Article 132(1) torpedo fizzles out

The Court of Appeal has addressed the application of the so-called "Article 132 Torpedo" in its recent judgment in Crafts Group LLC v M/S Indeutsch International – although by the time of the hearing, the pleadings had been amended such that the case is likely to turn on its own facts rather than being of broad general applicability. 

Background:  launching the torpedo

Under article 132(1) of Regulation (EU) 2017/1001 (the "EUTMR"), EU trade mark courts shall stay an action for infringement of an EU trade mark where an application for revocation or invalidity of that mark has been filed at the EU Intellectual Property Office ("EUIPO") or an EU trade mark court, unless there are special grounds for not imposing the stay.  

At first instance, the Intellectual Property Enterprise Court ("IPEC") had imposed a stay of all claims, whether or not they concerned the EU trade mark which was being challenged at the EUIPO. That stay was appealed.

There was a complex factual and procedural background. The parties both traded in knitting needles and crochet hooks and an earlier commercial relationship had broken down. Crafts began selling its own goods via Amazon. Indeutsch – trading as KnitPro – had EUTMs for knitting needle designs which, at Brexit, gave rise to comparable UK marks, and submitted a takedown request to Amazon against the Crafts goods.

Crafts brought a claim in IPEC seeking relief from unjustified threats – it said KnitPro's takedown requests to Amazon were threats of infringement (note that the December 2023 Court of Appeal decision in NOCO v Carku held that an Amazon takedown request amounted to a threat of infringement proceedings for the purposes of the Patents Act 1977).  KnitPro counterclaimed for infringement of its EU and UK trade marks as well as passing off.  Crafts claimed invalidity of the EU and UK trade marks under articles 7(1)(a) & (b) EUTMR^[1].

The UK and EU invalidity proceedings are still ongoing, with the EU proceedings having bounced backwards and forwards through many layers of the EU – the Cancellation Division, Board of Appeal, Grand Board of Appeal, General Court, and potentially to the CJEU. Furthermore, under article 54(3) of the Brexit Withdrawal Agreement^[2], if an EU trade mark is declared invalid or revoked in the EU as the result of an administrative or judicial procedure which was ongoing on the last day of the Brexit transition period, the corresponding right in the UK shall also be declared invalid or revoked. Therefore if the EU mark were declared invalid, the UK mark would also be invalid.

KnitPro requested a stay of all claims pending resolution of the issue of validity of the mark referred to as the "EU Chevron Mark" under article 132(1) EUTMR and under Civil Procedure Rules rule 3.1(2)(f) (the court's general case management power to stay). IPEC initially refused the stay but then granted it on appeal. 

Pleadings were amended several times. After the stay was imposed and before the Court of Appeal hearing, KnitPro dropped the allegation of infringement of the EU Chevron Mark, which "fundamentally changed the complexion of the case".  Article 132(1) could not continue to apply. Crafts added in a claim to attack the mark referred to as the "UK Chevron Mark" under s3(1)(c) Trade Marks Act 1994^[3] - a ground on which it was not attacking the EU Chevron Mark.

The Court of Appeal's decision

Given all of this, the discretion the IPEC judge had exercised in imposing the stay could no longer stand, and the Court of Appeal re-exercised the discretion itself. It held that the judge had been correct to look at the guidance given in the patents case of IPCom v HTC; even though patents and trade marks are governed by different regimes including to what extent central decisions impact national courts, it was still a good analogy.

The court held the principles of articles 7(1)(a) & (b) EUTMR are fairly well settled and although it was unlikely, it was possible that the UK court and the EUIPO could come to different conclusions on the validity of the UK and EU Chevron Marks respectively. Further, given the ground added to the validity attack on the UK Chevron Mark, it could have been held that the UK Chevron Mark was invalid even if the UK court followed the same conclusions as the EU tribunals on the other grounds. The court held that many of the issues were unaffected by the validity of the EU Chevron Mark and resolution of those issues may well be determinative of the whole dispute, and if not, resolution was likely to assist settlement. 

The court considered the impact of staying all claims versus staying only the claim in respect of the UK Chevron Mark. Staying everything would lead to a likely delay of five years or more; that is how long the parties agreed it could be before the validity of the EU Chevron Mark was finally resolved by the CJEU. Staying only the claim for a declaration of invalidity against the UK Chevron Mark pending resolution of the invalidity of the EU Chevron Mark could lead to a second trial if the EU Chevron Mark were held valid – but the court felt there would be little duplication between the two trials and so this approach would not entail "significant" extra costs.  The court felt the balance of justice favoured the limited stay; it ordered a stay of the claim for a declaration of invalidity against the UK Chevron Mark pending resolution of the invalidity of the EU Chevron mark.

Footnotes

¹ Article 7(1). The following shall not be registered: (a) signs which do not conform to the requirements of Article 4 [signs of which a mark may consist]; (b) trade marks which are devoid of any distinctive character.
² Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (2019/C 384 I/01).
³ Broadly speaking, signs or indications which serve to designate characteristics of the goods/services.