European Union: Divergence Of Law Relating To Acquiescence

Almost three years after the end of the Brexit transitional period, the UK Courts have again chosen to diverge from retained EU case law (now known as 'assimilated law') in the landmark judgment of Industrial Cleaning Equipment (Southampton) Ltd v Intelligent Cleaning Equipment Holdings Co Ltd & Anor [2023], which was handed down in December 2023. It will be interesting to see whether, over time, this recent divergence will encourage other departures from existing IP principles founded on pre-Brexit EU Law, particularly in light of the Retained EU Law (Revocation and Reform) Act 2023, which came into force on 1 January 2024 with the intention of uncoupling assimilated law from previously applied EU principles.

The divergence on this occasion relates to the statutory defence of acquiescence and, more specifically, the question as to when the clock starts running for earlier rights' holders to take enforcement action against infringers. The reasons for divergence are thoroughly considered and supported in the judgment, demonstrating the degree of caution that is required when exercising the UK Court's ability to diverge from existing EU principles.

Statutory Acquiescence

Statutory acquiescence is a defence available in trade mark infringement and invalidation proceedings. Until now, and more notably since Brexit, the Courts had followed the retained EU case law that was handed down in Budvar, by virtue of section 6(7) of the European Union (Withdrawal) Act 2018.
As established in Budvar, owners of earlier trade marks had a period of five continuous years to challenge the use and/or registration of a later registered mark. The time period for these five years was held to commence at the point from when the owner of the earlier rights became aware of both the use and (either explicitly or deemed) registration of the later mark.

At paragraph 84 of the present judgment, Arnold LJ highlights the fact that Budvar is very much an isolated judgment and the principles that stem from it are as a result of a "bald conclusion" with limited explanation. Furthermore, and emphasising an arguable flaw in the current position, Arnold LJ agreed with the Defendants that the requirement for knowledge of registration of the later trade mark effectively encourages brand owners not to consult the trade mark register, in order avoid the clock ticking when calculating the time period for statutory acquiescence.

Finally, Arnold LJ considered the commercial aspect to the situation in that there is no requirement in the UK for brand owners to use the ® symbol to indicate a registered trade mark. Accordingly, he considered that it may be more difficult to prove knowledge of registration compared to knowledge of use, particularly when bearing in mind that communications between brand owners and professional advisors in the UK would likely be covered by legal professional privilege.

Divergence

In contrast to the position handed down in Budvar, Arnold LJ therefore instead held that the five year term should begin when the proprietor of the earlier trade mark becomes aware of the use of the later trade mark, and the later trade mark is registered, regardless of whether the proprietor of the earlier mark is aware of the registration of the later mark. This is a notable shift from the previous position, wherein proprietors had to be aware of both use and registration before the clock started.

Assessment

Aside from the weaknesses in Budvar set out above, a key factor in the decision to diverge from assimilated law is that the principle still remains unsettled at EU level. Indeed, Arnold LJ felt it was important to highlight that EU IPO practice and the case law of the General Court conflict with the Court of Justice (CJEU) in Budvar. Accordingly, it may well be that statutory acquiescence is reconsidered by the CJEU, and existing principles re-evaluated, later down the line.

The divergence in this instance did not help the Defendants as, although their appeal succeeded on the first ground (whether the proprietor of the earlier mark must be aware of the later trade mark in order for time to run), they were unsuccessful in relation to their second ground of appeal and were held to be liable for trade mark infringement. However, the consequences of the divergence on this aspect of trade mark law are even more far reaching. Undoubtedly, the new position encourages brand owners to be vigilant in watching the trade mark register for infringing marks, as well as ensuring that they take appropriate enforcement action sooner rather than later. Whether the clock has now started ticking in relation to the longevity of other aspects of assimilated law, only time will tell. With attorneys in both the UK and the EU, Marks & Clerk are ideally placed to advise in relation to this possible future divergence of the law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.