The Trademark Licensing Company Ltd and Another v Leofelis SA
| Jurisdiction | England & Wales |
| Judge | SIR WILLIAM BLACKBURNE,Sir William Blackburne |
| Judgment Date | 11 December 2009 |
| Neutral Citation | [2009] EWHC 3285 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC09C00370 |
| Date | 11 December 2009 |
[2009] EWHC 3285 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
Before : Sir William Blackburne
Case No: HC09C00370
George Leggatt Qc and Jasbir Dhillon (instructed by Reynolds Porter Chamberlain LLP) for the Claimants
Amanda Michaels (instructed by Lawrence Graham LLP) for the Defendant
Approved Judgment
Hearing dates: 30 November and 1 December 2009
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Sir William Blackburne :
Introduction
I have before me an application under CPR 11 by the defendant, Leofelis SA (“Leofelis”), for a stay of the claim in these proceedings, which are for breach of contract, pending resolution of what Leofelis claims but which the claimants deny is a “related action” in the specialist intellectual property court of Milan brought by an Italian company, Leeside Srl (“Leeside”), against the three parties to these proceedings. Since 10 October 2007 Leeside has been in liquidation. The claims against Leofelis in the present proceedings, which I shall call the 2009 Proceedings, have been brought by two UK companies which for convenience I shall describe as Lonsdale. It is not necessary to distinguish between them. Leofelis is a company incorporated under Swiss law.
Lonsdale's claims against Leofelis in the 2009 Proceedings which were issued on 10 February 2009 arise under a trade mark licence agreement dated 21 November 2002 (“the Licence Agreement”) by which the second claimant, as licensor, granted to Leofelis, as licensee, an exclusive licence to use on clothing and other goods certain trade marks relating to the Lonsdale brand in all of the then states of the European Union except the UK and Ireland but including Hungary, Poland, the Czech Republic and Switzerland. The Licence Agreement replaced an earlier licence dated 11 June 2001 granted to Leofelis by a previous proprietor of the trade marks. The licence was for a period of six years starting on 1 January 2003 in consideration of the payment by Leofelis of a fixed royalty amounting in all to €16.15 million over the term of the agreement. It was payable by equal quarterly instalments in each year increasing from €1.6 million (in all) for year one to €3.5 million (in all) for year six.
Clause 10 of the Licence Agreement empowered Leofelis to grant sub-licences of the trade marks on various conditions one of which was the need to obtain the prior written consent of the licensor which was not to be unreasonably withheld or delayed. It was expressly provided that certain existing sub-licences, as detailed in a schedule to the Licence Agreement, were, subject to certain immaterial terms, approved by the licensor. One of those was a non-exclusive licence dated 19 June 2001 and made between Leofelis and Leeside. That sub-licence was confined to Italy.
The Licence Agreement contained provisions for its termination in stated events. By clause 11.2 it was agreed that the licensor could terminate the agreement by immediate written notice in the event, inter alia, that the licensee should commit a breach of the agreement provided that if the breach should be capable of remedy termination should only occur if the breach should not have been remedied within 30 days of the licensee having been given notice in writing specifying the breach and requiring it to be remedied. By clause 13.6 it was agreed that the Licence Agreement should be governed by and construed in accordance with English law and that the parties should submit to the exclusive jurisdiction of the English court.
The 2009 Proceedings followed proceedings brought by Leofelis and Leeside against Lonsdale and another Lonsdale group company in this Division of the High Court. Those proceedings (“the 2005 Proceedings”) were launched in October 200They arose out of a number of disputes including the activities of third parties using the Lonsdale marks. Leofelis incurred what it says were extensive costs (“the Italian legal fees”) in actions to protect the marks, which Leofelis claimed Lonsdale was obliged to reimburse. Lonsdale did not do so. Leofelis also alleged that, in breach of the Licence Agreement, Lonsdale was directly supplying goods bearing the marks to a connected Belgian company called Sports World Belgium involving what it claimed were very substantial sales in Belgium which affected the market for Lonsdale goods in other EU countries, thereby causing Leofelis to suffer what it alleged was considerable loss and damage. Trial of the action took place before Evans-Lombe J in late 2006. Judgment was delivered on 8 March 2007. Evans-Lombe J found, inter alia, that Lonsdale was liable to pay damages to Leofelis for breach of contract in respect of the supply of the goods bearing the Lonsdale marks to retail shops in Belgium operated by Sports World Belgium, and also the Italian legal fees.
Another issue in the 2005 Proceedings was the validity of an extension of Leeside's sub-licence to further EU states including Germany which had been purportedly granted by Leofelis to Leeside on 20 December 2002 but which Lonsdale said that it had not approved. Leofelis contended that the need for formal approval had been waived. In relation to this, Lonsdale had obtained an injunction stopping Leeside from selling goods under the marks in Germany (“the German injunction”). Evans-Lombe J found the extension of the sub-licence to Leeside to have been valid.
On 11 April 2007 Lonsdale lodged an appeal against various of the findings made by Evans-Lombe J. The appeal came on for hearing in April 2008. By its judgment, delivered on 1 July 2008, the Court of Appeal reversed certain of the findings below including, so far as material, the judge's finding as to the validity of the extension of Leeside's sub-licence granted in December 2002. Leeside was one of the respondents to the appeal and was represented before the Court of Appeal. In the meantime Lonsdale's appeal on the Belgium sales issue had been abandoned. By clause 14 of its order, the Court of Appeal declared that no valid or effective sub-licence had been granted by Leofelis to Leeside for any country within the territory defined in the Licence Agreement other than Italy. The finding below in favour of Leofelis in respect of the Italian legal fees was not challenged.
Evans-Lombe J had ordered that Leofelis's claims in respect of the Belgian sales and the Italian legal fees should be the subject of an inquiry. He gave directions to that end. After some delay, on 2 October 2009, lengthy points of claim were served by Leofelis claiming damages well in excess of €50 million. Lonsdale contends that the claim is grossly exaggerated but has yet to serve points of defence.
In the meantime, by letter dated 14 September 2007 —which was after Evans-Lombe J had delivered judgment in the 2005 Proceedings but before the hearing of the appeal which was then pending —Leofelis, relying on the judgment below, asked Lonsdale to withdraw the German injunction, reserving its right to terminate the Licence Agreement “immediately and at any time while the injunction remains in place”. Lonsdale did not do so. Accordingly, on 28 September 2007 Leofelis gave notice to Lonsdale of termination of the Licence Agreement. The notice was on the ground that the German injunction was a repudiatory breach of the Licence Agreement. The notice stated that it was without prejudice to any other breaches on which Leofelis may be entitled to rely.
Lonsdale disputed that it was in repudiatory breach stating its belief that there was no valid sub-licence to Leeside applicable to Germany and that the ruling of Evans-Lombe J to the contrary was one which it did not accept as correct and was subject to the pending appeal. Other points were also raised in connection with that injunction. In the meantime, a few days earlier, on 2 October, Lonsdale alleged that Leofelis was in breach of the Licence Agreement by failing to pay the fourth quarter royalty for 2007 due on 1 October 2007. Lonsdale accordingly gave formal notice of that breach and of the requirement that Leofelis remedy the breach within 30 days in accordance with the relevant provision of the Licence Agreement. Leofelis did not pay, maintaining that it had already terminated the Licence Agreement with effect from the 28 September 2007 letter. Further correspondence ensued. No payment having been made, Lonsdale, by letter dated 2 November 2007, claimed to terminate the Licence Agreement for non-payment of the royalty. Further inconclusive correspondence ensued. The upshot, however, is that it was common ground that the Licence Agreement had been determined but not by whom, and therefore on what ground.
On 23 June 2008 Leeside commenced its proceedings in the specialist court of Milan (“the Milan Proceedings”). Shortly stated, the relief claimed by Leeside in those proceedings consists of (1) a declaration that Leeside was the exclusive sub-licensee of the Lonsdale trade marks for the whole of continental Europe until 31 December 2008, (2) a declaration that Leofelis and/or Lonsdale (and the other Lonsdale group company, which was a co-defendant to the proceedings) had violated the alleged sub-licence and (3) damages in the sum of not less than €50 million. I shall return later to the basis of Leeside's claims in those proceedings.
Leofelis and Lonsdale were served with the Milan Proceedings in the course of July 2008. They were required to file defences before a hearing on 25 March 2009. Leofelis's defence was filed on 26 February 2009. In it Leofelis pleaded that it...
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