How to avoid losing your Trade Mark to your agent or distributer

In the recent appeal case of Dalsouple (2014), a French manufacturer of rubber flooring products was unable to register its own trade mark in the UK because its UK distributor had obtained a prior UK registration of the same mark and successfully opposed the French manufacturer’s application.

 

This case highlights the risks for suppliers in allowing local distributors or agents to register trade marks in their own name. Suppliers should carefully consider creating written provisions that clearly set out the limitations on what agents and distributors may, and may not, do with the supplier’s marks – or risk losing ownership of their marks.


Facts

Dalsouple UK was the UK distributor of rubber flooring products made by Dalsouple France. In 1998, Dalsouple UK obtained a UK trade mark registration for "DALSOUPLE". In 2011 Dalsouple France sought to register "DALSOUPLE" in the UK. Dalsouple UK opposed this registration on the basis of their earlier mark, which Dalsouple France in turn sought to invalidate.

In May 2014, the Hearing Officer for the Trade Mark Registry found that Dalsouple France had consented to Dalsouple UK registering the earlier mark in its own name, and was thus barred from obtaining a declaration of invalidity, and Dalsouple UK’s opposition succeeded.

Dalsouple France’s subsequent appeal was dismissed by the High Court in December.


Consent as an Answer to Passing Off and Bad Faith

The key grounds on which Dalsouple France had sought to invalidate Dalsouple UK’s trade mark were that their application to register the trade mark was prevented under the law of passing off, in light of Dalsouple France’s earlier International Trade Mark for the word "DALSOUPLE", and that the application was made in bad faith (as it was made at a time when Dalsouple UK was an agent and/or distributor of Dalsouple France’s goods).

Under both EU and UK legislation, such a passing off argument cannot succeed where the party objecting to the trade mark has already consented to the mark’s registration by the mark’s owner. It was also common ground that consent would defeat the bad faith argument.

Consequently, both parties’ cases hinged on whether or not Dalsouple France had consented to Dalsouple UK registering the UK trade mark in 1998.

 

The High Court’s Decision

The High Court emphasised that an appeal court must be especially cautious about interfering with decisions which are essentially value judgements. As a specialist tribunal, the Trade Mark Registry’s decisions should be respected unless it is quite clear it has misdirected itself in law, in this case as to the question of whether the Registry had used the correct interpretation of "consent" in reaching its decision.

The Court of Appeal decided that the interpretation of "consent" must be autonomous and uniform across different parts of the trade mark legislation. Therefore, "consent" should have the same interpretation in trade mark application cases (as in the current case) as that in the Zino Davidoff SA landmark decision, which was a parallel import case. The High Court held that:

  • consent must be unequivocally demonstrated, for which an express statement of consent will normally be sufficient;
  • consent does not need to be given in writing
  • whether express consent has been given should be determined as a matter of fact according to the usual civil standard of proof (namely on the balance of probabilities);
  • it was not necessary for the tribunal to have clear evidence of what was said, particularly if it occurred many years ago. It simply had to be determined whether it was more likely than not that consent was given taking into account the passage of time, failing memories and other relevant matters.
     

Implications

This case highlights the risks for suppliers of allowing its distributors or agents to register trade marks in their own name. This is quite common for suppliers who wish to save costs on trade mark registration and maintenance fees. However, by granting such consent, the supplier could irrevocably lose its exclusive rights in the mark and the distributor/agent can retain the mark even after the distributorship/agency has terminated.

It is important for both suppliers and distributors/agents to consider any explicit provisions, or prohibitions, in any distribution or agency agreements in relation to the right of distributors/agents to register the supplier’s marks (including domain names) in their own name. As consent does not need to be in writing, the supplier’s conduct and verbal communication with the distributor/agent will also be relevant.

Whilst this is an English judgment, the High Court’s decision was reached in light of EU case law and therefore other EU national courts may adopt a similar approach. Accordingly, this decision should be borne in mind for EU-wide distribution/agency agreements as well as for those operating only within the UK.