Case No: HC-2015- 000572
Neutral Citation Number: [2016] EWHC 344 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL

Date: 23/2/2016

Before :

MASTER CLARK

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Between :

	THE ENTERTAINER (AMERSHAM) LIMITED	
Claimant	
			
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(1) THE ENTERTAINER FZ LLC
(a company incorporated in the United Arab Emirates)
(2) THE ENTERTAINER MEDIA LIMITED
(3) THE ENTERTAINER FZ (CYPRUS) LIMITED
(a company incorporated in Cyprus)
(4) NICOLA HOCK
(trading as The Entertainer Malta)
(5) MENA FRANCHISE SERVICES (IKE)
(a company incorporated in Greece)		
		Defendants	

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Douglas Campbell (instructed by Wragge Lawrence Graham & Co LLP) for the Claimant
Simon Malynicz (instructed by Curtis, Mallet-Prevost, Colt & Mosle LLP) for the Defendants

Hearing dates: 18 January 2016

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Judgment
Master Clark:
The application
1.	This is the defendants’ application to transfer the claim to the IPEC, made by application notice dated 2 December 2015.

Claim and parties
2.	The claim is for trade mark infringement and passing off.  The marks in issue are, in each case, THE ENTERTAINER (“the marks”), for which the claimant has a UK trade mark registration (for services in class 35) and a Community Registered trade mark registration (for goods in classes 9, 28, and services in class 35).

3.	The claimant is a specialist toy retailer with 97 retail stores in the UK.  It claims to have used the marks in the UK for over 28 years and for many years elsewhere in the Community.  Its products include toys, games, playthings and associated products.  It also claims to have used its marks in relation to a range of printed publications, including various types of books, drawing pads, greetings cards, gift cards/vouchers and Christmas catalogues.  

4.	The first defendant is a company incorporated under the laws of the United Arab Emirates.  It sells books and products, including mobile apps which provide “buy-one-get-one-free” (“BOGOF”) vouchers for dining, hotels and leisure activities.  The second and third defendants are the UK and Cyprus branches of the first defendant.  The fourth and fifth defendants are the first defendant’s franchisees in, respectively, Malta & Greece.

5.	The infringing acts alleged are the use of the signs THE ENTERTAINER and ENTERTAINER (and other signs consisting of or including the word ENTERTAINER) in relation to the defendants’ voucher books and apps, and providing retail services under those signs.  The claimant alleges infringement under sections 10(1), (2) and (3) of the Trade Marks Act 1994 and their equivalents in the Community Trade Mark Regulation (Council Regulation (EC) 207/2009), Articles 9(1)(a), (b) and (c)).

Procedural history
6.	The relevant procedural history of this application is as follows.  On 17 December 2014	the claimant’s solicitors sent a letter before claim.  On 13 February 2015 the proceedings were issued against the first 3 defendants.  The Defence and Counterclaim was served on 31 March 2015.  On 14 May 2015 the defendants’ solicitors raised in correspondence the possibility of an application to transfer the claim to the IPEC.  On 21 May 2015 they confirmed that they would be issuing a transfer application.  The claimant obtained permission to amend its particulars of claim twice, firstly to join the fourth defendant (the franchisee in Malta) and then to join the fifth defendant (the franchisee in Greece), the Re-Amended Particulars of Claim being served on 15 October 2015.  On 19 October 2015, the defendants filed their directions questionnaire in which they again indicated their intention to make a transfer application.  The Re-Amended Defence and Counterclaim is dated 22 October 2015 and the Re-Amended Reply and Defence to Counterclaim was served on 29 October 2015.

7.	The costs and case management conference was listed to be heard on 8 December 2015.  Shortly before it, on 2 December 2015, the defendants issued their transfer application.  I therefore adjourned the CCMC to enable this application to be heard before it took place.
 
Principles applicable to the transfer application
8.	Since 1 April 2014, paragraph 2.1 of CPR PD7 has provided that:

“Proceedings (whether for damages or for a specified sum) may not be started in the High Court unless the value of the claim is more than £100,000.”

9.	Para 3.6 of PD7 provides that parties issuing a claim in the High Court are obliged to state that the claimant expects to recover more than £100,000, or that the claim is to be in a specialist list.  In this case, the only relevant specialist list that could have been specified is the IPEC (noted to be a specialist list in CPR 63.1(2)(g)).

10.	CPR 63.18(1) modifies rule 30.5 to the effect that a judge (which for present purposes includes a Master – CPR 2.3(1)) sitting in the general Chancery Division may transfer proceedings to the IPEC, and requires that an application to transfer from the general Chancery Division be made to a judge sitting there.  The court is obliged by r.63.18(2) to have regard to the provisions of PD30.

11.	Paragraph 9 of PD30 states the following:

“Transfer to or from the Intellectual Property Enterprise Court (Rule 63.18)
9.1	When deciding whether to order a transfer of proceedings to or from the Intellectual Property Enterprise Court the court will consider whether –
(1)	a party can only afford to bring or defend the claim in the Intellectual Property Enterprise Court; and
(2)	the claim is appropriate to be determined by the Intellectual Property Enterprise Court having regard in particular to –
(a)	the value of the claim (including the value of an injunction);
(b)	the complexity of the issues; and
(c)	the estimated length of the trial.
9.2	Where the court orders proceedings to be transferred to or from the Intellectual Property Enterprise Court it may –
(1)	specify terms for such a transfer; and
(2)	award reduced or no costs where it allows the claimant to withdraw the claim.”

12.	This is supplemented by the guidelines in the IPEC Guide at para 1.3, which sets out the following factors:

“*	Size of the parties. If both sides are small or medium sized enterprises then the case may well be suitable for the IPEC. If one party is a small or medium sized enterprise but the other is a larger undertaking then again the case may be suitable for the IPEC but other factors ought to be considered such as the value of the claim and its likely complexity.

*	The complexity of the claim. The procedure in the IPEC is streamlined and trials will seldom last more than 2 days. A trial which would appear to require more time than that even with the streamlined procedure of the IPEC is likely to be unsuitable.

*	The nature of the evidence. Experiments in a patent case may be admitted in the IPEC but a case which will involve substantial complex experimental evidence will be unsuitable for the IPEC.

*	Conflicting factual evidence. Cross-examination of witnesses will be strictly controlled in the IPEC. The court is well able to handle cases involving disputed factual matters such as allegations of prior use in patents and independent design as a defence to copying; but if a large number of witnesses are required the case may be unsuitable for the IPEC.

*	Value of the claim. Subject to the agreement of the parties, there is a limit on the damages available in the IPEC of £500,000. However, assessing the value of a claim is not only concerned with damages. Putting a value on a claim is a notoriously difficult exercise, taking into account factors such as possible damages, the value of an injunction and the possible effect on competition in a market if a patent was revoked. As a general rule of thumb, disputes where the value of sales, in the UK, of products protected by the intellectual property in issue (by the owner, licensees and alleged infringer) exceeds £1 million per year are unlikely to be suitable for the IPEC in the absence of agreement.”

13.	In addition Environmental Recycling v Stillwell [2012] EWHC 2097 is authority for the proposition that the fact that a party can afford to litigate in the High Court does not mean that the case should stay in the High Court, if other relevant factors point towards its transfer.

14.	I also mention the recent Guidelines to Chancery Masters published on 20 May 2015. These provide:

“8.	… The value of a claim is not a consideration which has greater weight than the other criteria set out in CPR 30(3)(2) but it is likely to be a factor with considerable influence in making a decision about transfer to the County Court or a specialist list. The figure of £100,000 mentioned in PD29 is not generally regarded as a relevant measure for money claims in the Chancery Division in London.

9	If the value of the claim is ascertainable, particular focus should be given to the possibility of transferring Part 7 claims with a value of less than £500,000. Factors which may point to retention of such claims in the High Court include:
(a)	complex facts and/or
(b)	complex or non-routine legal issues and/or
(c)	complex relief and/or
(d)	parties based outside the jurisdiction and/or
(e)	public interest or importance and/or
(f)	large numbers of parties and/or
(g)	related claim and/or
(h)	the saving of costs and/or
(i)	efficiency in the use of judicial resources .”

15.	Finally, I must also of course have regard to the requirement of the overriding objective and deal with the case in a way that is proportionate as set out in CPR 1.1.

Applying the principles
16.	I turn therefore to consider the various factors.  The defendants’ evidence in support of their application was given by its solicitor, James Cockburn, in witness statements dated 2 December 2015 and 12 January 2016; and by Donna Benton, in witness statements dated 2 December 2015 and 12 January 2016.  Ms Benton is the founder and Chief Executive of the First Defendant, and is also the director and a shareholder of the Second Defendant.  The claimant’s evidence in opposition was given by its solicitor, John Coldham, in witness statements dated 4 December 2015 and 13 January 2015.

Size and financial position of the parties
17.	The claimant is a very substantial business with an annual turnover in the UK of over £100 million and in the rest of the EU of £2.7 million.  The defendants are less substantial. However, their website (www.theentertainerme.com) reveals that they have 150 employees and offices in 10 countries.  In a statutory declaration dated 27 April 2015 made on behalf of the first defendant in another trade mark dispute between the parties, Ms Benton stated that:

“My Company’s core business is in distributing marketing offers for over 10,000 merchant partners located across 23 destinations and 16 countries throughout the Middle East, Asia, Africa and Europe including offices in the UK and Cyprus with over $1.3 billion in revenue driven to its merchant partners.”

18.	She also stated in the same declaration that the first defendant has “sold hundreds of thousands of ENTERTAINER/THE ENTERTAINER products worldwide including Europe for many years”; and “has spent millions of US dollars on advertising and promoting its ENTERTAINER/THE ENTERTAINER products worldwide including Europe for many years”.

19.	The defendants themselves have not stated what their turnover is, or exhibited any accounts.  Ms Benton, in her reply evidence, has only said that that the figure of “EAD 150 million”, which equates to about £28 million, is “significantly higher than the Defendants’ combined turnover”.  This coyness suggests that the relevant figure is sufficiently high for the defendants to consider that it does not assist their application.

20.	The defendants relied upon the fact that, with 150 employees, they fall within the category of a “medium enterprise” under the relevant European Commission regulation referred to by HHJ Birss QC in ALK-Abello v Meridian [2011] FSR 351 at para 28.  But as the Judge goes on to say in that case, these definitions are only a starting point in gauging the sorts of enterprises the IPEC is intended to serve.  I have also to have in mind that the purpose of the IPEC is to “ensure that small and medium sized enterprises, and private individuals were not deterred from innovation by the potential cost of litigation to safeguard their rights”: Chaplin v Lotus (CA, unrep, 17 December 1993).

21.	The size of the parties is therefore closely linked to their ability to afford to litigate in the High Court. Both sides agreed that they could both afford to litigate in the High Court.  As noted above, whilst inability to litigate in the High Court may be a factor favouring transfer to the IPEC, the reverse is not the case; and in this case this is a neutral factor.  In any event, as the guidance in the IPEC Guide set out above provides, the size of the claimant alone necessitates consideration of the value of the claim and its complexity.

Value of the claim, including the value of the injunction
22.	The claim form states (for the purposes of the fee payable) that the value of the claim exceeds £300,000.  For the purposes of the court’s statistical form to be completed by me, the claimant’s counsel put the value of the claim at between £1 million and £10 million. He did not however make any detailed submissions as to the basis of that figure.

23.	The defendants’ counsel referred me to [42] of ALK-Abello, where HHJ Birss QC said:

“In my judgment, for the purposes of considering transfers, the assessment of
the value of a claim and the value of an injunction is intended to reflect
commercial realities. It is not intended to involve fine questions of causation
or remoteness of damage.”

24.	He submitted that the commercial reality of this case was that there is no actual commercial competition between the parties, and their products and services are entirely different.  The claim is, he said, an abstract, technical, “paper-based” claim.  The claimant’s specifications are too wide and invalid for the products on which the infringement claim is based, printed publications and computer software.

25.	He submitted that the claimant’s damages claim was at best £50,000 based on Ms Benton’s evidence that the defendants’ turnover in the relevant countries totalled £320,000 in the period 2013-2016 inclusive.  I agree that the damages for infringement are, on the figures provided by the defendants, unlikely to exceed £50,000.

26.	The defendants counsel also submitted that the value of the injunction should be measured by the brand damage it would prevent and that since the numbers of relevant products sold by the defendants is so small, the value of the injunction sought to prevent those sales is correspondingly small.  He pointed to Ms Benton’s evidence that the defendants have no plans to expand into any further EU territories in 2016 or beyond.  However, I note that Ms Benton does not say that the defendants have no plans to expand their UK and existing EU business; she only says that sales to date have been relatively modest and that she does not expect them to increase in 2016.

27.	Finally, the defendants’ counsel submitted that for the purpose of the guidance in para 1.3 of the IPEC Guide, I should take into account only the claimant’s turnover in products of the same type as the infringing products.  In my judgment, this cannot be right, given the inclusion in the claim of claims for infringement under s.10(3) and Art 9(1)(c).  The claimant’s turnover as set out above is therefore a strong factor in favour of retention in the High Court.

28.	If the only factor in this case were the amount of damages recoverable by the claimants, then this would be a strong factor towards transferring to the IPEC.  Because there is little or no commercial overlap between the parties’ businesses, assessing the value of the injunctive relief sought is difficult; but I do not agree that this means that the value of the injunction is inevitably small.  Significant damage to the marks may be caused by their use in relation to products or services which are not in direct competition to those of the claimant.

29.	The claimant’s position is that this case is about its core brand, a name it has developed over 30 years and the identity that sets it apart from its multi-national competitors.  Mr Coldham’s evidence is that the claimant has carried out co-branding promotions with major brands such as STAR WARS, and tie-ups with entertainment venues such as theme parks.  He gives an example of 2-for-1 entry to Chessington World of Adventures as part of the claimant’s past promotional activity.  The injunction sought by the claimant is to protect that brand.  Given the size of the claimant’s business, notwithstanding the difficulties of putting a figure on the potential damage to the claimant’s marks, I consider that the value of the injunction is substantial and justifies this claim being brought in the High Court.

30.	In this context, it is also relevant that these parties are engaged in opposition and cancellation applications in respect of each other’s marks all around the world.  There are about 33 applications initiated by the claimant and 25 applications initiated by the first defendant.  Even taking into account that the costs of each of these proceedings in trade mark registries will be significantly less than a High Court action, the sheer volume of them indicates that both sides regard the marks as having considerable commercial importance and value.

31.	Taking this into account, together with the size of the claimant’s business under the marks and the potential damage to the marks which this claim seeks to prevent, the value of the claim is, in my judgment, a strong factor in favour of retaining it in the High Court.

Complexity of the claim
32.	The defendants’ counsel submitted that this is a routine trade mark infringement claim that could be accommodated within a 2 day trial, although he accepted it might stretch to 3 days.

33.	I do not agree for the following reasons. 

34.	Firstly, the claim alleges trademark infringement and passing off in 4 different countries of the EU (the UK, Malta, Cyprus and Greece). The claimant seeks a pan-European injunction and therefore, the Court is being asked to sit as a Community Trade Mark Court considering the allegations of infringement in each country in turn (see Case C-235/09 DHL Express France SAS v Chronopost SA [2011] FSR 38).  In defence to the Art 9(1)(b) claim, the defendants assert that the “overall manner and context of use” of the use of their signs negates a likelihood of confusion with the marks.  The Defendants have declined to answer a request for further information as to what was meant by this.   I accept the claimant’s counsel’s submission that on its face, this allegation would involve considering the use in each country and national differences in that use.  In addition, the defendants do not generally accept that they are jointly and severally liable for each other’s acts (though the first and second defendants accept they are liable for each other’s acts in the UK), so each defendant’s acts will need to be considered by the court.

35.	Secondly, I agree with the claimant’s counsel’s submission that the claim and, in particular, the defence and counterclaim raise a raft of factual and legal issues, which create a level of complexity which make this case unsuitable for the IPEC. These can be summarised as follows:
(1)	The Defence puts the claimant to proof that it has used the mark other than in relation to retailing toys and toys; and specifically challenges its use in relation to printed publications and books, gift vouchers/gift cards, and Christmas catalogues.
(2)	It asserts that use of the mark in relation to the retail of children’s books and other items is not use in relation to retail of “printed publications”;
(3)	It asserts that use of the mark in relation to gift cards/vouchers and catalogues is not use of the marks at all;
(4)	It asserts that use of the marks in relation to a sub-category of computer games such as videogams or educational software is not use in relation to the retail of “computer software”;
(5)	It denies that the marks have an enhanced distinctive character in relation to retail of goods other than toys;
(6)	It relies on the “principle of speciality”;
(7)	It asserts that infringement in relation to “computer software” must be determined once the community mark has been declared partially invalid as a result of the counterclaim for partial revocation;
(8)	As mentioned, it asserts that the “overall manner and context of use” of the defendants’ signs negates a likelihood of confusion;
(9)	It denies that there is any detriment to the distinctive character of any of the marks as a result of dilution;
(10)	It raises a defence to the s.10(3)/Art 9(1)(c) claim of use in good faith;
(11)	It raises a defence under s.11(2)(a) and Art 12(a) of use by the defendants of their own names, and asserts that this use has been in accordance with honest practices in industrial and commercial matters;
(12)	It raises the “Office Cleaning Services” defence to the passing off claim;
(13)	There is a counterclaim claiming partial revocation of the marks on the grounds of
(i)	non-use;
(ii)	non-compliance with legal certainty requirements (as set out in the CJEU decision in IP Translator); and
(iii)	non-compliance with the principles set out in the Postkantoor decision i.e. wrongly specifying a good or service by reference to a characteristic that is does not possess.

36.	By way of example only, the single issue of whether the defendants’ use has been in good faith would involve consideration of the following factors:
(1)	whether the defendants knew of the existence of the marks, and if not whether it would have been reasonable for it to conduct a search;
(2)	whether the defendants used the sign complained of in reliance on competent legal advice based on proper instructions;
(3)	the nature of the use complained of, and in particular the extent to which it is used as a trade mark for the defendants’ goods or services;
(4)	whether the defendants knew that the claimant objected to the use of the sign complained of, or at least should have appreciated that there was a likelihood that the owner would object;
(5)	whether the defendants knew, or should have appreciated, that there was a likelihood of confusion;
(6)	whether there has been actual confusion, and if so whether the defendants knew this;
(7)	whether the trade mark has a reputation, and if so whether the defendants knew this and whether the defendants knew, or at least should have appreciated, that the reputation of the trade mark would be adversely affected;
(8)	whether the defendants’ use of the sign complained of interferes with the owner’s ability to exploit the trade mark;
(9)	whether the defendants have a sufficient justification for using the sign complained of; and
(10)	the timing of the complaint from the claimant;
and this list is not exhaustive: see Samuel Smith Old Brewery (Tadcaster) v Lee (t/a Cropton Brewery) [2011] EWHC 1879 (Ch), [2012] F.S.R. 7 at [118] – [119].

37.	There is much force in the claimant’s counsel’s submission that the defendants have chosen to defend the claim like a High Court claim; and that this is a reason for retaining it in the High Court.  However, in the final analysis, there is an element of judgement in evaluating the level of complexity of this claim and whether it could be properly dealt with using the stream-lined IPEC procedures in 2 days.  I have reached the clear view that it could not be.

Conclusion
38.	I therefore refuse the defendants’ application.  The defendants’ counsel submitted that the claimant’s costs were disproportionately high, and that the claimant was thereby seeking to bully them into conceding the claim.  If the claim is properly a High Court claim, as I have found, then it follows that costs will be higher than in the IPEC.  But retaining the case in the High Court does not give the Claimant carte blanche as to its costs.  The court has the power to control and manage costs in the costs management process; and in particular only to approve costs that are within the range of reasonable and proportionate costs; and whether the claimant’s budgeted costs of £872,363 are disproportionate is an issue which can be fully addressed in the costs management process.