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Assigning a mark without the business: a question of deception?

The following note has been submitted by Mark Engelman for publication on this blog on a matter of substantial legal significance. Mark is a barrister in Hardwicke Building, which has recently become a member of MARQUES. Class 46 is willing to publish short notes (of up to 1,000 words) on matters of general interest, that have been submitted by its members.

Under the Trade Marks Act 1994, s.3(3)(b) it is an absolute ground for refusal of registration where a sign is

"... of such a nature as to deceive the public (for instance as to the nature, quality or geographical origin of the goods or service)”.
By s. 47(1) of the same Act, a ground for invalidity of registration exists if "“the trade mark was registered in breach of section 3 or any of the provisions referred to in that section (absolute grounds for refusal of registration)”. Both of these provisions are incorporated into Article 3(1)(g) of the Trade Mark Directive.

Such deceptive trade marks include those where, even where there has been no passing off, the ownership of a registered trade mark by two entities would result in a likelihood of deception: Berlei (UK) Ltd v Bali Brassiere Co Inc (No.1) [1969] 1 WLR 1306. In that decision the House of Lords concluded, in relation to an earlier Trade Marks Act, that it was not necessary for an applicant for revocation for deception to prove that there was an actual probability of deception leading to a passing off or an infringement action -- it was sufficient if the result of the registration of the mark was that a number of persons would be caused to wonder whether it might not be the case that the two products come from the same source.

Nothing has changed in this regard following harmonisation of European trade mark law. The Court of Justice of the European Communities (ECJ) has consistently identified the “essential function” of a trade mark as being the guarantee that goods or services bearing a mark originate from the same source, and Article 2 of the Directive identifies signs of which a trade mark may consist as being those that are capable of distinguishing the goods or services of one undertaking from those of other undertakings. The ECJ has interpreted that literally. See for example, Case C-273/00 Ralf Sieckmann v Deutsches Patent- und Markenamt:

“It is also clear from the Court's case law that the essential function of a trade mark is to guarantee the identity of the origin of the marked product or service to the consumer or end-user by enabling him, without any possibility of confusion, to distinguish that product or service from others which have another origin and that, for the trade mark to be able to fulfil its essential role in the system of undistorted competition which the EC Treaty seeks to establish, it must offer a guarantee that all the goods or services bearing it have been manufactured or supplied under the control of a single undertaking which is responsible for their quality" (citations omitted).
Section 24 of the Trade Marks Act 1994 permits the transfer of a registered trade mark by assignment, testamentary disposition or operation of law in the same way as other personal or moveable property. It is so transmissible either in connection with the goodwill of a business or independently. However, the position at common law remains unchanged by s. 2(2) of that Act, which states that nothing in that Act affects the law relating to passing off.

The prohibition of assigning the trade mark without the goodwill of a business was disparaged in Pinto v Badman (1891) 8 RPC 181, CA. In Scandecor Development AB v Scandecor Marketing AB [2002] FSR 7 the House of Lords sought assistance from the ECJ on the question of the legitimacy of bare licences (a reference which was ultimately withdrawn), the principle in Pinto v Badman remained unchanged. In AL BASSAM Trade Mark [1995] RPC 511, per Morritt LJ:

“…the right to the used mark as an indication of the origin of the goods could not be assigned separately from the goodwill of the business in which it had been used for that would have been to assign the right to commit a fraud on the public.”
While the question before the House of Lords in Scandecor remained unanswered, the Lords, in an earlier case (LeCouturier v Rey [1910] 1 AC), decided that the retention of a trade secret from a transfer of the business associated with a common law trade mark invalidated the transfer. Thus the principle in Pinto v Badman has been affirmed by the Lords. Further, the business might include not merely trade secrets but the manufactory, see for example Lacteosote Ltd v Alberman [1927] 2 Ch, in which the failure to transfer the manufacturing of the business invalidated the transfer.

In essence, it seems therefore that both the ECJ and English courts recognise the need that a trade mark, if it is to remain valid and subsisting, must indicate one source of origin. There cannot therefore be two standards.

Class 46 invites readers to comment on the propositions contained in this piece, particularly if their national case law suggests any variance from its analysis or its practical conclusions. Please post your comments below, or email them to Class 46 here.

Posted by: Blog Administrator @ 12.56
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MARQUES does not guarantee the accuracy of the information in this blog. The views are those of the individual contributors and do not necessarily reflect those of MARQUES. Seek professional advice before action on any information included here.

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