The Court of Appeal of England and Wales has delivered a landmark judgment (Industrial Cleaning Equipment v Intelligent Cleaning Equipment & Another [2023] EWCA Civ 1451) diverging from the case law of the Court of Justice of the EU (CJEU) on an aspect of trademark law, specifically the 'acquiescence' defence to trademark infringement. The point goes to the heart of the balance sought to be struck by the registered trademark system, between the interests of trademark owners and the interests of other economic operators.

A factor in the Court of Appeal's unanimous decision to depart from retained EU case law was the apparent difference in the approach adopted by the CJEU in its case law compared with that adopted by the General Court and the Boards of Appeal of the EU's Intellectual Property Office (EUIPO).

Arnold LJ was in agreement with the General Court's and EUIPO's approach. Since the difference with the CJEU's approach was significant, and raised a real possibility of a subsequent change of approach in the CJEU, it was important that the courts in this jurisdiction were able to apply the legislation in the manner which best served its objectives.

Accordingly, departing from the CJEU's ruling in Budvar, for the purposes of the acquiescence defence to trademark infringement, the five-year term of the acquiescence clock starts to run when the owner of the earlier trademark becomes aware of the use of the later trademark. The later trademark must be registered but knowledge of the fact of registration is not needed.

The Court of Appeal's reasoning is explained further below.

How the question on acquiescence reached the Court of Appeal

Industrial Cleaning Equipment (Southampton) Ltd (the claimant) sued Intelligent Cleaning Equipment Holdings Co Ltd and an associated company (the defendants) for registered trademark infringement.

The key trademark asserted by the claimant was of a logo, incorporating the acronym "ice", which has been used since 2007 and registered as a UK trademark on 22 January 2016. From around July 2014, the claimant was aware of the use of the defendant's logo, which incorporated the acronym "ICE". In June 2015, the defendant applied for international trademarks for the logo, pursuant to which EU trademarks were eventually registered.

On 2 July 2019, the claimant's solicitors sent a letter before claim alleging infringement of the claimant's trademark and passing off. A response denying infringement and relying, among other things, on the defendants' trademarks, was dated 26 July 2019. In November 2019, the claimant filed invalidation actions at the EUIPO against the defendants' EU trademarks, but withdrew the actions in January 2021. On 24 May 2021, the claimant issued the claim form in the High Court for infringement; the claim form was subsequently served by being placed in the first class post on 21 September 2021.

The defendants pleaded the 'acquiescence' defence. Different iterations of the legislation employ slightly different wording, but the defence operates where the owner of the trademark, said to have been infringed, has "acquiesced" for a period of five successive years in the use of the later trademark.

The judge applied the principles laid down by the CJEU in its judgment in Case C-482/09 Budejovický Budvar np v Anheuser-Busch Inc [2011] ECR I-08701 ("Budvar"), as she was required to do. She concluded that since the claimant first became aware of the defendants' trademark registrations on receipt of the 26 July 2019 letter, the claimant's claim form had been issued and served well before the expiry of the five year period required for acquiescence. So the defendants' acquiescence defence failed and they were found liable for trademark infringement.

The defendants' arguments on acquiescence in the Court of Appeal

The defendants appealed to the Court of Appeal. They argued that, contrary to the approach taken by the judge, the acquiescence clock should begin to run from the time of registration of the defendants' later trademarks, not when the claimant found out about the registrations ("issue 1").

The defendants also argued that the time of registration of the defendants' later EU trademarks was 18 June 2015 – the date that the defendants' international registrations at the WIPO were registered – rather than the subsequent date that the EU trademarks were entered into the EU trademarks register, on 25 May 2016 and 15 June 2016 ("issue 2").

In order for the defendants' acquiescence defence to succeed, the defendants needed to persuade the Court of Appeal to rule in their favour on both issue 1 and issue 2.

Issue 1: must the owner of the earlier trademark be aware of the registration of the later trademark in order for the acquiescence clock to begin to run?

Arnold LJ began his reasoning by explaining the different legislation operating at different dates, and the small differences in the wording of the acquiescence provisions employed. While the parties were not agreed as to which legislation applied, the differences were not, however, material. This was because CJEU case law (in particular (C-381/12 P I Marchi Italiani v OHIM and Budvar) had consistently held that for the purposes of the acquiescence defence time could not start running until the later EU trademark had been registered.

In Budvar, the CJEU held that four conditions must be satisfied before the acquiescence clock began to run: 1) use of a later trademark which is identical to, or confusingly similar to, the earlier trademark; 2) the later trademark must have been registered in good faith; 3) the later trademark must be used in the Member State where it is registered; and 4) the proprietor of the earlier trademark must be aware of the registration of the later trademark and of the use of that trademark after its registration.

The key point was point 4. The reasoning of the Advocate General and the Court in Budvar made clear that the acquiescence clock only began to run once the proprietor of the earlier trademark was aware that that later trademark had been registered AND that the later mark was being used.

However, in the earlier, unreported, 21 October 2008 decision in Case R 1299/2007-2 Cristanini v Ghibli SpA ("Ghibli"), the Second Board of Appeal of OHIM (now the EUIPO) concluded that the acquiescence clock did not require knowledge of registration of the later mark in order to begin to run, only knowledge of the use of such a sign. A subsequent Second Board of Appeal decision, in R 502/2008-2 I Marchi Italiani v Osra SA (unreported, 9 January 2009), ruled that the acquiescence clock only begins to run once the later trademark was registered. The General Court's judgment in the same case (Case T-133/09 I Marchi Italiani v OHIM) indicated that for acquiescence to run, the proprietor of the earlier mark needed to be aware of the use of the later trademark after it had in fact been registered, rather than requiring knowledge of the registration. Then in the next instance of the same case (C-381/12 P I Marchi Italiani v OHIM), the CJEU referred to knowledge of both registration and post-registration use being required, with reference to Budvar, without reference to the different formulation of the test provided by the General Court, and despite other parts of its reasoning being more consistent with the approach explained by the General Court. Subsequent case law of the General Court remained consistent with its re-iteration of the principles in I Marchi Italiani.

Therefore the case law of both the EPO's Boards of Appeal and the General court appeared to be "in conflict" with the case law of the Court of Justice. Arnold LJ said ([65]):

"If the UK was still a Member State of the EU, the correctness of this contention could be determined by means of a reference to the Court of Justice. …That course is no longer open to us, however. We must decide the issue for ourselves. That involves answering two questions. First, what is the correct interpretation of the legislation? Secondly, if we consider that the correct interpretation of the legislation is that contended for by the Defendants, should we depart from Budvar?"

On the correct interpretation of the legislation, Arnold LJ said ([69]):

"It is well established that provisions of the Directives and Regulations must be interpreted having regard to the wording of the relevant provision, its context and the objectives of the legislation.

In my judgment the more natural reading of the operative words in the Directives and Regulations is that the proprietor of the earlier trademark must be aware of the use of the later trademark, but not the registration of the later trademark. As the Board of Appeal pointed out in Ghibli, if the legislative intention had been to require knowledge of both use and registration, it would have been easy to say so. Furthermore, this reading is supported by the recitals to the Directives. I acknowledge, however, that it is possible to interpret the words in the way in which the Advocate General and the Court of Justice did in Budvar and the judge did in this case."

Arnold LJ I therefore turned to consider the context and the objectives of the provisions. He noted his discussion of some relevant background in his 2022 judgment in Combe International v Dr August Wolff & Co [2022] EWCA Civ 1562. In that case the court was concerned with what, exactly, was needed in order to stop the running of the acquiescence clock. It ruled that making threats of infringement proceedings was not enough; nor was it enough to seek cancellation of the later registered mark. In order to stop the acquiescence clock from running, the owner of the earlier trademark needed to take administrative or court action to oppose the use of the later mark. In other words, infringement proceedings.

Arnold LJ reiterated that use and registration are two different things. Use affects the market, while registration does not. The purpose of the legislation was to sanction owners of earlier trademarks who were insufficiently vigilant to stop the use of later marks. This was in the interests of the owners of earlier marks themselves, users of later trademarks and the consuming public. It therefore followed that ([74]):

"…provided that the later trade mark is in fact registered, time should run from the date on which the proprietor of the earlier trade mark becomes aware of use of the later trade mark, not from some later date."

Arnold LJ added that requiring knowledge of registration of the later mark would give the owner of the earlier mark a "perverse incentive" not to consult the register, in order to delay time running. Yet users of trademarks should be encouraged to consult the register, and by keeping a watch on the register the owner of an earlier mark can find out about a later mark. Further, if knowledge of registration was required, proof would be significantly more burdensome because communications between the owner of the earlier trademark and their professional advisors would be likely to be covered by legal professional privilege.

Therefore Arnold LJ's conclusion was that the legislation should be interpreted as meaning that ([79]):

"the five year period starts to run once the proprietor of the earlier trade mark becomes aware of the use of the later trade mark, and the later trade mark is in fact registered, whether or not the proprietor of the earlier trade mark is aware of the registration of the later trade mark. In order to give effect to this conclusion, however, this Court must depart from Budvar. "

Arnold LJ then addressed whether the Court of Appeal should, in these circumstances, depart from Budvar. He noted that Budvar is "retained EU case law", from which the Court of Appeal and the Supreme Court have power to depart but only on the same basis that the Supreme Court has power to depart from one of its own precedents (or one of the House of Lords). Such power exists in accordance with the Practice Statement (Judicial Precedent) [1966] 1 WLR 1234. It is a power to be exercised "with great caution".

Arnold LJ observed that in Budvar, neither the Advocate General's Opinion, nor the Court's judgment, contained any analysis of the issue. The legal test was simply stated. Budvar was also an isolated judgment. The present case was very different to Warner Music v TuneIn [2021] EWCA Civ 441, in which the Court of Appeal declined to depart from CJEU jurisprudence on 'communication to the public' of copyright works developed over the course of 25 judgments. The difference in approach taken in both the EUIPO and the General Court was also significant. It meant there was a "real possibility" that in a later case the Court of Justice would endorse the approach of the General Court and the EUIPO. Arnold LJ continued ([86]):

"This is also relevant to the question of legal certainty. One of the main reasons why the Supreme Court is cautious about departing from its own precedents is that doing so risks undermining legal certainty. In the present case, however, this consideration is of little weight. Few trade mark proprietors are likely to have based their commercial strategies on this aspect of Budvar. Moreover, a well-advised trade mark proprietor would be aware that EUIPO and the General Court have taken a different approach and that the Court of Justice might depart from Budvar."

It was of little weight that the defendants had not cited any academic criticism of this aspect of Budvar because it was a narrow issue in a specialised field. There was, however, reason for thinking that this aspect of Budvar unduly restricted the proper development of the case law ([88]):

"…there are a surprising number of trade mark disputes in which delays on the part of trade mark proprietors (and proprietors of rights in passing off) have led to complex disputes arising when prompt action would have prevented this. Statutory acquiescence is a key tool for dealing [with] this problem, and it underpins the defence in section 11(1) of the 1994 Act. It is therefore important that the courts of this jurisdiction are able to apply the legislation in the manner which best serves its objectives."

Accordingly, Arnold LJ concluded that the Court should depart from Budvar, "to the extent of holding that the five year period starts to run when the proprietor of the earlier trade mark becomes aware of the use of the later trade mark and the later trade mark is in fact registered, whether or not the proprietor of the earlier trade mark is aware of the registration of the later trade mark". Nugee LJ agreed ([122]):

"…there does appear to be a divergence (surprising as this may seem to our eyes) between on the one hand the approach adopted by the OHIM/EUIPO and the General Court in Ghibli and later cases, and on the other the position of the Court of Justice in Budvar which suggests that the question is not regarded as settled at European level; and the wider context, the objectives of the legislation and practical considerations all suggest that the better view is that the proprietor of the earlier right need only be aware of the use of the later mark, not of the fact of its registration. In those circumstances I am persuaded that this is indeed a case where we can and should exercise the new freedom to depart from retained EU case law as Arnold LJ suggests."

Issue 2: what is the registration date in the case of an international trademark protected in the EU?

The defendants' trademark registrations had been sought through the international system. Upon the expiry of the Brexit implementation period, UK trademarks were extracted from the EU-wide right.

The question for the court was whether the "registration date" for the purposes of the acquiescence provisions was the date of the international filing, or a later date. Tracking through the various legislative provisions, Arnold LJ concluded that that it was a later date. The international registration date was equivalent to the "filing date" in the subsequent UK trademark. Therefore 18 June 2015 was the "filing date" of the defendants' UK trademarks, not their registration date, which was later. This meant that the defendants did not succeed on issue 2. Arnold LJ explained ([106])

"I therefore conclude that the registration dates of the Defendants' EU Trade Marks were either 24 or 25 May 2016 and either 14 or 15 June 2016 respectively. It is not necessary to decide whether the correct date is the date of acceptance (as suggested by analogy with Ghibli) or the second republication date (as suggested by analogy with Article 160) for this purpose, because it makes no difference on the facts of this case. Even if the relevant date in the case of 685 was 24 May 2016, the claim form was issued on 24 May 2021. That was the last day of the five year period and therefore just in time to stop a full five years' acquiescence accruing: compare the approach to calculating the five year period of non-use founding an application for revocation explained in BSA by R2 Trade Mark [2008] RPC 22. The claim form was served within the four month period allowed under the Civil Procedure Rules. Following the reasoning of the Court of Justice in Heitec at [58]-[68] discussed in Combe at [48]-[53], that was effective to stop acquiescence as at the date of issue."

Nugee LJ added ([124]):

"…the issue of the claim form on 24 May 2021 was on the last available day of the 5 year period and was enough to stop time running (being duly served within 4 months) for the reasons given by Arnold LJ at paragraph 106 above, … this is in accordance with the normal position in English law in relation to limitation periods. If a cause of action accrues on a particular day (here 24 May) and the relevant limitation period is for example 6 years, the last day for the issue of a claim form is usually the corresponding date 6 years later. That was decided by this Court in Pritam Kaur v S Russell & Sons Ltd [1973] QB 336. In Matthew v Sedman [2021] UKSC 19, [2022] AC 299, the Supreme Court had to consider how this applied in the particular case where a cause of action accrued at the end of a day (at midnight), but it did not cast any doubt on the general position as stated in Pritam Kaur."

Final thoughts

For the first time, a Senior Court in the UK has departed from CJEU jurisprudence on a provision of retained / EU-derived legislation in respect of intellectual property. It has also been demonstrated how and when a departure may occur.

On the approach to the interpretation of legislation according to English law, in view of the Retained EU Law (Revocation and Reform) Act 2023, please explore our article "REULA's End of Supremacy of EU Law Will Impact IP Law in the UK from 2024, explains High Court".

To discuss any of the points raised in this article, please contact Kate Swaine or Ailsa Carter.