Landmark trade mark ruling is overturned

A landmark ruling which revolutionised trade mark practice has been overturned on appeal. The decision means arguments already heard in a Trade Mark Registry proceeding can be heard all over again in court.

A dispute over trade marks between cosmetics giant L'Oreal and small prospective hair and cosmetic product producer Special Effects came to the High Court last year. L'Oreal had previously used the Registry's opposition proceedings to object to the smaller company registering a trade mark in the UK for hair products for 'Special Effects'. A matter of days after that registration L'Oreal had launched a range of beauty products using the Special FX name. That opposition was unsuccessful.

Special Effects then sued L'Oreal for trade mark infringement. In the course of that case it argued that L'Oreal could not oppose the validity of its trade mark because that issue had already been resolved at the Registry proceedings. Special Effects argued that there was a cause of action estoppel, i.e. the processes of the Registry and the court were effectively the same; and issue estoppel, i.e. the issue under consideration was essentially the same. It also argued that L'Oreal was guilty of abuse of process in attempting to make the invalidity argument.

In March last year the High Court found in favour of Special Effects, ruling that the arguments could not be re-heard because they had already been decided at the Registry opposition proceedings stage.

The ruling was a shock to the trade mark attorney world because it was the first time that Registry proceedings had been given that status by the courts. Effectively it meant that the court system could not act as an appeal process for the Registry's own system. Attorneys who lost an action in the Registry proceedings could not then simply re-argue it in the courts.

L'Oreal appealed and the Court of Appeal heard the case in November of last year. The just-issued ruling overturns the High Court ruling and effectively re-establishes the status quo. Arguments already heard in Registry proceedings can, in many circumstances, be reheard in court, it said.

Both parties agreed that in some cases the rulings of the Registry could not be challenged by a court, but L'Oreal argued that this was not one of these cases.

The original decision was set to change the way trade mark cases at the Registry were heard, and was likely to add to the cost and scale of such hearings. "The point is seen as being of considerable importance," said Lord Justice Lloyd in giving the Court of Appeal's decision.

"If the [High Court's] decision is right, the practice in relation to opposition proceedings will change in one or both of two ways: either parties will not attempt to oppose or, if they do oppose, they will seek to do so in a much more substantial way, similar to the conduct of litigation in court."

The issue was of such importance that both the International Trade Mark Association and the Institute of Trade Mark Attorneys sought to intervene and filed evidence to the court.

The Court of Appeal found that the Registry's opposition proceedings did not have the finality of a court decision.

"The decision of the Registry on opposition proceedings, or more generally a decision to register despite opposition, is not a final decision so as to be capable of being the basis for an issue estoppel," ruled the court. "This is true both as regards the grounds of invalidity and as regards the issue of prior use more generally, as relevant to a passing off claim. The same would be true of cause of action estoppel if, contrary to our view expressed above, there was a cause of action at that stage."