Court sets out detailed reasons on why it was appropriate to depart from the ECJ's ruling in Budvar and answers many of the remaining questions about the law of acquiescence. Decision is another in a long line emphasising the importance of not delaying in bringing actions for trade mark infringement and passing off where the allegedly infringing right is itself registered.

What has happened?

• The Court of Appeal has departed from retained CJEU case law in an IP case for the first time. However, the Court was careful to point out that there were special circumstances for doing so in this case. This – and other decisions – suggest the Court will not depart from such law lightly.

• The departure related to a particular provision of the law of acquiescence. This law provides that the owner of a registered or unregistered trade mark can lose the right to invalidate or object to the use of a later registered trade mark where that owner has knowingly acquiesced to the use of the later registered mark for five continuous years.

• The Court held that the owner of an earlier right need only be aware of the use of a later mark (which is, in fact, registered) for it to be deemed to be acquiescing; it need not be aware that the later mark is registered.

• It also confirmed that the law of acquiescence applies to earlier unregistered rights (ie passing off claims) as well as registered marks; that sending a warning letter alone is not sufficient to stop the acquiescence period from running – it must be followed within a reasonable period of time by administrative or court action for infringement; and ruled on the relevant dates for assessing acquiescence for International trade marks designating the UK or EU.

• The decision will make it easier for defendants to infringement, passing off and invalidity claims to argue no infringement/passing off/invalidity due to acquiescence. To mitigate this risk, brand owners should not delay in taking action for trade mark infringement and passing off where the later (allegedly infringing) right is registered.

Want to know more?

UK law on acquiescence

Section 48 of the UK Trade Marks Act 1994 (TMA) provides that, where the owner of an earlier trade mark or other earlier right has acquiesced for a continuous period of five years in the use of a registered trade mark in the UK, being aware of that use, there shall cease to be any entitlement on the basis of that earlier trade mark or other right:

• to apply for a declaration that the registration of the later trade mark is invalid

• to oppose the use of the later trade mark in relation to the goods or services in relation to which it has been so used, unless the registration of the later trade mark was applied for in bad faith.

The quid pro quo is that, where this provision applies, the owner of the later trade mark is not entitled to oppose the use of the earlier trade mark or the exploitation of the earlier right, notwithstanding that the earlier trade mark or right may no longer be invoked against the later trade mark.

UK law on acquiescence derives from the EU Trade Marks Directive and numerous decisions of the CJEU (and post-Brexit, UK courts) have interpreted the provision: see, in particular, the ECJ decision in HEITEC v HEITECH Promotion (article here) and the Court of Appeal decision in Combe v Wolff (article here).

Knowledge of registration not required

One aspect of acquiescence that has been unclear is whether the owner of the earlier mark or right must be aware of the use and registration of the later mark for the five-year acquiescence period to start running or whether awareness of the use of the later mark - which mark is, in fact, registered - suffices. This is not specified in the legislation (although it points towards the latter interpretation).

In Budějovický Budvar v Anheuser-Busch (C 482/09), the ECJ held that the owner of the earlier right must be aware of the registration as well as the use of the later mark for time to start to run. However, that decision has not been consistently followed by the EUIPO or General Court. For example, in Cristanini v Ghibli SpA (R 1299/2007-2), the EUIPO Board of Appeal held that knowledge of registration was not required. Furthermore, the EU IP Office Guidelines suggest that the owner of the earlier mark or right does not necessarily have to be aware that the later mark is registered.

The Court of Appeal has now held that knowledge of the registration of the later mark is not required, departing from the ECJ decision in Budvar (and overturning the High Court decision on this point in the present case - Industrial Cleaning Equipment).

This is not surprising given that the EU institutions are not consistently following the Budvar ruling themselves. It is also not surprising in light of the Court of Appeal's comments (obiter) on this issue in another recent acquiescence case, Combe v Wolff (article here).

The Court cited a number of reasons for such departure including:

• There was little reasoning on this issue in the Budvar decision and the ECJ may not have received much argument on the point.

• The ECJ had only ruled on the issue once – in Budvar. The case was therefore very different to Warner Music UK v TuneIn, another recent Court of Appeal case in which the Court was asked to - but did not – depart from retained ECJ case law. In that case, there was considerable CJEU jurisprudence on the point in question and the CJEU had more knowledge of the issues than the Court of Appeal.

• Case law and practice showed that Budvar was not consistently followed.

• The departure would not affect legal certainty since few brand owners would have based their commercial strategies on this issue and would be aware that Budvar had been inconsistently followed.

• Delays in taking action are surprisingly common and have led to complex disputes which prompt action may have prevented. Requiring knowledge of the registration of the later mark would unduly limit the application of the law of acquiescence.

Acquiescence also applies to passing off claims

Section 48 of the TMA specifically states that the acquiescence provision applies to the owners of earlier trade marks and other earlier rights (such as those under the law of passing off). However, section 2(2) of the TMA states that nothing in the Act affects the law of passing off.

Some have questioned how these two provisions sit together – how can the TMA introduce a new defence (or limitation) to passing off (in the form of the acquiescence provision) if the Act does not affect the law of passing off?

Until now, the issue had not been considered by the UK courts. The Court of Appeal confirmed that acquiescence applies in the case of earlier unregistered (passing off) rights. Various reasons were cited including:

• The section 48 acquiescence provision implements the EU trade marks Directive, which takes precedence over any other provision (including section 2(2) of the TMA).

• While section 2(2) specifies that the TMA does not generally affect the law of passing off, that does not prevent the TMA affecting the rights of specific persons in particular circumstances. The two provisions can be reconciled.

• Section 2(2) is a general provision whereas section 48 is a specific one - and the specific takes precedence over the general.

A warning letter alone cannot stop the acquiescence period

The Court of Appeal also held that warning letters themselves are insufficient to stop the five-year acquiescence period running. However, if the warning letter is followed within a reasonable period by administrative or court action, then the warning letter will stop time running. On the facts of the case in question, the claim form was not issued within a reasonable period from the letters and so did not stop the acquiescence period.

This decision is, again, hardly surprising given:

• The ECJ's recent ruling in HEITEC v HEITECH Promotion, which held that brand owners must act decisively by commencing administrative or court actions against the alleged infringer in order to stop the acquiescence period.

• The Court of Appeal's ruling in Combe v Wolff, which held that a mere application to invalidate the later trade mark registration is not sufficient to stop the acquiescence period - there must be a claim directed at the actual infringing use of the later mark.

The relevant date for calculating the five-year acquiescence period for IRs designating the EU is unclear

A question arose as to the relevant date for assessing whether the later mark has been registered for at least five years in the case of an International mark designating the EU.

The Court of Appeal held that the relevant date is either:

• the date the designation is accepted by the EUIPO (as suggested by the Ghibli case)

• the date when such acceptance is published by the EUIPO (the so-called second republication date) (as suggested by Article 160 of the 2009 EUTM Regulation). 

The Court did not have to decide which of these two dates was the correct one as it had no bearing on the outcome of the case. Accordingly, there is still some uncertainty as to which date is correct. The Court did, however, hold that the relevant date is not the date when the trade mark application was registered by WIPO. 

The significance of the Court's departure from retained CJEU case law

The case is an important first in showing that the Court of Appeal is willing to depart from retained CJEU case law under the powers in the EU (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020.

The Court of Appeal must apply the same test as the Supreme Court on departure - ie that it is "right to do so". Note that this power (of the Court of Appeal) only relates to "retained EU case law" and not "retained domestic case law relating to retained EU case law". Retained EU case law includes ECJ preliminary rulings, as well as General Court and ECJ decisions.

The Court was clear that there were particular reasons for departing from retained EU case law here, in keeping with statements made by the government and Supreme Court that the power is to be exercised with great caution. 

What does this mean for you?

• The decision is important for understanding when the UK courts might depart from retained CJEU (EU) case law.

• It is also another in a long line of recent cases on acquiescence, which emphasise the importance of not delaying in bringing actions for trade mark infringement and passing off where the allegedly infringing right is itself registered. That is particularly so since the present ruling increases the scope for defendants to infringement, passing off and invalidity claims to argue no infringement/passing off/invalidity due to acquiescence.