"Goodwill Hunting": Latest on Cybersquatting

In a recent Court of Appeal decision, it has been held that cybersquatting (ie the practice of registering well-known brand names as internet domains to later resell them at profit) does not in and of itself amount to passing off. A claimant is still required to demonstrate relevant goodwill in the name or mark relied upon. It follows that an unused mark (which, by its very nature, lacks sufficient goodwill) is incapable of supporting an action for passing off based on cybersquatting.

Background

The first claimant, Media Agency Group Ltd (MAG), had been incorporated in 2009 under the name "Transport Media" and was associated with the domain www.transportmedia.co.uk. MAG provided advertising services, including advertising on different forms of transport such as buses, trains and the London underground. In 2012 the second claimant was incorporated within the same group and the two companies swapped names – the second claimant adopted the Transport Media name (becoming Transport Media Limited (TML)) and MAG took on its current name. TML remained dormant.

In 2014, MAG registered the trade mark "Traccountable" for a product that was, at that time, under development however this product was never launched and, as a result, the "Traccountable" mark was never used.

In 2016, a former MAG employee set up a new advertising company, Space Media Agency (SMA), which operated under the trade name "Transport Media Agency" and was owned by two shareholders - Mr Shafiq and Mr Buksh. Mr Buksh registered the domain names www.transportmediaagency.co.uk and www.trackaccountableadvertising.com.

The claimants issued proceedings against SMA, Mr Shafiq and Mr Buksh for passing off and Mr Buksh admitted to cybersquatting. The judge at first instance held, in reliance on British Telecommunications plc v One in a Million Ltd [1999] 1 WLR 903, that MAG owned the necessary goodwill in the "Transport Media" and "Traccountable" marks and that the defendants' registration of both of the domain names above amounted to an actionable passing off.

Appeal

Mr Buksh appealed the High Court's decision on three grounds:

1. MAG should not have succeeded in its claim for passing off as it was TML that owned the relevant goodwill;
2. the mark "Transport Media" was purely descriptive and was therefore not protectable; and
3. "Traccountable" was an unused mark and so could not support a claim for passing off.

Decision

Rejecting the Appellant's grounds 1 and 2 but allowing the appeal on ground 3, the Court of Appeal held that:

1. goodwill in the "Transport Media" and "Traccountable" marks vested in MAG. This was because customers who sought out services via the TML www.transportmedia.co.uk website were channelled to MAG and it was MAG who actually contracted with the customer and whose services were supplied;
2. "Transport Media" was not so descriptive so as to make it incapable of supporting a claim to passing off, particularly given its significant use by the claimants; and
3. the judge at first instance had misinterpreted the court's decision in British Telecommunications plc v One In a Million Ltd. In that case, the issue was whether cybersquatters were using (or threatening to use) a trade mark merely by registering well-known domain names. That decision does not remove the general requirement in a passing off action to demonstrate goodwill in the mark relied upon. Given that the Traccountable mark had not been used by the claimants they could not possibly claim to have acquired goodwill in it and their passing off claim must fail.

Comment

This case provides a useful reminder that where a mark has not been used, a passing off action (including one based on cybersquatting) is likely to fail for lack of goodwill. Cybersquatting does not itself amount to passing off. For rightsholders that own a registered trade mark, demonstrating goodwill in the mark will be less of an issue when it comes to pursuing cybersquatters - under WIPO's Domain Name Dispute Resolution Service, rightsholders can apply to transfer a domain name to themselves where that domain name is identical or confusingly similar to their mark and where the registrant registered the domain name in bad faith (ie for the purposes of cybersquatting).

For the full case see: Media Agency Group Ltd, Transport Media Limited v Space Media Agency & Ors [2019] EWCA Civ 712