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IPEC considers infringement by localised use

The recent decision in Caspian Pizza Ltd and others v Shah and another [2015] EWHC 3567 (IPEC) dealt with a dispute between two companies using the same trade marks in different UK locations. The IP Enterprise Court’s decision serves as an important reminder to all business to protect their intellectual property rights through formalised written agreements.

What happened?

From 1991 Caspian Pizza Ltd (CP Ltd) owned a number of pizza restaurants in Birmingham, trading as Caspian Pizza. CP Ltd applied to register the word mark CASPIAN in 2005 and a logo mark in 2010 (the Caspian Trade Marks).

Shah ran a number of pizza restaurants in the Worcester area. In 2002, prior to CP Ltd's registration of the Caspian Trade Marks, Shah and an associated company opened a restaurant called Caspian Pizza in Worcester (the Worcester Restaurant).

CP Ltd claimed that an oral and informal franchise agreement existed between the parties, licensing Shah to use the Caspian marks for the Worcester Restaurant. It was CP Ltd’s position that any goodwill  in the name Caspian Pizza arising from the trading of the Worcester Restaurant during that period belonged to CP Ltd.

Following Shah’s refusal to recognise the existence of a franchise agreement, it was terminated by CP Ltd in December 2013. CP Limited alleged that the defendants’ continued use of the Caspian Trade Marks constituted trade mark infringement and passing off.

The defendants counterclaimed, alleging that the registration of the Caspian Trade Marks was invalid by virtue of s5(4) Trade Mark Act 1994 (TMA). Relying on the defence under s11 (3) TMA, they also argued that the Caspian Trade Marks could not be infringed because the Worcester Restaurant had generated its own goodwill in the marks prior to the date of their registration, which was localised to Worcester.

What was decided?

Judge Hacon in the Intellectual Property Enterprise Court found in favour of the defendants. He held that there was no franchise agreement between the parties. The goodwill that had been built up by the defendants since the Worcester Restaurant began trading in 2002 therefore remained within the business.

As the defendants’ localised goodwill pre-dated the filing of the Caspian Trade Marks, the court found that the CASPIAN word mark had been registered contrary to s.5(4) of the TMA and was invalid.

Judge Hacon considered the defence for trade mark infringement under s.11(3) TMA. This provides that a trade mark is not infringed where there is an earlier unregistered right which applies only in that locality. The defendants could rely on this defence, as the local goodwill in the Worcester Restaurant was sufficient in itself to commence an action for passing off.

CP Ltd's claim for passing off also failed as it failed to show that its goodwill extended to Worcester when the Worcester Restaurant began trading in 2002.

Beyond Caspian Pizza – protecting IP rights

The case highlights the risk of waiting to register a trade mark where a third party may obtain a local right defeating any later trade mark application. Consideration should be given to applying to register a trade mark at the earliest opportunity.

Contributors: Heather Williams, Asima Rana

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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