Millen v Karen Millen Fashions Ltd & Anor

Contractual restrictive covenants must be construed from the language chosen by the parties, read in its commercial context. Later developments may be relevant when applying a covenant, although they do not ordinarily alter its meaning at the contract date. A covenant against use of intellectual property rights does not necessarily prohibit every act connected with those rights, and trade mark applications or registry challenges are not automatically use of another party’s rights. A further assurance clause may require reasonable acts and documents needed to give full effect to a transaction. Negative declarations require a useful purpose and a sufficiently clear and specific issue. Broad declarations cannot be refined by the court through a blue-pencil exercise.

The claimant had sold her shares in the companies carrying on the KAREN MILLEN business under a share purchase agreement. The agreement contained restrictive covenants, a further assurance clause and an English exclusive jurisdiction clause.

The claimant sought negative declarations concerning proposed businesses and trade mark activities in the USA and China. The defendants counterclaimed for enforcement of the covenants and sought declarations and other relief. The principal issues concerned the meaning and scope of clauses 5.1.4, 5.1.6, 5.1.7 and 10, the justiciability of the proposed negative declarations, and whether proceedings brought by the defendants in the United States breached clause 21.2.

1. Contractual interpretation. The court applied the principles in Rainy Sky S.A. v Kookmin Bank [2011] UKSC 50 and Arnold v Britton [2015] UKSC 36. The language chosen by the parties remained central. The factual matrix included the nature and anticipated expansion of the business at the date of the agreement, but later developments were relevant to applying, rather than interpreting, the covenants.
2. Clause 5.1.4. KMHL IPR was limited to rights existing at the date of the agreement, although mutable rights such as goodwill could develop over time. “Use” bore its ordinary meaning. Preparatory commercial acts could constitute an attempt to use a right, but applying for the claimant’s own trade marks, opposing or cancelling the defendants’ registrations, and asserting lack of consent did not amount to use of the defendants’ rights. A breach of clause 5.1.7 would also amount to misuse of goodwill under clause 5.1.4.
3. Clause 5.1.6. The covenant concerned conduct directly and specifically referable to concessions or similar arrangements. An indirect adverse effect on the business generally was insufficient. The defendants’ case under this clause therefore failed.
4. Clause 5.1.7. The clause imposed a freestanding contractual test, rather than importing foreign trade mark law or the English passing-off test. Similarity or competition had to be assessed by comparing the businesses as wholes. Confusing similarity had to be assessed in the surrounding circumstances, with the names themselves remaining central. The covenant did not create an additional zone or penumbra of protection beyond what was necessary to protect goodwill.
5. Further assurance. Clause 10 extended beyond execution of documents. It required reasonable acts and documents necessary to give full effect to the agreement. The claimant was therefore required to consent to the defendants’ applications and registrations for KAREN MILLEN marks in the USA and China.
6. Negative declarations. The court applied the principles collected in Skyscape Cloud Services Ltd v Sky Plc [2016] EWHC 1340 (IPEC). The declarations could serve a useful purpose, but their breadth and lack of detail prevented a clear and fair determination. The court declined to sever them by a blue-pencil exercise. In any event, many activities within their scope would breach clause 5.1.7.
7. Application and outcome. The defendants succeeded under clause 5.1.7 in relation to both KAREN MILLEN and KAREN solus marks in the USA and China. The claimant succeeded under clause 5.1.4, subject to the overlap with clause 5.1.7, and under clause 5.1.6. The defendants’ United States proceedings breached clause 21.2, which bound successors in title and identified third parties enforcing the agreement. Damages were to be assessed; the question and scope of any anti-suit injunction were reserved for further argument.

First-instance decision. The judgment records no earlier appellate decision in this litigation.