Gaming the system not permitted by Court of Appeal

28 Jul 2022 , 1:20pm

Attempting to prejudice opponents by using the procedure for amending cases as a weapon will not be tolerated, explains AA Thornton’s Daniel Byrne

Caption: Daniel Byrne speaking at the Luxury Law Summit last month

There has been a significant recent development in the law relating to amendment of a case before the court and what will and will not be tolerated. In particular, it has been determined that deliberate delay in order to attempt to prejudice an opponent by reason of the passage of time will not be permitted.

This topic is one that I covered at AA Thornton’s workshop at the Global Legal Post’s Luxury Law Summit last month, but its applicability is wider than just luxury brands. It potentially applies in many situations, but, particularly, in a trade mark context where certain periods of time are provided for in the Trade Marks Act 1994 in relation to which a party might secretly try to take advantage.

Introduction

The question which fell to be answered by the Court of Appeal is what should happen when a party delays seeking to amend its defence to take account of the following circumstances: 

The defendant had been accused of trade mark infringement and acquired an earlier identical trade mark from a third party and deliberately concealed that fact for a period of time before seeking permission to deploy the trade mark in the litigation. The earlier trade mark was fatally flawed because it had not been used and, so, was liable to be revoked for non-use, but the defendant hid the acquisition of the trade mark while it made use of the mark for long enough to exceed the statutory requirements and arguably cure the flaw.

The Court of Appeal refused to allow the amendment to the defence to introduce the acquired mark in circumstances where to do so would be to take advantage of the process of civil justice. 

Background

ABP Technology Limited (“ABP”) is a UK based producer of gaming accessories, including a range of gaming headsets which it has sold under the marks STEALTH VR and STEALTH.  Voyetra Turtle Beach Incorporated and its subsidiary Turtle Beach Europe Limited (together referred to as “VTB”), are competitors in this field who have also sold gaming headsets in the UK under the mark STEALTH.

The outcome of proceedings before the UK Intellectual Property Office favoured ABP, leaving it as the owner of the trade mark STEALTH VR (in a stylised form) and, subsequently, STEALTH. Following this, VTB did not cease using the mark STEALTH and, so, ABP commenced trade mark infringement proceedings against VTB in November 2020 claiming that VTB’s use of the mark STEALTH on gaming headsets constituted trade mark infringement.

In January 2021, after the infringement proceedings had been commenced and a few days before the Defence was filed, a professional cut-out company called Name Creations Ltd (“NCL”), purchased an earlier trade mark for STEALTH for VTB (the “Earlier Mark”). 

VTB’s connection to the Earlier Mark was kept secret and it was (purported to be) licensed by NCL for a period in excess of three months until mid-June 2021 when the Earlier Mark was then formally assigned to VTB. The significance of the greater than three month period was that, had ABP learned of VTB’s interest in the Earlier Mark before three months of resumed use had elapsed, it would have had an unanswerable claim for revocation for non-use (because section 46(3) of the TMA disregards the first three months prior to the bringing of such a claim and there had been no other use).

In July 2021, VTB sought to amend their Defence to introduce the Earlier Mark into proceedings both as a defence to the infringement claim, under s11(1B) TMA, and as the basis of a counter-claim for infringement (and to attack the validity of ABP’s marks). The judge at first instance in the High Court (ABP Technology Ltd v Voyetra Turtle Beach, Inc [2021] EWHC 3096 (Ch)) allowed some of these amendments (not the invalidity attack), finding that the amendments were not late because the proceedings had not progressed very far and, essentially, that it would be artificial to exclude consideration of a right that had been lawfully acquired by VTB.

ABP appealed against this decision.

The Appeal

ABP disagreed that the application to amend the Defence was not late. It said that the application to amend was late because it could have been made at an earlier point in time, and that the timing of the licensing and later formal assignment from NCL to VTB was in VTB’s hands.

ABP said that the judge had erred in not going on to seek any explanation from VTB as to why the amendment was late. Had he done so he would have inevitably found that there was no good reason for the lateness because VTB had filed no evidence in relation to this issue and the evidence of ABP in relation to the deliberate scheme employed by VTB was uncontested.

In the absence of evidence from VTB, the involvement of VTB in the acts of NCL were revealed piece-meal at the various hearings. VTB’s barrister at the first instance hearing confirmed it and expanded upon it at the hearing of the appeal to the effect that VTB had undertaken a deliberate scheme to be able to be in possession of trade mark with its vulnerability to revocation removed. To have done otherwise and sought to introduce the trade mark earlier would, VTB said, have been to have rendered the amendments pointless.

The Appeal Decision

The Court of Appeal held that an amendment is to be regarded as late if it could have been made earlier and that, where an amendment is late, it calls for an explanation justifying the lateness.

As such, considering that VTB could have introduced its s11(1B) defence on 2 February (i.e. in the original Defence) – as that defence did not require that VTB be the legal proprietor of the Earlier Mark – the judge had erred in finding the amendment was not late. 

Moreover, he should have found it late even on the footing as it appeared to him at the first hearing that the relevant date was that of the licence on 15 March (ABP Technology Ltd v Voyetra Turtle Beach, Inc [2022] EWCA Civ 594).

Despite the lateness of the amendment, the Court could have allowed new issues to be raised only so long as they did not cause unjustified prejudice to the other party. The real issue in this case was that VTB’s lateness in applying to amend its defence had deprived ABP of a claim for revocation which it would have had if the amendment had been raised when it could have been, namely, that the Earlier Mark had not been used and should therefore be revoked.

In light of the lateness and the prejudice caused to ABP, an explanation for the lateness was required from VTB. However, VTB did not provide any such explanation, despite a clear request from ABP to do so. The Court of Appeal held that such a failure should have been fatal to VTB’s application to amend.

Although it was not directly relevant to the decision, the Court of Appeal also addressed VTB’s arguments that ABP could have checked the register themselves for the Earlier Mark and could have revoked it if they had been concerned about it. This argument was rejected with the Court finding that there was no duty on ABP to conduct a search of the register and apply to revoke any marks of concern.

Commentary

The Court of Appeal was highly critical of VTB’s approach and the way in which they conducted the amendment application.

In the words of Lord Justice Birss: “Voyetra’s conduct will not do”. He went so far as to say that, in response to an apparently well-founded challenge in evidence relating to the statement of truth in the original Defence (i.e. that the Defence was known to omit certain things at the time it was signed): “Voyetra ought at the very least to have filed apologetic evidence explaining what had happened.”

While VTB’s scheme might not have been unlawful as regards the Trade Marks Act 1994, Lord Justice Birss noted: “The power to refuse late amendments which cause unjustified prejudice may well have the result that a point is excluded from consideration at trial which would not have been excluded if it had been raised earlier.” Thus, it was VTB’s deliberate lateness coupled with the lateness being the cause of the prejudice to ABP that led to the application to amend being refused.

Ultimately, the Court of Appeal found VTB’s conduct to be an attempt to take advantage of the process of civil justice and that permitting the amendments would: “sanction an act of deliberate concealment by the party seeking to be permitted to amend”. As a result, the appeal was allowed and VTB was refused permission to amend its defence and to introduce a counter-claim.

Lessons to be Learned

This case has important implications for trade mark owners (and maybe others) because it is clear from the judgment that any scheme within litigation which seeks to resume use of a trade mark but to hide the connection between the trade mark and the use for any period sufficient to overcome section 46(3) Trade Marks Act 1994 (i.e. at minimum three months) will be considered late because of the prejudice it causes. The over-riding consideration mentioned is that the system of civil justice includes the idea that “litigation is conducted with cards on the table – face up”.

However, outside of litigation such strategies may still be permissible. In other words, if the Court does not have oversight (for example no permission is required from the Court to amend a statement of case) then what is to stop an alleged infringer (e.g. in receipt of a letter of claim) from purchasing an earlier relevant trade mark and hiding its connection to the mark for a period of time? Seemingly nothing. While there may be arguments that purchasing a trade mark purely for the purposes of anticipated litigation does not give rise to the genuine use which is required to save a trade mark from revocation, the strength of those arguments has yet to be tested in Court. Of course, such considerations may not be relevant where the earlier mark has recently been used and, so, no secret period of use is required to save it from revocation.

What then should those asserting trade marks against infringers and those accused of infringement do? 

While there is no duty to check and clear the trade marks register of potentially conflicting earlier rights which might not be in use, it would be safest to take a pro-active approach to this option in case: i) those asserting trade marks do not proceed to litigation swiftly enough (and being swifter may also be a helpful approach), and ii) for those defending such claims, to try to obtain a mark in good time before there is a formal requirement to deploy it in the litigation.
 
Daniel Byrne is a Barrister and Partner at AA Thornton specialising in Intellectual Property. AA Thornton acted on behalf of ABP Technology in these proceedings and continues to act for ABP Technology in related proceedings. Nothing in this article should be considered to reflect upon ABP Technology’s position in the proceedings or at all; certain statements made in this article are necessarily simplified or edited for brevity and clarity.