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Trade mark licence: termination does not mean the licensor can use

Adrian Dykes

In Holland and Barrett v GNIC, the Court of Appeal considered the interplay between the terms of a trade mark licence relating to exclusivity, termination and revocation of the licensed marks for non-use.

The licence was part of a business that Holland and Barrett bought that sold nutritional supplements under the GNC brand. The licence used typical language to grant an exclusive licence and included a term whereby GNIC could terminate the licence in respect of marks not used for a continuous period of five years or more. This term was aimed at protecting the trade mark registrations so they would not be revoked for non-use.

Holland and Barrett had not used five of the licensed marks and the licence was terminated by GNIC in respect of those marks. The question was whether GNIC was entitled to use those five marks after termination given the exclusivity term of the licence. If GNIC was entitled to use the marks, then there would be two GNC products on the market ailing from different manufacturers and there was a risk of consumer confusion.

At first instance, the judge held that GNIC was entitled to use the marks – there was nothing in the licence that gave Holland and Barrett a right to prevent the use. The fact that confusion could arise in the market was not sufficient to imply a term that restrained GNIC’s use.

On appeal Holland and Barrett stressed that the licence gave it the right to use the marks “to the exclusion of all other persons including the Licensor.” If GNIC was permitted to use the marks (or something confusingly similar to the marks), then that would cut against the exclusivity.

GNIC argued that the agreement was merely a licence which it was free to terminate enabling it to use its marks. The termination clause allowed GNIC to intervene to protect its marks from revocation for non-use and this must override the exclusivity term as otherwise the GNIC would risk losing its registrations. Essentially, the problem was one of Holland and Barrett’s making and GNIC should not have its property put at risk because of that.

The court sided with Holland and Barrett. The GNC business had been sold to it and the licence was part of that transaction. It was therefore critical to Holland and Barrett that the licence was exclusive and, under the definition of “exclusive”, GNIC was explicitly prevented from using the marks. Therefore, whilst the licence could be terminated in respect of the unused marks, GNIC could not use them.

Comments published on Compact Contract do not necessarily reflect the views of Allen & Overy or its clients.

Read comments below or add a comment
  1. Job Michael says:

    If such is the finding, then what was the purpose of the termination clause? If the intent of the termination clause was to protect against cancellation of registration of trade mark, by implication it means that GNIC will have a right to use it or right? Inthe absence of such an implication the termination clause in the contract loses its meaning.

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