Lifestyle Equities v Hornby Street: UK courts will vigorously protect arbitration agreements

The following is an article by Jude Antony on the High Court's decision in Lifestyle Equities v Hornby Street concerning an application under the Arbitration Act 1996 to stay trade mark infringement proceedings.

• The High Court granted the defendants’ application under the Arbitration Act to stay proceedings for trademark infringement brought by the claimants
• Applying Californian law, the court found that the claimants were bound by the arbitration clause in a 1997 agreement
• Even if English law were applied, the claimants had become parties to the 1997 agreement when they relied on it in 2015

In Lifestyle Equities CV v Hornby Street (MCR) Ltd ([2020] EWHC 3320 (IPEC)), the High Court has granted an application by the defendants under the Arbitration Act 1996 to stay proceedings for trademark infringement brought by the claimants because the parties or their predecessors in title had earlier agreed that disputes were to be resolved by arbitration.

Background

The claimants were the assignees of various trademarks including the word mark BEVERLY HILLS POLO CLUB and a polo player device logo. The defendants were the owners and licensees of a trademark including the word mark SANTA BARBARA POLO AND RACQUET CLUB and a polo player device.
 
An earlier dispute between one of the defendants and the claimants' predecessors in title had been settled with a co-existence agreement in 1997 (‘the 1997 agreement’). Each side had consented to the other's continued use and registration of their respective marks. The co-existence agreement was governed by Californian law and provided for disputes to be settled by arbitration under American Arbitration Association rules. 
 
The claimants acquired rights in the BEVERLY HILLS POLO CLUB marks in 2009 and subsequently brought proceedings against the defendants in the High Court, alleging trademark infringement and passing off. The claimants argued that they did not know about the 1997 agreement when they acquired the relevant rights, and were not bound by it. Notably, the claimants had themselves relied on the 1997 agreement, after becoming aware of it, in correspondence with the defendants and third parties, including the Mexican Trademark Office, in 2015.
 
The defendants applied for the proceedings to be stayed under the Arbitration Act, arguing that, under Californian law, the claimants were bound by the arbitration clause in the 1997 agreement. Section 9 (1) of the Arbitration Act provides:

A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.

Decision

The court granted a stay of proceedings. Haycon J rejected the claimants' argument that they were not a party to the 1997 agreement. Even if English law were applied, as the claimants argued, they had become parties to the 1997 agreement when they relied on it in 2015.
 
However, the issue of whether the claimants were party to, or bound by, the 1997 agreement was a matter of interpretation of that agreement,which was governed by Californian law. In holding that they were bound, Haycon J accepted the defendants' expert evidence in relation to Californian law, which was that the defendants could enforce the 1997 agreement as signatories or third-party beneficiaries under an express provision in the agreement. The evidence showed that Californian law provides that a burden attaching to a trademark which is the subject of a co-existence agreement passes with its assignment to become an obligation binding on the assignee, regardless of whether the assignee was aware of the burden at the time of the assignment. The contractual obligation to arbitrate any disputes was held to fall within the concept of a "burden" attached to a trademark.
 
In addition, Haycon J held that the claimants were estopped under Californian law from claiming that they were not bound by the 1997 agreement because they had expressly relied on the agreement and represented themselves as a party to the agreement in the 2015 submissions to the Mexican Trademark Office.

Comment

This case shows that the UK courts will robustly protect arbitration agreements and not allow such agreements to be easily circumvented in order to have disputes brought to court. Although not relied on in the current case because the claimants had become party to the 1997 agreement, it is interesting that Haycon J highlighted that Section 9 of the Arbitration Act does not require the party initiating the court proceedings to be a party to the arbitration agreement, only the party making the stay request. This opens up the possibility that a party to an arbitration agreement may be able enforce it against a non-party in certain contexts.

This article first appeared on WTR Daily, part of World Trademark Review, in February 2021. For further information, please go to www.worldtrademarkreview.com.