License Talks Save UK Right from Non-Use

It takes time to build a business around a brand, but if 5 years elapse before a registered mark is used it can become vulnerable to non-use cancellation. A lapse of use for 5 years or more can lead to the same result. Proper reasons for non-use are generally hard to prove, but the UK-IPO recently held that negotiations to grant a licence can justify non-use and save a registration from revocation (Jeremy Kerner v Stewart Waters, INOTHESCORE, O-088-09).

Use? You Betcha

At the heart of this case was Stewart Waters' UK registration for INOTHESCORE for betting and gambling services, registered on 2 February 2001. On 20 September 2007 Jeremy Kerner applied to revoke it for non-use.

In evidence, Waters claimed that he was using the mark for an Internet game in which players (then numbering only 20) competed to predict the score of ten Football Association Premiership matches. Waters had attempted to interest Sky Sports in a bigger project under the mark in 2001, without success.

Waters claimed that financial constraints had prevented him from launching the game nationally, and that he had not made any further attempts to exploit the mark because he had been in negotiations since mid-2005 to grant a licence to Jeremy Kerner, who had been using the similar mark, IKNOWTHESCORE, since around August 2003 in relation to a similar Internet-based game.

Kerner accepted that the parties had corresponded concerning a possible license including backdated royalties, and that a final agreement for signature had been sent to him in June 2007. However, that agreement was never signed, and Kerner argued that the correspondence had been "without prejudice" and should not, therefore, have been disclosed.

The hearing officer accepted that the correspondence had been "without prejudice," despite not being so marked, but noted a number of exceptions to the rule excluding such correspondence from disclosure in a case. These included cases where the "without prejudice" correspondence was relied on to show that there had been a concluded agreement, or that one party had made a clear statement on which another had relied and which had given rise to an estoppel, or to explain a party's delay or apparent acquiescence.

In this case, the hearing officer considered the correspondence admissible to explain why Waters had not used his mark, in light of the license discussions with Kerner. In the hearing officer's view, the negotiations were a proper reason for non-use, and he denied the application for revocation.

Comment

While the hearing officer's decision in this case deserves respect, brand owners should be careful not to take it as authority for the general principle that license discussions are a complete defence to non-use. The hearing officer's reasoning is scanty and a number of critical issues remain unresolved.

For example, it is not clear whether the very small-scale use made by Waters was use during the relevant period, or whether it began only after the application for revocation was filed.

If in fact there had been no genuine use, it is hard to understand why the hearing officer regarded the negotiations between 2005 and 2007 as adequately explaining the non-use. The decision appears to assume that there was no use between 2001 to 2005, and that Waters had made no real effort to exploit the mark due to financial constraints. Proper reasons for non-use typically require a registrant to show that but for the reasons given, genuine use would have been made. Yet, there is nothing in the facts or evidence summarised by the hearing officer to suggest that but for the negotiations with Kerner, Waters would have used the mark between 2005 and 2007.

The hearing officer's acceptance of the "without prejudice" evidence was probably correct insofar as it was offered for the limited purpose of showing that the parties were on the cusp of an agreement, in reliance on which the registered proprietor was not itself using the mark at the time. However, as indicated above, whether the negotiations on the facts of this case were sufficient to demonstrate proper reasons for non-use is debateable, to say the least.

In light of that, the registrant in this case was rather fortunate. Others owning vulnerable registrations may not be, though, as proper reasons for non-use are notoriously difficult to prove.

It is therefore essential to keep the issue of use on the radar, even where license discussions are underway. If an important brand is not in use, consider whether new protection may be appropriate, especially if interest has expanded geographically or in terms of goods or services. Non-use vulnerability can be healed by renewed use, but if a third party brings a claim before use begins, you might not make the clock.

Timing is therefore key. Where sales are delayed it makes sense to evaluate the impact on brand protection before time runs out.