Scandecor Developments AB v. Scandecor Marketing AV and Others and One Other Action

The use of a trade mark by a bare exclusive licensee does not, merely because the proprietor lacks quality control, make the mark liable to mislead. A mark denotes goods from one business source, which may be the proprietor or the exclusive licensee. It does not itself guarantee quality.

After a licence ends, possible deception depends on the current facts, including whether the former licensee continues the same business and remains associated with the mark. Revocation for misleading use must therefore be assessed by reference to the mark’s present message. Questions concerning these principles, the meaning of an undertaking, the own-name defence and whether revocation is mandatory required rulings from the Court of Justice.

The appellant owned two registered Scandecor trade marks and sued its former distributors and licensees for infringement. The respondents counterclaimed for revocation under section 46(1)(d) of the Trade Marks Act 1994, contending that licensed use without proprietary quality control had made the marks misleading. They also relied on passing off and the statutory defence for use of a person’s own name.

Lloyd J, whose decision was reported at [1998] FSR 500, refused revocation but permitted Scandecor Ltd to continue under its existing name. The Court of Appeal ordered revocation of both marks. The appeal raised questions concerning bare exclusive licences, the identity of an undertaking, the corporate own-name defence and whether revocation was mandatory under legislation implementing the Trade Marks Directive.

1. Disposition. The House unanimously adjourned the further conduct of the appeal and ordered a reference to the Court of Justice. Lord Nicholls delivered the leading speech. Lord Steyn and Lord Hobhouse agreed with his reasons and order. Lord Millett agreed that the identified questions were not acte clair and should be referred, while reserving whether the answers would determine the appeal. Lord Scott agreed and proposed an additional question concerning the nature of the revocation power.
2. Bare exclusive licences. Per Lord Nicholls, a trade mark indicates that goods come from one business source. It does not itself represent their quality. Under the Trade Marks Act 1994, that source may be the proprietor or an exclusive licensee. Customers understand that marked goods may be produced by the proprietor or by another person acting with consent. Consequently, the proprietor’s absence of contractual quality control does not of itself make the mark liable to mislead. Because this represented a significant change in English law on provisions derived from the Directive, the point required an authoritative European ruling.
3. Termination of a licence. During an exclusive licence, customer association of the mark with the licensee does not by itself destroy distinctiveness because the goods still have one source. After termination, deception depends principally on the subsequent facts. A mark may cease to distinguish one business source if the former licensee continues the same business and customers remain likely to associate the mark with it.
4. Revocation. Per Lord Nicholls, liability to mislead under section 46(1)(d) is essentially a current question of fact. The court must consider the message conveyed by the mark at the time of decision. Article 10(3), which deems consensual use to be use by the proprietor, concerns non-use and does not govern revocation for misleading use.
5. Further questions. Guidance was also required on the criteria for deciding whether linked traders constitute one undertaking and whether a company may invoke the own-name defence. Lord Nicholls considered that the defence should extend to companies but held that the point was not acte clair. At Lord Scott’s instance, the reference was also to ask whether revocation under article 12(2) is mandatory or discretionary when its criteria are satisfied.

1. House of Lords: The further conduct of the appeal was adjourned unanimously pending rulings from the Court of Justice.
2. Court of Appeal: Allowed the respondents’ appeal and ordered revocation of both registered trade marks.
3. High Court: Lloyd J, reported at [1998] FSR 500, declined to revoke either mark but held that Scandecor Ltd could continue carrying on business under its existing name.