Ipsofactoj.com: International Cases [2002] Part 6 Case 11 [Ch.D]


CHANCERY DIVISION

Coram

WWF

- vs -

World Wrestling Federation

Entertainment Inc

THE HON MR JUSTICE JACOB

1 OCTOBER 2001


Judgment

Jacob J

  1. This application for summary judgment is by WWF - World Wide Fund for Nature and its US affiliate, World Wildlife Fund Inc. Nothing turns on the presence of the second claimant and I shall collectively call the claimants "The Fund." The defendant is the World Wrestling Federation Entertainment Inc. ("The Federation"). The Fund seeks enforcement of a contract dated 20th January 1994 and governed by English law. The contract severely limits the Federation's freedom to use the initials WWF in its trade. How severely is in dispute, but on any view the Federation admittedly has broken the terms of the contract. It says it is justified in so doing because the relevant terms are void, either at common law as being in unreasonable restraint of trade or by virtue of the provisions of Art. 81 (formerly Art.85) of the Rome Treaty as amended. Even if the terms are valid it says no injunction should be granted. Finally there are some minor disputes as to the meaning of the contract and an application by the Fund to claim an account of profits.

    THE PARTIES' RESPECTIVE ACTIVITIES

  2. The Fund is very well known. It was founded in 1961 as the World Wildlife Fund. Soon after foundation it extended its activities to the broader range of environmental conservation. It is now the largest private international nature organisation. It has, via its affiliated national organisations (such as the second claimant), a world-wide or near world-wide presence, for instance in the years 1990 to 1993 the Fund was engaged in 1170 projects in 125 countries. It has more than 4.5 million individual contributors. It is beyond dispute that its name, and the initials WWF are extremely well-known world-wide. Generally the initials are used with a picture of a Giant Panda, a picture which must be equally well-known. However the initials alone have enormous recognition. Both to enhance and raise its profile and to make money it engages in extensive merchandising activities through gift catalogues and licensing. I have examples of the catalogues from many countries. The goods offered are of a wide variety and are generally presented as goods of the Fund in the sense that that they are to exclusive designs of the Fund and selected by the Fund. All the goods are consistent with the Fund's "image", that is to say of a charity concerned with conservation and the environment. The goods include T-shirts and toys. I was supplied with an example of a Fund toy bear wearing a WWF and Panda T-shirt.

    THE DEFENDANT

  3. The Federation is a company whose main officers are Mr and Mrs McMahon. It was originally called Titan Sports, Inc., adopting its present name in 1999. It is the successor to a business originally called the World Wide Wrestling Federation. In 1979 that organisation changed its name to World Wrestling Federation because the former name was too much of a mouthful. From about then (and to minor extent earlier) it started using the initials (not an "acronym" as the defendants' evidence sometimes says) WWF. Its activities were broadly confined to the US until the late 1980s.

  4. The Federation's core business is live wrestling entertainment events. However over the years its business has extended - not only by way of sale of television rights to such events but in a variety of other ways. By the 1990's there were sales of magazines, videos and associated merchandising as well. One can get an idea of the latter from the Federation's UK catalogue for 1992. This has pages headed "WWF Toys & Gifts", "WWF Back to School" (for items such as exercise books and back-packs), "WWF Apparel", and "WWF Videos". The goods are all related to wrestling somehow. Many feature some of the wrestlers appearing at the Federation's events, characters going by names such as "Hulk Hogan" and "Ultimate Warrior."

    EVENTS LEADING TO THE CONTRACT IN DISPUTE

  5. Early on the Federation adopted what has been called the "block logo". It was in use at least by 1983. By the time of the contract (1994) there were 7 versions, copies of which form Annex 2 to the contract and are annexed to this judgment. To some eyes the logo is not obviously a stylised version of the initials WWF, for instance I first saw it as WF. However the use of the logo in connection with the title World Wrestling Federation must have educated at least a large section of the interested public that it is WWF. Moreover the Federation was using the initials WWF in other ways (e.g. on the page headings of the 1992 catalogue simply in an ordinary type) as was used by journalists. Of course the spoken word conveyed no particular typescript. The main use, as I have said, was initially in the USA but by the late 1980's had spread significantly to at least economically important parts of the world, for instance Europe.

  6. The Fund did not initially object to any of this. However the Federation had made a US trade mark application in Class 41 for entertainment services, namely the production of professional wrestling events rendered live and through the media of television. It was for the initials WWF as such. There had been earlier registrations which included the initials along with references to wrestling to which there had been no objection. However, the second claimant objected to the registration of the initials as such. The objection was resolved by a letter agreement of 12th September 1989. It placed minor restrictions on the Federation's use of the initials. The letter read as follows:

    As you know, Titan Sports, Inc., ("Titan") has applied for federal trademark registration of the mark "WWF" in International Class 41. Your client, the World Wildlife Fund, has filed for extensions of time to oppose such registration, on the basis that its mark may be confused with the registered "WWF" trademark of the World Wildlife Fund.

    By letter dated September 6, 1989, you requested that Titan Sports agree that it would not use the mark "WWF" in "Times Roman" typeface when that mark was standing alone, that is, when not used in conjunction with the World Wrestling Federation's logo or when the context of the World Wrestling Federation Magazine.

    Titan Sports is willing to accept the terms of your offer, on the condition that by doing so, the World Wildlife Fund agrees that it will not oppose federal trademark registration by Titan Sports or the mark "WWF" in Class 41, Serial No. 770,628.

    On that basis the Fund dropped its opposition to that US registration. The restriction was very minor, particularly since the Federation did not use WWF in Times Roman.

  7. It was on the international scale that conflict began to emerge. The Federation had commenced applying for trade marks outside the United States. In some countries Trade Mark Registries raised objections due to earlier conflicting marks of the Fund. In others the Fund opposed or took preliminary steps to oppose. The first objections were in Canada. It was apparent to the Federation that a global solution ought to be reached. So it was that it proposed one in September 1991 along the lines of the US Agreement. The Fund did not agree and sought information about the Federation's merchandising activities which by then covered not only the US but also a number of important European countries. Details of the Federation's use on merchandise and television programming were supplied. The Federation maintained that confusion could not occur because of the very different nature of the parties' activities.

  8. In April 1992 a Grand Jury commenced an investigation into the Federation. It was pursued by the US Department of Justice. In November 1993 the Department of Justice announced a criminal indictment of the Federation and Mr McMahon on charges of illegal possession of anabolic steroids with intent to distribute and conspiracy to defraud the United States Food and Drug Administration. All this put the Federation under pressure, though its business was plainly at all times very substantial. Its turnover in 1990 was nearly $168m. In 1991 that fell to $144m. In 1993 revenues fell to $130m and for the first time the Federation made a loss. In 1994, the turnover fell to $91m, although a profit of $5.5m was made. During 1995 the year of the criminal trial turnover fell somewhat more. Thereafter, business has picked up. The Federation's profits jumped in 1999 from $8.5m for the previous year to $57m.

  9. Meanwhile, the parties were increasingly coming into conflict around the world. Annex 6 to the defence and counterclaim sets the conflicts out. In all but one of the cases the conflicts were in Trade Mark Registries in various countries. For the most part it was the Fund objecting or seeking extensions of time in which to object to trade mark applications by the Federation. But there were instances the other way. For instance in the United Kingdom it was the Federation who opposed the Fund's application for the WWF Panda Device in Class 16 (printed matter). The Federation was also opposing the Fund's marks in Denmark and Spain. I cannot think of any basis for such opposition other than an allegation by the Federation that the Fund's mark was confusingly similar to WWF as used by the Federation. By 1993 the Fund was threatening legal proceedings in a number of different countries, particularly in Europe.

  10. Eventually it took action, suing the Federation in Switzerland. It made what we would call a "without notice" application for an injunction against a distributor of the Federation's magazine which was entitled "WWF - Magazin". The application was successful. A reasoned judgment was given. The Judge thought that there was unlikely to be any confusion as regards the magazines of the parties ("the average purchaser wishing to buy a wrestling magazine would hardly mistake it for the 'WWF News' or vice versa"). However, he took the view that there was real possibility of indirect confusion. He said:

    Owing to the high degree to which the plaintiff's mark WWF is well known, the public may well get the wrong impression that the plaintiff is in some form associated with the World Wrestling Federation.

  11. The Federation did not at the time challenge the judgment, as I assume was open to it. It now suggests that the Judge was not given full information as to co-existence and a number of other matters so that no significance to the Swiss judgment should be given. The parties then entered into settlement negotiations. Mrs McMahon describes the details of these, from the point of view of the Federation. The various proposals and counter proposals are in evidence. Throughout the Federation maintained that there was no risk of confusion and the Fund otherwise. During these negotiations the Fund became aware of an article in Penthouse about the Federation. This alleged involvement of the Federation's wrestlers and employees in "violence, drug free for alls, sexual harassment, paedophilia and rape". There were similar headlines in the more general press. The Fund, already concerned about confusion became more so because even the slightest chance of any confusion or association was likely to be injurious.

    THE CONTRACT

  12. It was against this background that the parties entered into the contract in dispute. I set out all the material terms here:

    RECITALS

    WHEREAS, the Fund is the world's largest private environmental conservation organization carrying on its activities using the initials WWF as well as providing goods and services under the mark WWF and wishes to avoid any confusion with the trade name "World Wrestling Federation" when abbreviated to the initial "WWF" by Titan;

    WHEREAS, the National Affiliates are all signatories to agreements with Fund under which they are each licensed by the Fund to use and sublicense the use of the initials "WWF" in connection with their activities;

    WHEREAS, Titan is in the business of providing sports entertainment services and goods and does so under the marks "World Wrestling Federation" and "WWF".

    NOW, THEREFORE, the parties, in consideration of the mutual covenants and agreements contained herein and intending to be legally bound hereby, agree as follows:

    ARTICLE 1

    DEFINITIONS

    As used in this Agreement, the following terms shall have the meanings set forth as follows:

    1.1

    "Initials" means the initials "WWF" in any language, but does not include Titan's logo or the name "World Wrestling Federation".

    1.2

    "Titan's Logo" means Titan's World Wrestling Federation logo in all forms appearing in Annex II attached hereto and made a part hereof and in any color or combination of colors selected by Titan.

    ARTICLE 2

    UNDERTAKINGS BY TITAN

    2.1

    Subject to the provisions of Article 5, Titan undertakes, whether acting directly or indirectly through its officers, servants, agents, subsidiaries, licensees or sublicensees, its television or other affiliates, or otherwise howsoever, and subject only to the terms hereinafter set out in this Agreement:

    (1)

    forthwith to cease and thereafter to refrain from using or causing to be used the Initials whether in printed or written or other visual form in any country of the world in or for the purposes of or in connection with its business;

    (2)

    with reasonable dispatch, in all countries to withdraw and to refrain from filing any application for registration of the Initials or any mark consisting of or including the Initials as a trade mark or service mark and immediately to cancel any registration of any such mark, except (a) Titan's logo, or (b) where such mark is consistent with the oral uses of the initials permitted only in Section 2.1 (6)(b) of this Agreement;

    (3)

    immediately to cease and thereafter refrain from using or causing to be used the Initials orally in any language in any country of the world in or for the purposes of or in connection with:

    (a)

    the promotion or sale of or in any other connection with any goods whatsoever;

    (b)

    the encouragement directly or indirectly of support including donations or otherwise for charitable or similar purposes; or

    (c)

    the promotion or sale of or in any other connection with any services, other than as permitted under Section 2.1 (6)(b);

    (4)

    not later than December 31, 1993 to notify all forms of media with whom Titan has agreements including public relations firms, press, magazine publishing houses, all television, video and film production houses or broadcasters to whom the right to broadcast Titan or Titan related programmes is granted, including broadcast, cable and satellite broadcasters of all relevant restrictions set out in this Agreement and request them with immediate effect to refer to Titan and its programming in their advertising and promotion of its progress and events whether orally or in writing by the name "World Wrestling Federation" and not by the initials and not to use the Initials in any manner whatsoever with reference to Titan or any of its activities; and

    (5)

    not later than December 31, 1993 to notify its licensees and sublicensees of all relevant restrictions set out in this Agreement and require them with immediate effect to observe the same subject only as hereinafter provided;

    (6)

    PROVIDED THAT nothing in the foregoing undertakings shall prevent any of the following:

    (a)

    the use of Titan's logo and/or the name "World Wrestling Federation";

    (b)

    the occasional use of the Initials orally, but only in the English language during Titan sports entertainment events presented in any language, whether prerecorded or live or whether televised or not, including in the story lines, interviews, comments, introductions and promotions of such events, etc. (e.g. "the current WWF champion"), provided that, Titan will use its best efforts not to use the Initials orally in scripted matter including story lines, comments, introductions or promotions;

    I interpolate that the agreement provided for certain things to be done by 31st December 1993 although in the end it was not signed until 20th January 1994. Nothing turns on this, however

    ARTICLE 3

    UNDERTAKINGS BY THE FUND

    3.1

    The Fund and each National Affiliate hereby undertakes as follows:

    (1)

    immediately to withdraw all legal actions pending against Titan, its officers, directors, employees, affiliates, and/or licensees; provided that, Titan shall make no financial claim of the Fund or any National Affiliate against a claim by any officer, director, employee, affiliate or licensee of Titan relating to any such legal action.

    (2)

    to refrain from instituting any legal action against Titan, its officers, directors, employees, affiliates, and/or licensees based on use of the Initials orally, Titan's Logo or the name "World Wrestling Federation" in compliance with the undertakings set out in this Agreement, and the Fund agrees to indemnify Titan, its officers, directors, employees, subsidiaries, affiliates, and/or licensees against any such action by any National Affiliate;

    (3)

    subject to Titan, whether acting itself or through its officers, directors, employees, subsidiaries, licensees and/or its television and other affiliates, complying with its undertakings set out in this Agreement, to refrain from instituting or threatening legal action against Titan, its officers, directors, employees, subsidiaries, licensees and/or its television or other affiliates based on trademark infringement, passing-off, alleged confusion, unfair competition, deceptive business practices or trade name abuse brought about by Titan's conduct of its business, and the Fund agrees to defend and indemnify Titan, its officers, directors, employees, licensees, subsidiaries and its television and other affiliates against any such action by any National Affiliate.

    ARTICLE 5

    UNITED STATES OF AMERICA

    This Agreement shall not apply to the United States of America as to the oral use of the Initials in relation to goods; however, this Agreement shall apply to the United States of America in relation to the printed, written, visual or other uses of the Initials upon or otherwise in relation to goods made or offered for sale by Titan or its licensees or the use of the Initials in any manner in connection with solicitation of charitable donations, otherwise the rights of Titan and of the Fund in the United States of America shall only be subject to that certain Letter Agreement between Titan and World Wildlife Fund, the United States affiliate of the Fund, dated September 12, 1989 (the "Letter Agreement") (a copy of which appears in Annex 3), with the Fund standing in the stead of World Wildlife Fund.

    ARTICLE 6

    INFRINGEMENTS

    6.1

    Should the Fund become aware of any use of the Initials by any party who is not licensed by or affiliated with Titan in connection with any goods or services related to wrestling entertainment or who is not licensed by the Fund in connection with any goods or services related to other sport entertainment events, the Fund shall use its best endeavors to notify Titan immediately. If any such use relates to wrestling entertainment, the Fund and the National Affiliates shall take all actions requested by Titan, at Titan's expense and under Titan's control, necessary to abate such use. If any such use relates to any other use of the Initials, at Titan's request, the Fund and the National Affiliates shall take all such actions as may be reasonable in the circumstances, at Titan's expense and under Titan's control, to abate any such use.

    ARTICLE 15

    SEVERABILITY

    Should any of the terms of this Agreement be or become fully or partly invalid, the legal validity of the Agreement shall not be affected thereby. This applies also to any possible omission which may be found in the Agreement. In such cases, this Agreement shall be supplemented by a provision which, as far as is legally possible, comes nearest to what the parties hereto had desired or would have desired according to the sense and purpose of the Agreement, if they had considered the point when concluding the Agreement.

    ARTICLE 16

    ENTIRE AGREEMENT: MODIFICATIONS

    16.1

    This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter of this Agreement and supersedes all prior discussions between them except the Letter Agreement, and no party shall be bound by any condition, definitions, warranties or representations with respect to the subject matter of this Agreement otherwise than as expressly provided herein or in the Letter Agreement.

    THE POST CONTRACT EVENTS

  13. The Federation initially complied with the contract. Its skeleton argument says it did so "as long as it reasonably could". For instance there is an example in the evidence of it asking the Daily Telegraph not to use the initials WWF (though the Telegraph refused to comply, saying it only did so in an obvious wrestling context). But since at least 1997 The Federation has simply ignored the contract. In particular with its adoption of the website address www.wwf.com in that year the Federation has more or less used the initials at will and on an increasing scale. It also dropped the block logo and went over to what was called the "scratch logo", an example of which is also annexed to this judgment. To my eye it is more obviously the initials than the block logo.

  14. The Fund eventually complained. Why it did not complain earlier is not explained, though Mr Morcom QC for the Fund suggested that it was because the Fund, being a charity, was more reluctant than a commercial organisation might be to enter into litigation. This action began last December. The application for summary judgment was only made following exchange of pleadings. The Federation have suggested that the trial might take as long as 8 weeks. The Fund say that none of that is necessary - the case is plain enough for a summary judgment.

    PRINCIPLES FOR SUMMARY JUDGMENT

  15. There was no dispute as to these. I have to be satisfied that the defendant has no real prospect of successfully defending the claim. It is immaterial in relation to that test that lengthy litigation is in prospect, see per Lord Hope in Three Rivers DC v Bank of England (No 3) 2001 2 All ER 513 at 546. What I am looking for is "absence of reality" to use Lord Hobhouse's words in Three Rivers at page 568b.

  16. The Federation's skeleton argument suggests I should also bear in mind that further evidence might become available and take that into account. Within limits I accept that the possibility of further evidence is a material consideration. However, there must be some reasonable basis for assuming that it might be available and be relevant. It is not enough to suppose that something might turn up out of the blue. It remains the law that a defence to a summary judgment application based upon "a case that is all surmise and Micawberism" per Sir Robert Megarry VC in The Lady Anne Tennant v Associated Newspapers [1979] FSR 298 at 303 will fail. In this case the Federation has put in a mass of evidence, both factual and expert. It is difficult to see what further material could emerge between now and the trial. The main suggestion was that there should be a detailed investigation of the Fund's world-wide use of WWF up to the date of the Agreement. The cost and expense of going into that for every country in the world might well be vast. I can see no useful purpose that would be served by the exercise: it is indisputable that by 1994, and indeed well before, the use was massive and had given those initials a high degree of notoriety with the world wide public. This is not the kind of case where there is an acute conflict of evidence of primary fact or where there is any reasonable prospect of anything significant emerging on disclosure. The overall picture is bound to remain the same at trial. Moreover, it is just that sort of investigation in all the parallel disputes around the world, which the settlement agreement was designed to avoid.

    THE COMMON LAW RESTRAINT OF TRADE DEFENCE: THE BATTLELINES

  17. Below I hold that on its true construction the Agreement prevents the use of WWF whether in upper case or lower case and moreover it also prevents the use of the scratch logo. There are limited exceptions but the Agreement prevents the Federation from using its website address or from selling from its website goods marked WWF. The Agreement very significantly impinges on what the Federation are doing now.

  18. On that basis (and indeed even on the less restrictive construction of the Agreement for which he contends) Mr Carr QC for the Federation submits that the restriction on the use of WWF by the Federation is a restriction in restraint of its trade. So he says, it is therefore, prima facie void at common law. He goes on to say that it is for the Fund to demonstrate that the relevant restrictions are reasonable. That it cannot do because it has no reasonable basis for wanting to prevent the use of WWF by the Federation given the parties' wildly differing activities. A fair summary of his submission is that the restraint is no more than a dog in the manger restraint: the Fund does not want to use the initials for wrestling but wants to stop the Federation from so doing. Moreover, submits Mr Carr, that if the Federation were compelled to drop WWF it would be involved in enormous expense and commercial risk. Mr Olins, a very well known successful and distinguished brand expert puts the current cost of change at $50m. I must accept that for present purposes, though I note that Mr Olins appears to be considering a complete name change rather than some modification of the existing name, e.g. to the Federation of World Wrestlers whose initials would not conflict with those of the Fund.

  19. Mr Carr further submits that the fact that the Agreement is in settlement of litigation or potential litigation is irrelevant, save to the extent that it may show how the parties at the time regarded their legitimate interests. What they agreed cannot be conclusive: if it is in unreasonable restraint of trade it will nonetheless be struck down. He submits that the true principle is that enunciated by Advocate General Slynn in BAT v Commission [1985] ECR 363 who said, at p. 369:

    The two key factors are (1) whether there is a genuine dispute between the parties concerning the use of a trade mark and (2) whether, in compromising the dispute, the terms of the agreement impose obligations that are reasonable in the light of the nature of the dispute and the extent to which the trade mark right could reasonably be expected to have been upheld.

  20. Moreover, submits Mr Carr, the contract cannot be regarded as one reached between parties of equal bargaining power. On the contrary the position was that the Fund, by its series of oppositions, threatened oppositions and threatened litigation around the world had declared world war on the Federation. This was at a time when the Federation was, so to speak, back on the ropes - so weakened by what was happening in the US that it really had no option but to surrender to the Fund's exorbitant demands.

  21. Mr Morcom submits that the contract is not in restraint of trade at all. Moreover if it is, very great weight must be placed on the fact that it was in settlement of world-wide disputes. After all, if the settlement of an intellectual property dispute by one party agreeing not to do something can be readily re-opened, moreover with an obligation upon the restrainor to justify that restraint then settlements will seldom have any value. He submits that the contract was between parties of equal bargaining power or at least that the Federation had sufficient power so to be regarded. Further the Fund had a real interest in the restrictions: they were not just pointless fetters on what the Federation could do. He emphasised that the Federation, having had all the benefits of the contract by way of disposal of trade mark disputes and obtaining of registrations, was now simply seeking to ignore its side of the bargain.

    GENERAL PRINCIPLES

  22. Before coming to contracts settling intellectual property disputes it is worth restating the general principle of law applicable to contracts in restraint of trade. They are void, that it to say unenforceable, unless they are reasonable. The classic statement is that of Lord Macnaghten in Nordenfeldt v Maxim Nordenfeldt [1895] AC 535 at 565:

    .... restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable - reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public, so framed and so guarded as to afford adequate protection to the party in whose favour it is imposed, while at the same time it is in no way injurious to the public.

    The onus of proof of reasonableness lies on the restrainor. Moreover:

    In every case it is necessary to consider first whether the restraint went farther than to afford adequate protection to the party in whose favour it was granted, secondly whether it can be justified as being in the interests of the party restrained, and, thirdly, whether it must be held contrary to the public interest.

    per Lord Reid in Esso v Harper's Garage [1968] AC 269 at p.300.

  23. In assessing the reasonableness of a restraint great weight is to be attached to a bargain made between experienced parties bargaining on equal terms. On the same page Lord Reid went on to say:

    Where two experienced traders are bargaining on equal terms and one has agreed to a restraint for reasons which seem good to him the court is in grave danger of stultifying itself if it says that it knows that trader's interest better than he does himself. But there may well be cases where, although the party to be restrained has deliberately accepted the main terms of the contract, he has been at a disadvantage as regards other terms: for example where a set of conditions has been incorporated which has not been the subject of negotiation - there the court may have greater freedom to hold them unreasonable.

  24. There is one other general point. The term concerned must of course impose a real commercial restraint - it must actually genuinely impinge on the restrainee's trade, actual or realistically prospective. For instance a clause preventing a man from selling cheese on the moon, pointless though it might be, would not be in restraint of trade. Normally, of course, disputes about the validity of a restraint are always in the context of a restraint which obviously has a real commercial effect. No-one bothers to ask whether that it be so. But there are other cases where there is a real preliminary question as to whether a stipulation is one in restraint of trade at all. Thus, for example, the House of Lords in Esso held that a normal negative covenant by a lessee preventing use of the demised site for a particular form of trading were not within the doctrine at all. This was because the lessee had no right to trade from the site unless he took the lease so in reality the lease, even with the restraint, was enhancing his liberty to trade. By way of contrast, in Stenhouse Australia v Phillips [1974] 1 All ER 117, a clause which required the payment of money by an ex-employee if he traded with a client of the ex-employer, was within the doctrine. As a practical matter "it would diminish his prospects of employment" see per Lord Wilberforce at p. 124. On the same page Lord Wilberforce set out the test:

    Whether a particular provision operates in restraint of trade is to be determined not by the form the stipulation wears but, the statement of the question itself shows, by its effect in practice.

    SETTLEMENT OF INTELLECTUAL PROPERTY DISPUTES AND THE RESTRAINT OF TRADE RULES

  25. How does this general law apply to settlement disputes and particularly settlement of intellectual property disputes? It is worth considering this from the point of view of fundamental principle. Intellectual property rights are free-standing rights to prevent the world at large doing the acts encompassed by the right. They are independent restraints on trade. A settlement of an intellectual property dispute which imposes a restraint must inevitably be considered in the context of an independent pre-existing restraint imposed by the intellectual property right itself, just as covenant in a lease must be considered in the light of the landlord's pre-lease ownership of the land itself. Thus if a party agrees not to infringe the right he does no more than agree to respect an existing right. A settlement agreement in those strict terms - "not to infringe a valid right" - is practically valueless - the restrainee could simply press on, saying his acts do not fall within the scope of the right or challenging its validity. If he were to do so the restrainor will have to prove his infringement case just as if there never had been an agreement. For that reason a practical settlement agreement must normally be framed otherwise than by reference to the scope and validity of the right: it must itself define what it is the restrainee must not do. If the law of contracts void as being in unreasonable restraint of trade applied to any such contract, then reasonable (or indeed any) settlement of intellectual property right disputes would not be possible. That cannot be right. It cannot be open to the restrainee simply to say: "look, there is a contractual definition of what I cannot do. That is in restraint of trade. So you, the restrainor, must justify it - that you can only do by establishing that the scope of your underlying intellectual property right is at least as wide as the restraint."

  26. Yet that is more or less what the Federation say the Fund should do in this case - hence complaints that it has only put in pre-contract merchandising contracts for 10 countries and have not supplied massive detail of its world-wide use of WWF both by date and extent. I do not think that a contract settling a claim for infringement of an intellectual property right should, simply because it contains a restraint, be regarded as one in restraint of trade thus requiring justification. Before the doctrine can apply at all I think it is for the party restrained to satisfy a threshold requirement - he must show that that the contractual restraint obviously overreaches the intellectual property right concerned. You look at the "stipulation in practice".

  27. I put an example of such a case to Mr Morcom. Suppose a patent for a particular kind of sparkplug. If a defendant sued for infringement agreed by way of settlement not to make sparkplugs at all, then there would be an obvious overreaching and the doctrine would apply. Suppose alternatively a case where, by the settlement agreement, the defendant merely agreed not to make a plug which on any reasonable view might fall within the claim. That would not to my mind attract the restraint of trade doctrine at all. The court would not conduct an inquiry as to whether the restrained plug actually fell within the claims of the patent, in effect conduct an infringement claim before deciding whether the restraint was in restraint of trade.

  28. Thus a restraint imposed by an intellectual property dispute settlement should only be regarded as falling with the restraint of trade doctrine (and thus require justification) if the restrained party can show that:

    1. the restraint actually imposes a real fetter on his trade; and

    2. the restraint goes beyond any reasonably arguable scope of protection of the intellectual property right in issue.

      If the restrainee can show that, the restrainor may nonetheless justify by showing

    3. that the restraint nonetheless provides a protection which he reasonably needs.

    I add C. because there may be cases where the restrainor can justify the restraint independently of or in conjunction with any intellectual property right. The ultimate question is whether the restraint is reasonable in all the circumstances. The restrainor's intellectual property rights are not necessarily the sole determinant of this.

  29. The validity of the right can be taken into account in assessing reasonableness. However the court will not make a detailed investigation of validity. Only to the extent that the right is obviously invalid will it be disregarded. An obviously invalid intellectual property right has correspondingly obviously no scope of protection. An attempt to justify a contractual restraint based on such a "no right" is like building on quicksand. A good example in the closely analogous area of Art.81 (once Art.85) of the Rome Treaty is the BAT/Toltecs case. BAT had entered into a contract with a company called Segers whereby the latter agreed not to use its mark Toltecs save in a limited way. The "justification" for the restraint was that BAT had an unused registered mark Dorcet. Quite apart from the fact that the marks are obviously different, BAT's registrations of Dorcet were completely vulnerable to non-use attacks. In truth BAT obviously had no rights justifying the restraint. Not surprisingly the restraint was held void. The trade mark dispute "justifying" the restraint was no more than a "contrived conflict" (the words of the Court, see para. 37).

  30. Mr Carr submitted that the strength or weakness of the underlying intellectual property right was irrelevant in deciding whether contract was in restraint of trade. He said that all one had to do was to look at the restrainor's actual trade and ask whether the restraint went further than was reasonably necessary to protect that. He referred me to Apple Corp v Apple Computers [1991] 3 CMLR 99. The case was technically concerned with the meaning of a pleading and the admissibility of an amended pleading. One of the issues was the extent to which, if at all, Apple Computer could argue that Apple Beatles' trade mark registrations in various countries could be impugned. It was held that it could not. The basis of this decision was that the reasonableness of the restraint depended on the actual trade conducted by Apple Beatles under the mark and not on the validity or otherwise of any registrations it might have. But the reason was that to the extent that Apple Beatles held registrations of marks registered for goods in which they had no interest, those registrations were invalid - just like BAT's Dorcet mark. Nicholls LJ put it this way:

    The plaintiffs could have no legitimate interest in seeking, as against the defendants to preserve registrations of their versions of the name and device in relation to Apple goods and services unless, put shortly, they had acquired a sufficient degree of goodwill or interest in consequence or their user or intended user of those marks for it to be reasonable, in all the circumstances, to restrain the defendants from using their versions of the same name and device in connection with Apple goods and services. A trade mark is an adjunct of the goodwill of a business (see Lord Diplock in General Electric Co v General Electric Co Ltd [1972] 1 WLR 729 at 742. Registration of a trade mark confers valuable rights on the proprietor, but the basic underlying purpose of the registration system is to facilitate the use of the mark as a mark in the course of business by the duly-registered proprietor. The proper and orderly use of trade marks is in the public interest. But the plaintiffs cannot have a legitimate interest in preserving registrations as such, that is, divorced from the conduct of a business in which the marks are being used or are intended to be used. So, once again, one comes back to the same questions of fact concerning the parties' businesses and their respective use and proposed use of the marks in question in 1981 and the foreseeable consequences of indefinite restraints on those businesses.

  31. I note particularly what was said by Taylor LJ at para 149:

    First, this was a settlement agreement. It was made on the footing that each party had some legitimate interest in its trade marks and logos which it wishes to protect. The agreement was drawn up specifically so as to avoid challenges and contests in a host of countries. It was implicit in such a settlement that the parties were not attempting a finite assessment of all their rights country by country. They adopted a broad brush approach. If one party to such an agreement, dissatisfied with his bargain, can by challenging its enforceability require the court to explore and adjudicate upon the validity and strength of the other's rights country by country, then such an agreement would totally fail to achieve its object of avoiding disputes and litigation. A settlement agreement would settle nothing. It would merely set the stage for the very lengthy and expensive litigation sought to be avoided.

    I think that is an important statement of principle, applicable here. What Taylor LJ is saying is that one does not go into the minutiae of the restrainor's rights around the world. One stands back and looks at the global picture when asking "does the restrainor have a reasonable justification for the restraint". Mr Carr invited me to give no weight to this passage, saying that neither of the other members of the court subscribed to it. On the other hand they did not dissent either. The passage is the embodiment of commercial and practical logic. I intend to apply it here.

    ARE THE RESTRAINTS ON THE USE OF WWF IN RESTRAINT OF TRADE?

  32. Mr Morcom said they were not - after all there was no actual fetter on what activities could be conducted by the Federation. He relied on Tatler Publishing v Illustrated Magazine, unrep. CA 10th October 1989, Fox, Nicholls and Ralph Gibson LJJ. The case concerned a contractual undertaking (actually in a Tomlin order) not to use the mark Tatler outside Hong Kong or Singapore). The court tentatively doubted whether a trade mark restraint required justification at all. Fox LJ said:

    Whether this is a case of unlawful restraint of trade at all is debatable. The doctrine normally arises in a case in which a person is prohibited from following his vocation for a period of time within a specified area - and to that extent he is prohibited from carrying on his trade or business. Whether that principle applies to a prohibition upon the use of a name or mark (as in the present case) may be another matter. The person under restraint is free to trade, provided that he does not use the particular name or mark.

    Ralph Gibson LJ said:

    It appeared on its face to be an agreement which did not restrict in any way the trade which any person might pursue save insofar as it provided for the future use, as between the parties, of certain names and trademarks in the trade which the parties conducted. As such it would appear in my judgment prima facie to fall within the category of contracts which the court might dispense from the necessity of justification under a pubic policy test of reasonableness. I refer to the passage in the speech of Lord Wilberforce in Esso Petroleum Co Ltd v Harper's Garage (Stourport) Limited [1968] AC 269 at 332G, [1967], All ER 699. He continued at p 333B of the former report "Absolute exemption ... is never obtained ... there may be some exorbitance or special feature in the individual contract which take it out of the accepted category: but the court must be persuaded of this before it calls upon the relevant party to justify a contract of this kind.

    And Nicholls LJ said:

    Restraint of trade. I am prepared to accept that there is scope for argument that sub-clauses (f) and (g) of Clause 4 of the Tomlin agreement are void as being in unreasonable restraint of trade. An obligation not to sell a product, such as a magazine, under a particular name is a restraint on the trading activities of the covenantor. The dearth of authority in which the validity of such an obligation has been challenged and the touchstone of reasonableness has been applied, leads me to conclude, not that the legal doctrine of restraint is wholly inapplicable to such cases in all circumstances, but that this is an obligation of a type which normally does not require justification.

    However, to adopt the language of Lord Wilberforce in Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269 at 333, in an individual contract, there may be some exorbitance or special feature which takes it out of the accepted category. The court must be persuaded of this before it calls upon the relevant party to justify such an obligation.

  33. I do not think this case helps - the members of the court were particularly careful not to decide whether a restraint simply preventing use of mark requires justification. I think the question involves more than just asking whether there is a trade mark restraint. Whether such a restraint is a really a restraint of trade depends on all the circumstances. There could be no doubt that an undertaking by the Kodak company not to use the mark Kodak would have a devastating effect on its trade, even though it would be free to market film by other names. So I look at the circumstances here. By 1994 the Federation had been using WWF for some time - the initials had acquired some importance in its trade, particularly in the USA but increasingly abroad too. To the extent that the agreement placed limits on what could be done in the future it was an actual fetter. I here apply the principle enunciated by Lord Wilberforce in Stenhouse - it is substance not form that matters.

    IS THE RESTRAINT JUSTIFIED?

  34. Given that the restraint is an actual fetter on trade, it is for the Fund to justify it. But of course in considering justification one must take into account the degree of restraint imposed - the more restrictive a restraint is, the harder it is to justify and vice versa. This restraint is not particularly restrictive. The Federation was able to live with it for a time and during that time its business increased. Mr Carr submitted that because the restraint was directed at the Federation's initials somehow it should be regarded as particularly onerous. I do not see why, and anyway its initials actually are WWFE or even WWFEI if one includes the "Inc."

  35. Given that the restraint is not particularly great, was it reasonably in the Fund's legitimate interest? I conclude that it was. This is because I think the Fund was entitled to be concerned by any possible association between it and the Federation. At the time the Federation clearly had a very insalubrious image (serious criminal charges and press allegations) but even more generally than that I can well see how the Fund would not want any possibility of association, conscious or subconscious. Many would find the Federation's activities meretricious. Some would say its glorification of violence is somewhat unsavoury. A glance at the October 1994 edition of the Federation's magazine indicates the kind of thing I have in mind. Of course there will be many others (perhaps most) who take a different view (harmless and perhaps enjoyable nonsense) but the Fund's interests clearly extends to all kinds of people. I think the Fund had a legitimate interest in any injurious association with the Federation, whether conscious or even sub-conscious. It had an interest in the initials remaining unsullied, in putting as much clear water as possible between it and the Federation. Moreover that interest is worldwide. One must take into account the possibility of association (commercial or otherwise) in many lands, in many tongues and by people who are not particularly familiar with the Federation.

  36. Mr Carr submitted that this notion of association was too wide. He pointed to the existence side by side of many well-known concerns with identical initials, AA for roadside assistance and assistance with alcoholism for instance. But there is a difference. Here, to a significant extent, the image of the Federation is antithetical to that of the Fund. This means that the Fund has a positive reason for wanting to avoid association even of a momentary kind. It is not wholly inconceivable that an old person, fond of animals, might, having briefly seen WWF used in association with wrestling involving women (in the press or perhaps even channel hopping) just decide to donate to the RSPCA instead. Why take a chance that there might be some sort of link-up?

  37. In one area there was the possibility of conflict of another sort - goods marked WWF. Both parties are into merchandising - just like the Fund the Federation have a toy bear, called a "bear with attitude," in relation to which it uses the scratch logo version of WWF. So, in the area of merchandising both parties wanted to use WWF for the same or similar types of goods. One can see why the Fund would want to restrict the Federation's use. Mr Carr submits that where there is identity of goods (e.g. toy bears) the context is enough clearly to differentiate the parties, but I am not so sure. The Fund had a legitimate interest in ruling out the possibility.

  38. Mr Carr sought to attack this notion of injurious association by saying there was simply no evidence of it after several years of breach of the agreement by the Federation. The Fund has put in evidence showing some evidence of muddles in e-mails and the post, but, says Mr Carr, this is no more than the sort of thing that happens whenever two businesses have similar initials. Mr Carr is largely right about this, though there is one letter from someone in Africa asking the Fund for the addresses of the Duke of Edinburgh, famously associated with the Fund, and one of the Federation's wrestler's. And a journalist writing up a Fund activity referred to some people wearing Fund T-shirts as loving "their matching Panda Wrestling Federation T-shirts". But I do not think that matters. This is not the sort of thing that is likely to give rise to documented evidence of confusion. What the Fund want to avoid is any insalubrious connotation when the initials WWF are used.

  39. It may well be that they could not have achieved that by legal action in many countries (here, for instance, success in a passing of action would seem improbable). In other countries they might have been more likely to succeed. I have particularly in mind Switzerland (see the proceedings mentioned above) and the Benelux countries where the doctrine of "association" was holding sway, see e.g. Lucas Bols v Colgate Palmolive (1976) 7 IIC 420 (Claeryn and Klarein for gin and lavatory cleaner respectively - association, even though non-commercial, would be damaging so actionable). The problem of non-commercial association has now been resolved for the EU, see Canon v MGM Case C-39/97 [1988] ECR I-5507 but it had not at the time of the agreement, see for instance the discussion by Laddie J in Wagamama v City Centre Restaurants [1995] FSR 713. The possibility of success for the Fund in some countries was realistic: the Federation was genuinely at risk at least of a patchwork of decisions around the world. Nor is it without significance that the Federation, although mainly on the receiving end of disputes, itself opposed the Fund's trade mark applications in some countries. These matters go to show that the disputes of the time cannot be dismissed as mere "contrived conflicts."

  40. Mr Carr attacked the restraints via another route. He pointed out that the restraint was not a complete blanket, preventing any use of WWF by the Federation. On the contrary it had gaps in it (e.g. the exception for the block logo and the lesser restraint in the US). Anyway journalists would be likely to go on using the initials. These gaps in the restraint showed that was not necessary, submitted Mr Carr. I do not agree. The gaps were the result of negotiation. The Fund was not able to secure a total blanket. But what it did secure, if the Federation had complied, would be a very significant diminution of the Federation's use of the initials and hence to the possibility of association.

  41. Another point taken by Mr Carr was in my opinion astonishingly poor. He submitted that even if the restraint would be regarded as legitimate if the Fund were a commercial concern, the Fund's status as a charity made things different. The submission presupposed that the Federation's use of WWF affected the Fund's fundraising. Mr Carr said that such an activity was not "trade" and so could not be justified. The law would be poor thing if that were so. I unhesitatingly reject the submission. It has no foundation in authority or fairness. Actually, the nearest one can get to authority is against Mr Carr: namely the analogous case of the status of a charity to sue in passing off. It does not have to be "in trade" to sue, see e.g. The British Diabetic Assn. v The Diabetic Society [1996] FSR 1.

  42. Accordingly I hold that the Fund did indeed have a legitimate reason for wanting the restraints and accordingly they are valid.

    EQUAL BARGAINING POWER?

  43. At the time of the agreement the Federation was under pressure from the, as it turned out, unjustified criminal proceedings brought in the US. The pressure was on the MacMahon's personally. Moreover there was financial pressure. Nonetheless no-one can doubt that the agreement was negotiated by a series of proposals and counterproposals with each party being fully represented. Nor can it be doubted that the Federation at the time was a substantial concern with a large and profitable multinational business. Mr Carr makes the bold submission that the agreement should be regarded as vitiated or at least regarded as unfair because the parties were not of equal bargaining power. He needs to make this submission because the authorities place such great emphasis on upholding commercial bargains freely negotiated.

  44. I reject the submission. The authorities do not call for a detailed examination of the relative financial strengths of the parties or the pressures under which their respective managements happen to be at the time. All that is called for is a proper negotiation between commercial parties. The contrast is with an agreement where one party not only is in a position to say "take it or leave it" but the other really has no choice.

  45. I accordingly think it is right to place great weight on the fact that the Federation agreed to the restraints - in return for which it got considerable advantages. I asked Mr Carr whether his clients intended to contend that, when signing the agreement they had no intention of abiding by it. They do not. That shows that at the time they thought they could conduct their business within the restraint - as indeed they did for a time. So the Federation itself did not regard the restraint as particularly onerous and was worth the settlement. It must abide by the bargain it made.

    ARTICLE 81

  46. Mr Carr also submits that the restraints fall foul of Art. 81. I asked what, if anything, this could add to the common law doctrine. The parties agreed that under Art. 81 one can look at the position now, whereas the common law looks at the position only at the time of the agreement but allowing for reasonably foreseeable business developments. I accept that for present purposes, though I am by no means sure that the common law is so supine - in principle I see no reason why it should not touch a restraint which has, over time, become in unreasonable restraint of trade. Suppose, for instance, a restraint by an employer on an ex-employee which becomes pointless because, during the period of the restraint, the employer ceases to conduct the relevant trade. At present, however, the authorities appear to be against such a notion, see per Robert Walker J in Dawnay, Day v D'Alphen [1998] 1068 at p.1075.

  47. The defence under Art 81 is muddled and confused. The pleaded case is to the effect that the restraint will affect the Federation's business and thereby enable its identified competitor to compete better. The evidence is not directed to the pleaded case at all - indeed it would seem that the Federation has taken over or gained control of that competitor. So one is left with the restraint simply affecting the Federation's trade. Neither in the evidence or the pleading is any explanation of how trade between Member States is affected, yet such an effect, actual or potential, is an essential jurisdictional requirement for the application of Art 81. It is certainly not self-evident that inter-state trade is affected - so far as one can see the Federation has none. There is also the problem of market definition - between whom is competition affected? The pleading is opaque on the point. So also is the report of Mr Aaronson.

  48. Putting aside all these problems (which alone mean the defence is unrealistic) I address the proposition that because the restraint is now much more onerous, Art 81 can bite. The argument only arises if the restraint was not within Art 81 at the time of the contract but would be within it if the contract were made now. I think one must ask why the restraint has become more onerous. The answer is because the Federation has broken the agreement by committing itself to WWF more - especially with the website. I think it is obvious that a changed circumstance brought about by a breach of the contract cannot be a material consideration. A party cannot rely upon its own breach of contract to escape from it.

  49. I conclude that there is nothing in the Art 81 point.

    SHOULD THE COURT WITHHOLD AN INJUNCTION?

  50. Mr Carr submits that even if the restraint is valid and enforceable the Court should not grant an injunction to enforce it. He submits that the remedy of an injunction is discretionary and that in the absence of proof of specific likely harm the Fund should be left to a remedy in damages. It is a bold submission and I reject it.

  51. Mr Carr's argument brings him into conflict with the oft-quoted dictum of Lord Cairns LC in Doherty v Allman [1878] 3 App. Cas 719 at 720:

    If there had been a negative covenant, I apprehend, according to well-settled practice a court of Equity would have no discretion to exercise. If parties, for valuable consideration, with their eyes open, contract that a particular thing shall not be done, all that a Court of Equity has to do is say, by way of injunction, that which the parties have already said by way of covenant, that the thing shall not be done; and in such a case the injunction does nothing more than give the sanction of the process of the Court to that which is already the contract between the parties. It is not then a question of the balance of convenience or inconvenience, or the amount of damage or of injury, - it is the specific performance, by the Court, of that negative bargain which the parties have made, with their eyes open, between themselves.

  52. Mr Carr referred me to Meagher, Gummow and Lehane, Equity Doctrines and Remedies 3rd ed pp.568-569 and Spry, Equitable Remedies, 5th ed at pp.585-588. Both sets of authors suggest that Lord Cairns' dictum goes too far: that there may be cases where the court would refuse to enforce a negative stipulation, for instance where there was laches. Finally Mr Carr relied upon the dicta of Sir Thomas Bingham MR in Jaggard v Sawyer [1995] 2 All ER 189 at 202j-204a. There a permanent injunction to restrain breach of a negative covenant and trespass was withheld on the basis that the injury to the plaintiff's rights was small, capable of being estimated in money and an injunction would be oppressive.

  53. I see the force of all that. But I do not propose to examine the legal problem further. This is not a case where there is a minor infraction of a minor obligation: the obligation lies at the heart of the agreement. The Federation has had the benefit of the agreement. Equity, looking to the Federation's conscience, will hold it to the bargain it made. There is no case for withholding an injunction here.

    THE SCOPE OF THE RESTRAINTS

  54. As I indicated earlier there are several disputes as to the scope of the restraint. Above I have proceeded on the basis that the restraints, broadly, prevent the Federation from using the initials for goods and whether or not in lower or upper case. I must now turn to the arguments raised by Mr Carr for a lesser scope. They are all points of construction of the contract.

    A. Is the restraint so far as it applies to visual representations limited to the letters WWF in capitals?

  55. The real significance of this point relates to the Federation's adoption of the website www.wwf.com. Clause 1.1. defines "Initials" as "the initials WWF in any language but does not include Titan's logo or the name 'World Wrestling Federation." To my mind it is clear that this definition covers the initials whether in upper or lower case: letters in lower case are as much initials as they are in upper case. I can see no point in the agreement failing to touch lower case initials. If it were intended to permit these it would have said so, just as it permitted the defined forms of the logo. Moreover there are clear indications in the agreement that the parties were indifferent as to typeface or case there would hardly be any point in placing limits on the oral use of the initials if the agreement were limited to upper case use. Nor could there be any sensible purpose in the infringements by third parties clause (6) being limited to use by third parties in capitals.

    B. Does the Agreement permit registration or use of the website www.wwf.com?

  56. The argument here was for an implied term permitting such use. The argument is hopeless. Both sides knew about the internet at the time of the agreement - indeed the Fund had registered www.wwf.org. The Federation could have asked for permission to use a wwf address. It did not and there is no need to imply a term permitting such use after all plenty of other addresses were and are in principle workable. Clause 16 (the entire agreement clause) puts any such implied term even further beyond argument.

  57. An attempt to bolster the argument was based on Art. 5 which permits oral use of the Initials in the USA, but not use upon goods. It was suggested that somehow the less restrictive regime permitted in the USA permitted the website address. I do not understand this: after all the Federation seeks to sell goods all over the world via its website and written use of the initials in relation to goods remains forbidden. Even if use on goods was permitted in the US but not elsewhere, I can see no reason why that permission should extend to a website which was intentionally directed at the whole world.

    C. Can Art. 15 permit use of the website address?

  58. Art. 15 is concerned with the possibility of invalidity of the agreement. It provides on the one hand for the severance of any invalid clause and on the other for the introduction of a "possible omission" of what, clearly, is a clause, which might be necessary to cure invalidity. I see no possible application of this clause to permit world-wide use of the website address there is no invalidity to be cured by the introduction of such a clause.

    D. Does the Agreement permit use of the "scratch" logo?

  59. The Agreement permits "the use of Titan's Logo". That is defined as "Titan's World Wrestling Federation logo in all forms appearing in Annex hereto". Given that definition "Titan's logo" cannot mean any logo as used by Titan from time to time. The scratch logo is not a form appearing in the Annex. Nor can it fairly be regarded as variant of one of those forms. It is self-evidently not permitted. The permission does not extend to any logo consisting of the letters WWF.

    THE FUND'S APPLICATION TO AMEND BY ADDING A CLAIM FOR AN ACCOUNT OF PROFITS

  60. The Fund wishes to amend its Particulars of Claim to add a claim for:

    An order that the Defendant account to the Claimants for all profits that it has made by using the initials WWF otherwise than as permitted by the terms of the Agreement.

    The justification for this order is in a proposed new paragraph which reads:

    Further the Claimants seek an order that the Defendant account to the Claimants for all profits that the Defendant has made by its use of the initials WWF in breach of the Agreement. The Claimants contend that an account of profits is an available remedy for breach of contract in the circumstances of the present case. The circumstances are:

    11.1

    the Defendant has done the very acts that it expressly agreed that it would not do;

    11.2

    the Defendant's breach of the Agreement have been deliberate, widespread and repeated;

    11.3

    an account of profits is an available remedy for trade mark infringement and should therefore as a matter of principle be available for breach of a trade mark delimitation agreement;

    11.4

    the purport of the Defendant's defence (for example at paragraph 23 of the Defence and Counterclaim) is that the Defendant intended or considered it likely that when it signed the Agreement it would disregard its obligations under the Agreement;

    11.5

    the difficulty of obtaining full compensatory damages not only for the Claimants but also for the National Affiliates who operate world wide;

    11.6

    the inadequacy of protecting the Claimants from past breaches by way of injunction.

  61. I say nothing about how, if such an account were ordered, it could work other than to ask, rhetorically, how it could be shown that the Federation had made profits from the use of the initials as distinct from its actual commercial activities and the use of its full name. Fortunately I do not have to try to answer that question - I simply have to decide whether it should be answered.

  62. It used to be thought that the equitable remedy of account of profits was not available for breach of contract. But the House of Lords has held otherwise in AG v Blake [2001] AC 268. In that case a spy had to account for the profits he made from his memoirs. However the majority speeches in the House make it clear that the remedy is very exceptional. Thus Lord Nicholls (with whom Lords Goff, Browne-Wilkinson and Steyn agreed) having held that, "exceptionally, an account of profits may be the most appropriate remedy for breach of contract" went on to consider when it might be available. He said:

    A useful general guide, although not exhaustive, is whether the plaintiff had a legitimate interest in preventing the defendant's profit making activity, and hence in depriving him of his profit.

    Lord Nicholls then went on to consider situations where it would not be available. One of these is a negative covenant. He said:

    The second suggested category was where the defendant has obtained his profit by doing the very thing he contracted not to do. This category is defined too widely to assist. The category is apt to embrace all express negative obligations. But something more is required than mere breach of such an obligation before an account of profits will be the appropriate remedy.

    And three further categories were ruled out as individual factors:

    Lord Woolf MR [1998] Ch 439, 457, 458, also suggested three facts which should not be a sufficient ground for departing from the normal basis on which damages are awarded: the fact that the breach was cynical and deliberate; the fact that the breach enabled the defendant to enter into a more profitable contract elsewhere; and the fact that by entering into a new and more profitable contract the defendant put it out of his power to perform his contract with the plaintiff. I agree that none of these facts would be, by itself, a good reason for ordering an account of profits.

  63. When I look at what are ruled out by Lord Nicholls, and compare it with the list of factors in the proposed pleading I can see nothing which makes this case of the exceptional character called for by the decision in Blake. All one really has here is a negative covenant. The fact that it relates to use of initials and so is a bit "trademarkish" or "IPish" does not mean the common law should provide what Parliament provides by statute for an infringement of a registered mark or intellectual property right. It would indeed be odd if breach of an ordinary full restraint of trade clause (e.g. not to work in a defined area at a defined job for a defined period of time) did not attract an account, whereas breach of a lesser restraint (not to use a mark in a trade otherwise permitted) did. I conclude that the proposed amendment should not be allowed.

  64. I will hear counsel as to the appropriate order.


Cases

Three Rivers DC v Bank of England (No 3) 2001 2 All ER 513; The Lady Anne Tennant v Associated Newspapers [1979] FSR 298; BAT v Commission [1985] ECR 363; Nordenfeldt v Maxim Nordenfeldt [1895] AC 535; Esso v Harper's Garage [1968] AC 269; Stenhouse Australia v Phillips [1974] 1 All ER 117; Apple Corp v Apple Computers [1991] 3 CMLR 99; Tatler Publishing v Illustrated Magazine, unrep. CA 10th October 1989; Lucas Bols v Colgate Palmolive (1976) 7 IIC 420; Canon v MGM Case C-39/97 [1988] ECR I-5507; Wagamama v City Centre Restaurants [1995] FSR 713; The British Diabetic Assn. v The Diabetic Society [1996] FSR 1; Dawnay, Day v D'Alphen [1998] 1068; Doherty v Allman [1878] 3 App. Cas 719; Jaggard v Sawyer [1995] 2 All ER 189; AG v Blake [2001] AC 268.

Legislations

Treaty of Rome: Art.81

Authors and other references

Meagher, Gummow and Lehane on Equity Doctrines and Remedies, 3rd ed

Spry on Equitable Remedies, 5th ed

Representations

Christopher Morcom QC and Mark Brealey for Claimants (instructed by Edwin Coe)

Christopher Carr QC, Siobhan Ward and Emma Himsworth for Defendant (instructed by S J Berwin)


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