Woolley and Another v Ultimate Products Ltd and Another
| Jurisdiction | England & Wales |
| Judgment Date | 01 March 2012 |
| Neutral Citation | [2012] EWHC 339 (Ch) |
| Date | 01 March 2012 |
| Court | Chancery Division |
| Docket Number | HC10C00996 |
[2012] EWHC 339 (Ch)
IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION
INTELLECTUAL PROPERTY
Robert Englehart QC
(Sitting as a Deputy Judge of the Chancery Division)
HC10C00996
Simon Malynicz (instructed by Collyer Bristow LLP) for the Claimants
Thomas Moody-Stuart (instructed by Kuit Steinart Levy LLP) for the Defendants
INTRODUCTION
In this action the Claimants seek injunctive and other relief for the tort of passing off. The case concerns use of a mark very similar to the mark HENLEY which the Second Claimant company ("Timesource") uses as a brand name for a line of watches and a few other items which it sells. The mark HENLEY is also in fact a registered Community Trade Mark ("CTM") under certain classes of goods, and the Particulars of Claim complain of both passing off and infringement of this CTM. However, the commencement of this action postdates an application by the Second Defendant ("HCL") in the Office for Harmonisation in the Internal Market challenging the CTM. The Defendants sought a stay of this whole claim pending the outcome of that challenge. A stay of the CTM infringement claim is mandatory in these circumstances, and it was undisputed that there should be such a stay of that part of the claim. Nevertheless, Master Bragge directed that the passing off part of the claim should be determined. In these circumstances the action, only insofar as concerned with passing off, came on for trial before me.
The CTM claim which is currently stayed covers a variety of goods. For the purposes of the passing off claim, however, Mr Malynicz on behalf of the Claimants acknowledges that the claim could only be maintainable in relation to three types of product: (1) watches (2) jewellery and (3) bags. Of these goods, it is the claim in respect of watches which is the most important and which took up the major part of the trial.
THE PARTIES
Mr Woolley, the First Claimant, has his business background in the watch import and trade sales business. He was a joint founder of what became a substantial watch business carried on by a company which came to be called Peers Hardy UK Limited. He resigned as Managing Director of that company in 2003, and after a spell as consultant to a French business he founded Timesource. It began trading around mid-2004. Mr Woolley is the Managing Director. The watch sales business has been conducted by the company since then, although in fact the CTM for HENLEY is held in Mr Woolley's personal name. Doubtless, that is the reason for Mr Woolley being a Claimant in this action, although it is Timesource which is the owner of the relevant goodwill for the purposes of the passing off claim.
Timesource has since its foundation developed what has become a successful business in sales of watches. It evidently enjoys a strong reputation for good quality watches of attractive design and keen prices. Its main customers are wholesale distributors, multiple retailers and internet sales companies. The watches are marketed under three brand names: (1) "Ravel" which is the lowest priced range (2) "Freefall" which are sports watches and (3) HENLEY which is, of course, the brand in issue in this case and is the most successful line marketed by Timesource.
The HENLEY name was devised by Mr Woolley. He explained that he was trying to think of a brand name which was easy to pronounce, not evocative of any particular age or gender and had what he called "upscale connotations". He came up with the name HENLEY, prompted by his knowledge of Henley-in-Arden in Warwickshire which Mr Woolley described as "a very middle class, respectable and typically 'English' market town". It has evidently been a successful choice of name. The evidence is that since 2004 Timesource has sold around 1.2 million items under the HENLEY brand name.
HCL is essentially a clothing company, although it has in recent years expanded into the accessories market. There is no doubt that HCL has built up a substantial goodwill in relation to clothing. Its products are marketed under the name HENLEYS. The company was established by its Managing Director, Ben Luscombe, in 2000, but he had previously since 1996 been trading personally under the HENLEYS name. Apparently, the name of the company takes its provenance from the Oxfordshire town where Mr Luscombe grew up. The trading name HENLEYS, whilst not literally identical to the company name, is obviously derived from it. During the comparatively short period of HCL's existence it has enjoyed notable growth. Its turnover peaked at about £41.5 million pounds in the year ended 31 March 2010, although it fell by about 50% in the following year and has continued to fall, by about half again, since then.
HENLEYS products were until recently sold by retail, through a subsidiary Henleys Retail Limited, at some 18 HENLEYS stores throughout the country. However, those stores have now been closed down with that company having been put into administration. HCL's core business is, as it always has been, selling by wholesale. It sells to retailers, both independent and multiple shops, mail order companies and internet sales companies. It describes its target market as the 18 to 25 year old age group, predominantly male. The image which HCL cultivates for the HENLEYS brand was described before me as "a cool urban street wear brand".
The First Defendant ("Ultimate") is a company which imports and sells by wholesale a very wide variety of some 4,000 different products. However, it is involved in these proceedings because it has come, in the circumstances which I shall describe, to sell under licence from HCL watches and jewellery under the HENLEYS name.
THE FACTUAL BACKGROUND
I am entirely satisfied that both Timesource and HCL have established substantial goodwill in at least their respective core businesses of watches and clothing. The extent to which the goodwill extends beyond the respective core business was in dispute before me. As far as Timesource is concerned, it has under Mr Woolley's direction built up a thriving business for HENLEY watches. It enjoys excellent relations with its trade customers and enjoys a fair amount of repeat custom for these watches. Timesource sells only in comparatively large amounts and accordingly does not sell by retail. Its best customers in terms of sales were given by Mr Woolley as JD Williams, Amazon, Jewellery World Ltd, DK Wholesale Ltd, Watt Bros Glasgow, Harvey and Thompson plc, Universal Trade, Clyde Importers, Worldwide Gifts, A2Z Wholesale and Time and Diamonds SA. HENLEY watches are made by Chinese manufacturers to Timesource designs with quartz movements provided by Seiko Industries in Japan or Singapore. Although the watches are relatively inexpensive and tend to sell by retail at well under £50, they evidently have a high reputation for quality. Returns of faulty watches by members of the public were said to be very low indeed; the cost to the company of returns runs at only about 1% of turnover.
In 2006 Ultimate was looking for a predominantly male fashion brand under whose name it could profitably market watches and, to a lesser extent, jewellery. It alighted upon HENLEYS clothing and approached HCL for a licence to use its HENLEYS brand name. HCL was interested in this proposition, and Ultimate was willing to offer a 12% royalty on net selling prices. However, the presence of Timesource with its HENLEY watches in the watch market came to be recognised by both Ultimate and HCL as presenting an obstacle.
Mr Woolley explained in evidence how one day in early 2007 he received a telephone call from Mr Clawley of Ultimate. He was known to Mr Woolley since he had previously worked for Peers Hardy UK Limited and, indeed, had once approached Mr Woolley for a job at Timesource. Mr Clawley told Mr Woolley that Ultimate had done a deal with HCL to market HENLEYS watches. However, he had been embarrassed to discover that HCL did not own a HENLEYS trademark for watches but that Mr Woolley did own the trademark HENLEY. Eventually, Mr Woolley agreed to grant Ultimate a licence for watches under his trademark for a royalty of 5% of net selling prices. At the same time HCL was prepared to reduce the royalty it was to receive from Ultimate down to 7% from the previously mooted figure of 12%. Thus, the net result made no difference to Ultimate in what it was to pay by way of royalty.
There was understandably a fair amount of argument devoted to the significance of the trademark licence arrangements. It is clear that Mr Woolley was prepared to tolerate competition from other watches with a virtually identical brand name provided that (a) there was sufficient financial compensation and (b) his licence incorporated certain safeguards. The written licence of 22 June 2007 records Mr Woolley granting to Ultimate a non-exclusive licence to use his registered trademark HENLEY for the 5% royalty. For present purposes it is material to note that (a) the licence was restricted to men's watches only despite an earlier indication in Mr Woolley's email to Mr Bird of 24 May 2007 that it was also to cover "Gents jewellery" (b) sales by Ultimate were to be confined to mail order companies and "regular" retail shops rather than discount retailers and wholesalers (c) Ultimate was only to use the mark in a manner which Mr Woolley was to approve and which was not confusing or misleading (d) publicity for Ultimate's watches was subject to Mr Woolley's approval and (e) all Ultimate's customers had to be approved by Mr Woolley so as to avoid conflicts with Timesource sales. Along with the licence from Mr Woolley to Ultimate, HCL and Mr Luscombe also granted to Ultimate a licence for a royalty of 7% of net wholesale price. That...
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