• Handling Parallel English and OHIM Proceedings

    When a CTM is challenged both before OHIM and a national court, parties often differ as to which body they would prefer to decide the case. Both OHIM and the national court have the power to suspend proceedings pending the outcome of the action before the other, but the factors to be considered and the general approach have until now escaped careful scrutiny. With the recent High Court decision in Kitfix Swallow Group Ltd. v Great Gizmos Ltd. [2007] EWHC 2668 (Ch), however, the issues have finally had a proper airing.

    The Cross-Actions

    In the action, Kitfix owned CTM registration no. 3850039 for SEQUIN ART for craft and hobby kits. Great Gizmos, acting on behalf of a Hong Kong company, 4M Industrial Development Ltd., began distributing craft kits in the United Kingdom under the identical mark, SEQUIN ART.

    Kitfix sued Great Gizmos, the U.K. distributor, for trade mark infringement and passing off in the English High Court. Great Gizmos counterclaimed that the CTM was invalid for non-distinctiveness and descriptiveness under Article 7 (1) (b) and (c) CTMR.

    About 8 months later, the Hong Kong source, 4M, brought a separate invalidity action before OHIM challenging Kitfix’s CTM on the same grounds raised by Great Gizmos in court, as well as claiming that the mark was not a trade mark, was in common use and was in fact deceptive under Article 7 (1) (a), (d) and (g).

    OHIM Equivocates

    Under Article 100 (2), in the absence of “special grounds” OHIM must suspend invalidity proceedings at the request of one or both parties where an invalidity action relating to the same CTM has already been brought before a national court.

    Consequently, at the request of Kitfix, OHIM suspended the 4M action pending a decision by the High Court in the Great Gizmos counterclaim. Subsequently, for reasons that were never made clear, OHIM lifted the suspension and stated that OHIM was not bound to await a decision of a national court where the request for invalidity was based on Article 7. OHIM determined to decide the 4M action.

    Suspense in the Court…

    If the 4M action succeeded, the Kitfix infringement claim against Great Gizmos would fail. Great Gizmos therefore petitioned the High Court to suspend the English proceedings pending OHIM’s decision. It argued that it would be inequitable for it, as distributor, to have to incur the much greater costs of defending a High Court action when an action involving the source of the goods and most of the same issues could be decided before OHIM instead at much lower costs, thereby probably dispensing with most of the issues on the counterclaim in the High Court case.

    In reply, Kitfix contended that to suspend the High Court proceedings would be to delay a decision in the case for at least 3-6 months, since it was common ground that OHIM would not decide the 4M case until, at the earliest, January 2009. Kitfix vigorously challenged the appropriateness of OHIM’s own stay and argued that the English action, filed some 8 months before the OHIM claim, should be decided expeditiously.

    The High Court agreed. It found no presumption that English invalidity proceedings should be stayed pending the outcome of later-commenced OHIM proceedings. Indeed, it considered that if a presumption existed at all, it was that OHIM should suspend the proceedings before it under Article 100 (2). The court was mystified as to why OHIM had lifted its initial suspension order, as the mere fact that an invalidity action was based on Article 7 (a common basis for such a claim) did not appear to constitute “special grounds” to refuse suspension under Article 100 (2).

    Since there was no presumption that the High Court should suspend its own proceedings, the judge considered that each case had to be weighed independently.

    In this case, the judge noted that costs in the OHIM proceedings would undoubtedly be lower than those before the High Court, although he raised an eyebrow at Great Gizmos’ OHIM estimate of only £5,000. Nonetheless, the 3 – 6 month delay in a decision by OHIM was significant from the point of view of business certainty, and there was potential for further uncertainty for several years if an OHIM decision were appealed first to the CFI and then to the ECJ. From OHIM, the court noted, an appeal lay as of right, whereas before the High Court, an appeal required leave.

    The judge took into account that Kitfix had not sued Great Gizmos, a mere distributor, in order to attain any advantage, but rather because only Great Gizmos was in the jurisdiction. Moreover, he noted that the English action included a passing off claim, which was separate to the infringement and validity issues. Finally, he gave weight to the fact that 8 months had passed before 4M brought its invalidity claim before OHIM. The judge considered it unlikely that Great Gizmos had not notified 4M at an early stage about the action in the U.K. Kitfix, having relied all that time on the matter being disposed of in the U.K., was entitled to have the proceedings continue on that footing.

    The judge ordered the English proceedings to continue.

    Comment

    When judgment was handed down, the court’s attention was drawn to a new order by OHIM reinstating the suspension of the proceedings before it. OHIM did not explain its volte-face other than to cite the prior decision as an error. Had that error not been made, the parties would have been spared a great deal of expense in the English proceedings.

    Nonetheless, the judgment in Kitfix is a useful guide to the factors that a national court may take into account in considering whether to suspend its own proceedings pending the outcome of a case before OHIM. They are also relevant to both national courts and OHIM in determining whether there are special grounds for refusing a suspension in cases where the matter has already been placed before another tribunal.

    Where concurrent actions are running before a national court and OHIM, it is clear that the widely divergent costs and timescales may make suspension of the national procedure attractive to one party, and unattractive to the other. These are factors that are clearly relevant to any decision on whether, and where, to suspend. However, lower costs will not always win out: factors such as how quickly the national court can resolve the matter, whether the national claim includes issues not before OHIM, and any delay in bringing either proceeding will also affect the decision on whether to suspend.

    The Kitfix scenario is likely to be unusual, as OHIM is unlikely often to have special grounds to decline to suspend proceedings commenced before it after a national action has been filed. However, similar factors may well be relevant to whether there are special grounds to refuse suspension.

    The court’s guidance on this important tactical issue is welcomed. Parties seeking the edge in concurrent actions should keep the Kitfix criteria in mind.