Special Effects Ltd v L'Oreal SA & Anor

An unsuccessful opposition to the registration of a trade mark does not create cause of action estoppel because opposition proceedings involve no cause of action. Nor does it create issue estoppel. The statutory availability of a later application for a declaration of invalidity means that an opposition decision is inherently not final.

Ordinarily, it is not an abuse of process for the unsuccessful opponent later to challenge validity, or rely on prior use in passing off proceedings. Opposition is a preliminary, economical procedure, whereas subsequent infringement proceedings may expose the opponent to financial liability and an injunction. Exceptionally, relitigation might be abusive where the opposition was conducted in a manner comparable to High Court litigation.

The claimant owned the registered trade mark SPECIAL EFFECTS for cosmetics and hair products. It alleged that the defendants' use of SPECIAL FX infringed that mark. The defendants challenged validity and claimed passing off, relying in part on use predating the claimant's application.

The first defendant had unsuccessfully opposed registration before the Trade Marks Registry on substantially similar grounds. The Chancellor held in [2006] EWHC 481 (Ch) that cause of action estoppel and issue estoppel prevented the defendants from raising those matters again. He also held that prior use could not be asserted for a defence under section 11(3) of the Trade Marks Act 1994 or for passing off.

The defendants appealed. The central issues were whether an unsuccessful trade mark opposition was sufficiently final to create an estoppel and whether the later challenge amounted to an abuse of process.

1. Appeal allowed. The court set aside the provisions of the Chancellor's order which precluded the defendants from challenging validity and asserting prior use.

2. Cause of action estoppel did not apply. Opposition proceedings raise issues about whether a mark should be registered, but neither the applicant nor the opponent has a cause of action at that stage. The cause of action in the later infringement, invalidity and passing-off proceedings was therefore not identical to anything determined during the opposition.

3. Issue estoppel also did not apply. Such an estoppel requires a final decision by a competent judicial tribunal. The coexistence of opposition under section 38 and post-registration invalidity proceedings under section 47 of the Trade Marks Act 1994 showed that an opposition decision was inherently not final. Despite a failed opposition, an unrelated person could raise the same grounds under section 47 and obtain a declaration that the registration had always been invalid. The invalidity provisions therefore disclosed a statutory intention to exclude finality for opposition decisions.

4. The later defence and counterclaim were not an abuse of process. Applying the broad, merits-based approach in Johnson v Gore Wood, the court considered the preliminary and economical character of Registry opposition proceedings. Their failure does not itself expose the opponent to damages or an injunction. An opponent may reasonably devote fewer resources to that process than to High Court infringement litigation. The defendants were using an opportunity expressly provided by the legislation.

5. The court left open the possibility that exceptional facts could make relitigation abusive. That might occur where the opposition had been conducted like High Court litigation, with counsel, disclosure and cross-examination, and the same issues were then pursued again.

6. It was unnecessary to decide privity. The Chancellor's proposed presumption that every company within a corporate group is the privy of every other group company was too broad. The more limited inquiry is whether, having regard to the dispute's subject matter, there is sufficient identification between the companies to make it just that one should be bound by a decision involving the other.

1. Court of Appeal (Civil Division): In [2007] EWCA Civ 1, the court allowed the defendants' appeal and set aside the provisions precluding their validity challenge, passing-off claim and reliance on prior use.
2. High Court, Chancery Division: In [2006] EWHC 481 (Ch), the Chancellor decided preliminary issues in the claimant's favour. He held that cause of action estoppel and issue estoppel arose from the unsuccessful opposition and bound both defendants.
3. Trade Marks Registry: The Hearing Officer rejected the first defendant's opposition and registered the SPECIAL EFFECTS mark. The first defendant did not appeal that decision.