J W Spear & Sons Ltd & Ors v Zynga Inc [2012] EWHC 1374 (Ch)

Case No HC12 B01387[2012] EWHC 1374 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY
Venue Royal Courts of Justice, The Rolls Building, 7 Rolls Building, Fetter LaneDate 04/05/2012
London EC4A 1NL
Before
MR. JUSTICE HENDERSON
Between
(1) J. W. SPEAR & SONS LIMITEDClaimants(2) MATTEL, INC.Claimant(a corporation incorporated under the laws of the State of Delaware in the United States of AmericaClaimant(3) MATTEL U.K. LIMITEDClaimantZYNGA, INC.Defendant(a corporation incorporated under the laws of the StateDefendantof Delaware in the United States of AmericaDefendant
Transcript of the Stenographic Notes of Marten Walsh Cherer Ltd.,1 st Floor, Quality House, 6-9 Quality Court, Chancery Lane, London WC2A 1HP.Telephone No: 020 7067 2900 Fax No: 020 7831 6864DX 410 LDE info@martenwalshcherer.com
MR. ADRIAN SPECK QC (instructed by Messrs. Bird & Bird LLP) for ClaimantsMISS CHARLOTTE MAY (instructed by Messrs. Olswang LLP) for Defendant
JudgmentMR. JUSTICE HENDERSON :
[1]This is an application for an expedited trial in a trade mark case. The claimants are all members of the Mattel group of companies, which is one of the world's largest manufacturers of toys and games with its headquarters in California. The group owns the Scrabble brand in Europe and the rest of the world, with the exception of the United States of America and Canada, where the Scrabble rights are owned by a competitor of the Mattel group called Hasbro.[2]Scrabble itself probably needs no introduction. It is the well-known word game which was originally developed in 1954 and which is played in its physical form with a board and tiles with letters and numerals upon them. The tiles are square with rounded edges and they contain the points scored for the relevant letter in the bottom right-hand corner. The object of the game, in the broadest terms, is to place words on the board, joining on to words which are already there, and to achieve the highest possible score, making use of various premium squares which give double or treble word or letter scores.[3]As one might expect, Scrabble has generated various electronic versions, including one called Scrabble Scramble which was launched in, I think, 2007 and has been successful in the marketplace ever since as an application, or "app", to be downloaded on to iPhones and similar devices.[4]The defendant Zynga Inc. is, I am told, the world's largest social gaming company and also a leading developer of apps in this area. It is a relatively young company, having been established in 2007 and floated at the end of 2011. However, it has been very successful and has a portfolio of games with, according to the evidence before me, over 227 million users.[5]The allegations in the present case are of infringement of four registered Community or United Kingdom trade marks owned by the claimants. Those trade marks are the word mark SCRAMBLE, the word mark SCRABBLE, the device mark SCRABBLE and a "Tile" device mark.[6]The nature of the allegations is set out in the particulars of claim. In particular, in paragraph 8, complaint is made of infringement by the defendant, in that on or about 5th January 2012 it launched a new game called "Scramble With Friends" for the Apple iPhone and iPad market. The game is available in various forms for users in the United Kingdom, and what is said is that it infringes the trade marks to which I have referred in a number of different ways which are then particularised.[7]Reliance is also placed on an allegation that the get-up or general appearance of this new game is, it must be inferred, deliberately intended to have many similarities to Scrabble in the form in which it is currently marketed. For example, use is made of similarly shaped electronic "tiles" with rounded edges and with a letter and numeral on each tile, although the numeral is in the top right rather than the bottom right-hand corner; and the colours used, green in particular, give a similar overall impression to Scrabble products.[8]The allegations of infringement are set out in paragraphs 11 and 12. For example, it is alleged in relation to the Community Trade Marks for the SCRABBLE word and figurative marks that there is infringement of Article 9(1)(b) of the Community Trade Mark Regulation, in that there exists a likelihood of confusion.[9]It is also alleged there is infringement of Article 9(1)(c), in that the use of the sign takes unfair advantage of or is detrimental to the distinctive character or repute of the trade mark.[10]Similar allegations are then made in relation to the tile mark, and relief is claimed under the usual wide range of headings, including final injunctions, delivery up and an inquiry as to damages.[11]As to the recent history of the matter, it is relevant to note that the defendant has had a range of Scramble games of its own since late 2007 or 2008. Scramble With Friends is by no means the first product which the defendant has launched with the word SCRAMBLE contained in its title. On the other hand, there is on the evidence before me a considerable difference between the get-up of those earlier Scramble products and Scramble With Friends which, as I have said, does at least on the face of it appear to bear a number of fairly close similarities to features of the Scrabble get-up.[12]There is evidence of the use that has been made of those earlier Scramble products which is conveniently summarised in paragraph 12 of the skeleton argument of Miss Charlotte May, counsel appearing for the defendant, to the effect that each of those earlier versions has, at least at various times, had more than 100,000 players per day, with the figures sometimes going up to around 300,000.[13]The other matter I should mention is that there have been abortive negotiations between the claimants and the defendant with a view to reaching an agreement for the claimants to manufacture physical games based on the defendant's portfolio of digital games. A first round of negotiations took place in 2010, and a second round began in late 2011 and came to an end in early 2012. The claimants made a formal pitch on 26th January 2012, but that was then rejected in favour of a link up with the claimants' competitor, Hasbro. It had become clear by 9th February that this was the case, although formal confirmation that the negotiations were at an end was not provided until 25th February.[14]Not long afterwards, on 16th March, the letter before action in the present proceedings was sent. It may be relevant to note that the complaints made in that letter went considerably wider in some respects than those pleaded in the particulars of claim, because they included complaints of passing off and breach of copyright, which at present anyway have not been pleaded against the defendant.[15]The claim form itself was issued on 30th March, together with an application for a speedy trial with a return date of 18th April. On 11th April permission was obtained to serve the proceedings out of the jurisdiction. On 18th April, unsurprisingly, there was not time for the matter to be dealt with in the applications court and it was adjourned to be heard as an application by order, with a timetable for evidence. It is on that basis that it comes before me today.[16]As to the legal principles which the court should apply on an application for expedition, I think there is no real dispute between the parties. The first case to which I would refer is the decision of Lloyd J in Daltel Europe Ltd (in Liquidation) & Ors v Hassan Ali Makki [2004] EWHC 1631 Ch (otherwise, as far as I know, unreported) where the learned judge made a number of points in paragraphs 11-13 of his judgment. He began by pointing out:
"11. The question of expedition is partly a question of principle and partly a question of practice. Any order for expedition involves a disturbance of the normal procedure of a case to be got to trial. It involves giving preference to one case in the allocation of court time over other cases; it also involves requiring the lawyers on both sides to give preference to the tasks of preparation [of that particular case] over tasks of a similar nature in relation to the affairs of other clients."
[17]The judge went on to say that the court naturally wishes in all cases to bring them on for hearing as soon as reasonably possible, and the resources of the courts are managed as best they can be with a view to achieving that objective. However, we do not live in a perfect world, and obviously cases cannot always be listed as early as would otherwise be desirable. That, I should add, is my comment rather than Lloyd J's, although it is a commonplace and hardly needs authority to support it.[18]Lloyd J then said in paragraph 13 that expedition is not just a question of choosing a slightly faster route to proceed to trial, and a case should be granted expedition only "on the basis of real, objectively viewed, urgency". It is only such urgency which can justify giving a preference which will inevitably have the effect on other court users and on the lawyers for the parties to which the judge had already referred.[19]More recently, in 2009, a further review of the relevant principles was given by Warren J in CPCGroup Ltd v Qatari Diar Real Estate Investment Co [2009] EWHC 3202 (Ch) at paragraphs 83-90, in a passage which was itself applied and quoted by Floyd J, in 2011, in Warner-Lambert Co Inc. v Teva UK Limited [2011] 2018 (Ch), [2011] FSR 44 at paragraph 12. That review of the law drew on the observations of Lloyd J, to which I have already referred, and also on other case law.[20]I will not quote it at length, but among the points which emerge are the following: first, the question of expedition is essentially one for the discretion of the judge; secondly, the court has to have regard to its wider responsibilities to other litigants, and it is not just concerned with the position of the parties in the case before it; thirdly, it is always relevant to have regard to the procedural history of the case, and delay may count against an applicant although it will not necessarily be conclusive; fourthly, because the question is one for the court, the attitude of the respondent may be, or indeed is, comparatively unimportant, unless the defendant can show that it would suffer some real prejudice if expedition were granted. That is not to say, however, that the defendant may not helpfully draw the attention of the court to matters which may be relevant. Certainly, for my part, I have found it helpful to be addressed by Miss May as well as by Mr. Adrian Speck QC, counsel for the claimants. Lastly, it is emphasised that the first question which always has to be answered is whether urgency is justified at all. That may aptly be termed a threshold issue, and it is only if it is answered in the applicant's favour that one gets on to the next stage of considering what degree of expedition would be appropriate. It can be seen, therefore, that the question is not simply one of comparing competing timetables which are put before the court, and expedition will be granted only if the threshold test is duly satisfied.[21]I was also referred, by Mr. Speck in particular, to the decision of the Court of Appeal in W L Gore & Associates GmbH v Geox SPA [2008] EWCA Civ 622 where Lord Neuberger was sitting, I think before his appointment as Master of the Rolls, with Rix LJ. That case did have some procedural similarities to the present case, and perhaps for that reason Mr. Speck placed particular reliance upon it.[22]The appeal was a decision from Lewison J, who had refused expedition, as it was sought before him, on grounds which reflected the authorities to which I have already referred. In particular, he said that all parties are entitled to their place in the queue in the normal way, and there must be very cogent reasons indeed for giving preference to one litigant over all the others who are waiting for their cases to be heard.[23]The Court of Appeal quoted from Lewison's judgment and made it clear that, but for one matter, they would not have taken a different view of the case. However, by the time it came before the Court of Appeal matters had moved on, because the application for a speedy trial made to Lewison J had been on the basis of a hearing sought for July, whereas the proposal before the Court of Appeal was that the hearing should take place in September on the footing that two principal judges of the Patents Court, Kitchin J and Floyd J, were sitting as vacation judges in September and would be able to hear the case during that month. Enquiries had been made of the Chancery listing officer who had confirmed that this would not, in that particular instance, involve any problems of queue jumping. For that reason, the Court of Appeal held that this put an entirely different complexion on the matter and required them to reconsider the question of expedition.[24]In paragraph 25 of his judgment Lord Neuberger said:
"To my mind, when considering such an application there are four factors to take into account. The first is whether the applicants ... have shown good reason for expedition; the second is whether expedition would interfere with the good administration of justice; the third is whether expedition would cause prejudice to the other party; and the fourth is whether there are any other special factors."
[25]The court then went on to apply those factors and concluded, for reasons which I need not go into, that it would be right to order the case to be heard in September 2008.[26]That, I think, is all I need to say about the relevant procedural principles which I need to bear in mind. I should also mention that the proposal made in Gore v Geox has a certain resonance with the present case, because the claimants discovered that a slot might be available in the last week of September 2012 when Floyd J was due to hear an assessment of damages with a five-day time estimate. That case has now settled, so one suggestion floated before me was that, without any prejudice to other litigants, use could be made of that vacated slot for hearing the present case if it were otherwise fit for expedition. However, I have made enquiries of the Chancery Clerk of the Lists over the short adjournment, who informs me that Floyd J had made special arrangements to hear that case, in the sense that he will not be sitting as a regular vacation judge during that week, and, although he might in principle be available to hear some other case during that week, it would have to satisfy the test of being fit for vacation business as well as being fit for expedition. Mr. Speck realistically accepted that he has never sought to advance the case for expedition on as high a basis as that, so it follows that this possibility is no longer a live one.[27]Mr. Speck also submitted that the decision of the Court of Appeal shows that the only relevant type of prejudice to other court users is that caused by actually losing a slot or hearing date which would otherwise be available to them, and such prejudice would not be caused in the present case because, even if it were to be listed for October, further enquiries of the listing authorities had revealed that no other cases would lose their existing hearing dates as a result.[28]For my part, I am not convinced that the Court of Appeal in Gore meant to lay down any principle as narrow as that, and I see much force in the wider considerations referred to by Lloyd J in the Daltel case and followed in the other authorities which I have mentioned. It seems to me self-evident that there will always be a possibility of prejudice to other litigants and court users, or of extra strain on court resources and judicial time, if any application for expedition is granted. It may not be possible to point to any particular litigant who is disadvantaged, but simple common sense suggests that, if one litigant is allowed to jump its normal place in the queue, somebody somewhere is likely to suffer as a result. That, it seems to me, is one of the reasons why it is only in a case of real objectively viewed urgency that such an application may properly be granted.[29]I come on now to the threshold question, which is whether urgency of that type has been demonstrated in the present case. The need for urgency is sought to be justified on two grounds in particular, which are explained in the first witness statement of Stephanie Cota, who is the Senior Vice-President of global marketing for Mattel with particular responsibility for the Scrabble brand. First, her evidence is that the claimants are currently developing a new game which they plan to launch in a window between December of this year and February 2013. The new game is to be launched under the SCRAMBLE mark alone, unlike the existing Scrabble Scramble product, and to begin with it will be a digital product only, although if it succeeds it may be followed by a physical product in due course. The argument is that the launch of this product will be greatly prejudiced if it has to compete on the market with the defendant's Scramble With Friends which, as I have already said, was launched in January of this year.[30]In her evidence Miss Cota says that the longer the defendant's Scramble game remains on the market, the less able the claimants will be to make an effective launch of a new product with the same name, which of course they claim to be entitled to do as a result of their trade mark registration. If expedition is not granted, the current indications are that the trial will take place in approximately one year's time, whereas if expedition were to be granted, it would take place in October or possibly November. So there is a further period of some six months during which the two games would have to co-exist if the application for expedition is not granted. Miss Cota says, in effect, that unquantifiable damage will continue to accrue during that period and the court should therefore do what it can to achieve an earlier resolution of the issues.[31]Secondly, and separately, it is said that there will be a risk of serious and unquantifiable damage to the existing Scrabble brand in its digital version if it too has to compete with Scramble With Friends. Miss Cota expresses her belief that there will inevitably be a likelihood of confusion on the part of customers with consequential damage to the claimants' business. She points out that the claimants are continually seeking to retain consumer loyalty to the Scrabble brand, and they do not wish to be in the position where they may lose customers to people who are confused about the identity of the defendant's new product. She says quite rightly that there is no wish to prevent competition as such, but it is of course the alleged infringement of trade marks that causes the loss which they seek to prevent as quickly as possible.[32]In addition, she does express a fear that the defendant may also be planning to produce a physical Scramble game, but the evidence in answer makes it clear that there is no current intention on the part of the defendant to do that.[33]That, briefly, is the evidence relied upon by the claimants, which Mr. Speck supplemented with attractively presented oral submissions about the general difficulties of quantifying damage in cases of this nature. He points out, and to an extent, that it may be very difficult to pinpoint precisely how damage is caused in cases of trade mark infringement, and for that reason, if no other, quantification of loss by way of damages is a second best remedy to prevention by means of an injunction.[34]In answer to these points, Miss May submits, first, in relation to the launch of the Scramble game by the claimants, that the evidence on this is very thin, even allowing for understandable concerns about confidentiality, and also possibly contains an element of inconsistency. The defendant's solicitor Mr. Stevens points out in his evidence that the evidence on the claimants' side does not make it clear when development of this new product began or how far it has advanced, or indeed what kind of a game it is that is under development. The suggestion is made that it may have been generated as a reaction to the breakdown of negotiations in February, and reliance is placed on the fact that the defendant has had electronic Scramble games of its own since at least 2008. Also, there is some evidence suggesting widespread use of the word "Scramble" in other related contexts by other manufacturers, although the evidence on that is only prima facie and is of course inconclusive at this stage.[35]As for possible inconsistency, Miss May points to a possible contrast between what was said in the letter before action on 16th March, to the effect that the new game has been in development for some time and is now at an advanced stage, and what Miss Cota says in her first witness statement, which on one view appears rather less committal about the stage which the development has reached. I do not for myself place much, if any, weight on that point, because I think it may all depend upon what aspect of development one is focusing upon. As Mr. Speck says, it may be necessary to distinguish between development of the concept of the game on the one hand and development of the software which will be needed to produce it on the other hand. That point apart, however, I do see considerable force in the complaint that the claimants' evidence is very thin about the general nature and chronology of the development of this new product.[36]In addition to that, it is clear that the launch will in any event proceed either late this year or early next year, whether or not expedition is granted, and whether or not any form of injunctive relief has previously been granted.[37]As to the decision not to seek an injunction, I should refer to what Miss Cota says in paragraph 24 of her first statement:
"Reluctantly, we accept that because Zynga launched its game in January 2012 and we have not yet launched our new, directly competitive, Scramble game, it would not be appropriate for us to apply for an interim injunction to seek to shut down Zynga's game immediately. However, for the reasons set out in this statement, it is crucial to us that we have certainty as soon as possible; indeed, it is in both parties' interests."
[38]Turning to the alleged damage to the Scrabble app, Miss May submits that this case is on analysis not really out of the ordinary when compared with other trade mark disputes. We are concerned with two very large players in the market, each of which is well able to look after itself and to meet any award of damages which may be made. There is no question of any inequality of arms. Equally, one may surmise that the decision has been taken by the defendant to introduce Scramble With Friends, with the apparent similarities to Scrabble products to which I have drawn attention, no doubt in the belief that they are sailing just, so to speak, on the right side or as close to the wind as they safely can. Whether or not that turns out to be correct will, of course, be a matter for decision at the forthcoming trial. Nevertheless, I return here to the fact that no injunctive relief has been sought. There will therefore inevitably be a period of overlap when Scramble With Friends continues in the marketplace, and that will be the case whether the trial is expedited or not. The only difference will be as to the length of the period for which the potentially infringing use has continued, and from that point of view it may be asked what difference is really going to be made by having a trial six months later, in about a year's time, rather than in October of this year.[39]Certainly, so far as quantification is concerned, I accept that there are difficulties involved in cases of this nature, but I would agree with Miss May that they are difficulties of a familiar kind which the court is well used to dealing with. If infringement is made out, then it is likely that damages in a substantial sum will be payable, and various techniques can be used to achieve a just result. It may be relevant in this context that there are existing licensing deals in place for digital Scrabble and other products of that nature, and it may be with suitable adaptation they could provide a basis for a plausible calculation if that stage is ever reached.[40]Of course, a speedy resolution of the matter is desirable from everybody's point of view, and the court does not wish any delay to take place. But it seems to me, standing back and taking all the points which I have mentioned into consideration, that this is simply not a case which comes near affording the kind of cogent justification that is needed to jump the normal place in the queue. I should say here that I do not believe trade mark cases occupy any kind of special position, or that there is presumption in favour of granting expedition in such cases. The experience of counsel before me may differ slightly about the general likelihood or otherwise of being granted such an order, but for my part I see no reason to depart from the general principles to which I have referred. It is ultimately a question of discretion for the court, which must of course be exercised judicially and with regard to the effect on both parties as well as on the wider interests of litigants generally.[41]In view of that conclusion, it is not really necessary for me to go any further, but I will say a little about some procedural aspects of the case, because it was also submitted to me that they might have some bearing on the outcome. First, submissions on both sides were made about delay, but for reasons which I have explored in debate with counsel in the course of the hearing, I am not satisfied that they take matters any further and I therefore say no more about them.[42]Potentially more significant is the question of how long might be needed to prepare fairly for a proper trial of the matter. The defendant has adduced evidence, in particular from Mr. Stevens, its solicitor, about the complexity or potential complexity of the case and the time that will be needed for disclosure. On the issue of complexity, I need to note that these points are made before any defence has been produced, but it said that a number of complex issues are likely to be raised, indeed one might almost call them the standard issues in a dispute of this nature. So there will be disputes about the validity of the various trade marks. There will be questions whether they should be revoked on the grounds of lack of distinctiveness, or because the marks are purely descriptive, or because they are generic. Then there is the issue of whether the applications for registration of the marks were made in good faith. The defendant will also have to prove that there is no likelihood of confusion, and there are other issues pleaded by the claimants on questions of unfair advantage or detriment or dilution.[43]As to disclosure, Mr. Stevens sets out a large number of headings under which he submits it will be needed. His evidence is answered by Miss Macdonald of the claimants' solicitors, Bird & Bird, who takes issue with Mr. Stevens' list, with two exceptions, and expresses her view that disclosure should be nothing like as complicated as he seeks to make out. It is very hard for the court to form any reliable view about issues of this sort at the present stage, and in view of the conclusion I have already reached, it is not really necessary for me to do so. The most I will say is, first, this does appear to me on any view a substantial and potentially complex dispute. From recent experience, I have a healthy respect for the complexity and difficulty of trade mark law, and counsel on both sides accepted that it is one of the most difficult areas of law in the intellectual property field. That may or may not translate into the need for extra time in preparation of the case, but it seems to me on any view this is a case which will require careful pleading and analysis and carefully focused thought about the questions of disclosure which will arise. I accept that there will inevitably be a considerable amount of work that needs to be done on the disclosure front, which could well in the normal way occupy a firm of solicitors for a matter of months rather than weeks.[44]On the other hand, I have to bear in mind, as I have said, that these litigants are both very large players in their field, and they have both engaged very experienced solicitors with large teams of suitably qualified lawyers. All in all, I am not satisfied that, if this were a case where expedition were justified, it would not be reasonably practicable to work towards a trial date in October. It seems to me that, if such a deadline were to be imposed, the parties would and should be able over the considerable period between now and October to prepare for trial in a way which would not lead to any unfairness or undue difficulty for either side. Having said that, I also accept that following the normal timetable, with a trial in about a year's time, will enable preparation for trial to progress with less pressure and less possibility of the need for reallocation of resources which might otherwise be better used elsewhere on the part of the defendant. On balance, however, I would not have regarded this as a very telling point against expedition if I thought it were otherwise justified.[45]To conclude, though, on the threshold question, having considered all the evidence and the submissions very helpfully placed before me, both in writing and orally, and doing my best to balance them, I am not satisfied that a strong enough case has been made out for expedition, and the application for expedition will therefore be refused. (See separate transcript for proceedings after judgment)

Cited in 5 later judgments