Case No: HC05 C00024
Neutral Citation Number: [2006] EWHC 350 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 2nd March 2006

Before :

MR RICHARD SHELDON QC
(SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)

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Between :

	ANTONI FIELDS	Claimant	
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	(1) KLAUS KOBEC LIMITED
(2) MICHAEL COHEN	Defendants	

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Thomas Moody-Stuart (instructed by Salans) for the Claimant
Denise McFarland (instructed by Eversheds) for the Second Defendant

Hearing dates : 18-20 January 2006
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JUDGMENT
Mr Richard Sheldon QC (sitting as a Deputy Judge of the High Court): 

Introduction

1.	These proceedings are concerned with wristwatches sold under and by reference to the mark KLAUS KOBEC. The Claimant, Antoni Fields (“Mr Fields”), claims that his United Kingdom and Community trade marks, the word mark KLAUS KOBEC (“the Mark”), have been infringed. This is denied by the Second Defendant, Michael Cohen (“Mr Cohen”), who also relies on statutory defences to any infringements. Mr Cohen separately counterclaims for a declaration that Mr Field’s registrations in respect of the Mark should be declared invalid.

2.	The First Defendant, Klaus Kobec Ltd (“KKL”), played no part at trial, a settlement having been reached between it (acting by its administrators) and Mr Fields. As part of that settlement, KKL assigned to Mr Fields any goodwill it might have in the Mark and KKL’s counterclaim for a declaration of invalidity was struck out.

3.	The claims against Mr Cohen are made on the basis that he was the managing director and “moving spirit” of KKL. At all relevant times, Mr Cohen was the sole director of KKL. Mr Cohen is said to have personally procured and controlled the acts of KKL which are complained of. Accordingly he is said to be jointly liable for those acts: see MCA v Charly [2001] EWCA Civ 1441; [2002] F.S.R 26. It was clear from the evidence before me that Mr. Cohen was the driving force behind KKL and that, subject to the exceptions to which I refer below, he procured and controlled the relevant acts of the company.

4.	It is a matter for regret that the remaining parties were unable to settle their differences before the matter came to trial. KKL when into administration and ceased to trade some seven weeks after the acts originally complained of by Mr Fields started to occur. Late in 2005, Mr Cohen made open offers to give undertakings not to use the Mark but other issues (it would seem principally relating to costs) remained unresolved. In the absence of settlement, it falls to me to decide the issues between the parties. In view of what appeared to be the limited issues and amounts remaining at stake, with some encouragement on my part, counsel for both remaining parties sensibly limited their cross examination which enabled the trial to be completed within three days rather than the longer period of up to six days which had at one time been estimated by those representing Mr Cohen.

5.	There were many disputed areas of fact although such areas which are material to the issues I have to decide are limited. I propose in this judgment firstly to set out the facts, including my findings as to those which are disputed where relevant, before addressing the rival arguments.

The witnesses

6.	The following witnesses gave evidence on behalf of Mr Fields:

i)	Mr Fields himself;
ii)	Mr Bernard O’Connor, who has been associated with Mr Fields and formerly with Mr Cohen and whose role I describe in more detail below;
iii)	Mr Paul Zimbler, joint managing director with Mr Fields of Klaus Kobec Direct Limited, a company jointly owned by Mr Fields and Mr Zimbler whose business is primarily concerned with operating hotel showcase cabinets through which KLAUS KOBEC (and some Zeitner) branded watches are sold;
iv)	Mrs Edna Hilditch, who was employed part time as a bookkeeper with KKL between 6 May 1997 and 18 February 2005. Her last working day was 27 January 2005 and she was then on sick leave until KKL went into administration.
v)	Mr David Demby, a chartered certified accountant with UHY Hacker Young, who has advised Mr Fields and his various businesses since before 1997.

7.	The following witnesses gave evidence on behalf of Mr Cohen:

i)	Mr Cohen himself;
ii)	Ms Georgina Ann Walker, who was employed by KKL from about January 2002 until 18 February 2005 as systems co-ordinator, office manager and logistics manager. She was, and continues to be, Mr Cohen’s personal assistant;
iii)	Mr Christopher Hughes, a certified chartered accountant and, at the relevant time, sole partner in the Stephen Hughes Partnership (“SHP”);
iv)	Mr David Levine, who was employed by KKL as its operations/ office manager between about 15 September 2003 and 23 December 2004.

8.	As regards the evidence given by Mr Fields and Mr Cohen, I consider that much of the evidence each of them gave was unsatisfactory and unreliable. Their evidence was suffused by vindictiveness towards each other. Each of them sought to denigrate, and downplay the role of, the other. Accusations were on occasion made against the other without any apparent foundation. I consider that I have to exercise considerable caution before relying on the evidence of Mr Fields and Mr Cohen regarding contentious matters unless it is corroborated by documents or by the evidence of another witness whom I found to be reliable.

9.	I consider that I have to exercise similar caution with regard to the evidence given by Mr O’Connor. Although his evidence was not characterised by the same vindictiveness displayed by Mr Fields and Mr Cohen towards each other, I take into account that in about the late summer of 2004 he seems to have fallen out with Mr Cohen and more recently has continued a business relationship with Mr Fields and his companies. Mr O’Connor was the subject of a disqualification order, barring him from acting as a director, for a period of seven years which came to an end some time in August 2004. I consider that this affected the reliability of the evidence he gave about his actions at about that time. There was a direct conflict between the evidence Mr O’Connor gave concerning the incorporation of three companies in August/ September 2004 and the evidence given by Mr Hughes. Where there is conflict, I prefer the evidence of Mr Hughes.

10.	I consider the evidence given by Mr Zimbler, Mrs Hilditch and Mr Demby to be reliable. In the event of conflict with Mr Cohen’s evidence, I prefer their evidence. In particular I reject Mr Cohen’s evidence to explain why documents were missing that he was told by Mrs Hilditch that Mr O’Connor had been destroying them.

11.	I found Ms Walker’s evidence to be truthful and generally reliable. She gave evidence in a straightforward and clear manner. The only aspect of her evidence whose reliability I doubted was her account of the genesis of the name KLAUS KOBEC. As she herself said: “The only reason I remember it so clearly is because it has been so oft-repeated that it is engrained in my memory now.” I consider that her account, whilst genuinely believed by her, suffers from reconstructed recollection in the light of subsequent discussions after the current dispute had arisen.

12.	I consider that the evidence given by Mr Hughes was generally reliable and, as I have mentioned, prefer it to that given by Mr O’Connor. I have no reason to doubt the reliability of the evidence given by Mr Levine.

The facts

13.	Mr Fields has been involved in selling jewellery direct to the public for some time. He started trading through his own company, Tetherfield Ltd (“Tetherfield”), in the early 1980’s. Other companies formed more recently owned by Mr Fields, or in which he has an interest, and which deal in wristwatches include Toneclaim Ltd (“Toneclaim”) and Direct Mail Services Ltd (“DMS”).

14.	In about the late 1980’s/ early 1990’s, Mr Fields created certain brands of wrist watch. Amongst these were the Krug Baumen brand. Mr Fields registered the word mark KRUG BAUMEN as a trade mark in 1993. In addition to direct sales (through agents), he started selling KRUG BAUMEN branded watches through hotel showcases.

15.	Mr Cohen did not become involved in the jewellery business until 1994. Before that time, and since 1988 when he had left school, he had mainly worked in the catering and hospitality industry. 

16.	In 1994 Mr O’Connor was selling jewellery, including watches supplied by Mr Fields. Mr O’Connor then teamed up with Mr Cohen, selling, amongst other things, KRUG BAUMEN watches supplied by Mr. Fields direct to the public (described by Mr Cohen as “hawking/ street pedalling”). According to Mr Cohen, he and Mr O’Connor did not at this stage have retail or warehouse premises of their own and they tended to operate their business from the back of Mr O’Connor’s mother’s car. They also occasionally made use of the facilities of the Hotel Cornelius in Chorlton which was run by Mr O’Connor’s family.

17.	The genesis of the name KLAUS KOBEC is hotly disputed. Mr Fields says that he devised the name and in this he is supported by Mr O’Connor. Mr Cohen says he was the one who came up with the name and relies in support on the evidence of Ms Walker. To support their respective cases, Mr Fields and Mr Cohen each gave elaborate descriptions of how they devised the name.

18.	I find that towards the end of 1995, Mr Cohen and Mr O’Connor came up with the idea that they should develop their business by selling a distinctive brand of watch. Having no experience of their own in developing brands, they approached Mr Fields, who did have such experience. It was also in Mr Fields’ interest to develop a brand in conjunction with Mr Cohen and O’Connor. At about this time Mr Fields was considering expanding into the mail order business (and in 1996, Mr Fields launched Direct Mail Services Ltd (“DMS”) as a mail order business to deal with sales of his branded watches.) Mr Fields was encountering problems with the hotel showcase business because the watches were being sold more cheaply on the streets. He was quite content to allow Mr Cohen and Mr O’Connor take over the hotel showcase business with a view to selling watches to be supplied by him. Mr Fields also saw the benefit of himself selling such watches directly through his mail order business. It seems common ground that the new brand of watch would be marketed as a “quality” watch.

19.	Against this background I do not think it matters who thought of the name KLAUS KOBEC. Even if Mr Cohen had come up with the name, he would have wanted Mr Fields to approve it since it seems to me clear that it was envisaged from the start by all parties that Mr Fields and his companies would initially at least be responsible for designing, marketing and arranging for the manufacture of the watches i.e. developing the brand name. These were areas in which Mr Cohen and Mr O’Connor had no experience. It was common ground that a stylised “K” which came to be adopted on company notepaper and which appeared on KLAUS KOBEC branded watches was devised by Mr Cohen.

20.	Klaus Kobec International Ltd (“KKIL”) was incorporated on 6 December 1995. The shares in KKIL appear to have never to have been transferred from the original subscriber. The sole director was Mr Cohen.

21.	Mr Cohen claims that KKIL was incorporated and commenced business without reference to Mr Fields. Mr Fields says that he was consulted by Mr O’Connor and Mr Cohen about them forming a limited company bearing the KLAUS KOBEC name to which he agreed. On this aspect I prefer the evidence of Mr Fields. It is supported by the passage I have underlined in the minutes referred to in the immediately following paragraph which suggests Mr Fields’ involvement in the setting up of KKIL’s business from a very early stage. It is also supported by the subsequent transfer of KKIL’s business to KKL to which I refer below: although Mr Fields had no formal position with KKIL, his actions appears to have instigated the transfer.

22.	On 9 February 1996, there was a meeting between Mr Fields, Mr O’Connor and Mr Cohen to discuss the development of the business of KKIL. Minutes of this meeting were taken which were typed up by Ms Walker. Their veracity was not challenged. These minutes (in which KKIL is referred to as “Klaus Kobec”) record the following:

MATTERS DISCUSSED

Klaus Kobec are to be held responsible for all showcases sited in England (including central London), Scotland and Wales…..

Klaus Kobec are to be the sole agents of Tetherfield Limited, utilising hotel showcases. They can identify; locate; dress; and manage the sites. Subject to Tetherfield’s discretion, they will be permitted to display and sell the whole range of Klaus Kobec watches (yet to be designed and produced).

The Klaus Kobec range of watches is to be designed by Tetherfield, with input from Mr O’Connor and Mr Cohen. The current school of thought is that it will be approximately three months from inception to delivery.

The modification to the Krug Baumen Adventurer watch for Klaus Kobec will be landed on 30 May 1996 and Klaus Kobec will be the sole distributor of this watch, and their personal range of watches worldwide……

Klaus Kobec will act in an advertising agents capacity for mail drops. Where these mail drops are successful, Klaus Kobec will receive £2,500 from Toneclaim, plus the reimbursement for the cost of the campaign.

Although Toneclaim are to have overall say on the mail drops, Klaus Kobec will organise the first mail drop, to be 20 March 1996. Toneclaim are to be kept informed of its progress. The bromides will be returned to Toneclaim by Wednesday 14 February 1996….

The arrangements for fifty per cent of set-up expenditure to be met by Tetherfield Limited is to continue until 13 May 1996 (ie for the six months period originally agreed)…..

POINTS FOR FURTHER DISCUSSION

At Tetherfield’s discretion, the new “Zichner” [sic – should be Zeitner] watch (due to be landed on 26.03.1996) could be sited on the hotel showcases at full recommended retail price, for a limited period…. This would certainly enhance the appearance of the showcases until the full range of Klaus Kobec watches were available.

Tetherfield could be asked to advertise the Klaus Kobec range of watches in national magazines. It would also be extremely useful if a one-off mail order could be undertaken through Toneclaim. This would certainly assist at the showcases point of sale….

The modification to the Adventurer for Klaus Kobec to be given the working title “Challenger”.

(My emphasis)

23.	A number of points emerge from these minutes. The passages I have emphasised in italics strongly suggest that sales of Klaus Kobec watches (and Zeitner watches – Mr Fields’ undisputed brand) could only be made by KKIL with the permission of Mr Fields or Tetherfield, Mr Fields’ company. Tetherfield was to be principally responsible for the design of the Klaus Kobec watches. Another of Mr Field’s companies, Toneclaim, was to have overall say on mail drops and reimburse their cost. It was envisaged that Toneclaim and Tetherfield might otherwise advertise/ market the Klaus Kobec range.

24.	It is common ground that the first watches which were displayed in the hotel showcases by KKIL were the KRUG BAUMEN brand. Mr Cohen says that Klaus Kobec branded watches started to be sold by KKIL in June 1996. He relies on a photograph of a hotel showcase which he says he took at about that time, although his evidence of when he took the photograph was not clear. Mr Fields says the photograph was taken later because it shows a particular design of Zeitner watch on display which was not produced until 1997 or 1998. I prefer the evidence of Mr Fields.

25.	Mr Fields says that there were no significant sales of KLAUS KOBEC branded watches until the second half of 1997 or even 1998. At one time Mr Fields suggested that no such watches were sold until this time but I consider that this evidence is incorrect. It would appear that an advertisement was published in about August 1996 by which Toneclaim solicited orders for Klaus Kobec Challengers (the first KLAUS KOBEC branded watch which was a modified design of the KRUG BAUMEN Adventurer). This would suggest that these watches were available by that time. However, I find that any sales of KLAUS KOBEC watches by KKIL were by then insignificant. I refer to the evidence concerning KKIL and the transfer of its business to KKL which I consider below. Further, at this time, KKIL was still developing its network of hotel showcases.

26.	The records maintained on the Trade Marks register by the Patent Office show that an application to register the word mark KLAUS KOBEC was filed on 29 August 1996. The proprietor was shown as Mr Fields and “Klaus Kobec Limited”. The mark was in respect of Class 14 goods and services which included watches. (The details appearing on the file wrapper show that on 11 April 2002 there was an entry on the register recording an assignment from Mr Fields and Klaus Kobec Limited to Mr Fields with the effective assignment date shown as 5 March 2002. I deal with these matters further later in this judgment.)

27.	Moving back to the chronology of events, the next event of significance was the incorporation of KKL on 28 January 1997. Mr Demby’s evidence, which I accept, was that in early 1997 he was instructed by Mr Fields to review the financial position of KKIL (even though Mr Fields was not a director or shareholder of KKIL). Mr Demby discovered that there were virtually no records of KKIL’s takings or stock. He advised Mr Fields that there were too many uncertainties surrounding the business to allow it to continue in that way and recommended that the interested parties should operate their business arrangements through a new company – in the event KKL.

28.	Following its incorporation, the issued share capital of KKL became £100 comprising 100 shares of £1 each, held as to 85 shares by Mr Fields and 15 shares by Mr Cohen. Of the 85 shares held by Mr Fields 75 were held by him on trust for Mr O’Connor. Mr Cohen became the sole director and Mr Fields the company secretary of KKL.

29.	Mr Demby’s evidence was that with effect from 1 May 1997 all the assets and liabilities of KKIL were transferred to KKL. There was no documentation nor were formal arrangements made to effect this transfer. Mr Demby prepared a table showing the opening balances of KKL taken over from KKIL. This table showed the assets taken over as totalling £28,000 comprising fixtures, fittings and equipment (£8,000), stock of coins at valuation (£15,000) and stock of sunglasses, cufflinks and watches (£5,000). No value was attributed to goodwill and, according to Mr Demby, he was unable to detect from his investigations that KKIL had any goodwill. His understanding was that KKIL dealt with watches bearing the KRUG BAUMEN mark and not the KLAUS KOBEC mark. According to Mr Cohen, KKIL’s turnover in its first year was only some £150,000 - £200,000.

30.	I find that all the assets and liabilities of KKIL were taken over by KKL, including those to which no value was attributed. It follows that I find that such goodwill as KKIL owned, if any, was transferred to KKL. However, I also find that such goodwill as KKIL possessed was of no appreciable value. In particular, I find that, at this stage, sales of KLAUS KOBEC branded watches had still not become significant, with sales of KRUG BAUMEN watches and other goods comprising the majority of KKIL’s turnover up to that date (May 1997). Thereafter, turnover rose (according to Mr Cohen to £400,000 to £500,000 in KKL’s first year of trading) which I find included the first significant sales of KLAUS KOBEC watches (as well as other watches bearing Mr Fields’ or his companies’ brand names, such as Aston Gerard).

31.	KKIL was dissolved on 25 August 1998.

32.	 On 25 May 1999, Mr Cohen’s shareholding in KKL increased to 40 shares and Mr Fields’ shareholding was reduced to 60 of which he held 50 on trust for Mr O’Connor.

33.	On 16 May 2000, Mr Fields applied for registration of the word mark KLAUS KOBEC as a Community trade mark (also in respect of Class 14 goods and services which included watches) and registration was effected on 14 August 2001. Mr Fields was the sole applicant and is shown on the register as sole proprietor.

34.	It is unnecessary for me to dwell in detail on the course of KKL’s business after 1 May 1997. It was common ground that KKL sold KLAUS KOBEC branded watches which were supplied by Mr Fields’ companies and which in turn had been manufactured by a company known as Gold Super in Hong Kong. Mr Fields had developed a special relationship with Gold Super and its representative Alfred Lee. KKL also expanded into selling sunglasses and ties bearing the KLAUS KOBEC brand in the hotel showcases. Mr Fields was aware of this and raised no objection. 

35.	From about 1999 onwards, Mr Cohen was instrumental in causing KKL to develop the sale of KLAUS KOBEC branded watches to football clubs. These were described as “limited edition” watches and bore the name, logo and crest or badge of the relevant football club as well as the KLAUS KOBEC brand name. This development caused considerable interest amongst the football clubs and by the end of 2002 KKL was supplying most major clubs with “limited edition” watches. According to Mr Cohen, the watches would sell for about £79 and the football clubs received £28 per watch at no cost to them. Until 2002 all these watches were supplied to KKL by one of Mr Fields’ companies which had in turn been supplied by Gold Super in Hong Kong.

36.	In 2002, relations between Mr Fields and Mr Cohen became strained. There was initially a dispute about the use of the mark KOBEC SPORT which came to be registered in Mr Fields’ name. Later in the year, there appears to have been a problem over the supply of watches. I have been shown an exchange of letters dated 16 December 2002. 

37.	Mr Fields wrote a letter dated 16 December 2002 on DMS headed notepaper to Mr Cohen and Mr O’Connor at KKL which included the following:

As the trademark owner of Klaus Kobec, Aston Gerard and all other registered names or devices either owned by myself personally or by companies that I have an interest in, it has come to my attention that you are about to purchase products supplied by a manufacturer that is not sanctioned or approved by myself. This is NOT acceptable. Without the goodwill and support that you have been shown by my companies and myself personally over many years you would not have been in the privileged position that you, until now, have enjoyed……..

I do not want a third party such as Gold Power producing any watch products for any markets that I have allowed you to enter……

Please stop passing yourself off as the designer and founder of Klaus Kobec to potential customers and media groups…”

38.	The response, also dated 16 December 2002, was drafted by Mr Cohen and signed by Mr Cohen and Mr O’Connor. It includes the following:

…Alfred [from Gold Super] has promised the samples for January and I look forward to receiving them, however meanwhile I have a customer who wants 5000 watches that DMS, Tetherfiled [sic] cannot supply, so I ask a simple question to Gold Power last week which was “could you supply 2500 gents and 2500 ladies in January 2003?” He is due to be getting back to me today or tomorrow. We have spoken before about this and (maybe Bernard and I have misunderstood what you meant) you mentioned as long as you were cut in for 10% then go-ahead…..

We have never thought we have been a threat to your trading position as we have always seen us working as a team, I do not think there is anyone more loyal than myself and Bernard to the brand Klaus Kobec as it is our initial that make up this name, that I thought of nearly 10 years ago…..

We have never asked any factory to manufacture anything under your trade marks…

Making a comment of me trying to pass myself off as the designer and founder of Klaus Kobec, this is true to a certain extent as the watches I talk about that I have designed are the NEW football watches, the Kobec sport watches and boxes. As far as being the founder, I am managing Director of Klaus Kobec Ltd, in the event people think otherwise, then this is there [sic] problem….

Looking at the bottom line and taking our friendship out of it, you are a supplier. We are a customer that has no control over orders, designs or returns….

39.	In my judgment, the significance of the response from Mr Cohen is that whilst on the one hand it lends support to his evidence that he came up with the name Klaus Kobec, on the other:

•	Mr Cohen seems to accept that he cannot arrange for the manufacture of KLAUS KOBEC branded watches without Mr Fields’ permission;
•	Mr Cohen refers to a 10% “cut” for Mr Fields if Mr Cohen were to obtain supplies directly from the manufacturer;
•	Mr Cohen does not seriously dispute Mr Fields assertion that Mr Fields was the “founder and designer” (at least originally) of Klaus Kobec.

40.	It appears that Mr Fields and Mr Cohen resolved their differences – at least for the time being. At around this time, KKL obtained supplies of KLAUS KOBEC branded watches directly from Gold Super (not Gold Power which is a separate manufacturer). Mr Fields knew of this arrangement and he or one of his companies received a payment from KKL representing 10% of the price of goods so supplied. According to Mr Cohen, the 10% “cut” was paid to Mr Fields or his companies on all watches supplied to KKL from Gold Super even if they were not KLAUS KOBEC branded watches although it would seem that some of these bore other brand names owned by Mr Fields – including Aston Gerard.

41.	The next event of significance occurred in early 2004. For reasons upon which I need not dwell, the hotel showcase business of KKL was not going well and steps were taken for this to be transferred to Klaus Kobec Direct Limited, one of Mr Fields’ companies.

42.	Meanwhile, the football watches side of KKL’s business continued to develop. In about early 2004 KKL registered certain domain names including “klauskobecfootball.com” to develop the football side of the business. (KKL also registered the domain names klauskobec.com and klauskobecrugby.com). In early May 2004 KKL held a conference which served to promote the name “klauskobecfootball”. The full range of KKL’s products were on display. These included limited edition football watches which bore the KLAUS KOBEC brand name as well as that of the football club. There was also a lower price range of football watches called the “FC” brand which only had the brand of the football club and did not bear the KLAUS KOBEC brand name. Both these types of watch were manufactured by Gold Super on which Mr Fields or his companies received the 10% “cut”. There were other watches which formed part of KKL’s range which did not bear the KLAUS KOBEC brand name, for example childrens’ watches with 3D rubber straps and a budget range. Certain ranges of watch which did not bear the KLAUS KOBEC brand name were manufactured by others than Gold Super (for example the budget range were manufactured by a company called Prime Time and the children’s watches with 3D rubber straps were manufactured by Jacques Farrell). I was told that later in the year KKL developed a range of signature watches which bore the signature of a particular player as well as the name and crest/ badge of the football club and KlAUS KOBEC brand name.

43.	After the conference, according to Mr Cohen (para 77 of his first witness statement):

The clubs ordered out of KKL’s new range and they were extremely excited to be receiving them in time for the new season starting. One of the ranges was ordered from our existing supplier that we had dealt with for nearly 9 years via [Mr Fields’] companies (Alfred Lee/Gold Super).

Ms Walker says that the orders were placed by KKL with “the factory” between June and early August 2004. She explained that as far as she was aware the football watches were ordered from Gold Super and the other ranges (in particular the children’s watches) sourced from elsewhere.

44.	Relations between Mr Fields and Mr Cohen again became strained. KKL owed outstanding sums to Gold Super which threatened the good relationship that Mr Fields had built up with Alfred Lee at Gold Super. Mr Cohen was anxious to ensure that the watches which had been ordered arrived in good time to deal with KKL’s pre Christmas orders. On 12 August 2004 Mr Fields resigned as company secretary of KKL. I have seen an email sent by Mr Fields to Mr Cohen dated 15 September 2004 in which Mr Fields emphasised that any watches with his trademarks could not be produced by any manufacturer other than Gold Super.

45.	In the meantime the klauskobecfootball brand was being promoted by KKL. I was shown an example of an advertisement appearing in August or September 2004 for a Liverpool FC limited edition watch through the www.klauskobecfootball.com website and referring prominently to the Klaus Kobec name.

46.	As a result of the deteriorating relationship with Mr Fields and the increasing problems with Gold Super, Mr Cohen decided in about September 2004 to drop the Klaus Kobec brand name and market the watches under the name “thefootballwatchshop.com”, a domain name owned by KKL. A limited company, Footballwatchshop.com Limited, was incorporated on Mr Cohen’s instructions by SHP on 24 September 2004 but did not trade. I was told that thought was given to transferring KKL’s business to the new company but that this was not possible without jeopardising the licence agreements KKL had entered into with the football clubs.

47.	In late September/ early October, Mr Cohen and Ms Walker made arrangements for the KLAUS KOBEC name to be removed from watches and the packaging. The stylised “K” was to be removed from the face of the watches and either left blank or replaced by an “aeroplane hand” (resembling an inverted “V”). On the packaging the KLAUS KOBEC name was to be changed to “the footballwatchshop.com”.  Manufacturers were contacted (including Gold Super) to effect the required changes. KKL employees were instructed to ensure that nothing was despatched which contained any reference to the KLAUS KOBEC brand. Publicity material was changed to show references to “the footballwatchshop.com” rather than KLAUS KOBEC in the main body of the advertising (although Klaus Kobec was referred to at the foot of advertisements as part of the address for correspondence). I have also seen a print out of the web page at the klauskobecfootball.com website dated 19 January 2005 which appears to take the viewer to the thefootballwatchshop.com website (which again only refers to Klaus Kobec as part of the address for correspondence). 

48.	In early October 2004, orders were placed by KKL (trading as the footballwatchshop.com) with Gold Power for football watches. The only reference to the name KLAUS KOBEC that remained on the watches manufactured by Gold Power after this date was in the phrase “Designed and distributed by Klaus Kobec Ltd” which was imprinted on the case back or backplate of certain limited edition football watches. Ms Walker’s unchallenged evidence was that this requirement was stipulated by the clubs at the product approval stage, as they had required the name of the importer to be clearly shown and this had to the company name of KKL. Not all the clubs had stipulated this requirement: in the case of Manchester United limited edition watches there was no reference to Klaus Kobec Ltd on the case back as this was not required.

49.	Mr Moody-Stuart mounted a strong challenge to the evidence of Mr Cohen and Ms Walker that the first orders placed by KKL with Gold Power were in October 2004. Mr Cohen was cross examined on paragraph 77 of his witness statement (quoted above) which, it was said, showed that orders had been placed by KKL with Gold Power prior to that date for watches bearing the KLAUS KOBEC mark without Mr Fields’ permission. Although Mr Cohen’s answers were not wholly consistent, he was adamant that no orders were placed with Gold Power prior to October 2004 for watches bearing the KLAUS KOBEC mark. I accept this evidence. I do so in the light of Ms Walker’s clear evidence (which I accept) that the first orders were placed with Gold Power in October 2004 for football watches in the circumstances I have described above. Although Aston Gerard branded watches had been previously supplied to KKL by Gold Power, I find that Gold Power did not supply KKL with any KLAUS KOBEC branded watches. In accepting the evidence of Ms Walker and Mr Cohen to this effect, I consider it of some significance that, following settlement with the administrators of KKL, Mr Fields has had access to KKL’s documents. No documents have been produced to me which indicate that orders were placed by KKL with Gold Power for KLAUS KOBEC branded watches before October 2004 (or thereafter). On the other hand, I have been provided with confirmations of orders sent by Gold Power dated 15 October 2004 which are addressed to “thefootballwatchshop.com” at KKL’s premises. There is also an email from Ms Walker to Gold Power dated 12 October 2004 which makes it clear that the packaging for the watches ordered refers to “thefootballwatchshop.com”.

50.	It follows that I find that from about October 2004, KKL did not sell watches bearing the KLAUS KOBEC mark although limited use continued to be made of the company name in the manner I have described. I also find that KKL did not place any order for KLAUS KOBEC branded watches (other than in this limited sense) with a manufacturer other than Gold Super.

51.	By a letter dated 6 December 2004 from Salans, Mr Fields’ solicitors, to KKL Mr Fields terminated KKL’s licence to use the KLAUS KOBEC trade marks with effect from 25 December 2004 and asserted that after that date KKL would cease to be entitled to sell goods bearing the KLAUS KOBEC trademark and carry on business under the current company name.

52.	KKL responded by a letter, signed by Mr Cohen, dated 22 December 2004 in which it was asserted that no licence was needed and that: “we are entitled to trade under the mark KLAUS KOBEC whether directly or through other companies”. 

53.	By letter dated 5 January 2004 Salans asked KKL to give certain specified undertakings. KKL refused by letter dated 7 January 2004.

54.	These proceedings were commenced by a claim form dated 10 January 2004 with Particulars of Claim attached. Mr Fields applied for an injunction and on 27 January 2004 an order was made by consent which included injunctions until trial and directions for trial. The injunctions against KKL and Mr Cohen were limited to restraining them from setting up companies using the Klaus Kobec name, from transferring or assigning any of their purported rights in the KLAUS KOBEC mark, and from transferring or assigning specified domain names containing the name Klaus Kobec.

55.	On 9 February 2004 a defence and counterclaim was served on behalf of both defendants. It included the following pleas: 

“…the First Defendant …. [has]: (a) From December 1995 and at all material times carried on business and traded under and/or by reference to the name KLAUS KOBEC and/or (b) From May 1996 and at all material times sold and supplied watches under and/or by reference to the mark KLAUS KOBEC.” (Paragraph 5)

“The First Defendant is entitled to trade under and by reference to the mark KLAUS KOBEC and intends to lawfully continue to do so.” (paragraph 15)

After service of Ms Walker’s witness statement on 19 December 2005, these pleas were amended to make it clear that it was part of Mr Cohen’s case that no KLAUS KOBEC branded watches were sold after 25 December 2004.

56.	KKL in the meantime continued to trade as the footballwatchshop.com in the manner I have described above until it was placed into administration on 18 February 2005.

57.	There are a few loose strands on the facts with which I should now deal. The first concerns Mr Fields’ complaint that without his consent Mr Cohen procured the incorporation by SHP of three limited companies bearing the KLAUS KOBEC name as follows:

Klaus Kobec (UK) Ltd incorporated on 12 August 2004

Klaus Kobec (Europe) Ltd incorporated on 12 August 2004

Klaus Kobec Football.com Ltd incorporated on 28 September 2004

58.	Mr Hughes of SHP gave evidence that these companies were incorporated on the instructions of Mr O’Connor whom he believed to be a director of KKL. This is denied by Mr O’Connor. I accept the evidence of Mr Hughes and reject that of Mr O’Connor. There is something of an oddity about the date of incorporation of Klaus Kobec Football.com Ltd on 28 September 2004 (4 days after Mr Hughes incorporated Thefootballwatchshop.com Ltd at Mr Cohen’s request) and much later than the other two companies referred to in the previous paragraph. Mr Hughes could only speculate that there may have been a problem with Companies House. Nevertheless the three companies in question do appear to have been treated together as a package for invoicing purposes (as compared with the two companies incorporated at the behest of Mr Cohen). I find that it was Mr O’Connor and not Mr Cohen who procured the incorporation of these three companies. In reaching this conclusion I bear in mind all the contentions on the evidence made by Mr Moody-Stuart on behalf of Mr Fields but do not consider it necessary to deal with them in detail since the issue principally turns on the credibility of the witnesses. In any event, Mr Fields’ complaint is somewhat technical in that there is no evidence that any of the three companies traded and their names were changed in November 2004 when the matter was brought to Mr Hughes attention. It follows that no damage has been suffered by Mr Fields and the position was remedied before these proceedings were issued.

59.	The second loose end concerns the initial UK filing in August 1996 of the KLAUS KOBEC mark in the joint names of Mr Fields and Klaus Kobec Limited and the assignment in March 2002 to which I have referred above. At the time of the initial filing Klaus Kobec Ltd was not in existence (it was only incorporated on 28 January 1997) nor was it suggested either that its existence was contemplated at the time of filing or that Mr Fields or any other interested party intended that KKIL should become joint proprietor. Mr Fields gave evidence to the effect that he had instructed his then registration agents to file the application in his sole name and that the joint filing was a mistake on their part (he changed agents soon after). I accept his evidence in this regard. Miss McFarland did not suggest that the joint filing affected Mr Fields’ rights as proprietor of the mark (although she said that it – and the later assignment - was relevant to the question of bad faith which I consider below). I think it follows that, whilst Mr Fields’ rights remain unaffected, the registration in the name of Klaus Kobec Ltd was in effect a nullity. It also follows that in March 2002 KKL had nothing to assign to Mr Fields so that the assignment is equally of no legal effect. Mr Fields did not produce a copy of the assignment. I should nevertheless record that it would appear that Mr Fields purported to sign the assignment on behalf of KKL when he had no authority to do so. I reject his evidence that he told Mr Cohen and Mr O’Connor about the assignment at the time. 

The rival contentions

Infringement

60.	 The infringing acts complained of by Mr Fields are: 

i)	The use prior to 25 December 2004 of the mark KLAUS KOBEC (“the Mark”) in relation to watches not manufactured by Gold Super or sourced direct from the Claimant’s companies 
ii)	The actual use of the Mark in relation to watches after 25 December 2004 (whomever they were manufactured by).
iii)	The threatened use of the Mark in relation to watches after 25 December 2004. 
iv)	The use of the Mark in the names of the three companies incorporated in August and September 2004.

61.	In each case, the “use” complained of includes use of the Mark in advertising materials for watches, on the bodies of watches themselves, in Internet domain names incorporating the Mark which were used in the promotion of watches and as part of the company name of KKL.

62.	Mr Cohen denies that there were in fact any acts of infringement. (In the alternative, if there were such acts, he relies on a number of statutory defences which I consider below. I deal separately with his counterclaim for a declaration that Mr Fields’ registrations in respect of the mark KLAUS KOBEC should be declared invalid.) 

Identical mark

63.	Before making my determinations on the alleged acts of infringement in the light of my findings of fact, I need to deal with a point which was only raised by Miss McFarland in her closing submissions. I should add that, although I regard it as unfortunate that this point was not clearly raised in Mr Cohen’s Defence, skeleton argument or opening speech, it does seem to me that it was open to Mr Cohen to take the point in the light of the statements of case as originally pleaded and as amended. However, I should also make clear that I reject Miss McFarland’s submission that it is only a point which arose as a result of amendments to the statements of case at trial.

64.	The point is this. In paragraph 12 of the Particulars of Claim (as originally pleaded and as amended) reference is made to various alleged acts which it is said constitute the use or threatened use by the Defendants of  a mark “identical” to Mr Field’s registered trade mark. In paragraph 13, it is alleged that the Defendants “have infringed and threatened to infringe [Mr Field’s] Registered Trade Marks… pursuant to section 10(1) of the Trade Marks Act 1994 and Article 9(1)(a) of Council Regulation 40/94….”. In the Defence, paragraphs 12 and 13 are denied.

65.	Section 10(1) of the 1994 Act provides:

A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.

The equivalent provision of the Regulation, Article 9(1)(a) is the same in all relevant respects.

66.	It was said on behalf of Mr Cohen that the alleged use of the Mark was not of an “identical” sign for the purpose of these provisions. Whilst it was implicitly accepted by him that the alleged use of the Mark was of a “similar” sign (eg for the purposes of section 10(2) of the Trade Marks Act 1994), it was said that no infringement of section 10(2) was pleaded nor was there any evidence of likelihood of confusion on the part of the public.

67.	The point can have no application to the threatened use of the Mark after 25 December 2004 in that what was sought by Mr Fields and refused by the Defendants included undertakings not to use the Mark itself.

68.	As regards the other alleged acts of infringement, I am of the clear view that the point has no merit as regards the use of the company name (Klaus Kobec Limited). The addition of the word “Limited” (in particular to a distinctive name such as “Klaus Kobec”) has in my view no trade mark significance and can be ignored (cf Reed Executive plc v Reed Business Information Ltd [2004] EWCA Civ 159; [2004] R.P.C. 40 at paras 37 - 40 per Jacob LJ). I would find it surprising if the word “limited” could be ignored for the purposes of the “own name” defence (see below) but not for the purposes of assessing whether use of Klaus Kobec Limited is use of a sign identical to the Mark (cf Reed at para 115: “it matters not that the word Ltd or some other indication of incorporation is added”.)

69.	The position as regards the use of the domain names klauskobecfootball.com, klauskobecrugby.com and klauskobec.com appears to me to be not so clear. I have carefully considered the judgment of Jacob LJ in Reed at paras 20 – 41 where the difficulties of deciding whether marks or signs are identical or only similar are discussed. It was there held that “Reed Business Information” and “Reed” were not identical. But I think it important to note that in reaching this conclusion (at para 38) Jacob LJ noted that Reed was a common surname.

70.	In the present case, the Mark is “KLAUS KOBEC” which, far from being common, is highly distinctive. I take into account that the lower case is used in the domain names and that the two words have been elided but, because of the distinctive nature of the name, I consider that these differences would “go unnoticed by the average consumer”.

71.	I have come to the conclusion that “klauskobec.com” is identical use of the Mark, the addition of “.com” having no trade mark significance (for similar reasons as the addition of “Ltd”).

72.	However, I consider that the addition of “rugby” and “football” on the other two domain names falls on the other side of the line. These would in my view not go “unnoticed by the average consumer”. These are cases of similarity of mark and sign, not identity.

73.	It follows that Miss McFarland’s point succeeds as regards klauskobecfootball.com and klauskobecrugby.com but no further. Mr Moody-Stuart urged me nevertheless to make a finding that after 25 December 2004 KKL continued to trade under the Mark from these domain names. However, such a finding would be contrary to the evidence I have heard. I have already described how a person on the klauskobecfootball.com web site would be redirected the footballwatch.com web site. The print out of the klauskobecrugby.com web site after 25 December 2004 gives no indication that KKL continued to trade under the Mark from that site.  Further, Mr Cohen was cross examined as to continued trading after 25 December 2004 and his evidence, which I accept, was that the Mark was only used on the backplate of watches in the limited sense described above.

Consent

74.	Before making my findings on the alleged acts of infringement I should also deal with the question of Mr Field’s consent to the use by KKL of the Mark. Mr Fields accepts that he gave such consent to the extent pleaded in paragraph 5 of the Particulars of Claim, but says such consent was withdrawn with effect from 25 December 2004. This raises two issues in relation to alleged infringement: (a) acts of the Defendants in using the Mark prior to 25 December 2004 which are said to have been outside the scope of consent; (b) use of the Mark by the Defendants after 25 December 2004 after the consent was terminated.

75.	It was argued on behalf of Mr Cohen that no consent was required in relation to use of the Mark by KKL. I deal with this more fully in the context of his challenge to the validity of the registrations of the Mark and the issue of good faith where it is clearly a relevant issue. For the reasons there set out, I find that such consent was required. It was also submitted by Miss McFarland for Mr Cohen that consent or licence to use the Mark required certain formalities in order for it to be effective. This submission has an air of unreality – if successful (but the challenge to the validity of the registrations is unsuccessful) it would expose Mr Cohen to potentially increased liability. However, that is not part of Mr Field’s case and the issue seems to me to be academic.

Infringing acts

76.	 I therefore proceed to make my findings on whether the alleged infringing acts have been proved. I deal with each in turn and can do so in summary form in the light of my findings of fact.

(i) The use prior to 25 December 2004 of the Mark in relation to watches not manufactured by Gold Super or sourced direct from the Claimant’s companies.

77.	It follows from my findings of fact that the main thrust of this allegation fails. I have rejected the allegation that KKL had used watches bearing the Mark sourced from Gold Power prior to October 2004. However, it is accepted by Mr Cohen that after October 2004 watches in the Limited Edition range were sourced from Gold Power rather than Gold Super and that, as I have described above, certain of such watches bore the Mark in the form of a statement on the backplate to the effect that they were manufactured and distributed by KKL. To this limited extent, subject to statutory defences, the infringing act is established.

(ii) The actual use of the Mark in relation to watches after 25 December 2004 (whomever they were manufactured by).

78.	To the limited extent described in the preceding paragraph, and in addition the use of Mark in the KKL name and the klauskobec.com domain name, this infringing act is made out, subject to the statutory defences.

(iii) The threatened use of the Mark in relation to watches after 25 December 2004. 

79.	I find that the Defendants did threaten to use the Mark in relation to watches after 25 December 2004. Prior to the commencement of these proceedings, they were asked to provide undertakings not to use the Mark but refused and asserted their entitlement to use the Mark. Indeed in Paragraph 15 of the Defence (before amendment) it was pleaded that: “The First Defendant is entitled to trade under and by reference to the mark KLAUS KOBEC and intends to lawfully continue to do so.” It was – and remains – Mr Cohen’s case that Mr Field’s consent to the use of the Mark by KKL was not required. In view of the evidence that was given by Mr Cohen and Ms Walker (and reflected in the amendment to the Defence) as to the steps taken to avoid using the Mark, I find the original stance taken by Mr Cohen in correspondence and in the Defence (prior to amendment) surprising. I should, however, record that in letters dated 11 November 2005 and 9 December 2005 from his solicitors, Mr Cohen did make open offers not to use the Mark in the future. These will no doubt feature heavily in the argument on costs after delivery of this Judgment.

(iv) The use of the Mark in the names of the three companies set up prior to 25 December 2004.

80.	In the light of my findings of fact, I find that this alleged infringing act is not made out. I find that Mr Cohen played no part in setting up the three companies in question (Klaus Kobec (UK) Ltd, Klaus Kobec (Europe) Ltd and Klaus Kobec Football.com Ltd).

81.	It follows that the infringing acts against which the statutory defences fall to be considered are:

i)	Use of the KKL name stamped on the backcase of the watches sold by KKL after October 2004;
ii)	Use of the KKL name as the company name and the use of the “klauskobec.com” domain name after 25 December 2004;
iii)	The threats to use the Mark in relation to watches after 25 December 2004.

Statutory defences

82.	Mr Cohen relies on two statutory defences.

“Earlier right”

83.	The first is based on section 11(3) of the Trade Marks Act 1994 which provides:

(3) A registered trade mark is not infringed by the use in the course of trade in a particular locality of an earlier right which applies only in that locality. 

For this purpose an "earlier right" means an unregistered trade mark or other sign continuously used in relation to goods or services by a person or a predecessor in title of his from a date prior to whichever is the earlier of— 

 (a) the use of the first-mentioned trade mark in relation to those goods or services by the proprietor or a predecessor in title of his, or

 (b) the registration of the first-mentioned trade mark in respect of those goods or services in the name of the proprietor or a predecessor in title of his;

and an earlier right shall be regarded as applying in a locality if, or to the extent that, its use in that locality is protected by virtue of any rule of law (in particular, the law of passing off).

84.	The equivalent provision under Council Regulation 40/94 of 20 December 1993 (“the Regulation”) can be found at Article 107, which provides:

1. The proprietor of an earlier right which only applies to a particular locality may oppose the use of the Community trade mark in the territory where his right is protected in so far as the law of the Member State concerned so permits. 

2. Paragraph 1 shall cease to apply if the proprietor of the earlier right has acquiesced in the use of the Community trade mark in the territory where his right is protected for a period of five successive years, being aware of such use, unless the Community trade mark was applied for in bad faith. 

3. The proprietor of the Community trade mark shall not be entitled to oppose use of the right referred to in paragraph 1 even though that right may no longer be invoked against the Community trade mark.

85.	Mr Cohen claims that prior to the date of the registrations of the Mark and prior to the date of any use made by Mr Fields of the Mark in relation to watches, KKL or its predecessor KKIL carried on business and traded under and by reference to the name Klaus Kobec and sold and supplied watches by reference to the Mark. Accordingly he submits that KKL is the owner of an earlier right in and attaching to the Mark. 

86.	In my judgment, this statutory defence is not made out. The UK trade mark was filed by Mr Fields on 29 August 1996. In the light of my findings of fact, by that date KKIL had generated insufficient goodwill in the Mark to found an action for passing off. Even though I accept that any goodwill as KKIL had was transferred to KKL, it had no appreciable value even as late as 1 May 1997. Furthermore, it seems to me clear that KKIL’s use did not predate Mr Field’s use of the Mark since it was accepted by Mr Cohen that KKIL only sold watches bearing the Mark which had been supplied by Mr Fields or one of his companies and which were themselves selling watches bearing the Mark directly by mail order. It was only in 2002 that KKL obtained supplies of watches bearing the Mark directly from Gold Super. I should also add that the evidence I heard was insufficient for me to make a finding that any earlier right applied only in a particular locality – it seems that watches were sold by KKIL in showcases in hotels throughout the United Kingdom.

“Own name”

87.	The second defence relied upon by Mr Cohen is that KKL’s use of the Mark constitutes use of its own name. This defence is governed by section 11(2)(a) of the Trade Marks Act 1994. 

(2) A registered trade mark is not infringed by— 

 (a) the use by a person of his own name or address,…
 	
provided the use is in accordance with honest practices in industrial or commercial matters.

The equivalent provision under the Regulation (Article 12(a)) is the same in all relevant respects. 

88.	It was accepted on behalf of Mr Fields that, following Reed, the own name defence can apply to a company. The real issue is whether the continued use by KKL of its own name was “in accordance with honest practices in industrial or commercial matters”. The question of what constitutes honest practices has been considered by the ECJ in Gerolsteiner v. Putsch C100/02 [2004] RPC 39 at para 24 as requiring the defendant to “act fairly in relation to the legitimate interests of the trade mark owner”. The test is an objective one (see Reed at paras 131-2) and the court must carry out an assessment of all the circumstances (Gerolsteiner at paras 23-26).

89.	The argument focussed on the use of the name KKL on the backplate of the watches after October 2004. Ms. Walker and Mr Cohen gave evidence that this requirement was imposed by most clubs with whom they had licence agreements. At para 83 of his first witness statement, Mr Cohen said:

“The only reference to KLAUS KOBEC that remained on new stock produced after this date was a corporate reference on the case back  of watches which said “ designed and distributed by Klaus Kobec Ltd”. This was a condition of our license agreement with most clubs.”

At para 17 of her witness statement, Ms Walker said:

“This requirement was stipulated by the clubs at the product approval stage, as they required the name of the importer to be clearly shown, and this had to be the company name of KKL.”

90.	Neither of these statements was challenged in cross examination. The licence agreements with the clubs in question were not produced. Mr Cohen gave evidence, which I accept, that consideration had been given to transferring KKL’s business to a new company (footballwatchshop.com Ltd) but that this was not possible because the football clubs would not renegotiate the contracts. Mr Moody-Stuart suggested in his closing submissions that Mr Cohen had not established that KKL was inhibited from changing its name by the terms of the licence agreements with the football clubs. In the light of the unchallenged statements of Mr Cohen and Ms Walker to which I have referred, I reject that submission. I consider that the use of the KKL name on the backplate of the watches was in all the circumstances “in accordance with honest practices in industrial or commercial matters”. It seems to me clear that this was a genuine commercial requirement which had been adopted for some time previously (eg an email dated 27 October 2000 from Mr Cohen had referred to this requirement).

91.	Accordingly, I find that the “own name” defence applies to the continued use of the KKL name on the backplate of the watches. I also consider that this defence applies to the publicity material which had been changed to show references to “the footballwatchshop.com” rather than KLAUS KOBEC in the main body of the advertising: the KKL name was only referred to at the foot of advertisements as part of the address for correspondence. If the KKL name had to be retained to comply with the licence agreements with the football clubs it seems to me to follow that the use of the KKL name as part of the address does not render its use as falling foul of the “honest practices” test.

92.	In the light of these findings, I also conclude that the “own name” defence is made out as regards continued use of the Mark as part of KKL’s name. In reaching this conclusion, I take into particular account the rebranding exercise undertaken by KKL to trade under the footballwatchshop.com and the limited use that was made of the company name in its trading activities.  

93.	The evidential position concerning the “own name” defence as regards the continued use by KKL of the “klauskobec.com” domain name after 25 December 2004 is unsatisfactory. In the Defence (para 9(v)) it was admitted that KKL was the proprietor of this domain name via which KKL conducted business from its internet website. This plea clearly applies to the period after 25 December 2004. However, unlike the “klauskobecfootball.com” and “klauskobecrugby.com” websites, I have been provided with no print out of the “klauskobec.com” website after 25 December 2004.

94.	I have already described the steps taken by Mr Cohen to rebrand KKL’s business under “the footballwatchshop.com” name and a web site bearing that name was set up by KKL. In contrast with the limited use of the Mark in the company name described above, the continued use of the klauskobec.com website for trading appears to me to be prima facie inconsistent with this rebranding exercise. 

95.	I have carefully considered the evidence given by Mr Cohen as to the continued use of the three “klauskobec” websites, including paragraph 79 of this first witness statement and paragraph 29 of his second witness statement (which is in fact directed at a different point) as well as his answers in cross examination at Day 3 pp 61 – 64. I have found in Mr Cohen’s favour on the “identical” mark point as regards klauskobecfootball.com and klauskobecrugby.com. Even if the continued use of the klauskobec.com website was an oversight, as I have described, the “honest practices” test is an objective one. I consider that the continued use of the klauskobec.com website objectively was not in all the circumstances “in accordance with honest practices in industrial or commercial matters”. By continuing to use the website after Mr. Fields had withdrawn his consent on 25 December 2005 KKL did not in my judgment act fairly in relation to the legitimate interests of Mr Fields as trade mark owner. I bear in mind that Mr Cohen is only said to be liable as managing director in personally procuring and controlling the acts of KKL. But I am quite satisfied, particularly bearing in mind the pleaded defence to which I have referred, that Mr Cohen personally controlled and procured the continued use by KKL of the klauskobec.com website after 25 December 2004. In this context, it seems to me relevant that at this time Mr Cohen was maintaining (in my judgment wrongly – see further below) that Mr Field’s consent to the continued use of the Mark by KKL was not required.

96.	Accordingly I conclude that the “own name” defence is not made out in relation to the continued use of the “klauskobec.com” domain name and website after 25 December 2004. 

97.	It follows that the statutory defences relied on by Mr Cohen do not apply to the following acts of infringement:

i)	the use of the “klauskobec.com” domain name after 25 December 2004;
ii)	The threats to use the Mark in relation to watches after 25 December 2004.

98.	Whether any damage was suffered by Mr Fields as a result of these acts of infringement is doubtful. The evidence before me did not establish that any watches bearing the Mark were sold by KKL after 25 December 2004 (other than in relation to the watches bearing the KKL name on the backplate as to which I have found that the “own name” defence applies).

Validity of the registrations

99.	Mr Cohen challenges the validity of the Trade Marks on two grounds. The first ground is that at the filing date of the United Kingdom trade mark KKL was the proprietor of an earlier right under the law of passing off and that the marks should be declared invalid on relative grounds. The second is that the Claimant acted in bad faith in applying for the Trade Marks and that in consequence they should be declared invalid on absolute grounds. In her closing submissions on behalf of Mr Cohen, Miss McFarland focussed on the latter.

100.	Relative Grounds – UK Trade Mark: Section 47(2)(b) of the Trade Marks Act 1994 governs the application for a declaration of invalidity of a United Kingdom trade mark on relative grounds. It provides:

(2) The registration of a trade mark may be declared invalid on the ground— 

 (b) that there is an earlier right in relation to which the condition set out in section 5(4) is satisfied,

unless the proprietor of that earlier trade mark or other earlier right has consented to the registration.

101.	Section 5(4) provides:

(4) A trade mark shall not be registered if, or to the extent that, its use in the United Kingdom is liable to be prevented— 

 (a) by virtue of any rule of law (in particular, the law of passing off) protecting an unregistered trade mark or other sign used in the course of trade, or

 …

A person thus entitled to prevent the use of a trade mark is referred to in this Act as the proprietor of an "earlier right" in relation to the trade mark.

102.	The “earlier right” relied upon by Mr Cohen in respect of the United Kingdom trade mark is said to be a right under the law of passing off in respect of the use of the mark KLAUS KOBEC in relation to watches. It was common ground that the relevant date for assessing such an earlier right is the filing date of the trade mark, 29 August 1996.

103.	For the reasons which I have given in relation to the “earlier right” defence, I find that as at 29 August 1996 KKIL was not entitled to restrain the use by Mr Fields of the Mark in the United Kingdom under the law of passing off. Accordingly the challenge to the validity of the UK Trade Mark on relative grounds fails.

104.	Relative Grounds - Community trade mark:	Article 52 of the Regulation provides for the application for a declaration of invalidity of a Community trade mark. Article 52(1)(c) provides:

1. A Community trade mark shall be declared invalid on application to the Office or on the basis of a counterclaim in infringement proceedings: 

 (c) where there is an earlier right as referred to in Article 8 (4) and the conditions set out in that paragraph are fulfilled. 

105.	Article 8(4) provides:

4. Upon opposition by the proprietor of a non-registered trade mark or of another sign used in the course of trade of more than mere local significance, the trade mark applied for shall not be registered where and to the extent that, pursuant to the Community legislation or the law of the Member State governing that sign: 

(a) rights to that sign were acquired prior to the date of application for registration of the Community trade mark, or the date of the priority claimed for the application for registration of the Community trade mark; 

(b) that sign confers on its proprietor the right to prohibit the use of a subsequent trade mark. 

106.	It is of some significance that Mr Cohen does not claim to be the proprietor of the earlier right relied upon. Under the terms of compromise reached between Mr Fields and KKL, KKL has withdrawn its counterclaim and assigned to Mr Fields any goodwill it might own in the Mark. It would seem to follow that Mr Cohen no longer has standing to challenge the validity of the Community trade mark on relative grounds.

107.	In any event, I am not satisfied on the evidence before me that either KKL or Mr Cohen was entitled to restrain the use of the Mark in the United Kingdom on 16 May 2000 (the date of filing of the Community trade mark). This issue was not explored in cross examination. At that time KKL was only supplying watches bearing the Mark sourced from Mr Field’s companies – who were themselves selling watches bearing the Mark direct by mail order. I find that the challenge to the validity of the Community Trade Mark on relative grounds fails.

108.	Absolute Grounds:	Mr Cohen contends that Mr Fields applied for each of the Trade Marks in bad faith and that the registrations are accordingly invalid (see s. 3(6) of the Trade Marks Act 1994; Article 51(1)(b) of the Regulation).

109.	The issue of what constitutes “bad faith” has been considered by the Court of Appeal in Harrisons TM Application (“China White”) [2004] EWCA Civ 1028; [2005] FSR 10. Aldous LJ (at paragraphs 25 and 26 of China White, referring back to the decision of Lord Hutton in the House of Lords case Twinsectra Ltd v Yardley [2002] UKHL 12; [2002] 2 A.C. 164) said:

25	Lord Hutton went on to conclude that the true test for dishonesty was the combined test. He said: 

"36. ... Therefore I consider ... that your Lordships should state that dishonesty requires knowledge by the defendant that what he was doing would be regarded as dishonest by honest people, although he should not escape a finding of dishonesty because he sets his own standards of honesty and does not regard as dishonest what he knows would offend the normally accepted standards of honest conduct."

26	For my part, I would accept the reasoning of Lord Hutton as applying to considerations of bad faith. The words "bad faith" suggest a mental state. Clearly when considering the question of whether an application to register is made in bad faith all the circumstances will be relevant. However the court must decide whether the knowledge of the applicant was such that his decision to apply for registration would be regarded as in bad faith by persons adopting proper standards.”

110.	In her closing submissions, Miss McFarland in summary relied upon the following in support of the allegations of bad faith against Mr Fields when applying for the registrations of the Mark:

i)	Mr Fields knew or ought to have recognised the rights and interests of KKIL in relation to the UK Mark and KKL in relation to the Community Mark which he sought to monopolise by registration. At the least he should have notified them of the application and obtained their consent or allowed them the chance to object.
ii)	In respect of the UK registration, the lack of candour and failure to correct the register as regards the registration of the Mark in the joint names of himself and KKL (albeit before it existed) and his conduct concerning the assignment into his own name in 2002;
iii)	Mr Fields knew at all material times that Mr Cohen had coined or created the name “Klaus Kobec”.
iv)	The licence or consent of Mr Fields was not required for the use by KKIL or KKL of the Mark.

111.	In the light of my earlier findings of fact, the challenge to the validity of the registrations of the Mark on absolute grounds fails. I find that Mr Fields did not apply for the registrations of the Mark in bad faith. 

112.	As I have found, even if Mr Cohen originally devised the name Klaus Kobec, he and Mr O’Connor had no experience in developing brands and looked to Mr Fields and his companies initially at least to design, market and arrange for the manufacture of the watches i.e. developing the brand name. I refer to the minutes of the meeting on 9 February 1996 and related findings set out earlier in this Judgment.

113.	The exchange of letters on 16 December 2002 is also significant in this context. In the letter written by Mr Fields he clearly asserts his rights as the registered owner of the Mark. There is no suggestion by Mr Cohen in the response that Mr Fields had registered the Mark in bad faith and the response appears to accept that Mr Fields is the legitimate owner of the Mark.

114.	I also reject Mr Cohen’s assertion that the consent of Mr Fields was not required for KKIL or KKL to sell watches bearing the Mark or that he believed such consent was not required. At various stages in the history of this matter, Mr Cohen proceeded on the basis that the consent of Mr Fields was required. The first documentary evidence of this is the minutes of the 9 February 1996 meeting. It is again borne out by the exchange of letters on 16 December 2002. It is also reflected in Mr Cohen’s actions which are inconsistent with the assertion that he did not believe that Mr Fields’ consent was required. Thus, KKL paid Mr Fields or his companies the 10% “cut” in order to obtain supplies directly from Gold Super. It seems to me clear that Mr Cohen did not consider himself free to source watches bearing the Mark from an alternative supplier without Mr Fields’ consent – hence the rebranding exercise before ordering the football watches from Gold Power.

115.	As regards the registration of the UK Mark in joint names, I have found this to have been a genuine error which did not affect Mr. Fields’ rights as a proprietor of the Mark. Whilst the circumstances of the assignment in 2002 cast no credit on Mr Fields, it does not seem to me to have any bearing on whether the application for the Mark was made in bad faith.

116.	In the light of the evidence, I am quite satisfied that Mr Fields believed in good faith that he was entitled to apply for the registrations of the Mark. I am also quite satisfied that his knowledge was such that his applications to apply for the registration of the Mark would not be regarded as in bad faith by persons adopting proper standards.

117.	Accordingly the challenge to the validity of the registrations of the Marks fails and Mr Cohen’s counterclaim is dismissed.

118.	I shall hear Counsel as to the appropriate form of order to be made in the light of my findings.