Scandecor Developments AB v Scandecor Marketing AB and Others

The House considered whether use of a trade mark by an exclusive bare licensee can render the registration liable to revocation under section 46(1)(d) of the Trade Marks Act 1994 because it is "liable to mislead the public" as to the origin of the goods. The court reviewed the historical development of trade mark law, the purpose of a trade mark as a guarantee of origin and quality, and the changes introduced by the 1994 Act and the 1988 Trade Marks Directive.

The Law Lords concluded that, in principle, an exclusive licence which leaves the proprietor without quality-control rights is not automatically objectionable under the 1994 Act; during the currency of an exclusive licence the licensee can be the single source denoted by the mark. However, whether revocation is appropriate depends on the current facts and on whether the public is presently liable to be misled. Because the questions raised involved interpretation of Directive provisions and issues not acte clair, the House adjourned the appeal and referred several questions to the European Court of Justice, including whether a mark is liable to mislead if the origin is a bare exclusive licensee, the meaning of "undertaking" for article 2 purposes, and whether revocation under article 12(2)(b) is mandatory.

Background and parties:

• Scandecor International and its successors developed a large poster and related products business using the trade name and registered marks "Scandecor". After a business split between two founders, local companies including Scandecor Ltd and Scandecor Marketing AB used the Scandecor name and, from 1984, sold goods of their own under licence from the registered proprietor.
• Following insolvency of Scandecor International, Scandecor Developments AB acquired the registered marks and objected to Scandecor Ltd continuing to trade under the Scandecor name. Scandecor Ltd counterclaimed for revocation on the basis that the marks had become non-distinctive or misleading, and relied alternatively on passing off and the "own name" defence in section 11(2)(a).

Procedural history:

• At first instance Lloyd J refused to revoke the registrations and held Scandecor Ltd could continue using its existing name. The Court of Appeal ordered revocation of the two trade marks. Scandecor Developments appealed to the House of Lords.

Issues framed:

• Whether use by an exclusive bare licensee can, in consequence of that use with the proprietor's consent, render a registered trade mark liable to mislead the public under section 46(1)(d) of the Trade Marks Act 1994 (implementing article 12(2)(b) of the Directive).
• What message a trade mark conveys today (in particular whether the "source" may be the proprietor or an exclusive licensee).
• Whether the concept of "undertaking" in article 2 of the Directive requires further elaboration when several companies have collaborative links.
• Whether the "own name" defence in section 11(2)(a) extends to companies and is available in the circumstances, and whether the revocation power in section 46(1) is mandatory or discretionary.

Reasoning and conclusions:

• The House undertook a sustained review of the common law and statutory development from early Trade Marks Acts through the 1938 Act to the 1994 Act and the Directive, emphasising that a trade mark's essential function is to indicate the origin of goods and to give quality assurance.
• The 1994 Act liberalises assignment and licensing compared with earlier law. The court preferred the view that a mark denotes the goods of one undertaking and that the person entitled to use the mark for the time being may be either proprietor or an exclusive licensee; an exclusive bare licence is not, of itself, inherently deceptive.
• Whether revocation for misleading use under section 46(1)(d) arises is a question of present fact: the court must ask if the mark is currently liable to mislead the relevant public. Special transitional issues arise where licensing occurred under the 1938 Act before the 1994 Act came into force.
• Because the points raised bear on the correct interpretation of Directive provisions (including article 12(2)(b), article 2 and article 6(1)(a)) and are not acte clair, the House referred questions to the European Court of Justice for authoritative guidance before finally disposing of the appeal.

The House did not decide the appeal on its merits. It held that an exclusive licence which leaves the proprietor without quality-control rights is not automatically objectionable; whether a mark is "liable to mislead the public" under section 46(1)(d) depends on present facts and on the proper interpretation of relevant Directive provisions. Because these questions were not acte clair and involved Community law, the House adjourned the appeal and referred specific questions to the European Court of Justice, including whether a bare exclusive licensee can be regarded as the origin for article 12(2)(b) purposes, the meaning of "undertaking" in article 2 and whether revocation is mandatory under article 12(2)(b).

First instance: Lloyd J (reported at [1998] FSR 500) refused to revoke the registrations and allowed Scandecor Ltd to continue using the Scandecor name. On appeal the Court of Appeal (Sir Stephen Brown P, Otton and Mummery LJJ) ordered the two trade marks revoked. The appellant appealed to the House of Lords which adjourned further disposal and made references for preliminary rulings to the European Court of Justice ([2001] UKHL 21).