Out-Law / Your Daily Need-To-Know

MBNA v Freeman

Out-Law Guide | 02 Nov 2007 | 8:31 am | 5 min. read

MBNA claimed that Mr Freeman was infringing its registered trade mark by using the domain www.mbna.co.uk. The Court decided to hold a full trial to decide the issue, and ordered that Mr Freeman must not sell the domain in the meantime.

(1) MBNA America Bank NA and (2) MBNA International Bank Limited v Stephen Freeman

  • [2001] E.B.L.R. 13

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Facts

The Claimant is the largest independent credit card issuer in the world and offers numerous other related services.  It has had large scale operations in the UK since 1993.  MBNA conducts business from the website “www.mbna.com” and other similar registered domain names.

The Defendant runs a banner exchange business that enables a customer to advertise on the website of another company in return for allowing two other companies to advertise on its site.  The Defendant registered the domain name “www.mbna.co.uk” and described the business as “Marketing Banners for Net Advertising”.

In August 1999 MBNA realised the existence of the mbna.co.uk domain name but took no action at that stage.  In March 2000 the Claimant, via its agent, sent a letter to the Defendant asking for the domain name to be transferred to it.  The Defendant declined.  Consequently, MBNA issued proceedings against the Defendant for passing off and trade mark infringement.

MBNA argued that people searching the internet for its site were as likely to try www.mbna.co.uk as www.mbna.com.  MBNA relied on the authority of British Telecommunications Plc v One in a Million Limited [1999] FSR 1.  It claimed that business would be lost from those potential customers who looked no further than the Defendant’s site.  It also claimed that the potential quality of the Defendant’s service might reflect adversely on MBNA as some users might believe it owned or licensed the service.  An interim injunction was sought on the following terms:

to stop the Defendant activating a website with the domain name or any domain name including “mbna,” that allegedly infringed the Claimant’s registered trade mark; and

  • to prevent the Defendant from selling or dealing with the domain name.

Judgment

MBNA had an arguable case and in considering whether to grant or refuse an injunction the court looked to the balance of convenience and to which outcome would result in the least harm to the parties, if the injunction were granted/not granted.

The learned Judge did not accept the Claimant’s argument that the domain name used by the Defendant would lose it business.  Even if the Defendant’s site did not exist, people trying to access MBNA would be faced with a dead end if they attempted www.mbna.co.uk.  Those people who decided not to search again upon finding the Defendant’s site were no more likely to search again if faced with a dead end; meaning that in both scenarios MBNA’s website would not be accessed.

The Judge decided that MBNA had not established a real risk that in the 3 to 5 months leading up to the trial (an expedited trial was ordered) there would be any real loss of business beyond that sustained (if any) by the site not being there in the first place.

The learned Judge considered that MBNA had not established a real risk of uncompensatable damage, and it would be wrong to grant an injunction merely because it would do little harm to the Defendant.  With reference to the fact the Defendant had no intention of activating the site before the trial, the Judge recognised that the Defendant still wanted to be in a position to take advantage of all business opportunities.  Thus, if granted, an injunction would cause the Defendant inconvenience and uncertainty even though an application to vary it could be made.

The argument that possibly the quality of the Defendant’s service may reflect adversely on MBNA was not accepted either because:

  • potential users of a banner exchange service are likely to be sophisticated internet  users and are therefore unlikely to be confuse the relationship between the two sites;
  • evidence in the form of a Daily Mail article reinforced the Defendant’s business competence.

As concerned the injunction to prevent the Defendant from selling the domain name, the Judge accepted that the value of the web site might be increased by the number of visitors to the site.  Thus, he agreed that it would be unacceptable to leave the Defendant in a position to sell the domain name before the hearing, at a price which might be inflated by improper use of the Claimants’ goodwill.

Thus the injunction preventing the Defendant from using the domain name or operating a website was refused.  However, an injunction preventing the Defendant from selling or dealing with the domain name prior to the trial without leave of the court was granted.

Commentary

These cases do not create new law but are interesting examples of the application of the law after the One in a Million case.

That case went to the Court of Appeal.  Aldous LJ said,

"In my view there can be discerned from the cases a jurisdiction to grant injunctive relief where a defendant is equipped with or is intending to equip another with an instrument of fraud.  Whether any name is an instrument of fraud will depend on all the circumstances.  A name which will by reason of its similarity to the name of another inherently lead to passing off is such an instrument.  If it would not inherently lead to passing off, it does not follow that it is not an instrument of fraud.  The court should consider the similarity of the names, the intention of the defendant, the type of trade and all the surrounding circumstances.  If it be the intention of the defendant to appropriate the goodwill of the other, or enable others to do so, I can see no reason why the court should not infer that will happen, even if there is a possibility that such an appropriation would not take place.  If taking all the circumstances into account the court should conclude that the name was produced to enable passing off, is adapted to be used for passing off and, if used, is likely to be fraudulently used, an injunction will be appropriate.  It follows that the court will intervene by way of injunction in passing off cases in three types of case: first, where there is passing off established, or it is threatened; secondly, where the defendant is a joint tortfeasor with another in passing off either actual or threatened; thirdly, where the defendant has equipped himself with or intends to equip another with an instrument of fraud.”

The passage has been given in full, as it has been relied on as an authoritative statement of the law in this area.  Its application in these two cases, with different results for the claimant, show the sorts of reasoning the courts will use in coming to decisions.

From the facts given by the judge in Britannia, it seems that the defendant was always going to have a harder job convincing a court that it had bona fides in registering its domain name.  The judge described the Defendant's explanation as “wholly incredible” and it therefore seems to fall squarely within the third category described by Aldous LJ in the above passage.

The Defendant in the MBNA case, on the other hand, seemed to have a far more credible explanation.  The result for this reason is very interesting.  Given the procedure for an expedited trial and the timescales involved, the court was not prepared to grant an injunction against the defendant to prevent the website being activated but was prepared to stop the registration being passed to a third party who might not have a bona fide reason for wanting that registration.  As the court found, the value of the mark might well be inflated because of the simple reason that it could become, in the wrong hands, an “instrument of fraud”.

The lesson for all domain name owners is that success is not guaranteed, and that a thorough review of the evidence will be necessary as a court will not automatically assume a defendant has no reasonable explanation for its own registration.