Author: Nat Young

The European Court of Justice has finally ruled on the question of the application of trademark law to keywords.

When someone enters a trademarked word into an internet search engine, the natural result is that sites including the trademarked word appear, in order of relevance.

However, search engine providers often guarantee traders that their sites will appear as sponsored links in the event someone enters certain terms. This practice - particularly associated with Google’s Adwords system - means that a website can appear as a result of a search even without the search term being displayed on the site.

Trademark proprietors are usually unhappy about this practice, since it means that their websites appear alongside competitor’s websites, even where a search had been made for their specific mark. This means that unofficial or even counterfeit sellers can gain as much prominence for their sites as official distributors.

On the other hand, the use of registered trademarks as paid-for keywords is clearly a rather different kind of use to that usually in issue in trademark litigation. Normally, a trademark is used when it appears as a visible sign. With paid for keywords, the trademark did not need to be shown on a site for it to appear in the list of sponsored sites. The trademark was processed in a way invisible to the consumer carrying out the search.

The issue has been often considered in the US courts, but in the UK there was much less authority on the point. Thus trademark lawyers were eagerly awaiting the ECJ’s decision in Google France v Louis Vuitton Malletier, which concerned the use of Louis Vuitton’s trademarks by Google via Adwords.

In simple terms, the court cleared Google, deciding that search engine providers could have a system of keywords without that amounting to trade mark infringement.

However, the court was not so accommodating to advertisers who used others’ trade marks as paid-for keywords. It held that they could still be liable, if their sites made it difficult or impossible for the average internet user to tell if the goods came from the trade mark proprietor or a third party.

For this reason, there are still uncertainties from the point of view of traders using keywords, as opposed to search engine providers. Trade mark proprietors will no doubt start looking in this direction, and it will be interesting to see what tests the courts develop when considering what makes it ‘difficult’ for the average internet user to tell the origin of goods.

Author: Nat Young

News that the Sugababes’ founder member Mutya Buena has applied for a trademark in the word ‘Sugababes’ has already provoked considerable discussion.

When their last original member left in 2009, the Sugababes reopened discussion of a paradox as old as philosophy: whether something could survive the replacement of all its component parts.  But whatever the importance of the Sugababes’ band, it is now the Sugababes’ brand - the cornerstone of a multi-million pound business - that is at stake.

The legal position between the parties remains to be seen; Buena clearly considers herself entitled to the mark as a founder member, but the suggestion from the current trio seems to be that Island Records have the rights in the name, although they have no trademark.

This is not the first time different band members have struggled for control of a brand. In 2003 a case involving the heavy metal group Saxon went to the Court of Appeal, where it was held that, in the absence of a partnership agreement specifying otherwise, members of a band were members of a partnership at will, which was dissolved when they split up. The name and the goodwill built up under it belonged to the partnership jointly, and not to any one individual or individuals, whether or not they claimed to be surviving members. In that case the trademark application was refused, but it was one of the original members that objected to it.

The legal issues in this case remain to be seen, but the practical issues are familiar to all intellectual property lawyers. Names - whether names of companies, names of bands or names of products -  can become commercially important overnight. It is crucial that the ownership and registration of the intellectual property rights in names is given thought at the earliest possible stage. Otherwise issues can arise, often years after the name first comes to prominence. It is unlikely that we have seen the last of the Sugababes trademark application, and still more unlikely we have seen the last case of this type.

Author: Guy Thomas

In a dramatic turn of events, HM Revenue and Customs (HMRC) have announced that they will not use the next listed hearing to pursue its challenge to the appointment of Administrators by Pointpin Limited, the British Virgin Island based company which is controlled by Mr. Chainrai.

Although the hearing, scheduled to be heard at the Royal Courts of Justice in London on Monday 15th March 2010, will still go ahead; the anticipated tussle will not be as spectacular as many had awaited.

It has been further reported that “Despite HMRC continuing to have a number of remaining questions and concerns around the relationships of various parties, and a lack of detail of financial affairs, HMRC has now advised the Administrators that we will no longer challenge the validity of the Administrator’s appointment.”

“This comes in light of the additional material now provided following the judge’s directions of 2 March 2010.”

Portsmouth and its’ Administrators should not feel completely reassured by the further reporting that HMRC are “still not happy” but “do not see any benefit in continuing an expensive, long-running, legal protest against the club”. 

What now?

In no particular order, some of the things that are still to come in this administration include:

1. HMRC will keep a close eye on events; they can do this through a creditors committee (which is meant to oversee the actions and fees of the Administrator).

2. Unsecured creditors (like HMRC) put in their proof of debt to the Administrator setting out what they are owed [most creditors do this without taking legal advice].

3. Statutory Investigations will be carried out by the Administrator into the conduct of the club, its directors and any who acted as if they were directors. The Administrator submits a “D” report to the Secretary of State for BIS.

4. The directors finalise their statement of affairs and a report goes out to creditors on the events that led to formal insolvency. This may include their view of when the club became insolvent. This is usually followed by a meeting of the creditors to vote on the housekeeping issues for the Administration.

5. The League will decide on the first part of the likely point’s deductions. Part “two” will depend on the outcome of any proposal to exit the Administration. The exit the League usually expects is a Creditors Voluntary Arrangement.

6. The Administrator will continue to look for savings in costs. Players are unlikely to be made redundant. The Professional Footballers’ Association has strong influence in this area. However that doesn’t exclude the likelihood that loan agreements will be cancelled to save the salary costs. It’s been reported Pompey having six temporary signings on their books.

7. The Administrator looks to realize assets for creditors and or raise finance to allow continuing trading. It has been reported that Mr Chainrai will provide the funding and the Administrator is looking for bids.

Anyone got a spare £15 million?

Author: Guy Thomas

Until the Court orders otherwise, Andrew Andronikou, of insolvency firm UHY Hacker Young remains as an Administrator of Portsmouth City Football Club. The paperwork appointing him was filed at the High Court on Friday, 26th February.

Incidentally the appointment names three administrators. Mr Andronikou is the “lead” administrator as far as the media is concerned, but he has no special status above the other two in statutory terms - their responsibilities, powers and duties are the same.

It has been well reported that HMRC are seeking to challenge that administration appointment. The first hearing was on 2 March 2010 and you may have been unlucky enough to catch my comments on Sky Sports News before the hearing. The application to challenge the Administration has been adjourned, until the week beginning 15th March and I will be writing more about that closer to the time.

Whichever insolvency mechanism the Court decides upon (i.e. Administration or Liquidation), you may be wondering what will happen next for the former directors of the club (or anyone who may have acted as if they were a director). Is Administration the complete end of the directors’ involvement with the club? Maybe not.

It seems likely that under Mr Andronikou, some of the former directors will continue in place (hopefully to help establish and maintain the clubs value as well as assist the Administrator’s work). However that assistance will not protect them from any statutory investigation by the Administrator concerning their conduct before the Administration took place.

Insolvency Practitioner & Accountant Nick O’Reilly of Vantis, who recently examined the club’s books, said Pompey accounts were “completely dysfunctional” and its business methods had gone “against all good governance”. 

Ouch!

“I came away not knowing who controlled what,” O’Reilly told BBC Sport.

The problem for the directors of the club and any company which enters Administration is this; when the company’s financial position was deteriorating there was a “tipping point” when the interests of shareholders become secondary to the interests of creditors. I don’t know when that point was or if there was in fact any wrongdoing by the directors of Portsmouth FC. The Judge in the (now suspended) winding up proceedings indicated in February, that this “tipping point” may have passed some time before the club entered Administration.

After Portsmouth entered Administration then one of the roles of the Administrator put in charge of that process is to review the actions of directors in the period leading up to the Administration.

If the Court subsequently orders the liquidation of the club then a liquidator will have to carry out the same investigation and report to the Secretary of State. (more…)