2 March 2016

The Eastern High Court: Pressalit infringed Tivoli's trademark and breached the licence agreement

In January 2016, the Eastern High Court ruled in the appeal proceedings between Tivoli A/S and Pressalit Group A/S. The proceedings concerned the construction of a licence agreement concluded between Pressalit Group A/S and Tivoli A/S concerning the use of the word mark TIVOLI, including whether Pressalit Group A/S had infringed Tivoli A/S' rights and whether Tivoli A/S' termination of the licence agreement was lawful.
Jens Jakob Bugge, partner at Horten, represented Tivoli A/S during the proceedings.

TERMINATION OF LICENCE AGREEMENT AND LEGAL ACTION

In 2003, the parties concluded a licence agreement retroactively in the light of Pressalit's already established unlawful use.  According to the agreement, Pressalit was entitled to use the trademark TIVOLI as a word mark for toilet seats against payment of 5 % of the company's Danish profit.  It appeared from the agreement that Pressalit could not use TIVOLI "as part of a compound mark in addition to Tivoli plus a number or another identifier".

Tivoli terminated the licence agreement in 2011 referring to Pressalit's material breach as Pressalit had registered the Community trademark TIVOLI without Tivoli's consent, and as Pressalit had used Tivoli's trademark together with other features, including "PRESSALIT TIVOLI", "TIVOLI SOFT", etc. Subsequently, Tivoli became aware that Pressalit had also used TIVOLI as a device mark on the toilet seats together with Pressalit's logo and name. The device mark was similar to Tivoli's famous Grandjean logo.

Immediately after the termination of the licence agreement, Tivoli filed a request for preservation of evidence and an injunction with the Bailiff's Court of Horsens, which request was rejected on 7 March 2012 as the court found that the licence agreement had not been breached. An appeal was brought against this decision with the Western High Court.  On 19 March 2013, the Western High Court ruled that Tivoli had rendered probable that Pressalit had infringed Tivoli's trademark rights, and that Tivoli had therefore been entitled to terminate the licence agreement. However, the Western High Court affirmed the Bailiff's Court's decision to reject an injunction stating the (new) argument that it had not been rendered probable that Pressalit was going to perform the actions covered by the request for an injunction as Pressalit had made a binding declaration prior to the main trial before the Western High Court that the company had ceased using the trademark TIVOLI and was not going to resume use of the trademark.

We find this argument to be somewhat questionable.

INFRINGEMENT PROCEEDINGS BEFORE THE MARITIME AND COMMERCIAL HIGH COURT

The day before Tivoli's filing of the request for an injunction, Pressalit commenced a declaratory action before the Maritime and Commercial High Court, according to which Tivoli was to recognise that the licence agreement had not been lawfully terminated and that Pressalit's use of the names "TIVOLI SOFT", "TIVOLI SOFT D", "TIVOLI SOFT UNIVERSAL", "TIVOLI 2" and "PRESSALIT TIVOLI 2" in relation to toilet seats were covered by the permitted use under the licence agreement. Tivoli claimed a ruling in favour of Tivoli, made separate injunction claims concerning the use of a number of features containing TIVOLI and claimed compensation for the trademark infringements.

On 12 March 2014, the Maritime and Commercial High Court ruled that Pressalit had acted contrary to the licence agreement to such an extent that Tivoli had been entitled to terminate the agreement. Further, the Maritime and Commercial High Court found that the use of "PRESSALIT TIVOLI" constituted use of a compound trademark contrary to the licence agreement. Based on the above, the Maritime and Commercial High Court ruled partly in favour of Tivoli as regards the infringement claims except in relation to some of the features - "TIVOLI SOFT", "TIVOLI SOFT D" and "TIVOLI SOFT UNIVERSAL". A majority of the judges found that these features were covered by the permitted use under the licence agreement as it was a general description of the type of toilet seat.

The Maritime and Commercial High Court dismissed Pressalit's claim that Tivoli had forfeited its injunction right as a consequence of inactivity, but in relation to Tivoli's compensation claims, the Maritime and Commercial High Court found that Tivoli had been inactive in relation to enforcement of the agreement and objections against Pressalit's actual use to such an extent that there was no basis for compensation.

However, the Maritime and Commercial High Court ruled in favour of Tivoli as regards Pressalit's payment of royalty in the period after the termination of the licence agreement. However, the Maritime and Commercial High Court found - surprisingly in the light of sections 4 and 43 of the Trademark Act and case law - that Tivoli was not entitled to compensation in relation to export sales as the (terminated) licence agreement only concerned licence of Danish sales, and as Tivoli had not registered TIVOLI abroad in relation to toilet seats.

EASTERN HIGH COURT RULING

Tivoli appealed against the Maritime and Commercial High Court ruling, and Pressalit cross-appealed.

The Eastern High Court also found that Tivoli had been entitled to terminate the licence agreement and that Pressalit must have been aware that Tivoli considered the matter a material breach. According to the High Court, the termination of the licence agreement was therefore valid. Like the Maritime and Commercial High Court, the Eastern High Court found that Pressalit's use of "TIVOLI" together with "PRESSALIT" constituted a compound mark contrary to the licence agreement. Further, the Eastern High Court found - as opposed to the Maritime and Commercial High Court - that the words "SOFT", "SOFT D" and "SOFT UNIVERSAL" together with the word "TIVOLI" was to be considered compound trademarks within the meaning of the licence agreement.

Consequently, the Eastern High Court affirmed the injunction ruling of the Maritime and Commercial High Court, but with the addition of an injunction against the use of the features "TIVOLI SOFT", "TIVOLI SOFT D" and "TIVOLI SOFT UNIVERSAL".

Tivoli therefore succeeded with its injunction claim before the Eastern High Court.

As regards the claim for compensation, the Eastern High Court found that Pressalit's use of Tivoli's trademark to a wider extent than permitted under the licence agreement constituted an infringement of Tivoli's trademark resulting in a claim for financial compensation.

In the calculation of compensation, the Eastern High Court found - in line with the Maritime and Commercial High Court - in relation to Pressalit's use of the trademark "PRESSALIT TIVOLI" that Tivoli had been inactive to such an extent that there was no basis for compensation. Consequently, a significant part of Tivoli's claim for compensation lapsed.

However, the Eastern High Court found that Tivoli had not been inactive in relation to the use of the other claimed features, and the court fixed compensation at DKK 250,000 covering the period prior to the termination of the licence agreement (where the court found that the calculation had to take into account that the agreement did not include export sales).  Further, the court fixed compensation at approx. 5 % (DKK 250,000) of Pressalit's sales in the period after the termination of the licence agreement.

In principle, the Eastern High Court thus ruled that the Maritime and Commercial High Court had unlawfully prevented Tivoli from obtaining a licence fee based also on the export sales after the termination of the licence agreement, and the court fixed Tivoli's compensation at 5 % of total sales, including export sales.

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