Holland And Barrett International Ltd & Anor v General Nutrition Investment Company

In a conventional exclusive trade mark licence, contractual exclusivity prevents the licensor from using the registered mark or a confusingly similar sign for relevant goods or services.

A non-use termination clause must be construed with the licence as a whole. Termination of one unused mark may permit the licensor to use it only if that use does not breach the exclusivity of another licence that remains in force. The clause does not confer a right to override continuing exclusivity merely because use would protect the registration from revocation.

This was an appeal from Mr Justice Warren’s judgment after a trial concerning an exclusive United Kingdom trade mark licence forming part of a business sale. The licence covered the GNC word mark and several auxiliary marks. The judge held that termination under the non-use clause entitled the licensor to use unused marks without breaching the licence.

The licensees appealed. They pursued Ground II, concerning the contractual effect of termination of unused marks, and did not pursue Ground I if Ground II succeeded. The central issue was whether use of an unused auxiliary mark would breach the continuing exclusivity of the GNC word mark.

1. Disposition. The court allowed the appeal on Ground II. It was unnecessary to consider Ground I.
2. Scope of exclusivity. The agreement formed part of a business sale, making exclusivity a fundamental feature of the transaction. The exclusion of the licensor was express. In a conventional exclusive trade mark licence, the contractual exclusivity is co-extensive with the scope of the right to prevent infringement by third parties. It therefore covers confusingly similar signs used for the relevant goods or services.
3. Contractual rather than infringement rights. An exclusive licensee’s rights against the licensor are contractual. Use by the proprietor is not trade mark infringement because it occurs with the proprietor’s consent under section 9(1) of the Trade Marks Act 1994 and article 9 of Council Regulation 2017/1001. The court also accepted that passing off was unavailable on these facts because goodwill accrued to the licensor. The authority of Northern & Shell Plc v Condé Nast & National Magazines Distributors Ltd [1995] RPC 117 supported that conclusion.
4. Construction of clause 5.6. The clause served more than one purpose. It permitted termination of an individual unused mark, enabling the licensor to protect it against non-use revocation. It also permitted termination of the whole licence if none of the marks had been used. Individual termination removed the exclusivity applying to that mark, but did not override the exclusivity of marks that remained licensed.
5. Resulting rule. After valid termination under clause 5.6, the licensor could use the unused mark only in a manner that did not breach the continuing licence. Here, use of an auxiliary mark such as GNC Herbal Plus would be confusingly similar to the GNC word mark and would breach its continuing exclusivity. The risk of revocation did not justify a contrary construction. The court applied the principle in Re Strand Music Hall Co Ltd (1865) 55 ER 853, 35 Beav 152, that contractual provisions should be given effect together where possible.

• Court of Appeal (Civil Division): Allowed the appeal on Ground II and left Ground I undecided: [2018] EWCA Civ 1586.
• High Court of Justice, Business and Property Courts, Intellectual Property: Mr Justice Warren held after trial that termination of the unused marks entitled the licensor to use them without contractual, infringement or passing-off liability: [2017] EWHC 746 (Ch).