Passing off

This was an appeal by the defendants from summary judgment given to a number of leading British companies in a series of actions against the same defendants by Mr Jonathan Sumption QC, sitting as a deputy judge of the High Court, on the 28 Nov 1997 pursuant to Order 14 of the Rules of the Supreme Court. The causes of action in each case were trade mark infringement and passing-off.

The Facts

The defendant companies and their directors dealt in domain names. They specialized in registering well-known names and trade marks without the consent of the person or company owning the goodwill in the name or mark and offering those names for sale to the owners of such goodwill. By way of example, they registered "burgerking.co.uk" which they offered to Burger King for £25,000 and of "bt.org" which they offered to British Telecommunications for £4,700. The plaintiffs, Marks & Spencer Plc, J Sainsbury Plc, Virgin Enterprises Ltd, British Telecommunications Plc, Telecom Securior Cellular Radio Ltd and Ladbrokes Plc, objected to the defendants’ registration of "marksandspencer.com", "marksandspencer.co.uk", "britishtelecom.co.uk", "britishtelecom.net", "britishtelecom.com", "bt.org", "ladbrokes.com", "sainsbury.com;" "sainsburys.com", "j-sainsbury.com", "cellnet.net", and "virgin.org".

The Order

Granting injunctions to restrain the defendants from such registration and dealings, Mr. Sumption had explained that

	it was enough for a plaintiff to show that a defendant intended to infringe the plaintiff's rights in future even though the mere registration of a deceptive company name or a domain name did not amount to passing-off; and
	the use of a trade mark in the course of the business of a professional dealer for the purpose of making domain names more valuable and extracting money from the trade mark owner amounted to "use in the course of trade"..

The Defendants’ Submissions

The defendants attacked his judgment on the ground that the action was premature. They submitted that if a name could be used for a legitimate purpose, it was not a vehicle of fraud and injunctive relief should not be granted unless it was established that the defendant either threatened to pass-off or was, with another, part of a common design to pass-off. In other words, jurisdiction depended upon the plaintiffs’ establishing that a name was of such a character that a trader would be a joint tortfeasor when carrying out the threatened use or that such trader would be identified as the person who had performed the passing-off. In their case, they registered domain names with a view to making a profit either by selling them to the owners of the goodwill, using the blocking effect of the registration to obtain a reasonable price, or, in some cases, selling them to collectors or to other persons who could have a legitimate reason for using them. They submitted that could amount neither to passing-off, or a threat to pass-off, nor render them liable as joint tortfeasors.

The Judgment

Dismissing the appeal, Aldous LJ analysed the following strands of authority in which injunctive relief had been granted before the tort was complete:

	cases such as Farina v Silverlock (1855) 1 K & J 509 where the defendant sold materials for an infringing product where the jurisdiction was granted inter alia to prevent the defendant from enabling passing-off;
	cases such as John Walker & Sons Ltd v Henry Ost & Co Ltd [1970] RPC 489 where an injunction was granted to prevent the supply of bottles and labels to facilitate passing-off abroad;

	cases such as Panhard et Levassor v Panhard Levassor Motor Company Ltd [1901] 2 Ch 513 and Fletcher Challenge Ltd v Fletcher Challenge Pty Ltd [1982] FSR 1 to protect a foreign trader who has not yet had an opportunity to establish himself in the jurisdiction; and
	cases such as Glaxo Plc v Glaxowellcome Ltd [1996] FSR 388 where the defendant had incorporated a company combining the name of two well-known public companies,

as well as Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133 where the ability to restrain dissemination of an instrument of fraud was recognised by the Court of Appeal.

His lordship discerned from those cases a jurisdiction to grant injunctive relief where a defendant is equipped with or is intending to equip another with an instrument of fraud. He added that the question whether a name is an instrument of fraud must depend upon all the circumstances: for instance, a name which by reason of its similarity to another name will inherently lead to passing-off is such an instrument but not if it would not inherently lead to passing-off. The court should consider the similarity of the names, the intention of the defendant, the type of trade and all the surrounding circumstances. If, after taking all the circumstances into account the court should conclude that a name was produced to enable passing-off, was adapted to be used for passing-off and, if so used, was likely to be fraudulently used, an injunction would be appropriate. He identified three categories of cases in which a court would grant an injunction. "First, where there is passing-off established or it is threatened. Second, where the defendant is a joint tortfeasor with another in passing-off either actual or threatened. Third, where the defendant has equipped himself with or intends to equip another with an instrument of fraud. This third type is probably mere quia timet action".

After reviewing the party to party correspondence and other dealings between the parties, Aldous LJ concluded:

"In my view there was clear evidence of systematic registration by the appellants of well-known trade names as blocking registrations and a threat to sell them to others. No doubt the primary purpose of registration was to block registration by the owner of the goodwill. ……. The registration only blocks registration of the identical domain name and therefore does not act as a block to registration of a domain name that can be used by the owner of the goodwill in the name. The purpose of the so-called blocking registration was to extract money from the owners of the goodwill in the name chosen. Its ability to do so was in the main dependent upon the threat, expressed or implied, that the appellants would exploit the goodwill by either trading under the name or equipping another with the name so he could do so."

As for trade marks, his lordship was satisfied that threats to infringe had been established. The defendants sought to sell domain names that were confusingly similar to registered trade marks. Those domain names indicated origin, which was the purpose for which they were registered, and they were to be used in relation to the services provided by the registrant who trades in domain names. The Court of Appeal concluded that the deputy judge’s analysis in respect of passing off and trade mark infringement had been correct.