Tuesday, 10 May 2022

Art 67 of the Withdrawal Agreement and Art 132 of the EUTMR - Crafts Group LLC v M/S Indeutsch International

Author Sadarama Licence CC BY-SA 4.0 Source Wikimedia Commons

Intellectual Property Enterprise Court (Mr Ian Karet) Crafts Group LLC v M/S Indeutsch International and another [2021] EWHC 3505 (IPEC) (23 Dec 2021)

This was an application by the defendants, M/S Indeutsch International and M/S KnitPro International ("KnitPro"), for the following relief:
  • an order to set aside service in India of proceedings brought by the claimant, Crafts Group LLC ("Crafts") for groundless threats under s.21 of the Trade Marks Act 1994, 
  • a declaration that the court has no jurisdiction over the KnitPro; or 
  • alternatively, for a stay of proceedings pending determination of the validity of one of the trade marks in dispute by the European Union Intellectual Property Office ("EUIPO").
The threats of which the Crafts complained were two takedown notices that had been sent by the defendants' solicitors.to Amazon.  They concerned two of Crafts knitting needles.   The claimant alleged that Amazon would not relist its knitting needles unless the notices were withdrawn or there was an intervention by the court.  Permission to serve the proceedings outside the jurisdiction had been granted by HH Judge Hacon.   The invalidity proceedings in the EUIPO had been. started by the claimant's predecessor, Crafts American Group.  

KnitPro complained that service of the threats action had been defective because the application notice and evidence in support of the application for permission to serve process overseas had not been served on them.  Secondly, KnotPro said that Crafts had failed to make full and frank disclosure at the hearing of its application which was made without notice and in KnitPro's absence.  Alternatively, KnitPro argued that the invalidity proceedings should be allowed to take their course.

The application came on before Mr Ian Karet sitting as a deputy judge of the High Court on 23 Nov 2021. The learned deputy delivered judgment on 23 Dec 2021 (see Crafts Group LLC v M/S Indeutsch International and another  [2021] EWHC 3505 (IPEC) (23 Dec 2021).

Mr Karet considered first the application to set arise service of the threats action proceedings.  He directed himself that CPR 6.36 enables the court to permit service out of the jurisdiction if any of the grounds set out in para 3.1 of PD 6B applies. CPR 6.37 requires an application to set out the relevant ground(s) for service out of the jurisdiction. The court will give permission only if it is satisfied that England and Wales is the proper place in which to bring the claim.. CPR 6.38 provides for service of any document other than a claim form.   Applications for permission to serve process outside the jurisdiction are made under CPR Part 23.  CPR23.10 entitles a person who was not served with a copy of the application notice for a without notice order to apply to have the order set aside or varied.

The deputy judge declined to set aside service for failure to serve the application notice and supporting evidence,  He referred to CPR 3.10 which provides:
"Where there has been an error of procedure such as a failure to comply with a rule or practice direction—
(a) the error does not invalidate any step taken in the proceedings unless the court so orders; and
(b) the court may make an order to remedy the error." 
He also considered the Court of Appeal's judgment in  Denton v TH White Ltd [2014] EWCA Civ 906 and the commentary on that case in the White Book at paras 3.9.3, 3.9.4 and 3.9.7, In his view, KnitPro had not been significantly disadvantaged by the belated provision of the application notice and evidence given to the court on the application for service out. The making of the service out order was not conditional upon the service of those documents. Failure to serve those documents does not render the service ineffective. The error could be remedied by an order under CPR 3.10.   He reached the same conclusion by considering Denton by analogy even though that case was not directly applicable.

Turning to the alleged failure to give full and frank disclosure, Mr Karet listed the alleged deficiencies as follows:
"i) The evidence did not fairly present to the court the fact that there was no correspondence between the parties in relation to alleged unjustified threats from July 2015, when the first takedown notice was submitted to Amazon UK, to November 2020.
ii) Crafts did not show the court that there had been a second takedown request submitted to Amazon in November 2015, as to which Crafts did and said nothing.
iii) On the basis of these facts, there would at least be open to KnitPro an argument that Crafts had impliedly consented to, or acquiesced to, its takedown requests. The court was not told that.
iv) Crafts appeared to tell the court in general terms the subject-matter of without prejudice discussions between the parties. But the information Crafts gave was wrong. KnitPro's position was that there was no such discussion about any alleged threats action at all.
v) Crafts' evidence in support wrongly suggested that the threats of infringement proceedings were ongoing. Crafts incorrectly elided present threats with ongoing damage from earlier threats.
vi) Crafts did not inform the court that the absence of infringement proceedings in the UK could not simply be taken to indicate that the Caspian and Sunstruck needles did not in fact infringe the Chevron and Symfonie Marks, as Crafts asserted.
vii) Crafts' account of the EU invalidity proceedings was incomplete and imprecise."

 The learned deputy declined to set aside service on the ground of material non-disclosure.  In his view, the correct test for full and frank disclosure on an application for service outside the jurisdiction is that set out by Mr Justice Toulson between paras [23] and [31] of his judgment in MRG (Japan) Limited v Engelhard Metals Japan Limited [2003] EWHC 3418 (Comm), [2004] 1 LLR 731, [2004] 1 Lloyd's Rep 731:

"[23] The starting point is that an applicant for an order on a without notice application must make full and frank disclosure of all material facts, that is, facts known to the applicant which might reasonably be taken into account by the judge in deciding whether to grant the application: R v Kensington Income Tax Commissioners ex parte Princess Edmund De Polignac [1917] 1 KB 486, 514 (Scrutton LJ); Siporex Trade SA v Comdel Commodities Limited [1986] 2 Lloyd's Rep 428, 437 (Bingham J); Brink's Mat Limited v Elcombe [1988] 1 WLR 1350, 1356 (Ralph Gibson LJ).
[24]. It is for the court to determine what is material according to its own judgment and not the assessment of the applicant: Brink's Mat Limited v Elcombe. This means that if the court considers there to have been material non-disclosure, it is not an answer that the applicant in good faith took a different view, although that may affect the court's exercise of its discretion in deciding what to do in the light of the non-disclosure. It does not mean that an applicant is under a duty to disclose facts which could not reasonably have a bearing on the decision which the judge has to make.
[25- Materiality therefore depends in every case on the nature of the application and the matters relevant to be known by the judge when hearing it. I was referred to a number of statements on the duty of disclosure in the context of applications for freezing injunctions. In such cases the court is being asked to make an order of an exceptional kind, prohibiting or restricting a defendant's use of its own assets before any adjudication has been made against it. Because of its draconian nature, it is a jurisdiction which requires great caution and a wide range of factors may have a bearing on the court's decision.
[26]. An application for permission to serve out of the jurisdiction is of a very different nature. The general principles about disclosure on without notice applications still apply, but the context is different. The focus of the inquiry is on whether the court should assume jurisdiction over a dispute. The court needs to be satisfied that there is a dispute properly to be heard (i.e. that there is a serious issue to be tried); that there is a good arguable case that the court has jurisdiction to hear it; and that England is clearly the appropriate forum. Beyond that, the court is not concerned with the merits of the case.
[27]. Authority supports this approach. In BP Exploration Co (Libya) Limited v Hunt [1976] 3 AER 879 (which concerned an application for leave to serve out of the jurisdiction) Kerr J said at 893:
'In my view, a failure to refer to arguments on the merits which the defendant may seek to raise in answer to the plaintiff's claim at the trial should not generally be characterised as a failure to make a full and fair disclosure, unless they are of such weight that their omission may mislead the court in exercising its jurisdiction under the rule and its discretion whether or not to grant leave.'

[29] If MRG was aware of matters which might reasonably have caused the judge to have any doubt whether he should grant permission to serve out of the jurisdiction, those would have been relevant matters and therefore ought to have been disclosed. This must be so in principle, and it is implicit in the authorities to which I have referred.
[30] However, Mr Gruder submitted that the duty of disclosure was wider. He submitted that if an applicant knew matters which would not on any reasonable view make any difference to whether there was a serious issue to be tried, or to any of the other questions which the judge had to consider, but which were relevant to the ultimate merits of the action, they must be disclosed. To the question "why?", Mr Gruder's answer was that: i) it is for the court and not for the applicant to decide what is material and ii) anything which is relevant to the merits of the claim is potentially relevant to the matters which the judge has to consider. I do not accept that submission. The first proposition is correct, but Mr Gruder seeks to apply it in such a way as to enlarge the test of materiality. It is for the court to determine what is material, but the test of materiality is that to which I have referred: whether the matter might reasonably be taken into account by the judge in deciding whether to grant the application. The second proposition goes too far. There may be many points which would be relevant to the ultimate merits of an action, but which could not on any reasonable view affect the judge in deciding the "merits threshold" question (or the ultimate question whether to grant the application).
[31]. Mr Gruder submitted that if the applicant is not required to disclose all matters which go to the merits of the action, but only those matters which go to the questions whether there is a serious issue to be tried, whether the court has jurisdiction to hear it and whether England is clearly the appropriate forum, the result will be to reduce the judge's role on such an application to a "rubber stamping" exercise. I would not agree with that description, although I do agree that the issues which the judge is required to consider are limited. This is because the judge is at this stage concerned with the question whether the court should assume jurisdiction, rather than with the question who is likely to win."

Mr Karet explained at para [41] of his judgment:

"While the evidence in support of service in this case may have mis-described matters, this was by mistake. The complaints KnitPro raise about the evidence do not go to the question of whether this court has jurisdiction over the alleged threats. Instead, they are matters that may be raised in defence to the threats claim. KnitPro are in effect adopting the unsuccessful approach which Toulson J dismissed in MRG of concentrating upon matters that may be relevant to the ultimate merits of the action rather than whether there was a serious issue to be tried. Accordingly I do not think there has been material non-disclosure in this context."

    For good measure, the deputy judge added at [42]:

    "If there had been material non-disclosure then I would also have dismissed the application on the basis that the judge would have given permission had the full facts been before him."

    The last issue before Mr Karet was whether to stay the threats action pending the invalidity application in the EUPO.  The defendants argued that art 67 of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community continued to apply art 132 of the European Union Trade Mark Regulation which provided:

    "An EU trade mark court hearing an action referred to in Article 124 other than an action for a declaration of non-infringement shall, unless there are special grounds for continuing the hearing, of its own motion after hearing the parties or at the request of one of the parties and after hearing the other parties, stay the proceedings where the validity of the EU trade mark is already in issue before another EU trade mark court on account of a counterclaim or where an application for revocation or for a declaration of invalidity has already been filed at the Office."

    The Chancellor had held in Easygroup Limited v Beauty Perfectionists Limited [2021] EWHC 3385 (Ch), [2022] Bus LR 146, [2022] WLR(D) 7 that art 67 of the withdrawal agreement has direct effect as part of domestic law without the need for any further legislative enactment.  Mr Karet also referred to the judgment of the Court of Appeal in Starbucks (HK) Ltd v. British Sky Broadcasting Group plc [2012] EWCA Civ 1201 that there is a strong presumption in favour of a stay.   The Court added that "special grounds" within the meaning of art 132 are hard to make out and that a general argument about getting to the end of proceedings is unlikely to be sufficient.

    Mr Karet declined to order a stay pending the outcome of the validity proceedings in the EUIPO.   Art 124 listed a number of causes of actions that were reserved for EU trade mark courts but threats actions were not one of them.  

    Anyone wishing to discuss this article can call me on 020 7404 5252 during office hours or send me a message through my contact form.

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    Art 67 of the Withdrawal Agreement and Art 132 of the EUTMR - Crafts Group LLC v M/S Indeutsch International

    Author Sadarama   Licence CC BY-SA 4.0   Source Wikimedia Commons Jane Lambert Intellectual Property Enterprise Court (Mr Ian Karet) Crafts ...