Best Buy Co Inc & Anor v Worldwide Sales Corporation Espana SL

A communication threatens trade mark infringement proceedings if a reasonable recipient, knowing the relevant circumstances and reading it as a whole, would understand that the rights holder intended to enforce its registered rights. The threat may be implied, conditional, future or made in response to an enquiry.

The exceptions in section 21(1) of the Trade Marks Act 1994 bear their natural meaning. A threat extending beyond an excepted act remains actionable. Advertising services is distinct from supplying services under a mark.

An invitation to negotiate does not itself attract without-prejudice protection. The communication must reasonably be understood as part of sufficiently advanced compromise negotiations. A direct recipient of a threat is a person aggrieved without proving loss.

The appellants planned to open European consumer-electronics shops under the Best Buy name. The respondent owned Spanish and Community trade marks incorporating those words. During the cooling-off period in Community trade mark proceedings, the respondent's lawyers sent a letter asserting its rights throughout Europe, requesting that use cease pending negotiations and requiring a response within 15 days.

The appellants claimed relief for groundless threats under section 21 of the Trade Marks Act 1994. Floyd J held in [2010] EWHC 1666 (Ch) that the letter threatened UK infringement proceedings concerning acts outside the statutory exceptions, but dismissed the claim because the letter was protected by the without-prejudice rule.

The appeal concerned whether there was an actionable UK threat, whether it fell outside the statutory exceptions, whether the settlement language made it privileged and whether the appellants were persons aggrieved.

1. Appeal allowed unanimously. The September letter contained a threat of trade mark infringement proceedings within section 21(1) of the Trade Marks Act 1994. A communication is construed according to what a reasonable recipient, knowing the relevant circumstances at the time, would understand the writer to intend when the communication is read as a whole. A threat need not expressly announce proceedings. It may be veiled, conditional, future or responsive to an enquiry. The assertions of registered rights, serious damage and entitlement to take legal action, reinforced by the 15-day ultimatum, conveyed an intention to enforce those rights.

2. The threat extended to proceedings in the United Kingdom. Although the letter did not imply that proceedings would necessarily be issued in every EU member state, its claims and demands were expressed on a European basis. Both sides knew that the proposed European business would launch in the United Kingdom. A Europe-wide threat could therefore encompass the United Kingdom even if proceedings might ultimately be brought in only one state.

3. The exceptions in section 21(1)(a)–(c) were to receive their natural meaning, informed by the distinct forms of use listed in section 10(4). A threat remains actionable where it covers an excepted act but also extends beyond it. The complaint about use in advertising and the media was outside the exception for supplying services under the mark. Advertising available services is not itself their supply. The exception for applying a mark was confined to the physical act of affixing or applying it.

4. The letter was not protected by the without-prejudice rule. Although that rule generally protects communications made in an attempt to compromise a dispute, the question was whether the recipient would reasonably understand that negotiations had advanced into the protected zone. Read as a whole, the letter principally asserted rights and threatened proceedings. Its concluding paragraphs merely invited negotiations, made no admission or concession and were not identified as privileged.

5. The Master of the Rolls added provisionally that, even if the letter had been without prejudice, the policy of that rule might have yielded to the statutory policy against groundless threats. Otherwise, actionable threats could be made with impunity merely by placing them in privileged communications.

6. The appellants were persons aggrieved. Direct recipients of a threat need not prove damage. In practice, the addressee acted for the group companies intending to trade in Europe. In any event, the evidence established a prima facie case that the threat caused operational uncertainty and affected publicity and deployment of the mark. Etherton and Patten LJJ agreed.

1. Court of Appeal (Civil Division): The appeal was allowed unanimously. The court reversed the dismissal of the threats claim and directed that an appropriate order be agreed.
2. High Court, Chancery Division: Floyd J held in [2010] EWHC 1666 (Ch) that the letter threatened UK infringement proceedings extending beyond the statutory exceptions. He nevertheless dismissed the claim because the letter was protected by the without-prejudice rule.