UK COURT DIARY

SPAM Busted: Cause of Action Estoppel Defined in Trade Mark Proceedings

In the last issue of Make Your Mark, we commented in our editorial on the recent decision of the High Court in Hormel Foods Corp. v Antilles Landscape Investments [2005] ETMR 54, popularly known as SPAMBUSTER.

The implications of this decision for trade mark litigants, whether before the Patent Office or the court, are immense. Since the introduction of the Civil Procedure Rules, appellate work has become especially challenging and the prospects often inherently poor since the standard applied is now firmly fixed as a review, rather than a re-hearing. The emphasis has therefore shifted to the first instance as the best chance to win a trade mark proceeding. Following SPAMBUSTER, the need to get it right—and complete—the first time is now beyond a shadow of a doubt, and the consequences of not doing so can be serious indeed.

 

The Story Begins

Hormel is known the world over for its iconic SPAM canned lunchmeat. It is the owner of a United Kingdom trade mark registration for SPAM in respect of canned meats, dating from 1938.

In December 1997, Antilles Landscape Investments NV (“the Defendants”) applied to register the trade mark SPAMBUSTER in a logo form in respect of “computer programming” in Class 42. The application was granted.

In March 2001, Hormel applied to invalidate the Defendants’ registration on the grounds that the SPAMBUSTER Logo was similar to Hormel’s earlier registered mark SPAM, in which Hormel enjoyed a reputation, and that its use would take unfair advantage of or be detrimental to the distinctive character or repute of Hormel’s mark. Neither party asked for a hearing. The application to invalidate was rejected in February 2002.

 

Chapter 2

Hormel did not appeal the result in the Patent Office, but instead brought a fresh set of proceedings before the High Court.

In the new proceedings, Hormel claimed that the SPAMBUSTER Logo registration was invalid inter alia because it was non-distinctive and descriptive of programming relating to computer software that combats unsolicited commercial emails, popularly known as “spam,” under Sections 3 (1) (b) and (c) of the Trade Marks Act 1994. Hormel argued alternatively that as a result of the acts or inactivity of the Defendants, SPAMBUSTER had become the common name in the trade in respect of such services under S. 46 (1) (c)

The Defendants argued that Hormel’s action should fail on the grounds that Hormel was estopped from bringing the new proceedings, having already failed in proceedings before the Patent Office.

The Defendants further argued that Hormel’s claim was an abuse of process, designed to oppress and vex. The matter came to be heard before Richard Arnold QC sitting as a Deputy Judge of the High Court and judgment was handed down on 24 January 2005.

 

Cause of Action Estoppel

The availability of cause of action estoppel to prevent new proceedings in trade mark matters was a new question before the court. In a detailed judgment, the Deputy Judge exhaustively reviewed the authorities relating to cause of action estoppel in patent and registered design matters, and ultimately concluded that the principles relating to registered trade marks must be, in effect, the same.

Cause of action estoppel, he held, was intended to bring closure and finality to proceedings. It was a principle rooted in the public interest and was intended to avoid the drawn-out litigation that might result if parties litigated their claims in a piecemeal fashion, first bringing proceedings on one point, then on another if the first case was lost, then on another if the second was lost, ad infinitum.

Hormel argued that it was not estopped by this principle because although it had previously brought invalidity proceedings, the new proceedings were based on different grounds, and required proof of different facts in order to succeed. The Deputy Judge, however, found that the patent and registered design authorities in this field recognised a broader form of cause of action estoppel, in which the grounds pleaded under a second validity challenge were irrelevant to whether the claimant was estopped, on the basis that they could and should have been pleaded in the first proceedings.

The Deputy Judge held that a party who seeks to challenge the validity of a registered trade mark is under a duty to put his full case at trial or before the Patent Office. If he fails, cause of action estoppel will prevent him from raising a second validity attack, whether on the same or different grounds, regardless whether the different grounds could reasonably have been ascertained before the hearing of the first action. The Deputy Judge recognised the harshness of this result but considered that it was a correct application of the authorities.

Hormel could have submitted that SPAMBUSTER was non-distinctive and descriptive in the first set of invalidity proceedings, and indeed much of the evidence would have been the same as that already filed. Hormel failed to do so, and was therefore barred from its second attack, despite (and indeed because of) not having pleaded those grounds in the first proceedings.

 

Abuse of Process

Cause of action estoppel did not block Hormel’s revocation claim, since the argument that SPAMBUSTER had become the common name for the services in the trade due to the acts or inactivity of the Defendants amounted to a different cause of action altogether. It required an assessment of the mark at a date subsequent to registration, whereas invalidity required assessment as at the filing date.

Hormel did not profit from this largesse for long, however. The Defendants argued that the revocation claim, if not blocked by cause of action estoppel, nevertheless amounted to an abuse of process. Applying the test set out by Lord Bingham in Johnson v Gore Wood & Co. [2002] 2 A.C. 1, the Deputy Judge found that the underlying public interest was the same for cause of action estoppel and abuse of process—namely, “that there should be finality in litigation and that a party should not be twice vexed in the same matter.” The Deputy Judge held that there would be an abuse of process if the bringing of the revocation claim should have been raised in the earlier proceedings if it was to be raised at all.

The Deputy Judge accepted the Defendants’ argument that this was the case. Although the cause of action differed from invalidity, nonetheless many of the factual and evidential issues involved in the revocation were the same, and some of Hormel’s evidence would have supported a claim for revocation under S. 46 (1) (c). The Deputy Judge found that the revocation action could and should have been brought in the first set of proceedings, such that Hormel was barred from continuing with the revocation claim, also.

 

Finis

For Hormel, the ending was bittersweet.

The Deputy Judge went on to consider the invalidity and revocation pleas in the event that he was found to have erred on appeal. In doing so, he found that SPAMBUSTER had indeed been devoid of any distinctive character and descriptive as of the filing date, and that, if that were not the case, it had in any event become the common name in the trade for services designed to combat “spam” emails by 2003. Its minimal and unimaginative stylisation was not enough to save the registration.

Had the claims not been blocked by cause of action estoppel and abuse of process, therefore, Hormel would have succeeded.

 

Comment

Hormel’s appeal is pending and the outcome is awaited with interest by the IP legal profession. Meanwhile, the Patent Office is treating the decision with caution, and it is expected that it will not, at least for now, apply the same principles to invalidity actions brought after unsuccessful oppositions. It is difficult to see how this could continue, however, if SPAMBUSTER is upheld on appeal, as the cause of action in opposition and invalidity, which both involve assessments as of the filing date, is arguably the same.

Hormel’s mistake was to treat the first instance proceedings with complacency. The matter was important enough to merit litigation before the High Court, but in the Patent Office proceedings Hormel was surprisingly narrow in its scope of attack and was content to allow the matter to be decided without attending a hearing. When the decision went against it, Hormel abstained from filing an appeal, which in the light of the eventual High Court decision would probably have gone in its favour had broader grounds been pleaded. Instead it tried to re-write the book by starting a new set of proceedings in a different forum.

Lessons can be learned from Hormel’s misfortune which will apply with equal force regardless of the outcome of its appeal. Proceedings before the Patent Office are not to be regarded as an inexpensive “dry run” preceding a more considered attack later if unsuccessful. Parties should consider and plead the full range of grounds reasonably open to them at first instance; even if SPAMBUSTER is overturned, a more comprehensive, though still properly focused, attack is more likely to win at first instance, thus saving the costs of an appeal. Moreover, the difficulty of winning at appellate level except where the tribunal has made a fundamental error of principle makes this approach a solid investment in the future for any trade mark litigant.

Additionally, parties should seek to be heard in any proceedings which are of commercial importance. Appellate bodies are increasingly noting that appellants who are represented (and lose) on appeal might have enjoyed a different outcome had they troubled to appear at first instance. There is no better opportunity to put one’s case, to clarify misunderstandings and to guide a hearing officer or judge to the correct outcome than an oral hearing. In commercially important matters, parties eschew this at their peril.

Lastly, an appeal, for now at least, seems a fundamentally safer route than new proceedings where there may be a defence based on cause of action estoppel or abuse of process. As challenging as it can be to persuade an appellate body to reverse a lower decision, it is still far more attractive to be appear before a tribunal willing to listen and able to act, than to one whose hands are tied by the principles of estoppel or abuse.