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Much Ado about Clothing: Discontinuance Dismissed

Date: 1 October 2018

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In Walton International Ltd v Verweij Fashion BV [2018] EWHC 1608 (Ch), the High Court set aside a notice of discontinuance which discontinued the claim so far as it related to the EU trade marks, finding that to allow it would give the claimants a “collateral advantage” because it would shield the EU trade marks from a determination of their validity in the present case while allowing the claimants to bring further proceedings based on any of the EU trade marks against the defendant in any other Member State.

 

In a trade mark war in which the parties were in dispute in other European jurisdictions, the High Court revoked all of the claimants’ trade marks for GIORDANO (except one, which Mr Justice Arnold found invalid on relative grounds), and held the claimants liable for passing off. A notice of discontinuance had been served on the eve of trial: “thus most of the costs had been incurred, and the parties were about to commence battle”. In those circumstances, the court would have required an undertaking that the claimants would not bring further infringement and/ or opposition (or cancellation) proceedings based on any of the EU trade marks against the defendant in any other Member State. However, the claimants refused to give that undertaking. In those circumstances, Arnold J considered that the service of the notice of discontinuance amounted to an abuse of process: its effect would be to shield the EU trade marks from a determination of their validity in the present case while allowing the claimants to use them in further infringement and/or opposition (or cancellation) proceedings in other Member States pending determinations by the EUIPO.

 

The claimants (Walton) are part of the Giordano group, a fast-fashion retailer based in Hong Kong with core markets outside Europe (in Asia, Australasia and the Middle East), although they made sales to the UK and EU via international websites. Walton’s brands include “Giordano”, “Giordano Junior”, “Giordano Ladies”, “BSX” and “Concepts One”. The defendant (Verweij) is based in the Netherlands and sells high-quality menswear in Europe under the labels “Baileys” and “Giordano”. Both businesses are well-established and have used the GIORDANO trade mark since the 1980s.

 

Although GIORDANO is an Italian family name, neither side is Italian. Giordano Ltd was founded in Hong Kong by Jimmy Lai in 1981, and he chose the name from a pizza restaurant in New York, thinking that it would be advantageous to have an Italian name. Verweij is a family-run business founded by Arnold Verweij in 1955, which grew from modest beginnings in the form of a single retail shop in Rotterdam selling quality clothing imported from Italy and developed a wholesale arm to the business. In 1976, Verweij acquired a textile factory in Ireland to produce its own knitwear; this knitwear range has always been sold under the brand name BAILEYS (named after the pub in Dublin where Arnold Verweij signed the contract to purchase the factory). By the late 1980s, Arnold Verweij wanted to expand the business offering by way of a new brand name and clothing range; on a trip to Italy in 1989, he saw the name GIORDANO on some wine (it continues to be a brand of Italian wine to this day), and liked the fact that it sounded Italian, as Italian clothing was perceived to be particularly luxurious and fashionable.

 

Walton was the registered proprietor of UK and EU trade marks for the plain word GIORDANO, as well as the following trade marks shown below for various goods.

 

 

 

giordano1_448

 

giordano2_396

giordano3_550

 

Walton registered UK and EU trade marks (UK864, UK444, UK398, UK757, EU150, EU651, EU335 and EU044) in the 1990s and 2000s. After this dispute began, Walton registered a further UKTM (UK297) in 2014. Walton alleged that Verweij had infringed its trade marks. Verweij registered a trade mark GIORDANO in the Benelux territory in 1989 and obtained international registration for other European countries. Verweij had used the GIORDANO sign both in plain type and in the form of various logos over the years (see below for an example), but neither side suggested that the different forms of use made any difference to the issues.

giordano4_208

Verweij denied infringement and counterclaimed for revocation and/ or a declaration of invalidity of those registrations, and for passing off.

 

The present case is one of around 60 trade mark disputes that have been or are being fought by the parties all round Europe, including before the EUIPO. The EUIPO cancellation proceedings in respect of EU651 and EU335 are currently stayed pending the outcome of these proceedings. On the evening before trial, Walton served a notice of discontinuance of the claim insofar as it related to the EU trade marks.

 

To discontinue or not to discontinue?

 

Arnold J began by considering whether the notice of partial discontinuance should be set aside. As Aikens J observed in Sheltam Rail Co (Pty) Ltd v Mirambo Holdings Ltd [2008] EWHC 829 (Comm), a useful question to ask was whether, if permission of the court had been required to serve a notice of discontinuance, that permission would have been granted unconditionally; and the court was also entitled to consider what the claimant was attempting to achieve by serving the notice. The professed objective of Walton was to simplify and streamline the issues for trial. Walton said that, during the course of preparing for trial, they had come to the (admittedly rather late) realisation that the EUTM infringement claims added little, if anything, to the UKTM infringement claims, and that the counterclaims would require the court to consider a number of additional issues, adding time and expense to the trial. However, Walton did not shrink from asserting that, as an inevitable consequence of their decision to discontinue the infringement claims, the court would be deprived of jurisdiction to determine Verweij’s counterclaims relating to the EUTMs, regardless of Verweij’s desire to continue with those counterclaims.

 

Turning to consider whether the court would permit Walton to discontinue unconditionally if permission were required, it seemed clear to Arnold J that the answer was no. The notice of discontinuance had been served on the eve of trial, in fact on the same day that skeleton arguments were due to be (and were) exchanged and so most of the costs had been incurred, and the parties were about to commence battle. In those circumstances, Arnold J considered that the court would have required Walton to undertake not to bring any further claims for infringement of any of the EUTMs against Verweij in any other Member State without the court’s permission. Walton were not prepared to offer such an undertaking. In the judge’s view, Walton’s position would require Verweij, “having got virtually to the door of this Court with its counterclaim, essentially to start all over again in the EUIPO”, which would (at a minimum) entail a considerable delay in the resolution of Verweij’s attacks on Walton’s EUTMs. Moreover, Verweij would be exposed to the risk that Walton - having seen all of Verweij’s criticisms of Walton’s evidence filed in these proceedings - would take the opportunity to file better evidence in the EUIPO (“Even if the evidence was in fact no better, there would no doubt be arguments as to whether it was or not”).

 

In those circumstances, Arnold J considered that the service of the notice of discontinuance amounted to an abuse of process, because its effect would be to “shield” Walton’s EUTMs from a determination of validity by the court and to allow Walton to invoke the EUTMs in further infringement and/or opposition (or cancellation) proceedings elsewhere pending EUIPO determinations. That would give Walton a “collateral advantage”. Even if it did not amount to an abuse of process, Arnold J considered that the court should exercise its discretion to set the notice of discontinuance aside because it could then determine all of the issues raised in these proceedings justly and at proportionate cost.

 

Subject-matter jurisdiction under European law

 

The next question was whether the decision to set the notice of discontinuance aside would be incompatible with European law since it would involve the court determining a counterclaim relating to EUTMs where the counterclaim would not provide a defence to the infringement claim even if it was wholly successful (see Adobe Systems Inc v Netcom Distributors [2012] EWHC 1087 (Ch)). Arnold J explained that the subject-matter jurisdiction of a court in European law could be changed by procedural steps occurring after the service of the originating process (see Anan Kasei Co Ltd v Molycorp Chemicals & Oxides (Europe) Ltd [2016] EWHC 1722 (Pat)). In effect, what he concluded applying domestic procedural law was that it was simply too late, having got this close to trial, for Walton to be permitted unilaterally to discontinue their claim and, therefore, the court remained seised of both the claim and the counterclaim. It made no difference that Walton made it clear that they did not intend to pursue their arguments in support of the claim in any event.

 

Revocation of Walton’s marks for non-use

 

On the evidence, Arnold J revoked all of the trade marks except UK297 with effect from five years after their respective registration dates. Walton accepted that, but for its infringement of their other marks, Verweij would have acquired goodwill in GIORDANO in relation to clothing by the filing date of UK297, and accordingly that their use of UK297 would have amounted to passing off. Walton contended that Verweij could not have acquired any goodwill in GIORDANO because it was infringing Walton’s other trade marks. However, it was not necessary for Arnold J to consider those arguments as he had concluded that all Walton’s other trade marks should be revoked for non-use, meaning that they could not be infringed. Accordingly, UK297 was held to be invalid on relative grounds. It followed that Verweij had not infringed any of Walton’s trade marks, and it also followed that Verweij’s counterclaim for passing off succeeded.

 

Comment

 

In light of the fact that Verweij had been using the GIORDANO name since 1980s, coupled with the fact that its target market is Europe, it’s remarkable that the company hadn’t registered the mark at EUIPO before this trade mark war between the Giordano Group and Verweij broke out. As Arnold J said, “the situation cries out for a commercial settlement, but in the absence of a settlement the courts and tribunals must decide each case”. Aside from settlement, the other way to disentangle from infringement proceedings in the UK is to serve a notice of discontinuance in relation to all (or part) of the claim. Discontinuance involves the claimant ending all or part of a claim against one or more defendants, with the general rule being that the claimant is then liable for the defendant’s costs of the claim. However, in this decision, Mr Justice Arnold held that such notices can be set aside in certain circumstances. The judgment illustrates the English court’s ability to exercise its discretion to allow the determination of all of the issues raised in legal proceedings, both justly and at proportional cost.

 

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