Parties


Background

This case originally went to the High Court in March 2005. It was appealed to the Court of Appeal in May 2006, and was heard by Tuckey, Carnwath and Jacob LLJ. Lord Justice Jacob had formerly been in the High Court and dealt with the Euromarket and 800-Flowers cases.

In the High Court Mr Richard Sheldon QC, sitting as a Deputy High Court Judge had rejected the trade mark and passing off claims by Cauldwell (owners of the Phones 4u shops). Mr Caudwell had founded these shops in May 1995 and registered <phones4u.co.uk> in May 1997. Mr Heykali registered <phone4u.co.uk> on 23 August 1999. At around this time "there was a Phones 4u shop in most major towns and cities in England" (according to Mr Sheldon, QC). The logo used on the shops changed in 1997 from a megenta/black/white logo to the red/white/blue logo still in use. The old logo was not immediately phased out.

Mr Heykali's site went live in November 1999 with a 'going mobile soon' notice, although no trade. It was not clear when it actually started, but the first sale was on 24th March 2000, by which time Cauldwell had already complained about the site. There was then a gap until 2004 before legal proceedings began, claiming passing off.

The judgment - Passing Off

Lord Justice Jacob gave the judgement of the court (external link). He court looked at the purpose and history of passing off. They referred to the "more modern" state of the kind of damage that can be caused by misrepresentation, quoting from a previous Court of Appeal case:

"(a) by diverting trade from the plaintiffs to the defendants;
(b) by injuring the trade reputation of the plaintiffs [because of e.g. quality of goods];
(c) by the injury which is inherently likely to be suffered by an business when on frequent occasions it is confused by customers or potential customers with a business owned by another proprietor or is wrongly connected with that business."

The next point of passing off is the date by whcih it is to be judged. The parties agreed to use the date of registration, i.e. August 1999 although the judge noted that the date of first trading might really be more appropriate.

The next question was misrepresentation, needing 'deception' not 'mere confusion', which Jacob characterised as needing a substantial number of people and being the difference between "I wonder if there is a connection" to "I assume there is a connection." He gave the example of the 1861 case of Dent v Turpin, where Mr Dent had given both his sons one of his shops. There were then two separate businesses called Dent, who could not stop each other, but they could both stop Mr Turpin from using "Dent & Turpin" - in that case a passer by might be confused between the two 'Dent's, but this confusion was legitimate, whereas the "Dent and Turpin" would be misrepresentation.

Jacob also looked at Office Cleaning Services v Westminster Window and General Cleaners, a 1946 case. In that Lord Simmons said: "Where a trade adops words in common use for his trade name, some risk of confusion is inevitable. But that risk must be run unless the first user is allowed unfairly to monopolise the words. The Court will accept comparatively small differences as sufficient to avert confusion. A greater degree of discrimination may fairly be expected fromt he public where a trade name consists wholly or in part of words descriptive of the articles to be sold or the services to be rendered."

Jacob then asked what 'distinctive' meant. 'Kodak', as a made up word is regarded as a clear example, but many cases are less so. In those cases, evidence may be required of distinctiveness.

He also touched on the fact that the Court of Appeal does not decide cases from scratch, but instead looks at specific issues appealed. There were four arguments raised at appeal:

• the judge used the wrong test in deciding whether or not at the key date Caudwell had goodwill protectable by passing off;
• that the domain name was an instrument of fraud as set out in One in a Million;
• the judge wrongly characterised several cases of 'deception' as 'mere confusion'; and
• the judge made a mistake in placing significance on the co-existence of the marks.

Lord Justice Jacob agreed with all four of these contentions.

In relation to the 'distinctiveness', he observed that the judge seemed to be using the test of distinctiveness used for registering 'generic'-type trade marks, rather than the test for goodwill - and he noted that since it had been shown that there was a Phones 4u shop in most towns, it could not really be said that the brand was not 'an attractive force which brings in custom' protected by the law. Jacob also disagreed with the judge's belief that the name was "descriptive". While he agreed it was not hugely inventive, he said that people did not talk about going to a 'Phones 4u' shop instead of saying just 'phone shop' or 'mobile shop'. Again, this test is different to that required for obtaining the registration of a trade mark.

In relation to "instrument of fraud", Lord Justice Jacob felt that it flowed from the first point. If, like the judge at first instance, you felt that the name was not distinctive, it would be possible for the name not to be an instrument of fraud. If, like Jacob, you thought that it was protectable in passing off, then  Mr Heykali's conduct (in offering to sell after being aware of Phones 4u) was not 'materially different from that of the defendants in [One in a Million]'

On the topic of 'mere confusion' or 'deception' there had been a problem with evidence, as full disclosure had not been given. However, emails had now been provided and these revealed a mass of evidence of people emailing <phone4u.co.uk> while attempting to reach <phones4u.co.uk>, who appeared to believe that they were in communication with Caudwell's shops. Some of these emails got a standard reply distancing <phone4u.co.uk> from Phones 4u, but also advertising Phone4u. Jacob noted that the original judge had limited himself to damage by trade diversion, rather than by the wider range of factors available.

On the topic of 'co-existence' Jacob agreed that the delay was significant, and had swayed the original judge. But Jacob was less impressed with the evience provided by Heykali of his trade - of which there was little, suggesting that there really was no co-existence because Heykali's trade did not really exist. He briefly opened a shop in Balham, but sold only 27 phones to the public, and thereafter any trade that there was came from the website.

The judgement - Trade Mark infringement

There was a convoluted technical argument about whether the registered logo mark was registered in colour or black and while and the extent to which it protected colours. The relevance of this was that if the trade mark was limited to the words in the given colours, it would have less relevance to the domain name (which is colour-free). After a long discussion of the law, and the history of the law Lord Justice Jacob decided that the colour limitation was valid, so the mark did not protect the words alone and there was no registered trade mark infringement. He said that if it had been otherwise, there would have been trade mark infringement.

Carnwarth and Tuckey LLJ agreed with Jacob LJ's judgement in full.