New remedy to attack bad-faith trade mark applications

It is well established that a claimant may sue for passing off or trade mark infringement where a third-party has illegitimately “hijacked” their domain name. This is what happened in the landmark One in a Million case in the 1990s, where the defendant – a “cybersquatter” – had registered domain names that incorporated the names of well-known companies (British Telecommunications, Marks & Spencer and others), and then offered them for sale to those companies. In the One in a Million case, it was held that registration of domain names could amount to passing off and a domain name could be an “instrument of fraud”.

A more recent decision in 2021 – Litecoin v Inshallah – has extended the law set down in the One in a Million case. Now, an injunction can be used to fight trade mark applications made in bad faith: if an applicant has no connection with the trade mark or no intention to use it, an application can amount to passing off and (in some circumstances) an “instrument of fraud”. This is good news for brand owners who now have additional means to protect their intellectual property rights.

The Litecoin case

The Claimant, Litecoin Foundation Limited (“LFL”), promoted and developed Litecoin, a cryptocurrency launched in 2011. The Defendants were two companies, Inshallah and Nasjet (both of which were non-trading), and an individual – Mr Pepin – who was sole shareholder and director of both companies.

Inshallah filed a UK trade mark application in 2017 for the word mark “LITECOIN”. LFL asked Inshallah to surrender its application. No agreement could be reached, so LFL filed its own trade mark applications for “LITECOIN”, which were opposed by Nasjet. In 2018, Nasjet changed its name to “Litecoin Exchange Limited”. LFL then issued proceedings in the Intellectual Property Enterprise Court. The relief sought by LFL included an injunction to restrain the Defendants from passing off any goods, services or business as those of LFL.

The court granted the injunction. It found that Inshallah’s trade mark application (which appeared in a publicly accessible journal) did give rise to a misrepresentation to the public. It also found that this application and the registration of Nasjet’s change of name constituted “instruments of fraud”. The Defendants had no connection with Litecoin, and no intention to use the mark they were seeking to register; they were merely seeking to benefit from the goodwill LFL had built up in the name “Litecoin”. Mr Pepin’s history of registering and selling domain names and trade marks in bad faith was seen by the court as relevant evidence to support its decision to grant an injunction.

The first instance decision was upheld on appeal. The appeal judge decided that when filing a trade mark application, the applicant must confirm that “the trade mark is being used by the applicant, or with his or her consent, in relation to the goods or services shown, or there is a bona fide intention that it will be used in this way”. If a party makes an application to register a trade mark with no genuine intention of using that mark, this can amount to an actionable misrepresentation for the purposes of passing off. In the Litecoin case, it was clear that the only reason the Defendants had for registering the “LITECOIN” trade mark was passing off – ie they sought to misrepresent that they were connected to LFL and thereby benefit from the goodwill LFL had established.

The appeal judge agreed that it was appropriate to consider the Defendants’ previous conduct. This was in line with the decision in the One in a Million case, where it was held that “the intention of the defendant, the type of trade and all the surrounding circumstances” should be considered by the court when it comes to instruments of fraud.

What does this mean for brand owners?

This is an important decision for brand owners. The usual procedure to try and stop a trade mark becoming registered is by way of filing an Opposition; now, brand owners may choose to pursue a different cause of action and seek an injunction to restrain passing off at the trade mark application stage. This option is likely to be particularly appropriate where a brand owner suspects that the applicant is acting in bad faith (as was the case with Mr Pepin and his companies).

Also helpful to brand owners is the fact that they do not need to prove actual damage or even that damage will certainly occur. To obtain an injunction to prevent passing off, the court must just be satisfied that the trade mark application in question is calculated to infringe the claimant’s rights in future.

If you require further information about anything covered in this briefing, please contact Ian De Freitas, Lucy Penn, or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, November 2021