The Court of Appeal has recently clarified the circumstances in which the parties in court proceedings will be bound by the findings made in earlier UK Intellectual Property Office (UKIPO) proceedings as a result of issue estoppel. The judgment in Thomas v Luv One Luv All Promotions Ltd and another considers the scope of issue estoppel and when the courts can disapply it on the basis of there being special circumstances.
The judgment also helpfully explores the ownership of goodwill by a partnership and what happens to the goodwill when the partnership is dissolved.
Registration of a trade mark can be refused on a number of different grounds. These includes on the grounds of bad faith, under section 3(6) of the Trade Marks Act 1994 (the Act), or because use of the mark would be liable to a claim for passing off (section 5(4) of the Act).
A registered mark can also be invalidated on various grounds which include an equivalent of section 5(4), pursuant to section 47(2).
Ian Thomas and Winston Thomas are half-brothers who were both members of a musical group known as LOVE INJECTION or LUV INJECTION from 1986 to 2016 when the band dissolved. After 2016, they both continued performing separately under different variations of LOVE INJECTION/ LUV INJECTION.
In 2017 Winston made various applications to register “LUV INJECTION SOUND” and “LOVE INJECTION SOUND” as trade marks. Ian opposed one application and applied to invalidate a mark which had already been successfully registered. Ian argued that the application to register the mark had been made in bad faith pursuant to section 3(6) of the Act, and that the mark should not be registered because they were liable to be prevented by passing off, pursuant to section 5(4) of the Act. Ian applied to invalidate the registered mark pursuant to section 47(2), based on his earlier right.
In the first proceedings before the UKIPO, the hearing officer found that the group was an unincorporated association and a partnership at will. The goodwill in the group’s name was owned by the changing members of the group. The hearing officer expressly stated that he did not have to make a finding as to what happened to the group’s goodwill when it split, except to find that it had not been transferred solely to Winston. On this basis, the hearing office refused Winston’s application to register the marks and upheld Ian’s application to invalidate Winston’s registered trade mark.
In 2019 Ian issued proceedings in the Intellectual Property Enterprise Court (IPEC) against Winston for passing off arising from Winston’s use of “LUV INJECTION SOUND”. Winston defended the claim and counterclaimed for passing off on the basis of Ian’s use of “LUV INJECTION”.
Ian applied to strike out Winston’s defence on the basis of estoppel and abuse of process. In summary, Ian said that Winston was estopped from going behind the decision of the hearing officer.
The application came before HHJ Melissa Clarke, who found that there was no cause of action estoppel but that there was issue estoppel. In particular, the judge found that both parties were estopped from denying the findings of the hearing officer in the first proceedings and that there were no special circumstances which would disapply that estoppel.
Winston appealed to the Court of Appeal.
The Court of Appeal was not persuaded that there was any issue estoppel arising from the Hearing Officer’s findings in the UKIPO proceedings. The hearing officer had only determined that Winston was not the sole owner of the goodwill after the group had split. The hearing officer had not determined what had actually happened to the goodwill after the split. The result was that this issue had not been determined so as to create an issue estoppel.
In any event, the Court of Appeal found that there were special circumstances which would entitle it to disapply any issue estoppel. Issue estoppel was not absolute, and the court retained a discretion to disapply an issue estoppel if special circumstances existed which would mean that the issue estoppel would cause injustice.
In this case, the following circumstances meant that any issue estoppel should be disapplied:
- The lack of opportunity for Winston to appeal the objection based on section 5(4)(a). Winston could only appeal the order made by the Hearing Officer and not the individual findings. This meant that he could not mount an effective appeal against the hearing officer’s finding which he was said to be bound by.
- The hearing officer’s failure to appreciate that the partnership had been dissolved.
- The hearing officer’s failure to consider how partnerships are regulated on their dissolution.
- The continuing impact on Winston’s future ability to trade under the name.
The judgment confirms that the fact that an error has been made by the judge in the first decision does not in itself mean that there will be special circumstances which will cause injustice.
The Court of Appeal’s judgment is likely to be a welcome decision for many practitioners who may have been concerned about the increased risk of parties in later proceedings being bound by the findings of a hearing officer, even when that decision may have been potentially incorrect and not one which could be properly appealed.
When considering whether there are special circumstances, it may be particularly relevant to consider whether the party had the ability to effectively appeal the earlier finding and the continuing impact of the finding on that party.
The issue of what happens to goodwill when a group splits up is a common issue. The decision offers a helpful summary of the correct approach to be taken when considering the goodwill in a partnership and what happens to that goodwill when the partnership is dissolved.