the Infringement Action.

Had the UK not left the EU, Zaun would have been precluded from pursuing its counterclaim by reason (at least) of Article 86(5) of the Community Designs Regulation (“Article 86(5)”) (see below at [18.]).

On 18 September 2023, Betafence applied to strike out Zaun's counterclaim. It contends that this is an impermissible attempt to re-run in the UK an invalidity challenge that Zaun has already made, unsuccessfully, in the EUIPO.

The issues in outline

Betafence contends that Zaun is precluded from challenging the validity of the RCD and Re-registered Design, either because Article 86(5) still applies (as a result of the provisions of the Withdrawal Agreement, which have direct effect in English law), or pursuant to the English law principles of res judicata.

Zaun, on the other hand, contends that Article 86(5) has been expressly – or at least implicitly – disapplied by amendments made to the Registered Designs Act 1949 (“RDA 1949”), in respect of proceedings that were pending at IP Completion Day. There is accordingly no statutory res judicata that would preclude the counterclaim in the infringement action.

Moreover, Zaun contends that the English law principles of res judicata and abuse of process do not apply because: (1) the EUIPO is not a court of competent jurisdiction; or, if that is wrong, (2) the amendments made to the RDA 1949 should be interpreted as disapplying the doctrines of res judicata and/or Henderson v Henderson abuse of process. It further contends that there is no question of a decision of the EUIPO giving rise to any estoppel or abuse of process in relation to the Re-registered Design, because it is a newly-created UK right.

The statutory framework

The Withdrawal Agreement was implemented in the UK by the European Union (Withdrawal Agreement) Act 2020 (the “2020 Withdrawal Act”), which itself amended the European Union (Withdrawal) Act 2018 (the “2018 Withdrawal Act”).

By s.7A(2) of the 2018 Withdrawal Act all rights, powers, liabilities, obligations and restrictions from time to time created or arising under the Withdrawal Agreement are to be recognised and available in domestic law, and enforced, allowed and followed accordingly. By s.7A(3), every enactment – including an enactment contained in the 2018 Withdrawal Act, “is to be read and has effect subject to subsection (2)”.

One of the provisions of the Withdrawal Agreement to which effect is given by the 2020 Withdrawal Act is Article 67. This provides that in respect of legal proceedings instituted before the end of the transition period (i.e. before the end of 31 December 2020) a number of provisions of EU law shall apply, including “the provisions regarding jurisdiction of … [the Community Designs Regulation].”

Title IX of the Community Designs Regulation is headed “Jurisdiction and Procedure in Legal Actions Relating to Community Designs”. Title IX includes Article 86 (headed “Judgments of invalidity”) and Article 91 (headed “Specific rules on related actions”).

Article 86 provides as follows:

“1. Where in a proceeding before a Community design court the Community design has been put in issue by way of a counterclaim for a declaration of invalidity:

(a) if any of the grounds mentioned in Article 25 are found to prejudice the maintenance of the Community design, the court shall declare the Community design invalid;

(b) if none of the grounds mentioned in Article 25 is found to prejudice the maintenance of the Community design, the court shall reject the counterclaim.

2. The Community design court with which a counterclaim for a declaration of invalidity of a registered Community design has been filed shall inform the Office of the date on which the counterclaim was filed. The latter shall record this fact in the register.

3. The Community design court hearing a counterclaim for a declaration of invalidity of a registered Community design may, on application by the right holder of the registered Community design and after hearing the other parties, stay the proceedings and request the defendant to submit an application for a declaration of invalidity to the Office within a time limit which the court shall determine. If the application is not made within the time limit, the proceedings shall continue; the counterclaim shall be deemed withdrawn. Article 91(3) shall apply.

4. Where a Community design court has given a judgment which has become final on a counterclaim for a declaration of invalidity of a registered Community design, a copy of the judgment shall be sent to the Office. Any party may request information about such transmission. The Office shall mention the judgment in the register in accordance with the provisions of the implementing regulation.

5. No counterclaim for a declaration of invalidity of a registered Community design may be made if an application relating to the same subject matter and cause of action, and involving the same parties, has already been determined by the Office in a decision which has become final.”

Article 91 provides as follows:

“1. A Community design court hearing an action referred to in Article 81, other than an action for a declaration of non-infringement, shall, unless there are special grounds for continuing the hearing, of its own motion after hearing the parties, or at the request of one of the parties and after hearing the other parties, stay the proceedings where the validity of the Community design is already in issue before another Community design court on account of a counterclaim or, in the case of a registered Community design, where an application for a declaration of invalidity has already been filed at the Office.

2. The Office, when hearing an application for a declaration of invalidity of a registered Community design, shall, unless there are special grounds for continuing the hearing, of its own motion after hearing the parties, or at the request of one of the parties and after hearing the other parties, stay the proceedings where the validity of the registered Community design is already in issue on...