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	England and Wales Patents County Court
You are here: BAILII >> Databases >> England and Wales Patents County Court >> Redd Solicitors LLP v Red Legal Ltd & Anor [2012] EWPCC 50 (10 October 2012) URL: http://www.bailii.org/ew/cases/EWPCC/2012/50.html Cite as: [2012] EWPCC 50

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IN THE PATENTS COUNTY COURT

		Rolls Building 7 Rolls Buildings London EC4A 1NL
		10/10/2012

HIS HONOUR JUDGE BIRSS:

1. This is an application to amend the pleadings. Mr. Vanhegan QC appears for the defendant instructed by EMW Law and Mr. Hicks appears for the claimant instructed by Bristows. The claimant in this action is a firm of solicitors, Redd. Their practice has a practical emphasis in intellectual property law. The first defendant is a company offering conveyancing services under the mark Red Legal. The second defendant is a director of the first defendant. The first defendant has a website www.redlegal.co.uk. The claimant claims that the defendants are infringing two registered trade marks. One of the marks is a Community Trade Mark for the word Redd in respect of legal services. The other is a United Kingdom registered trade mark for the word Red, for the following specification of goods and services:

Legal services, legal advice for businesses; legal advice for schools; legal advice over the internet; legal advice relating to corporate, technology, media, intellectual property, sports, commercial, employment, commercial property and planning, conveyancing, family, trust, wills and probate, personal injury, motoring, criminal, immigration, equine, agricultural, insolvency and debt recovery law and commercial and personal litigation; information and consultancy services relating to the aforesaid.

2. The United Kingdom mark was acquired by the claimant in March 2011. It had been applied for by a firm of solicitors called Darbys in June 2010. In March 2011 the application was still pending when it was assigned to the claimant. It was registered in May 2011 with effect from June 2010.
3. The defendants' defences include what one might expect in a case of this kind. They also include a challenge to the validity of the United Kingdom trade mark. In the form of the defence as at the case management conference (including amendments which were made at the case management conference), the bases of the challenge to validity were these. There was a challenge under section 5(4) of the Trade Marks Act 1994 on the basis of the defendants' alleged prior use of the mark Red or Red Legal for conveyancing since 2009 and there was an allegation of bad faith as follows:

"Further or in the alternative, at all material times the UK RTM has been invalid on the ground that it was applied for in bad faith. In support hereof, the Defendants will rely upon the following facts and matters, namely that since 28th March 2011, being the date upon which the Claimant became the applicant for the said registered trade mark, it has had no genuine intention to:

(a) use the sign RED in relation to the provision of any services, even less the services set out in the specification of the UK RTM;

(b) use any sign in relation to legal services save in respect of legal services relating to intellectual property law. In the premises it has no intention to use any sign in relation to the provision of legal advice for schools; legal advice over the internet; legal advice relating to sports, commercial, employment, commercial property and planning, conveyancing, family trust, wills and probate, personal injury, motoring, criminal, immigration, equine, agricultural, insolvency and debt recovery law and commercial and personal litigation; information and consultancy services relating to the aforesaid; and/or

(c) use any sign in relation to the provision of conveyancing of real property."

4. The case management conference took place in March 2012 with directions for trial and the trial is due on 6th November, that is to say in about five weeks time. The estimate is that the trial will take approximately a day and a half, there will be some relatively brief cross-examination of three witnesses and otherwise the case will be taken up with argument.

The application to amend

5. This application seeks to add new parts to the bad faith ground of attack on the validity of the UK registered trade mark. The allegations to be included by amendment are:

"4(1)(a) As at the date of filing the application for the UK RTM namely on 10th June 2010 and at all material times when it was prosecuting the grant of the said application up and until it assigned its rights in and to the said application, ('the Relevant Period'), Darbys Solicitors LLP, ('the Applicant') only had an intention to use the RED sign or trade mark in relation to the provision of legal services relating to criminal law.

(b) At no time did the Applicant ever have any intention to use the RED sign or mark in relation to legal services relating to conveyancing of real property or wills or probate or in relation to legal services generally.

(c) For the avoidance of doubt as at the said application date and during the Relevant Period, the Applicant intended to use the names of different colours in combination with the respective other colours to designate different types of legal services which it intended to offer, none of which colours included the colour or word red save in respect of the provision of legal services relating to criminal law.

(d) For the further avoidance of doubt, after the Relevant Period, the Applicant has had no intention to use the sign or mark Red in relation to any legal services at all.

(e) In support of the above the Defendants rely upon (i) the second witness statement of Mr. Jonathan Smith dated 19 September 2012 (ii) the first witness statement of Simon McCrum, the Managing Partner of the Applicant dated 20 September 2012

(f) Copies of both witness statements are enclosed at Annex 1.

Further or in the alternative:

(2) since 28th March 2011, being the date upon which the Claimant became the applicant for the said registered trade mark, it has had no genuine intention to:

(a) use the sign RED in relation to the provision of any services, even less the services set out in the specification of the UK RTM;

(b) use any sign in relation to legal services save in respect of legal services relating to intellectual property law. In the premises it has no intention to use any sign in relation to the provision of legal advice for schools; legal advice over the internet; legal advice relating to sports, commercial, employment, commercial property and planning, conveyancing, family trust, wills and probate, personal injury, motoring, criminal, immigration, equine, agricultural, insolvency and debt recovery law and commercial and personal litigation; information and consultancy services relating to the aforesaid; and/or

(c) use any sign in relation to the provision of conveyancing of real property.

Further since 28th March 2011, the Claimant has:

(i) sought to prevent the information set out in sub-paragraphs 4(1)(a) - (d) becoming public and/or known to the Defendants and/or to the Court, by means of seeking to impose a restriction on the information which the Applicant was permitted to disclose to amongst others the Defendants as part of the contractual terms comprising the assignment of the application for the UK RTM to it from the Applicant (the aforesaid being a reasonable inference from the facts and matter referred to in paragraph 68 of the first witness statement of Mr. Jonathan Smith dated 9 August 2012);

and/or

(ii) continued with the prosecution of the said application to registration and thereafter sought to maintain the UK RTM without intending to use it, but rather having the sole objective of preventing third parties and the Defendants in particular from using the word 'red' on relation to the First Defendant's business."

6. The defendants submit I should allow the amendments. They rely on the principles relating to amendments of Statements of Case summarised by Peter Gibson LJ in the well-known Cobbold case. I was referred to the extract from that judgment at page 505 of the current edition of the White Book. They submit that those principles are satisfied in this case because (a) the points are properly arguable, and in that respect they refer to a decision of Arnold J in Red Bull GmbH v Sun Mark Ltd & Anr [2012] EWHC 1929 (Ch), and (b) that the claimant can be properly compensated in costs by the amendment. Thus the prejudice to the defendants in not allowing the amendment means that the amendment should be permitted.
7. The defendants' refer to the specific rule applicable in the Patents County Court at CPR Part 63 rule 63.23 about exceptional circumstances and they submit that the rule is satisfied in this case for reasons which are explained in the witness statement of Mr. Mark Finn, the defendants' solicitor.
8. He explains as follows. Mr. Smith of the defendants originally spoke to Mr. McCrum of Darbys in 2010. This would appear, although it does not matter, to be after the first complaint by the claimant in this case. Mr. McCrum of Darbys told Mr. Smith that when Darbys applied for the registered trade mark their only intention was to use the mark for criminal legal services. In August 2011 Mr. Smith and Mr. McCrum spoke again, at this stage Mr. McCrum said he could not help the defendant because he owed an obligation of confidence to the claimant. The defendants' solicitors call this a gagging provision or gagging contract. After exchange of evidence this year, they approached Mr. McCrum again and this time, to the defendants' and the defendants' solicitor's surprise, he agreed to speak and give them a witness statement. The evidence the defendant wishes to rely on is a statement from Mr. Smith which reconfirms what Mr. McCrum had told him in 2010 and a short statement from Mr. McCrum which confirms that what Mr. Smith says is correct.
9. The claimants submit I should not allow this amendment. First of all, in principle they submit that the rules relating to amendments in the Patents County Court are not the same as the rules applicable in the High Court. This application, because of rule 63.23, would require exceptional circumstances and that is not satisfied.
10. Second, the claimant submits that there are a number of elements to the amendment which are completely flawed and should not be allowed, in particular the claimant refers to paragraphs 4(2)(c)(i) and (ii) and also to 4(1)(d). These relate to intent after the application date and the claimant submits that those allegations should not be allowed on any view.
11. Third, the remaining points which relate to the intention of Darbys are weak and they also rely on what Arnold J said in the Red Bull case. They also submit that the point will involve a more detailed factual investigation than the defendants give the point credit for.
12. Fourth, they submit that it is a point which could and should have been raised at the case management conference and, overall, they submit that the cost-benefit balance and the lack of exceptional circumstances means that the point should not be permitted.

The applicable principles

13. Amendments to statements of case are governed by CPR rule 17.3 and that rule is applicable in the Patents County Court. I dealt with amendments to pleadings in general in my decision in Temple Island v New English Teas [2011] EWPCC 19 and in particular paragraphs 23 to 33 of that judgment. I maintain the view expressed in those paragraphs, that there is an emphasis in the PCC on the cost-benefit test and on proportionality and that the strength of the point to be raised is itself a factor to be considered in the overall balance.
14. The nature of the case management regime in the Patents County Court as a whole has a bearing on applications of this kind. Just because an amendment might be allowed in another case management regime, such as that applicable in the High Court, does not mean it will be allowed in the Patents County Court. Moreover, there is a further factor here. This is not an application to amend at the case management conference (CMC) and so rule 63.23(2) is engaged. Rule 63.23 provides as follows:

"(1) At the first case management conference after those defendants who intend to file and serve a defence have done so, the court will identify the issues and decide whether to make an order in accordance with paragraph 29.1 of Practice Direction 63.

(2) Save in exceptional circumstances the court will not consider an application by a party to submit material in addition to that ordered under paragraph (1)."

15. Not every amendment after the CMC will engage 63.23(2). For example a deletion amendment will likely not engage it. However this amendment undoubtedly engages that rule. The defendants wish, as a result of this amendment, to submit material in addition to the material ordered at the case management conference.
16. In my judgment the rule is intended to operate as a substantial hurdle. Apart from the obvious point that it refers to "exceptional circumstances" it is also notable that the rule is written in such a way that the application itself will not even be considered unless exceptional circumstances are in existence. The reason for this is because the case management conference is a key part of the package of measures in the Patents County Court procedure as whole. The identification of issues and the orders based on the issues made at the case management conference are all part of the overall costs capping and streamlined approach to litigation in the Patents County Court. It seems to me that the first question to be considered, before getting into general principles on amendment, is that raised by 63.23(2).

Are there exceptional circumstances in this case?

17. In this case the exceptional circumstances are said to be Mr. McCrum's recent change of position. He had said he was prevented by confidentiality obligations from helping the defendants, but his position has now changed. However, it is clear that in 2010 the actual facts of what the defendant says Darbys' intentions were, were known to the defendants. It is notable that the evidence of the witness statement from Mr. Smith uses the word "reconfirming", and is a recognition that the defendants have always known what Mr. McCrum says about his solicitors' firm's intentions in relation to this mark.
18. Mr. Vanhegan submits that the matter could not have been pleaded or raised at the case management conference because it would have only been based on hearsay but, in my judgment, that would have been quite sufficient to justify pleading this point. Moreover, if the problem was that the witness thought he owed an obligation of confidence to the claimant, which is what Mr. McCrum had said in 2011 still before the case management conference, then that is a matter which could have been addressed at the CMC. Disclosure under obligations of confidence in order to preserve the confidentiality can be arranged. If the defendants had explained at the case management conference that a witness would not talk to them because of a perceived obligation of confidence relating to this point which he owed to another party in the case, I cannot imagine that that problem could not have been overcome.
19. In my judgment this is a point which could and should have been pleaded from the beginning and certainly, if not at the beginning, raised at the case management conference. If it had been then the case would have been managed on that basis. It seems to me that exceptional circumstances must involve a careful consideration of why the point was not raised at the case management conference. The point of the rule is to create a very strong incentive to have all the issues in the case aired at the CMC to allow the case to be managed properly and to allow both sides to know where they stand.
20. The fact that Mr. McCrum is now prepared to talk to the defendants does not seem to me to justify the point not being raised at the CMC and I am very doubtful, therefore, that the defendants can overcome the hurdle in 63.23(2) in this case. However, before deciding what to do I will go on and consider the overall justice of the situation because it seems to me that that must be the right thing to do.
21. First I will consider the allegations sought to be raised in section 4(2) of the draft amended pleading. In my judgment those allegations are extremely weak. It is clear, see for example Red Bull paragraph 131, that the date for assessing bad faith is the date of the application. These allegations do not relate to that date, nor do they cast light back on what happened at that date. If they are anything they are a different species of alleged bad faith altogether. It may that be Mr. Vanhegan is right that with a reference to the CJEU the point might be able to be got off the ground, but in my judgment it fails the cost-benefit test. The benefit of this point is very low given its merits and even though the costs of raising it are also relatively low it seems to me that it does not satisfy that test.
22. Second, I will consider the allegations in 4(1). The allegation in 4(1)(d) is that after the relevant period, which means the period up until assignment, the applicant had no intention to use the mark at all. This is also a point about intentions after the relevant date and, in my judgment, falls with the previous point I have mentioned.
23. The real issue is the matter of Darbys' intentions at the date they applied for the mark. As Mr. Hicks points out, to look into this properly there needs to be a fuller investigation of Darbys' intention than has been done so far. More detail will be required. If it had been raised at the CMC I have no doubt it could have been done, but we are now five weeks from trial.
24. I also note that essentially this argument is a suggestion that a firm of solicitors, apparently properly advised, committed an act which need not actually be described as dishonesty but as something of the following kind i.e. "some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in their particular area" (Red Bull paragraph 134). They did this apparently as a firm of solicitors by applying for a trade mark for legal services. I think that is a weak argument. It may succeed but it is not strong.
25. Mr. Vanhegan says that the costs position of the claimants will be the same if the point had been raised at the case management conference and so, he submits, the costs cap should not cause a difficulty about an amendment of this kind in this case. I doubt that is a complete analysis of the position. The claimant's irrecoverable costs, because they are higher than the cap, are likely to be even higher as a result of this point being in the case than not. However, Mr. Vanhegan says, well, that will be the case if the point had been raised at the CMC. That may be true up to a point, but I still do not think it is a complete answer. It may be that at the case management conference review of the issues, steps would have been taken to get rid of this point altogether. In this case the claimant took no point on the existing bad faith allegation because the claimant rather thought it was so weak that it was not worth fighting about, but the circumstances would now be different and we cannot say what would have happened at the CMC in this case if these points had been there. Moreover, hijacking these proceedings by raising this point five weeks from trial will, in my judgment, inevitably raise the costs. Some costs of dealing with this issue from now until trial will be the same as they would have been if it had been raised earlier, but I am quite sure that raising the point in this fashion will cause both parties to incur costs which they would not have incurred at all if the point had been raised at the outset.
26. In the end, looking at the matter in the round, I am not satisfied that the hurdle set by rule 63.23(2) is satisfied. It is not really correct to say that I am refusing to consider the defendants' application to admit the material at all, since self-evidently I am considering it. In most cases despite the words of the rule it will make sense, as here, to hear the application and decide what to do bearing in mind rule 63.23(2) as well as the wider issues. I will formally refuse this amendment and in doing so I will say that I am far from convinced that I have deprived the defendant of a killer blow. If this had been a strong point or a very strong point then things might have been different but it is not.