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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Tesco Stores Ltd v Elogicom Ltd & Anor [2006] EWHC 403 (Ch) (08 March 2006) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2006/403.html Cite as: [2006] EWHC 403 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		08 March 2006

Mr Philip Sales:

Factual Background

1. This is an application by the Claimant ("Tesco") for summary judgment under CPR Part 24 on its claim against the Defendants and to strike out or for summary judgment to dismiss the Defendants' counterclaim. The claim and counterclaim relate to the registration and use by the First Defendant ("Elogicom") of internet domain names which incorporate the word "tesco" in various combinations. The Second Defendant ("Mr Ray") is the sole director of and principal shareholder in Elogicom and directs its affairs. At the hearing before me Tesco was represented by Mr Malynicz of Counsel. Mr Ray represented himself and Elogicom.
2. Tesco runs the well-known supermarket chain. It owns and operates some 1,780 stores in the United Kingdom. It has engaged in extensive advertising in the United Kingdom to establish, maintain and develop the "Tesco" brand name. Tesco also provides a variety of services under the "Tesco" brand, including in the areas of personal finance, insurance, mobile communications and broadband internet access.
3. Tesco also sells goods and services via websites on the internet which it maintains using the Tesco name. These include a home delivery service at www.tesco.com, goods and services relating to diet and weight loss at www.tescodiets.com (also accessed through www.tescodiets.co.uk) and a website called "Tesco Jersey" at http://tesco.jersey.com, which sells CDs, DVDs and games.
4. I accept, and the Defendants did not dispute, that Tesco has built up substantial goodwill amongst consumers in the United Kingdom for the name "Tesco" when used in conjunction with provision of goods and services. It is likely that a substantial proportion of consumers in the United Kingdom will assume that use of the word "Tesco" in connection with provision of goods and services denotes an association with Tesco in relation to such provision.
5. Further, Tesco has registered trade marks in relation to its name, "Tesco" (trade mark nos. 2321013 and 2258927), and "Tesco.com" (trade mark no. 2238995). Those registrations include coverage of goods and services within Class 35, as follows:

"The bringing together, for the benefit of others, of a variety of goods, enabling customers to conveniently view and purchase those goods in a supermarket or hypermarket or minimarket, or from a general merchandise catalogue by mail order, telephone, or other means of communications, or from a general merchandise internet website; … information and advice and assistance relating to all of the aforementioned services" (trade mark no. 2321013);

"The bringing together, for the benefit of others, of a variety of goods enabling customers to conveniently view and purchase those goods from a supermarket or hypermarket or minimarket or from a general merchandise catalogue by mail order, or by means of telecommunications or from a general merchandise Internet website; provision of information to customers and advice or assistance in the selection of goods brought together as above" (trade mark no. 2258927); and

"… the bringing together, for the benefit of others, of a variety of goods, enabling customers to conveniently view and purchase those goods from a supermarket or hypermarket store or mini-market, or from a general merchandise catalogue by mail order, telephone or other means of telecommunications, or from a general merchandise Internet web site; provision of information to customers and advice or assistance in the selection of goods brought together" (trade mark no. 2238995).

6. With a view to promoting sales through its Tesco websites, Tesco entered into an

arrangement with a company called TradeDoubler AB ("TradeDoubler"). TradeDoubler operates a system whereby a provider of another website can become an "affiliate" of one of its clients such as Tesco. The affiliate provides on the face of its website an advert or panel which, when clicked with a mouse by the individual who is visiting that website, takes the individual to the website of TradeDoubler's client. TradeDoubler runs software which tracks this process occurring, and which detects any sales made by its client from its website to the individual directed there from the affiliate's website. The client then pays commission via TradeDoubler to the affiliate in relation to the sales generated in this way.

7. It is part of the TradeDoubler system that the affiliate website has in each case to be approved by TradeDoubler's client (in this case, Tesco), to ensure that it has acceptable content which would not, for example, damage the reputation of the client (such as pornography and so on).
8. The relevant agreement between Tesco and TradeDoubler ("the client agreement") was entered into in 2001. It included the following terms:

"2. BACKGROUND

2.1 TradeDoubler has developed a system for tracking activities on the Internet and owns and operates a service ("the Service") on its website known as an "Affiliate Program" allowing [Tesco] to set up a program of its own which encourages other website operators ("Affiliates") to link and transfer visitors to www.Tesco.com ("the Company's website") and thereby increase clicks, leads, and sales on [Tesco's] website ("the Affiliate Program"). The Service helps [Tesco] to calculate and pay commission to natural persons or legal entities who join [Tesco's] Affiliate Program.

2.2 [Tesco] wishes to have an Affiliate Program in its own name and wants TradeDoubler to provide and administer the Affiliate Program. …

3. SCOPE TradeDoubler agrees to make available to [Tesco] the Service on the terms set out in this Agreement and TradeDoubler's Standard Terms and Conditions …. The content of this Agreement and its Appendices supersedes all previous written or oral commitments or undertakings made by the parties.

PAYMENT RATES

4.1 The Affiliate shall be entitled to receive 2% ("the Payment Rate") of the value of each purchase (exclusive of any applicable VAT or delivery charges) made through [Tesco's] website by users who access [Tesco's] website via the website(s) of an Affiliate (the "Commission"). The Commission is exclusive of VAT (or any other similar sales tax), which shall be paid in addition [to] TradeDoubler at the then prevailing rate.

4.2 TradeDoubler shall be entitled to collect the Commission on behalf of the Affiliates from [Tesco] and undertakes to pass this onto the Affiliates as agreed between [Tesco] and TradeDoubler.

4.3 [Tesco] is, at any time, entitled to change the Payment Rate or the conditions under which Affiliates are paid by written notice to TradeDoubler.

5 PAYMENT AND TRADEDOUBLER'S COMMISSION

5.1 [Tesco] shall pay £2,200 for accessing TradeDoubler's Services.

5.2 [Tesco] shall pay a network access fee of £150 per month.

5.3 [Tesco] shall pay TradeDoubler a fee of 30% of the amount due to Affiliates in accordance with clause 4.1.

5.4 TradeDoubler shall invoice [Tesco] monthly for

5.4.1 the Commission on behalf of the Affiliates,

5.4.2 the network access fee at clause 5.2, and

5.4.[3] the fee set out at clause 5.3.

5.5 All sums due under this agreement shall, unless the subject of a bona fide dispute, be paid by [Tesco] within thirty calendar days of the end of the month in which a valid invoice is received by [Tesco] from TradeDoubler.

5.[6] If [Tesco] should at any time fail to make timely payment in full, TradeDoubler shall be entitled to interest on the sum overdue until payment is made at an interest rate of LIBOR +2% per annum. …"

9. The evidence is that TradeDoubler's agreements with affiliates were in standard form, as set out at TradeDoubler's website. Applications to become an affiliate are typically completed on-line, and that is what Mr Ray did on behalf of Elogicom. Mr Ray told me that he could not remember and had no record of the particular standard terms set out by TradeDoubler when he caused Elogicom to register as an affiliate. Tesco adduced evidence of TradeDoubler's standard form agreement with affiliates, but it was unclear precisely what date those standard terms were promulgated. Nonetheless, in the absence of any evidence to suggest that there was any material variation in TradeDoubler's standard terms over time, in my judgment it is appropriate to treat the standard terms set out in evidence as those which applied in the affiliate agreement as between TradeDoubler and Elogicom ("the affiliate agreement").
10. The affiliate agreement included the following recitals:

"WHEREAS

A. TradeDoubler has developed and operates a service, which allows you to earn money by placing a link on your website to one or several websites, connected to TradeDoubler. …

C. You must be accepted by TradeDoubler and the company to whose Affiliate Program you would like to be registered before you can become an affiliate. You will be informed through TradeDoubler's website … when you have been accepted as an Affiliate."

11. The affiliate agreement included the following terms:

"1. Definitions The following terms when used in this Agreement shall have the following meanings:

1 "Linked Website" – means a Website to which the Affiliate has placed a link on his website and which is connected to an Affiliate Program registered at TradeDoubler.

2 "Visitor" – means any person who clicks on a link placed on the Affiliate's website and thereby is connected to a Linked Website.

3. "Click" – means a click by a Visitor on a link on the Affiliate's website serving a Linked Website to the Visitor's browser.

4 "Lead" – means a Visitor who is connected to a Linked Website by the Affiliate and who has completed a definite act at the Linked Website, for example made a registration as a user.

5 "Transaction/sale" – means a Visitor who is connected to a Linked Website by the Affiliate and who has completed an agreement to buy a product, service or anything else supplied on the Linked Website.

6 "Traffic" – is a collective term for valid Clicks, Leads and Transactions/sales.

7 "Artificial Traffic" – is a collective term for invalid Clicks, Leads and Transactions, which may originate (for example and without limitation) from automatic openings, spiders, robots, requests in e-mail or chat rooms, script generators, placing links on other websites than informed and Clicks which are not generated by a browser, Clicks which are not preceded by an active act if a Visitor who wants to reach a certain website.

8 "Affiliate Program" – is a program owned and operated by TradeDoubler for a company on TradeDoubler's website which the Affiliate can join …

2. The Service

1. The Affiliate is allowed to place links on his website to websites which have an Affiliate Program registered at TradeDoubler. …

3. Any Affiliate Program may be amended or terminated at any time. …

3. Obligations of the Affiliate

1. The Affiliate is solely responsible for his website and its contents and shall ensure that they conform at all times to all applicable laws and regulations. …

6. The Affiliate must not in any way generate or contribute to generating Artificial Traffic to Linked Websites. …

4. Obligations of TradeDoubler

1. TradeDoubler undertakes to monitor and register the Traffic generated by the Affiliate's website to Linked Websites, in accordance with the service provided by TradeDoubler.

2. TradeDoubler will collect and pay to the Affiliate all amounts due to him arising from this Agreement.

5. Remuneration

1. The conditions of remuneration for each Affiliate Program are published on TradeDoubler's website and shall apply at all times. The affiliate therefore agrees to "self-billing", which means that TradeDoubler will create the invoice on behalf of the affiliate. …

2. … payment of accumulated remuneration to the Affiliate shall be made monthly in arrears provided that the Affiliate has generated valid Traffic and that TradeDoubler has received payment from each company with whose Affiliate Program the Affiliate has registered. …"

12. Mr Ray told me that he was not aware of the terms of the client agreement between Tesco and TradeDoubler until after this litigation commenced.
13. Elogicom set up two main websites called "Avon4me.co.uk" and "Avonlady.co.uk", and registered them with TradeDoubler as affiliate sites on the Tesco Affiliate Program. Those websites were visited and approved as affiliate sites by a Tesco employee.
14. However, TradeDoubler permits an affiliate to register with it a number of site uniform resource locators ("domain names") grouped under the general site name. Domain names are the names which an individual using the internet may seek to put into the address bar when conducting a search of the internet. Thus, in TradeDoubler's own account records as between itself and Elogicom, against the websites named "Avon4me" and "Avonlady", Elogicom had the facility to list a range of domain names as addresses associated with those websites. The domain names other than "Avon4me.co.uk" and "Avonlady.co.uk" were not visible to TradeDoubler's client, Tesco.
15. Mr Ray caused Elogicom to register a number of domain names using the word, "tesco", which were then added to the list of domain names in TradeDoubler's system associated in particular with the website "Avon4me" run by Elogicom. An initial group of domain names were registered on 22 December 2003: www.tesco2u.co.uk; www.tesco2u.com; www.tesco2you.co.uk; and www.tesco2you.com. A further group of domain names were registered on 13 December 2004: www.tescojersey.com; www.jerseytesco.com; www.jersey-tesco.com; www.tescojersey.co.uk; www.tescojersey.co.uk; www.jersey-tesco.co.uk; and www.jerseytesco.co.uk. On 31 January 2005, Elogicom registered www.tescodvd.co.uk. On 10 May 2005 it registered www.tescodiet.com and www.tescodiet.co.uk. On 11 May 2005 it registered www.tesco-diet.co.uk; www.tesco-diets.co.uk; www.tesco-diet.com; and www.tesco-diets.com. On 28 May 2005 it registered www.tesco-opticians.com. On 2 June 2005 it registered www.tescodietsshop.com; www.tescodietshop.com; and www.tescodietshop.co.uk. On 28 July 2005, it registered www.tesco-opticians.co.uk and www.tescoopticians.co.uk.
16. If an individual browsing the internet entered any of these various Tesco related domain names into the address bar on his computer, they did not take him to the website Avon4me (or any other website operated by Elogicom). Instead, Mr Ray arranged that once the domain name was entered into the address bar the individual would be taken directly to one of the websites operated by Tesco.
17. Although an individual entering these Tesco related domain names in the internet address bar on his computer would not be taken to the Avon4me website (and there be given the choice to click on an advertisement to be taken to one of Tesco's websites), the TradeDoubler software system picked up and recorded traffic to Tesco's websites generated by persons entering any of these Tesco related domain names which had been registered by Elogicom and then grouped with, in particular, Elogicom's website "Avon4me" in its accounts with TradeDoubler. The effect was that if any individual consumer entered one of these domain names in his computer, was taken directly to a Tesco website and then made purchases on that website, TradeDoubler would charge Tesco commission on those sales under the client agreement, and would pay Elogicom that commission under the affiliate agreement. So far as Tesco was concerned, it would simply appear that it was paying commission to Elogicom in respect of business generated via its website "Avon4me" or, as the case may be, "Avonlady".
18. Elogicom's account with TradeDoubler in relation to its affiliation with Tesco shows small commission payments in December 2004 and January to April 2005 (£19.32, £82.35, £60.07, £74.66 and £75.42 respectively), and then a very considerable increase in May 2005 (£26,688.00). It appears that this large increase was particularly linked to the registration by Elogicom of domain names linking "tesco" and "diet" in various combinations. The commission rate payable in relation to sales on Tesco's www.tescodiets.com website, to which those domain names, when entered, took individuals, was considerably higher than on Tesco's ordinary shopping website, www.tesco.com.
19. This leap in commission apparently payable to Elogicom was picked up by Tesco personnel on about 26 May 2005, and obviously came as a considerable surprise to them. They raised the issue with TradeDoubler, and it was from TradeDoubler's explanation in response that Tesco learned that Elogicom had been registering domain names which incorporated the word "tesco" and had been generating traffic on the TradeDoubler affiliate program by that means.
20. Tesco wrote to Elogicom on 7 June 2005 drawing attention to Tesco's reputation in the Tesco name and to its UK registered trademark, "Tesco". The letter complained that Elogicom's registration and use of a list of domain names comprising those of the domain names set out above of which Tesco was aware at the time took unfair advantage of Tesco's reputation and was an infringement of Tesco's trade mark and unregistered rights in the Tesco name. The letter threatened legal action unless Elogicom confirmed by close of business on 28 July 2005 that it agreed to take immediate steps to transfer the domain names to Tesco, to cease all use of the domain names and to undertake not to register any domain names which relied on the trade mark name at any point in the future.
21. At about this time, TradeDoubler stopped the affiliation relationship between Elogicom and Tesco.
22. There was no response from Elogicom for two weeks. On 21 June 2005, Tesco's solicitors, Wedlake Bell, wrote a letter to Elogicom setting out the nature of Tesco's claim in detail and referring to relevant authority (British Telecommunications Plc v One in a Million [1999] FSR 1). This letter again threatened legal action, and required undertakings to be given by Elogicom by 5pm on 27 June 2005.
23. By letter dated 24 June 2005, Elogicom responded. It disputed that it was liable for passing off or trade mark infringement, and referred to its affiliate status with Tesco via TradeDoubler. No undertakings were offered. The letter stated, "In conclusion, we would consider that our domains, rather than being exploitive of Tesco, enhance the goodwill and reputation of Tesco, as they enable a certain proportion of the internet community to access Tesco's goods and services, by ensuring a direct link. Had Tesco themselves wished to register these domains, we consider they would have done so."
24. By a faxed letter dated 3 July 2005, Wedlake Bell replied. Tesco's claims were maintained, but an offer was made to resolve the dispute without recourse to litigation. Tesco offered that in return for Elogicom undertaking forthwith to do all things necessary to transfer the listed domain names into the name of Tesco and permanently to refrain from registering any other internet domain names which incorporate the word "tesco", Tesco would pay Elogicom a total sum of £170 (a figure based on the standard minimum fees for registering domain names) and would waive all further legal claims in relation to the services which Elogicom had been providing using those domain names. The offer was expressed to expire at 4pm on 11 July 2005.
25. Elogicom responded in a short letter signed by Mr Ray dated 8 July 2005. Elogicom did not accept Tesco's offer and did not offer any undertakings. It denied any unlawfulness and claimed that "anything we may have done, as far as we were aware, was with the consent of Tesco/TradeDoubler". The letter stated that Elogicom proposed to leave its domains "dormant for the foreseeable future".
26. Therefore, Tesco launched these proceedings.
27. After the proceedings were commenced, Tesco found out that Elogicom had registered other domain names incorporating the word "tesco" (including after this correspondence), and the pleadings were amended accordingly to cover all the specific domain names set out above. Tesco claims (1) an injunction to restrain the Defendants from infringing Tesco's registered trade marks and from passing off any goods or services as associated with Tesco by use of the sign "Tesco" or similar; (2) an order that the Defendants take all steps in their power to transfer to Tesco each of the domain names referred to above; and (3) an inquiry as to damage.
28. The Defendants deny liability and Elogicom has heads of counterclaim, of which the main one is a claim for payment of commission earned as an affiliate of Tesco through the TradeDoubler system for May 2005 of £26,688, which sum remains unpaid. Tesco seeks to strike out the counterclaims or summary judgment under CPR Part 24 dismissing them.

The claim for trade mark infringement

29. Section 10 of the Trade Marks Act 1994 provides, in relevant part, as follows:

"(1) A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered.

(2) A person infringes a registered trade mark if he uses in the course of trade a sign where because 

(a) the sign is identical with the trade mark and is used in relation to goods or services similar to those for which the trade mark is registered, or

(b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trade mark.

(3) A person infringes a registered trade mark if he uses in the course of trade, in relation to goods or services, a sign which 

(a) is identical with or similar to the trade mark, … where the trade mark has a reputation in the United Kingdom and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.

(4) For the purposes of this section a person uses a sign if, in particular, he - …

(b) … offers or supplies services under the sign …

(6) Nothing in the preceding provisions of this section shall be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor or a licensee. But any such use otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark if the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark."

30. Mr Malynicz for Tesco relied in particular upon section 10(2)(b) of the Act. He submits that the registration and use of the "tesco" related domain names by Elogicom involved use of a sign in the course of trade where because the sign is in each case similar to the trade marks registered by Tesco (namely, "Tesco" and "Tesco.com") and was used in relation to services identical with or similar to those for which the trade mark is registered, there existed a likelihood of confusion on the part of the public, including the likelihood of association with the trade mark.
31. This submission requires careful analysis. Elogicom did not use the "tesco" related domain names which it registered in order to direct consumers to any website which it operated. Instead, where individuals browsing on the net entered those domain names in the address bars on their computers, they would be taken direct to a Tesco website. Elogicom did not use those domain names in order to sell any goods or services of its own.
32. However, Elogicom was seeking to benefit from use of domain names which incorporated the word "tesco" by 'fishing' for persons browsing the internet who might be searching for goods or services provided by Tesco and, being unsure of the precise address for a Tesco website, might by guesswork enter in the address bars on their computers names closely associated with Tesco in the hope that those addresses would take them to the Tesco website they were searching for. To the extent that Elogicom could capture some internet traffic represented by consumers who entered the "tesco" related domain names it had registered, and direct that traffic to Tesco websites under the auspices of the TradeDoubler affiliate system, it sought to be able to reap commissions for itself from Tesco. I consider that the only material reason why a consumer in the United Kingdom browsing the internet might use one of the domain names registered by Elogicom would be because of the impact of the well-known Tesco brand name and their desire to seek access to a Tesco website.
33. In my judgment, the use of internet domain names is itself a service offered to the public, whereby the entry of such a name in the address bar of the computer of an individual browsing the internet will take them to a website. In my view, by registering and making its "tesco" related domain names available as pathways on the internet to Tesco websites with a view to generating income for itself in the form of commission, Elogicom did use in the course of trade a series of signs (those domain names) which were each similar to the trade marks registered by Tesco and were each used in relation to services (the provision of internet access to Tesco websites) identical with or similar to those for which the trade marks were registered, and in circumstances where there existed a likelihood of confusion on the part of the public, including the likelihood of association of Elogicom's service (the provision of internet access to Tesco websites) with the trade marks. In the case of trade mark no. 2321013, the service provided by Elogicom was identical to the service for which the trade mark was registered, since class 35 in that trade mark expressly includes "assistance relating to all of the aforementioned services [ie including viewing and purchasing goods from a general merchandise Internet website]", and I consider that the provision of domain names allowing speedy access to such a website is itself a service in the form of provision of "assistance" relating to the viewing and purchasing of goods on such a website. Further, in relation to trade mark nos. 2258927 and 2238995 (in which class 35 does not include express reference to "assistance" of the kind referred to in trade mark no. 2321013, but does include reference to "assistance in the selection of goods brought together"), I also conclude that the provision of domain names allowing speedy access to Tesco's internet websites is itself a service in the form of provision of "assistance in the selection of goods brought together". In the case of all three trade marks, even if the service provided by Elogicom was not identical with services for which the trade marks were registered, the service provided by Elogicom would in my view be similar to those for which the trade marks were registered (namely, in broad terms, the provision of internet access to shopping services), within the meaning of section 10(2)(b) of the Act.
34. Therefore, subject to the defences put forward by Elogicom to which I turn below, I consider that its use of "tesco" related domain names infringed Tesco's three trade marks, contrary to section 10(2) of the Act; and I also consider that Elogicom's use of those domain names infringed Tesco's three trade marks, contrary to section 10(3) of the Act, in that Elogicom used the domain names in the course of its trade in relation to services, they were similar to Tesco's trade marks, Tesco's trade marks had a reputation in the United Kingdom and – subject to Elogicom's defences – its use of those domain names was "without due cause" and took "unfair advantage of" the distinctive character and the repute of Tesco's trade marks. In my view, Elogicom took unfair advantage of the Tesco brand, reflected in its trade marks, by using the word "tesco" in its domain names specifically with the object of trading on and benefiting from Tesco's reputation with the general public, by capturing part of the traffic of persons browsing the internet and entering Tesco related names in the address bars on their computers in the hope of being taken to Tesco websites, and then obtaining payment of commission from Tesco via TradeDoubler in relation to that traffic. Moreover, on the authority of the Court of Appeal's decision in British Telecommunications Plc v One in a Million Ltd [1999] FSR 1, it seems to me that the situation which Elogicom brought about would also fall to be regarded as detrimental to the distinctive character or the repute of Tesco's trade marks, within the meaning of section 10(3), since the following observation of Aldous LJ at p. 25 would apply: "The domain names were registered to take advantage of the distinctive character and reputation of the marks. That is unfair and detrimental."
35. The Defendants seek to answer Tesco's trade mark claims by relying on what are in substance six defences.
36. First, it is said that the Defendants' use of the "tesco" related domain names was purely to direct the browsing public to Tesco's own websites and that Elogicom did not use any of Tesco's trade marks in any manner in its own business. I accept that Elogicom did not use the domain names to direct customers to its own websites. In my judgment, however, this is not a good defence to the claim. As set out above, I consider that Elogicom was offering a service to the public under the various domain names, and that in doing so it was in substance making use of and trading upon the Tesco brand as reflected in Tesco's registered trade marks.
37. Secondly, it is said that Tesco consented to Elogicom's activities, by entering into the TradeDoubler arrangement and accepting Elogicom as an affiliate. Again, however, this does not provide a defence in the circumstances of this case. The only affiliated websites of which Tesco was aware were the "Avon4me" and "Avonlady" sites which Elogicom registered as affiliate sites with TradeDoubler and which were approved by Tesco, in accordance with TradeDoubler's standard practice. On the evidence before me, it is clear that Tesco had no knowledge whatever that Elogicom was making use of the "tesco" related domain names alongside the "Avon4me" and "Avonlady" websites in order to generate additional traffic to Tesco's websites and additional commission for Elogicom until late May 2005. There was nothing in the client agreement between Tesco and TradeDoubler to suggest that anything like this might occur. As soon as Tesco learned what was happening, it protested against the use of those domain names. I would also add that I do not think that there was anything in TradeDoubler's standard affiliate agreement terms to suggest to a client like Tesco that it might be possible for an affiliate to generate additional traffic to the client's websites not from re-directing persons from a website operated by the affiliate but by registering domain names in the hope of capturing internet traffic from persons entering such names in the address bars on their computers, without interposing any website of the affiliate whatever. Since Tesco cannot be taken to have consented to Elogicom's activities, it seems to me that the provisional conclusion above that Elogicom contravened section 10(3) of the Act by making use of signs in the form of the "tesco" related domain names "without due cause" and took "unfair advantage of" the distinctive character and repute of Tesco's marks must be confirmed.
38. Thirdly, the Defendants sought to rely upon section 10(6) of the Act. They maintain that their use of the "tesco" related domain names merely enabled individuals to have direct access to Tesco's own websites, and that therefore they were used merely for the purposes of identifying goods and services available at those websites as those of Tesco itself. In my judgment, however, there are two reasons why this defence cannot succeed. First, as set out above, I consider that Elogicom used the "tesco" related domain names as signs under which it offered and provided its own service to the public, in the form of providing a pathway through the internet to Tesco websites. That use simply does not fall within section 10(6) at all. But in any event, in my judgment, the use by Elogicom of the "tesco" related domain names was not in accordance with honest practices in commercial matters and (as set out in the context of section 10(3) above) without due cause took unfair advantage of the distinctive character or repute of Tesco's trade marks. The notion of "honest practices" in commercial matters is an objective one: compare Reed Executive Plc v Reed Business Information Ltd [2004] EWCA Civ 159; [2004] RPC 40, at paras. [131]-[132] per Jacob LJ. I do not think that Elogicom's trading without Tesco's consent on Tesco's own goodwill and by reference to Tesco's own trade marks in order to generate business for itself, and commission payments to it from Tesco, could be described in objective terms as an honest practice. Therefore, although it appears to me that Mr Ray may well have honestly thought that Elogicom could do what it did, I consider that he could not satisfy the condition laid down in the last sentence of section 10(6).
39. Fourthly, it is said that the Defendants were not given sufficient time to negotiate in the correspondence with Wedlake Bell for Tesco. In my judgment, there is no possible defence to the claim of infringement of trade marks which could in principle arise from these matters. Either there had been a violation of Tesco's rights or there had not. But in any event, I consider that Wedlake Bell did afford the Defendants a fair opportunity to consider their position and respond to the claims being made against them, as well as a fair opportunity to resolve the dispute which had arisen with minimal cost and avoiding litigation.
40. Fifthly, the Defendants maintain that Tesco should have used available internet domain name dispute resolution procedures rather than issuing proceedings. However, Tesco and the Defendants are not party to any agreement between themselves which would make use of such procedures mandatory in preference to court proceedings. In any event, the internet dispute resolution procedures to which the Defendants make reference make it clear on their face that they are provided as a possible alternative to court proceedings, and not with a view to excluding recourse to the courts. Nor do I consider that there was anything unreasonable in Tesco deciding to have recourse to the courts to protect its rights in the circumstances of this case. Use of the internet dispute resolution procedures would not have provided Tesco with access to injunctive relief of the sort which it seeks in these proceedings, to protect its position for the future. Nor would they have provided Tesco with protection in respect of costs.
41. Finally, sixthly, the Defendants rely upon the use of the word "Tesco" in a range of other internet website addresses from around the world: a range of sites in the USA for firms in a variety of businesses with "Tesco" related names, including one called "TESCO Shopping" (standing for "The Eclectic Sales Company"); a site in Germany for the Tesco Organisation Germany, specialising in heavy electronics; and further sites in the Czech Republic and Japan for businesses with "Tesco" related names. In my judgment, however, there is no material prospect that any consumer in the United Kingdom would confuse Tesco, the United Kingdom supermarket chain, with these sites or businesses. The existence of these sites does not diminish the reputation and goodwill of Tesco with consumers in the United Kingdom, nor diminish in any way Tesco's claims for breach of its UK registered trade marks or, for that matter, its claim in relation to passing off in the United Kingdom market.
42. For all these reasons, I conclude that Elogicom did contravene Tesco's trade marks through its use of the "tesco" related domain names. Further, in my judgment, Elogicom's refusal to transfer those domain names to Tesco and its determination to retain them as its own registered domain names gives sufficient indication of a risk of future or continuing violation of Tesco's trade mark rights to warrant injunctive relief of the kind sought by Tesco. This is on the basis of the judgment of the Court of Appeal in British Telecommunications Plc v One in a Million Ltd [1999] FSR 1.
43. In that case, the defendants had registered a large number of domain names including the names and trade marks of some very well known UK companies, such as Marks and Spencer and Ladbrokes. The defendants admitted that all of the domain names were actually or potentially available for sale, including to the companies themselves. None were in active use. The claimant companies sought and obtained injunctive relief of the kind sought by Tesco in the present proceedings, to restrain the defendants from passing off and infringing their trade marks, and mandatory injunctions requiring the defendants to assign the disputed domain names to them.
44. There are significant differences between that case and the present one, but also important similarities. So far as injunctive relief was concerned, the Court of Appeal identified that the basis for the injunctions which it granted was a "quia timet" basis, founded on a reasonable fear that wrongs might be committed in future if the injunctions did not issue. Aldous LJ said, at p. 18:

"In my view there can be discerned from the cases a jurisdiction to grant injunctive relief where a defendant is equipped with or is intending to equip another with an instrument of fraud. Whether any name is an instrument of fraud will depend upon all the circumstances. A name which will, by reason of its similarity to the name of another, inherently lead to passing off is such an instrument. If it would not inherently lead to passing off, it does not follow that it is not an instrument of fraud. The court should consider the similarity of the names, the intention of the defendant, the type of trade and all the surrounding circumstances. If it be the intention of the defendant to appropriate the goodwill of another or enable others to do so, I can see no reason why the court should not infer that it will happen, even if there is a possibility that such an appropriation would not take place. If, taking all the circumstances into account the court should conclude that the name was produced to enable passing off, is adapted to be used for passing off and, if used, is likely to be fraudulently used, an injunction will be appropriate.

It follows that a court will intervene by way of injunction in passing-off cases in three types of case. First, where there is passing off established or it is threatened. Secondly, where the defendant is a joint tortfeasor with another in passing off either actual or threatened. Thirdly, where the defendant has equipped himself with or intends to equip another with an instrument of fraud. This third type is probably mere quia timet action."

45. In dealing with the domain name, Marksandspencer.co.uk, the Court agreed with the judge at first instance that the domain name was itself an instrument of fraud, since the name was so distinctive that any use of it would result in passing off: p. 23. Other domain names used the words "Sainsbury", "Ladbroke" or "Virgin", which were not so distinctive as to be capable of referring only to the well-known companies with those names. However, looking at the circumstances more widely, it was clear that the defendants had registered those names in order to trade upon the goodwill which those companies had, and therefore those domain names also were to be regarded as instruments of fraud and injunctive relief issued in respect of them as well: pp. 23-24.
46. Aldous LJ also set out at p. 23 the following basis for the grant of injunctive relief:

"Mr Wilson [for the defendants] submitted that mere registration did not amount to passing-off. Further, Marks & Spencer Plc had not established any damage or likelihood of damage. I cannot accept those submissions. The placing on a register of a distinctive name such as marksandspencer makes a representation to persons who consult the register that the registrant is connected or associated with the name registered and thus the owner of the goodwill in the name. Such persons would not know of One in a Million Limited and would believe that they were connected or associated with the owner of the goodwill in the domain name they had registered. Further, registration of the domain name including the words Marks & Spencer is an erosion of the exclusive goodwill in the name which damages or is likely to damage Marks & Spencer Plc."

47. In accordance with this part of the judgment, the very maintenance on the relevant register of a domain name which itself inherently contains a representation of connection with the goodwill associated with a well-known trading name involves a continuing passing off on the part of the registrant of that domain name. Aldous LJ also applied the same reasoning to the class of case where the domain name (for example, making use of the word "Sainsbury") might refer to persons other than the owner of goodwill in a similar trading name, but where the overall circumstances showed that the registrant's actions in registering the domain name were calculated to make a representation of connection with that goodwill: see p. 23 ("I believe that, for the same reasons I have expressed in relation to the Marks & Spencer Plc action, passing off and threatened passing off has been demonstrated").
48. Although the judgment of the Court of Appeal focused mainly on the issue of passing off, the Court also affirmed that part of the judgment of Mr Sumption QC as the judge at first instance which held that injunctive relief was also justified on the grounds of threatened infringement of the trade marks of the claimants: see pp. 24-25.
49. In my judgment, the principles stated by Aldous LJ govern the present case, despite the differences between the cases on the facts. In the present case, Elogicom did not register the "tesco" related domain names with a view to selling them to Tesco or third parties, but with a view to using them itself in order to generate commission from Tesco under the TradeDoubler affiliate programme. However, in my view, the "tesco" related domain names which Elogicom registered all fell into the category of names which were inherently misleading, as with the "Marksandspencer" related domain names in the One in a Million case. The names chosen by Elogicom combined the word "tesco" with words signifying particular locations ("jersey") where Tesco traded or types of goods or services likely to be offered by Tesco, including home-delivery services such as are often indicated by means of domain names using the formula "2u" or "2you". In each case, the only use of the domain name by someone other than Tesco would, realistically, have to involve infringement of Tesco's trade mark. Although Elogicom eventually said that it had no intention of actually using the domain names it had registered, it had used them in the past and there was no good reason why it should retain its registration of those names unless it was reserving its option possibly to use them again in the future. Therefore, I consider that Tesco has, like Marks & Spencer Plc in the One in a Million decision, made out its case that there is a sufficient threat of future use of the names that quia timet injunctive relief should be granted. In addition, I consider that the very maintenance by Elogicom of those domain names on the register itself involves a continuing use by Elogicom of Tesco's name for Elogicom's own business purposes, which represents a continuing infringement of Tesco's registered trade marks contrary to section 10(2) and (3) of the Act, which is itself sufficient to warrant injunctive relief.
50. I should add that, even if I were wrong in my assessment that the "tesco" related domain names registered by Elogicom were inherently fraudulent, like the "Marksandspencer" related name in One in a Million, I have no doubt that the relevant test in relation to the other names (such as "Sainsbury") considered in that case would also be satisfied in the circumstances of the present case, so that injunctive relief would be warranted on that basis.

Passing Off

51. In addition to its claim based upon infringement of trade marks, Tesco claims relief in relation to the tort of passing off, as in the One in a Million case.
52. In my judgment, there is no doubt that Elogicom, by its registration and use of the "tesco" related domain names, has sought to associate itself with and trade upon the considerable goodwill which attaches to the name "Tesco" for the benefit of Tesco. There is also no doubt that Elogicom continues to threaten to make use the Tesco name, so damaging Tesco's goodwill, both by retaining those domain names with the option of starting to use them again at some point in the future and by virtue of maintaining their registration against Elogicom's name in the register. Therefore, for the same reasons as I have given above in relation to Tesco's trade marks claim and by application of the principles in One in a Million, Tesco is entitled by way of summary judgment to the quia timet injunctive relief which it seeks on this basis also.

The Counterclaims

53. I turn now to consider the counterclaims advanced by Elogicom, which Tesco submits should be struck out or dismissed by way of summary judgment.
54. Elogicom, in its Amended Particulars of Defence and Counterclaim, sets out two counterclaims. One was for the costs of defending the case. Costs are a matter in the discretion of the court, and the relevant costs obligations of the parties will be a matter for debate in the light of this judgment.
55. The second of Elogicom's claims is for payment of commission which it claims to have earned for May 2005 from Tesco under the Tradedoubler scheme in the sum of £26,688, which has not been paid.
56. Tesco's first submission in relation to this claim is that it is misconceived, in that Elogicom only has rights under the affiliate agreement in respect of commission as against TradeDoubler, and Tesco's only obligation to pay commission under the client agreement is an obligation owed to TradeDoubler, not Elogicom. I would not dismiss Elogicom's claim for commission on a summary basis on this ground. In my view, the wording of both the client agreement and the affiliate agreement is capable of supporting an analysis that the parties recognised that they were entering into a tripartite arrangement (involving Tesco, TradeDoubler and Elogicom). Further, it appears that there was or may have been at least some degree of contact directly between Tesco and Elogicom under this arrangement, since Mr Ray told me that Tesco regularly e-mailed details of commission rates directly to Elogicom. I consider that it is possible that the true interpretation of the obligations arising under the tripartite arrangement could (in the light of all the circumstances to be explored in relation to that arrangement) be found to be that, if Elogicom acted in accordance with the affiliate agreement, it would become entitled to commission payments as against Tesco as a matter of substantive right; and that the provisions for payment of such commission via TradeDoubler simply set out the procedural mechanism whereby Tesco's substantive obligations to pay commission to Elogicom would ordinarily be satisfied (according to which, Tesco would pay the commission sums due to Elogicom to TradeDoubler as agent for Elogicom, Tesco's affiliate). But if, for example, TradeDoubler went into liquidation when commission was due but unpaid, it seems to me that it would be arguable that Elogicom would still be entitled under this tripartite arrangement to assert its substantive claims for payment directly against Tesco. I have set out above the terms of the client agreement and the affiliate agreement which appear to me to be capable of supporting an analysis of the obligations under the tripartite arrangement along these lines. In the client contract, I have in mind in particular the last sentence of clause 2.1; the reference in clause 2.2 to TradeDoubler "administering" the Affiliate Program; the reference in clause 4.1 to the entitlement of the Affiliate to receive commission; the reference in clause 4.2 to TradeDoubler collecting the commission "on behalf of the Affiliates"; and the separation in clause 5 of the obligations to pay fees to TradeDoubler in its own right and commission invoiced by TradeDoubler "on behalf of the Affiliates". In the affiliate agreement, I have in mind in particular the reference in recital C to the need for acceptance by the client company onto its Affiliate Program; the reference in clause 4(2) to TradeDoubler's obligation to "collect and pay to the Affiliate all amounts due to him arising from this Agreement"; the reference in clause 5(1) to TradeDoubler invoicing on behalf of the affiliate; and the reference in clause 5(2) to TradeDoubler paying the affiliate only after it receives payment from the client company. It seems to me that the client agreement and the affiliate agreement would have to be interpreted in the light of the whole factual context in which they were made. I am not satisfied to the requisite standard on an application for summary judgment that Tesco's argument that there is no contractual nexus between it and Elogicom - and hence no obligation for it to pay Elogicom any commission – is clearly correct. There is no evidence in this case to suggest that Tesco has in fact paid the commission sum to TradeDoubler so as to meet any obligation owed by it to Elogicom. Accordingly, on this view of the tripartite arrangement it could not be ruled out on the basis of this argument put forward by Tesco that Elogicom might have a valid counterclaim against Tesco for commission.
57. Tesco's second submission was that, even if there were on proper analysis a tripartite arrangement in place, the rights of Elogicom to earn commission under it were set out in the affiliate agreement, and that agreement stipulated only that commission could be earned where traffic to the client's website was generated from the affiliate's own website (see in particular clauses 2.1, 3.1 and 4.1 of that agreement) and did not contemplate that commission could be earned by the use by the affiliate (Elogicom) of domain names which provided a link not to the affiliate's own website (with the possibility of a link from that website to Tesco's website) but directly to Tesco's website. In this case, as explained above, the commission which Elogicom claims was all generated by this latter method.
58. I think there is force in this submission of Tesco, but again I am not satisfied to the degree necessary on an application for summary judgment that Elogicom's counterclaim should be dismissed on this basis. It is in fact clear that TradeDoubler did treat traffic generated by the direct links to Tesco's website which Elogicom provided as traffic falling to be monitored under the TradeDoubler scheme and in relation to which commission could be payable. Mr Ray referred me to TradeDoubler's current information, in a document headed "TradeDoubler – Linking Questions" printed from the internet, dealing with questions regarding its system, which does contemplate that affiliates may use a "redirecting URL" in the manner which Elogicom did. TradeDoubler also appeared to consider that it was entitled to charge Tesco for such commission. Therefore, I think that this would be a defence which would require fuller investigation of the material facts before it could be treated as made out.
59. Thirdly, Tesco submits that the affiliate agreement should be interpreted in the light of Tesco's own entitlements under the general law not to have its trade marks infringed and not to suffer from passing off by affiliates, and that the traffic to Tesco's website which Elogicom generated by means of the "tesco" related domain names constituted "Artificial Traffic", generated in breach of Elogicom's obligation under clause 3(6) of the affiliate agreement. In my judgment, this submission is correct. The definition of "Artificial Traffic" in clause 1(7) of the affiliate agreement is a generic definition, setting out a non-exhaustive list of examples falling within the concept. That list includes "placing links on other websites than informed [sc. to TradeDoubler and the client]". That seems to me to be an activity closely similar to what Elogicom in fact did in this case. Moreover, I consider that the concept of "Artificial Traffic" would naturally include traffic generated by means of violation of the rights of the client, as Elogicom violated Tesco's rights by its activities in the present case. In my judgment, the true interpretation of the affiliate agreement is that commission cannot validly be earned by Elogicom in respect of "Artificial Traffic", and therefore Elogicom cannot have a valid counterclaim for the commission which it claims in this case. That counterclaim is therefore dismissed.

Conclusion

Tesco succeeds in its claim for summary judgment and injunctive relief. Tesco also succeeds in its submission that the counterclaim for commission should be summarily dismissed. I will hear representations from the parties on the question of the precise form of the relief to be granted and costs