Jurisdiction on the Internet – not such a barrel of laughs for Euromarket!

August 31, 2000

The Facts
The US-based claimant ran chain stores selling furniture and household goodsunder the mark Crate & Barrel and had a UK registered mark for the mark fordomestic and garden items in class 21. However, the judge found that they didnot in practice trade in the United Kingdom.

The defendants rana shop in Eire called Crate and Barrel and had been trading there since 1994 andhad a turnover of about £1M, although it said it would have difficulty fightinglitigation against the larger claimant. In practice it did not trade in theUnited Kingdom either. However, the claimant alleged two acts of infringement inthe UK, an advertisement in Homes & Gardens magazine in the UK and a Website upon which the Crate and Barrel mark was used. A hurricane lamp and abeaded coaster were sold on the site and this fell within the goods covered bythe claimant’s UK registered trade mark.

The claimantapplied for summary judgment, alleging that at a meeting between the parties thedefendant admitted that it got the idea for its name from one of theclaimant’s shops in the US.

The defendantclaimed there was no use of the mark in the course of trade in the UnitedKingdom and that in any event it was fair use of own name. It was denied thatthe name had been ‘copied’. The defendant Peters pointed out she was apublican’s daughter and said this explained her choice of name. She said shehad no customers in the UK and said she did not expect her Web site or magazinearticle to drum up UK custom.

The Ruling
The judge dismissed the application for summary judgment against thedefendants. He held that for the purposes of the summary judgment application hehad to assume that there was no copying and this was important when it came toconsidering whether the defendant’s conduct was honest.

The claimantargued that the presence of the advertisement in a UK magazine was enough to beuse in the course of trade in the United Kingdom. However, the judge thoughtthat it was necessary to inquire as to the purpose and effect of theadvertisement in question. Normally an advert in a UK magazine would be intendedto drum up UK business and will do so, but this was not a normal case. This wasan advertisement for an Irish shop in a magazine which had Irish and UKcirculation.

The right question, I think, is to ask whether a reasonable trader would regard the use concerned as “in the course of trade in relation to goods” within the member state concerned. Thus if a trader from State X is trying to sell goods or services into State Y, most people would regard that as having a sufficient link with State Y to be “in the course of trade” there. But if the trader is merely carrying on business in X, and an advertisement of his slips over the border into Y, no businessman would regard that fact as meaning that he was trading in Y. This would especially be so if the advertisement were for a local business such as a shop or a local service rather than for goods. One needs to ask whether the defendant has any trade here, customers buying goods or services for consumption here. … On the facts here, I think the advertisement in Homes & Gardens is not an infringing use. I recognise that my view is provisional, this being only an application for summary judgment. Ultimately, the question of to what extent national trade mark law is permitted to impinge on trade within other countries may have to be considered by the European Court of Justice.’

The judge then went on to develop this reasoning and considerthe Web site. He was of the opinion that, with regard to the Web site, thelocality was even clearer. The Web site was attached to an .ie domain name andit was fairly obvious in the opinion of the judge that the site related to ashop in Ireland. He felt that there was no reason why anyone in the UK shouldregard the site as directed to him, commenting ‘So far as one can tell, no onehas’. He went on:

‘Whether one gets there by a search or by direct use of the address, is it rational to say that the defendants are using the words “Crate & Barrel” in the UK in the course of trade in goods? If it is it must follow that the defendants are using it in every other country of the world. … In 0800 Flowers [another of Mr Justice Jacob’s judgments] I rejected the suggestion that the Web site owner should be regarded as putting a tentacle onto the user’s screen. Mr Miller here used another analogy. He said using the Internet was like the user focusing a super telescope into the site concerned; he asked me to imagine such a telescope set up on the Welsh hills overlooking the Irish Sea. I think Mr Miller’s analogy is very apt in this case. Via the web you can look into the defendant’s shop in Dublin. Indeed the very language of the Internet conveys the idea of the user going to the site – “visit” is the word. Other cases would be different – a well known example, for instance, is amazon.com. Based in the US it has actively gone out to seek worldwide trade, not just by use of the name on the Internet but by advertising its business here, and offering and operating a real service of supply of books to this country. These defendants have done none of that.’

Even if jurisdiction had been established, the judge held thaton these facts the claimant’s action may still fail on the grounds that thedefendant had the defence of honest use of own name. The judge was of the viewthat the own name defence did apply to the names of companies as well asindividuals even though a company name had much more chance of being chosen bythe defendant. He acknowledged that there could be circumstances where a companyusing its own name may have built up its own goodwill in an honest manner. Hewas clear that anyone who chose a name knowing of a previous business of thesame name with goodwill and reputation in the name would be unlikely to beconsidered to be using in accordance with honest business practices. However, totake advantage of the defence, it was not necessary always to use Limited andInc as part of a formal title. Nor was it necessary to show that the name inquestion was known by the public to take advantage of the defence. Clearly, ifuse of the name amounted to passing off the goods of the defendant company asthose of the claimant then it would not be in accordance with honest businesspractices and the defence would fail. Here the judge was clear that there was noquestion of the defendant doing anything dishonest and so its defence might wellsucceed on this point.

Finally, and nodoubt to the claimant’s added frustration, the judge held that there was arealistic prospect of the claimant’s UK trade mark registration being foundinvalid due to non-use for five years. The minimal use the claimant could showin the United Kingdom was, in any event, arguably in relation to retail servicesand in relation to the claimant’s shop, and not the furniture goods sold bythe claimant, the goods for which the claimant had a registration. It wastherefore questionable if use in relation to a shop name alone could support theuse of a trade mark registered for the specific goods sold by the shop.

Practical Tips
Bearing in mind this decision, I would suggest a practical approach tochoice of jurisdiction as follows:

  1. Look to see if there is a contract between the parties and if so if jurisdiction has been agreed.

  2. If not, as a general rule sue the defendant in his domicile if you can. It may be an option to consider where the defendant’s computer servers are based.

  3. If not, you may be able to sue in the jurisdiction of your choice if you can show a sufficient trading connection with that jurisdiction and therefore damage caused by the offending site. US authorities such as the most recent Peepers.com case in Texas suggest that sufficient trading connection will be interpreted to mean actual trading with citizens of that jurisdiction and that passive sites (ie simple information sites) won’t be enough. The decisions of Jacob J in the United Kingdom in the 0800 Flowers and Euromarket cases suggest the position will be the same for trade mark cases in the UK.

  4. Bear in mind that the court may take a public policy approach and may not be prepared to give an injunction to prevent a national distribution, if the real effect of this is a worldwide ban due to the way the Internet works without boundaries. Whilst there have been decisions against foreign defendants in France and Germany which have led to a worldwide ban, in the Australian decisions of Macquarie Bank Limited v Berg and the US decision Barrett v Catacombs Press (both defamation cases) the courts declined to exercise jurisdiction on this public policy basis.

My motto as a litigator is to go for the spider in the Web ifyou can, ie sue the defendant where he is based unless there are compellingreasons not to. His home court will be much more likely to be willing to act tostop his activities than a court asked to take action at a distribution point onthe edge of the Web where the defendant has no real presence.

This is an areawhere developments are likely to take place in the near future. The EuropeanDirective onE-commerce seeks to introduce a country of origin principle forEuropean service providers so that they need to comply only with the laws of theMember State in which they are based, although there may be exceptions such asconsumer contracts. The World Intellectual Property standing committee on trademarks is currently examining a draft proposal concerning protection of trademarks on the Internet. The deliberations include a consideration of the factorsthat trade mark registries should take into account in determining whether useof a sign on the Internet has produced a commercial effect in any particularState. This, of course, also has jurisdictional implications. Finally, the caselaw itself is new and emergent and this may not be the last word in a difficultarea. For example, if the case had involved copyright or confidentialinformation where the value is in the information itself, the result might wellhave been different even if the site was only aimed at the Irish market. Theseand other questions remain unanswered in the UK, but Mr Justice Jacob’sdecisions are pragmatic and sensible in the context of trade marks and are inline with thinking on Internet jurisdiction in trade mark cases in othercountries such as the US. Accordingly, the decisions are likely to provide goodguidance for cases with similar facts in the UK in future.

Dawn Osborne is a Partner in Willoughby & Partners. Shecan be contacted at dawn@iprights.com