IP-2022-000036 - [2023] EWHC 2005 (IPEC)

The defendants relied on a chain of three licences culminating in a licence dated 27 June 2022 from Carroll Shelby Licensing, Inc to CSL. At the trial attention was focussed almost entirely on the first in the chain, an agreement dated 22 January 1997 between Ford and Mr Shelby doing business as Shelby American Management Company (“the 1997 Agreement”).

These are the relevant terms of the 1997 Agreement:

“TRADEMARK LICENSE AGREEMENT

This Trademark License Agreement (“'License”) is entered on January 22, 1997 (“Effective Date”), by and between Carroll Shelby d/b/a Shelby American Management Company, an individual residing in Los Angeles, California (hereinafter Shelby), and Ford Motor Company, a Delaware corporation, having a principal place of business in Dearborn, Michigan (hereinafter Ford).

WHEREAS, Ford owns COBRA and various Snake Design trademarks, and U.S. and California trademark registrations, applications to register said marks, as identified in Ex. A hereto, for use in connection with automobiles, automobile engines, parts, accessories, clothing and other products;

…

WHEREAS, Ford and Shelby have entered into a certain Settlement Agreement dated January 22, 1997, under which Shelby was granted a limited right to use the trademarks SHELBY COBRA, or SHELBY COBRA and Snake Design, in accordance with the terms of this License;

NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows: follows:

1.

Grant of License. Ford hereby grants to Shelby and his heirs an exclusive worldwide royalty-free license to use Ford's federally registered marks COBRA and Snake Design (the “Licensed Trademarks”) as part of the trademarks SHELBY COBRA and/or SHELBY COBRA and Snake Design for use strictly in connection with replicas of the 1960s' 427 SHELBY COBRA Roadster, 427 SHELBY COBRA Roadster SC (1965), COBRA Daytona Coupe and COBRA 289. The sole exception to Shelby's exclusive license to use the Licensed Trademarks in connection with the identified replicas shall be Ford's existing non-exclusive license in the United Kingdom. Ford further grants to Shelby and his heirs a royalty-free, non-exclusive license to use Ford's Snake Design trademark in conjunction with Shelby's SHELBY trademark in connection with clothing and related accessory items, made by or for Shelby, in the United States and throughout the world. Ford does not warrant that it has rights to the Licensed Trademarks in any jurisdiction.

…

3.

Quality Control. Shelby shall maintain at least the same standard of quality of the replicas of the 427 SHELBY COBRA Roadster, 427 SHELBY COBRA Roadster SC (1965), COBRA Daytona Coupe and COBRA 289, and of the clothing and related accessory items identified in Paragraph 1 above, as it has been selling or marketing for the past ten (10) years preceding the Effective Date. Shelby shall make no material changes to the nature and quality of such replica cars, without Ford's prior written approval.

…

5.

Termination. Ford may, on 60 days’ written notice, terminate the license granted under Paragraph 1, if Shelby, or his successors-in-interest:

…

b.

assign, transfer or license their rights under this License to any third party to any third party in violation of Paragraph 8; or

…

8.

Assignment. Neither Shelby nor his heirs may assign, license, or transfer this License, without Ford's prior written approval.

…

9.

Governing Law. This License shall be governed by and construed in accordance with the laws of the State of Michigan, and the venue and jurisdiction with regard to any disputes arising hereunder shall be the Eastern District of Michigan.”

By way of an initial comment, clause 9 states that the 1997 Agreement is to be construed in accordance with Michigan law. Sensibly, the parties made no attempt to provide expert evidence of Michigan law, which in all probability would have made no difference, so construction was argued according to the principles of English law, see FS Cairo (Nile Plaza) LLC v Brownlie [2021] UKSC 45 at [112]-[116].

In the United States it is possible to apply for a federal trade mark for the whole country or alternatively a state mark which affords protection just in the relevant state. This is reflected in the reference to “U.S. and California trademark registrations” in the first recital. Clause 1, the grant clause, only grants a licence under federal marks owned by Ford. On its face, no licence is granted under California marks or, more significantly, any trade marks registered outside the United States. The first recital does not mention trade marks granted outside the US. Exhibit A, referred to in that recital, was not among the documents made available to the court.

The defendants’ answer was to rely on the express exception in clause 1. The exclusivity of Mr Shelby's license under the 1997 Agreement is subject to “Ford's existing non-exclusive license in the United Kingdom”. The defendants submitted that sense could only be made of the exception if the grant of the “license to use Ford's federally registered marks” was loose language to be treated as a licence under marks, including COBRA, registered worldwide, which would encompass the UK registered marks. This was supported by clause 1 expressly stating that the licence was “worldwide”.

My attention was drawn to an existing non-exclusive licence in the United Kingdom, referred to as “the 1996 Licence”. At the start of the trial it appeared to be common ground that the 1996 Licence was “Ford's existing non-exclusive license in the United Kingdom” referred to in the 1997 Agreement. The 1996 Licence is an agreement between Ford and AC Car Group Limited of Weybridge, Surrey, the latter defined as “the Licensee”. It was signed on 29 January 1997 and probably 17 February 1997 (the writing is not clear), though clause 4 states that it was effective as of 6 December 1996. It is a non-exclusive licence to AC Car Group Limited under Ford’s COBRA registrations to use the name “Cobra” in relation to AC Mk IV sports cars. The licence is stated in clause 3 to be:

“… limited to vehicles manufactured by the Licensee in the U.K. but is without limit as to sales and marketing territory, save that the Licensee shall not export to North America any vehicle marked with the COBRA trademark that is not covered by product liability insurance in accordance with Section 12 of this Agreement.”

Section 12 of the 1996 Licence requires the Licensee to carry product liability insurance acceptable to Ford and to satisfy specified product liability provisions.

Thus, assuming that it was the 1996 Licence which was the cause of carve-out from the exclusive worldwide licence granted by Ford to Mr Shelby under the 1997 Agreement, that carve-out was to accommodate AC Car Group Limited’s right to make cars in the UK and sell them in the US under the sign Cobra. This is consistent with the 1997 Agreement being an exclusive licence under US federal marks only, as it says, the exclusivity being however subject to the terms of the 1996 Licence.

The grant in the 1997 Agreement of an exclusive “worldwide” licence under federal marks makes no sense, but I think that loose language was more likely to be in the use of “worldwide” than “federal”.

However, in closing the defendants contended that the foregoing was cast into doubt for two reasons. The first was that the 1997 Agreement was signed on 16 and 22 January 1997, before the 1996 Licence was signed. That is true, but the fact that the parties expressly made the 1996 Licence effective as of 6 December 1996 suggests that by the time that Ford concluded the 1997 Agreement, Ford knew had and possibly agreed that the 1996 Licence would later be granted. If that is right, Ford would also have known of the intended retrospective date from which the 1996 Licence would be effective and it fell to be treated as an “existing” licence.

The defendants’ second reason was what Mr Lubinsky said in cross-examination. He was discussing the 1996 Licence:

“A.

If I give you a bit of background to this agreement: webought AC, the assets of AC Cars in 1996 from the receivers. There was an existing agreement with Ford at the time whichterminated with the old company. As part of the purchase ofthe assets of AC Cars in 1996, Ford agreed to give usagreement, which was this document, however it was much more onerous terms because of the history with the previouscompany. So, when we started working with this, it was clearit was not beneficial to us to continue with that, and hence why it was terminated, I think in 2001, possibly somewhere and there.”

I fail to see why this makes any difference. It seems that when Acedes bought the assets of AC Cars in 1996, Ford agreed to enter into the 1996 Licence. As I have said, the most likely state of affairs was that Ford had in mind the 1996 Licence when it entered into the 1997 Agreement with Mr Shelby. But even if Ford had in mind some earlier licence, Mr Lubinsky’s evidence indicated that its scope was broader, so in all probability it included a non-exclusive licence in the United Kingdom.

I find that on a correct construction, the 1997 Agreement was a licence under US federal trade marks only, not any other trade marks.

Carroll Shelby Licensing, Inc sought to set right the position by an agreement with Ford dated 14 December 2022. It takes the form of a letter of that date from Shelby to Ford which refers to the 1997 Agreement, which it calls alternatively “the Trademark Agreement” and “the Trademark License Agreement”, and includes the following paragraphs:

“2.

The use of the term ‘Ford’s federal registered marks’ referred not to any limitation on the use by Shelby of such licensed trademarks, but rather was intended to make reference to the trademarks that in fact Ford Motor Company had ‘federally registered’ in the United States, and worldwide.

3.

Any suggestion or argument that Shelby or its licensees have not been authorized to utilize such licensed trademarks (pursuant to the Trademark Agreement) in any parts of the world is contrary to the original intent of the Trademark License Agreement, as exemplified by the continued use and practice since 1997 of Carroll Shelby, the Carroll Hall Shelby Trust, Carroll Shelby Licensing, Inc. and Ford Motor Company.”

The letter is marked “Agreed and Accepted, Ford Motor Company” at the bottom and was signed by Ford’s Chief Trade Mark Counsel.

The defendants argued that the letter of 14 December 2022 retrospectively amended the 1997 Agreement which now included that grant of a licence under Ford’s UK COBRA trade marks. I will assume that it does. Nonetheless, at the date of the defendants’ counterclaim for a declaration that the AC Cobra Mark is invalid, 28 June 2022, CSL was not a licensee under Ford’s UK Cobra marks.

In my view, CSL’s lack of locus standi to apply for the declaration when it did cannot be cured by acquiring locus standi later. A fresh claim for a declaration of invalidity would have to be made.

By way of an alternative argument, it was suggested by the defendants that this gap in the chain was cured by evidence of Ford’s being content with the chain of licences down to Mr Sutton. This, it was said, created an agreement by conduct between Ford and the various parties in the chain, including Carroll Shelby Licensing, Inc and CSL. I will assume, certainly without finding, that there is a potential claim by CSL against Ford, whether in contract, estoppel or by another route. Even if that were the case, it does not create a licence where none otherwise existed.

There are two further points to be made about the 1997 Agreement. The first is that the second Ford Cobra Mark cannot have been licensed under the 1997 Agreement because there had been no application for that mark on 22 January 1997. On any view, the defendants’ claimed licence chain for that mark fails at this first link.

The second point is that clause 8 of the 1997 Agreement forbids the grant of sub-licences by Mr Shelby or his heirs without the prior written approval of Ford. There was no evidence of such prior written approval.

The defendants argued that clause 8 had to be read with clause 5(b) and that taken together, the effect of clause 8 was to make Mr Shelby’s entering into a sub-licence without Ford’s approval a potential breach of the 1997 Agreement, subject to the violation being cured within 60 days of written notice from Ford.

I disagree. On a natural reading of clause 8, Shelby did not have the right to grant a sub-licence without Ford’s approval, so any such purported sub-licence was of no effect. Given the prohibition under clause 8, it is difficult to see how the circumstances of clause 5(b) could ever arise. On the other hand, if they could arise, it is not easy to see how an assignment, transfer or sub-licence could be cured within 60 days of Ford’s written notice without the (unlikely) co-operation of the assignee, transferee or sub-licensee. I do not believe that the two can be interpreted to mean that Shelby had the power to assign, transfer or license their rights provided that within 60 days of a complaint from Ford, Shelby did its best to retract the assignment, transfer or licence. The words of clause 8 should be given their natural meaning.

Moreover, s.28 of the 1994 Act is engaged. A sub-licence granted by Mr Shelby under the First Ford Cobra Mark, a UK trade mark, could only be effective if the head licence, the 1997 Agreement, so provided. Absent the prior written approval of Ford, it does not.

The chain of licences for both Ford Cobra Marks therefore fails at the second link.

In short, CSL has never been a licensee under either of the Ford Cobra Marks. Neither defendant is entitled to make an application for a declaration of invalidity of the AC Cobra Mark due to the restriction imposed by the 2007 Order. The application fails on that ground alone.