Interpreting trade mark agreements

The authority of Court of Appeal decisions is sometimes said to be greater if a “strong court” decides the case. For a decision on the interpretation of an IP licence agreement, it would be difficult to think of a stronger court than:

1. Lady Justice Arden – the first female judge to be appointed to the Chancery Division, who has decided many contract and company law cases. She is shortly to become a Supreme Court judge.
2. Lord Justice Kitchin – a senior IP judge in the Court of Appeal. He is also shortly to become a Supreme Court judge.
3. Mr Justice Birss – an IP judge in the Chancery Division who revitalised what is now the Intellectual Property Enterprise Court, and is surely due for promotion to the Court of Appeal before too long.

This was the panel in the recently-reported case of Holland And Barrett International Ltd & Anor v General Nutrition Investment Company [2018] EWCA Civ 1586 (04 July 2018). IP Draughts reported on the decision at first instance, here.

On appeal, the points at issue have crystallised into a point that was not discussed in IP Draughts’ summary of the first instance decision. He would summarise the point this way.

1. GNIC sells a business in nutritional supplements to Holland & Barrett (HB), whose shops are familiar in UK high streets. As part of the deal, GNIC grants HB an exclusive licence under certain GNIC trade marks, including the “GNC” word mark and several ancillary marks that include the word GNC, eg one consisting of a device and the words “GNC Herbal Plus”.
2. Clause 5.6 allows GNIC to terminate the licence in respect of one or more of the licensed marks if HB fails to use the relevant marks for a period of 5 years.
3. GNIC purports to terminate the licence for 5 unused, ancillary marks. The licence remains in force for the main GNC word mark.
4. GNIC contends that the implication of terminating the licence to these marks is that it may use them in the HB territory, even though such use may infringe the main GNC word mark.
5. HB contends that such use would be a breach of the grant of exclusive rights to the GNC word mark.
6. The judge at first instance agrees with GNIC.
7. The Court of Appeal agrees with HB, and overturns the first instance decision on this point.

The Court of Appeal focused on the exclusivity granted to HB with respect to the main GNC mark, and found it would be breached if, for example, GNIC sold products under a mark that included the GNC word and other elements, as in the GNC Herbal Plus mark mentioned above. This analysis was not affected by:

(a) the fact that a separate licence had been granted to, for example, the GNC Herbal Plus mark; nor

(b) the fact that the latter licence had been terminated. It was not necessary to imply a term that on termination of the latter licence, the exclusive licence to the GNC word mark was qualified or reduced in scope.

And as the Court of Appeal stated, paragraph 53 of their judgment:

Putting the matter in a different way, if when the licence was being drafted, someone had suggested to the parties that clause 5.6 might have the consequence which GNIC contend for today, then taking into account the parties’ intention construed objectively from the document as a whole, the parties would have agreed that that is not what they intended to achieve.

In IP Draughts’ view, the Court of Appeal’s forensic analysis of law and facts is persuasive, and overcomes a first thought that such an interpretation fails to give GNIC an effective remedy for failure to use the marks.

It is also interesting to note that the judgment is described as “the judgment of the court” rather than being ascribed to one of the court members and then agreed to by the others. This technique should be used more often, in IP Draughts’ view, and is a further sign of the quality of the judgment.