Intellectual Property Indemnity The importance of an intellectual property indemnity clause in a commercial contract?

Intellectual Property Indemnity – The JUMPSTAR Case

The importance of an intellectual property indemnity clause in a commercial contract?
My latest case review is a little late in being written up due to my work load but here goes. It’s the recent case in the High Court of Justice, Chancery Division, of, (1st Claimant) Data Marketing & Secretarial Limited (DMSL), (2nd Claimant) Winning Deals Limited (WDL) – and – (1st Defendant) S&S Enterprises Limited (SSEL), (2nd Defendant) Selective Marketplace Limited (SML), heard on the 08th April 2014. Judgment was handed down by His Honour Judge Hacon on 16/05/2014.

Intellectual Property Indemnity

Intellectual Property Indemnity

The facts are that DMSL owns UK registered trademark JUMPSTAR registered in Class 9 for Batteries, batteries for vehicles; battery pack; battery starter; battery adaptors; battery chargers; battery cables; parts and fittings relating to batteries.

Both DMSL and WDL have the same managing director who is also majority shareholder in both companies.

SSEL imported chargers into the UK and from about Sept 2012 they were marketed in the UK under JUMPSTAR by SSEL acting as wholesaler and also by SML.

Complaints of trademark infringement were made by the claimants against SML. The counterclaim was for an order that JUMPSTAR be declared invalid and for groundless threats of infringement proceedings.

The defendants admitted that they had infringed the trademark subject to the defence that the trademark had been invalidly registered. The submissions the defendants relied upon include the following noteworthy issues.

(i) That the mark consists exclusively of signs or indications which may save, in trade, to designate a characteristic of the goods in respect of which it is registered.
(ii) The mark is devoid of distinctive character
(iii) The application for the trademark was made in bad faith.

The useful conclusions to take away from this case are:

First, the defendants argued that the public would take JUMPSTAR to allude to JUMPSTART meaning that the product when used in relation to batteries was purely descriptive. It was designated to the characteristic of the good. The Judge disagreed. He concluded that the issue was whether the average consumer would mistake JUMPSTAR for JUMPSTART when it is used with batteries. Does the “t” make all the difference or what difference does the “t” make? The Judge’s conclusion was that the “t” did make a difference significant enough so that JUMPSTAR was not purely descriptive of jumpstarting a vehicle with a battery.

In arriving at his conclusions the Judge refers to the test in Article 3(1)(c) Council Regulation (EC) 207/2009. The test was whether there would be an immediate misperception of the mark as JUMPSTART without further thought based on the average informed consumer. I have no idea what “average informed consumer” means in the real world, in any event, the Judge did not find evidence adduced by both parties helpful in satisfying the test. Additionally the defendants argument that some people with an accent do not even pronounce the “t” was also dismissed. The Judge advised that aural similarity alone is liable to infringement where there are significant visual and conceptual differences, See Premier Brands UK Ltd v Typhoon Europe Ltd [2000] FSR 767.

Second, the defendants submissions that the trademark was registered in bad faith – Art 3(1)(b)- also failed. Referring to Arnold J’s comments on bad faith in Och-Ziff Management Europe Ltd OCH Capital LLP [2010] EWHC 2599 (Ch); {2011] FSR 11, that an applicant for a trademark doesn’t act in bad faith solely because he knows that other parties are using the mark in relation to the same goods or services. he may believe that he has the superior right to the mark, Hacon J dismissed the defendants arguments on bad faith.

The other noteworthy conclusion to be drawn from this case is the importance of intellectual property indemnity clauses in commercial contracts. In this case SML the second defendant was a beneficiary of an indemnity offered by SSEL .

As for the overall result of the case, the trademark was held to be validly registered, and had been infringed by the defendants.

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