Trade mark threat allowed because of 'without prejudice' rule

Worldwide Sales Corporation owns European trade marks for some combinations of the term 'best buy' and objected to Best Buy's attempts to register that term for its electronic goods sales business in Europe.

Worldwide's two trade marks incorporate the term 'best buy' with logos and other words. The company objected to Best Buy's attempts to register trade marks in that name and opened negotiations on how to resolve the situation.

It wrote to Best Buy saying that it would be prepared to let the company use the disputed terms in return for payment.

"[If Best Buy] were to remain interested in using the 'Best Buy' trademark in Europe [Worldwide Sales Corporation] would be prepared ... to reach a negotiated solution which would enable [Best Buy] to do so while at the same time compensating [Worldwide] for the cessation of its activity that this would undoubtedly entail," said a letter sent by lawyers acting for Worldwide.

That letter also indicated what would happen if negotiations failed, though. It said that Best Buy's activity was in "conflict with the intellectual property rights duly registered by [Worldwide] in Spain and Europe which would entitle it to take the appropriate legal action to defend its interests".

Making certain kinds of threats to sue is a breach of the UK's Trade Marks Act. There are exceptions to that rule, but Mr Justice Floyd in the High Court said that Worldwide had not met the terms of those exceptions.

The judge said that the letter sent on Worldwide's behalf, though not fully explicit, would have been understood as a threat to sue.

"It seems to me that the recipient would understand from the ... letter in the clearest terms that proceedings for infringement of trade mark were being threatened," he said in his ruling.

Negotiations that are genuine attempts to settle disputes without going to the courts, though, are specially protected. Things said and done in an attempt to settle an action cannot be held against someone in the court proceedings that result from a failure to settle the dispute.

These words and actions, which are said to be 'without prejudice' to any subsequent court case, are protected in a bid to encourage settlement rather than expensive litigation when people or companies are in dispute.

The High Court said that Worldwide's letter was protected by this rule.

"In my judgment the ... letter was part of a negotiating process and falls within the protection of the without prejudice rule," said Mr Justice Floyd. "Having been invited by [Best Buy] to negotiate within the [trade mark opposition] cooling off period, with [Best Buy] plainly asserting the strength of its own position, [Worldwide]'s response was doing no more than the same thing in relation to its own rights."

"Parties are to be expected, if invited to negotiate, to start from a position of strength, and then to indicate where concessions might be possible. The ... letter indicated, for example, that notwithstanding [Worldwide]'s monopoly position in Europe under these trade marks, potentially giving it the right to exclude [Best Buy] altogether by litigation, it might be prepared to give up those rights in return for money," he said. "That is a concession, albeit a limited one, which in accordance with the public policy basis for the rule, attracts the protection of the privilege."