An online seller of mobile phones did not infringe the trade mark of John Caudwell's Phones4u chain when it used the domain name phone4u.co.uk, according to the Court of Appeal. But Friday's judgment concluded that there was passing off.
The ruling reverses a High Court judgment of last year, which threw out both arguments from the company that made Caudwell one of Britain's richest men. According to Lord Justice Jacob, the High Court judge applied the wrong test in deciding whether Caudwell had goodwill that could be protected by passing off.
Passing off is a common law remedy. To succeed, a claimant must show that he has a reputation, that there has been a misrepresentation, and that that misrepresentation has caused or is likely to cause damage.
The phone4u.co.uk domain name was registered in August 1999 by Abdul Heykali who said he did not know of Phones4u at the time, albeit the Phones4u name had been used since 1995 and the domain name phones4u.co.uk was registered in 1997.
Heykali's site initially promoted the services available at his shop in London (which traded under another name). From 2001, it sold phones online. A picture of a mobile phone preceded "4u.co.uk". There was a disclaimer on the site, disassociating the company from Phones4u.
The High Court dismissed the disclaimer as an irrelevance – these "hardly ever work" unless they are "massive and omnipresent," wrote Justice Laddie. But he concluded that evidence of goodwill – and consequently of confusion – was insufficient, so the passing off action failed.
The Court of Appeal reversed this on Friday.
Lord Justice Jacob considered the evidence of brand-awareness as at August 1999, when the domain name was registered: there was a Phones4u shop in most towns and cities; almost 200,000 phones were sold that year; the turnover was £43 million; and newspaper advertising was widespread. "To infer from all that," he wrote, "that hardly anyone knew the name, that the name was not 'an attractive force which brings in custom' by August 1999 is simply untenable."
He noted that the lower court made a mistake in applying tests for trade mark registration to the question of passing off, including the descriptiveness of the name and its distinctive nature. These are not tests for establishing whether goodwill has been established, he pointed out.
It followed that when phone4u.co.uk was registered, "an instrument of fraud" was created. This term was first used in BT's landmark cybersquatting case against One in a Million. There could be no realistic use of the name, reasoned Jacob, "without causing deception." There was further evidence of this in Heykali's attempt to sell the domain name once he knew of Caudwell's shops.
Like the lower court, the Court of Appeal concluded that there was no trade mark infringement. Phones4u had a registration for the word 'phones' and the numeral and letter combination '4u' in white on a red and blue background – not for the mark 'phones4u' in isolation or without colour.