England and Wales High Court (Chancery Division) Decisions

The Licence Agreement

A.    The Licensor is the owner of the Trade Marks (defined later in the LA).

B.     The Licensee has entered into an agreement of the same date with Nutricia International BV, a company in the same group as the Licensor for the sale and purchase of the entire share capital of the Health & Diet Group.

C.     On completion, the Licensee will acquire Health & Diet Group Ltd being a part of the Health & Diet Group (also defined later in the LA) which “produces, manufactures, distributes, promotes, markets and sells the Products under the Trade Marks and uses the Trade Marks as a retail brand in the Territory”.

D.    The Licensor has agreed to grant to the Licensee the rights to use the Trade Marks and/or sublicense the use of the Trade Marks to the members of the Health & Diet Group in respect of “producing, manufacturing, distributing, promoting, marketing in so far as such rights are required for the purposes of retail sale, and selling the Products wholesale or through retail outlets or by means of the internet or by mail order only under the Trade Marks and using the Trade Marks as a retail brand in the Territory….”.

i)                    “Domain” means www.gnc.co.uk.

ii)                  “Health & Diet Group” has the meaning given to it in the share sale agreement which I have referred to.

iii)                “H&B Group” means the Licensee and all companies incorporated in the Territory which from time to time directly or indirectly are subsidiaries or subsidiary undertakings of the Licensee and any subsidiary holding company incorporated within the Territory.  It is to be noted that this does not include a parent company of the Licensee.

iv)                “Products” means vitamins, minerals, nutritional supplements and any similar products.  It does not matter who the manufacturer or distributer is.  Thus, items in this list which do not bear the GNC mark are nonetheless within the definition.

v)                  “Use or Used” means use of the Trade Marks in a variety of ways as set out in the lengthy definition.  It includes retail sale (including by the internet and/or mail order) and, subject as provided later in the LA, wholesale sale of Products bearing the Trade Marks (referred to as the “Sale of Products”).  It also includes the manufacture, distribution and marketing of Products and the use of packaging or marketing material bearing the Trade Mark in the production, manufacture, distribution and marketing of Products “all in relation to the Sale of Products and in each case by or on behalf of the Licensee or any Sub-licensees”.  It also includes the use of the Trade Marks on retail shop fascias “where the business of such retail outlets is the promotion, marketing and sale of the Products”.  Notwithstanding the above, such use shall not include any use over the internet unless such use is targeted at UK Purchasers and it is stated that orders cannot be accepted from outside the UK; nor shall it include wholesale sales outside the H&B Group.

vi)                “Unregistered Trade Marks” means any unregistered trade marks or service marks or get ups used by and owned by or licensed to the Licensor, the Health & Diet Group Limited and/or the GNC Group in relation to Products sold under the Trade Marks as of Completion.

vii)              “Sublicensees” means all companies within the H&B Group and all distributors of the Products and all subcontractors used by the H&B Group to manufacture or package the Product.

viii)            “the Territory” means the UK.

ix)                “the Trade Marks” means the GNC trade marks details of which are set out in Schedule 1.  Schedule 1 specifies seven trade marks of which the ones which are material for present purposes are “GNC” and “GNC LIVE WELL”.

i)                    Under clause 2.1.a, the Licensor grants to the Licensee

“the exclusive right to Use the Trade Marks during the term of this Agreement (as provided for under clause 5 below): (a) within the Territory….”

ii)                  Under clause 2.2, the Licensee

“shall be entitled to grant sub-licences of the rights granted under clause 2.1 above to the Sublicensees but shall have no other right to sub-license the rights granted hereunder without the prior written consent of the Licensor (not to be unreasonably withheld or delayed).

“The Licensee shall not, [sic] use the Trade Marks or seek customers or otherwise solicit orders outside the Territory…. for Products bearing or promoted using the Trade Marks but the Licensee shall be entitled to sell such Products within the European Union (as its membership may from time to time vary) in response to unsolicited orders for such Products.”

“3.1       The Licensee:

(a)      shall use the Trade Marks substantially in the form stipulated in Schedule 1 and shall observe all reasonable directions by the Licensor;

(b)     shall not use the Trade Marks in a manner that is derogatory or will cause a material dilution of the Licensor’s rights in the Trade Marks;

(c)      [concerns confusion and is not relevant for present purposes];

(d)     shall not incorporate any alpha, numeric or graphic additions to the Trade Marks; and

(e)      subject to clause 2.2, shall not sub-licence, assign or transfer this Agreement or any rights granted hereunder.

 3.2        The Licensee acknowledges the Licensor’s ownership of the Trade Marks and agrees that any goodwill accruing as a result of the Use of and attributable to the Trade Marks by the Licensee shall be for the benefit of the Licensor.”

“The Licensee shall not represent that it has any title in, or right of ownership to, any of the Trade Marks or do any act or thing which substantially impairs the rights of the Licensor in any of the Trade Marks, or brings into question the validity of their registration……., and shall ensure that any its agreements [sic] with any Sublicensee relating to use of the Trade Marks contain equivalent obligations.”

“5.2       The Licensor may terminate this Agreement immediately by notice in writing if:

(a)      The Licensee materially breaches this Agreement or any other member with the H&B Group commits an act which would amount to a material breach of this Agreement or (without prejudice to the Licensor’s other rights to terminate under this Agreement) otherwise infringes the Licensor’s rights under the Trade Marks to an extent likely to cause material lost to the Licensor; or

(b)     The Licensee commits any other breach of this Agreement or any other member of the H&B Group commits an act which would amount to any other breach of this Agreement and, to the extent that the breach or such other act is capable or remedy, fails to remedy it within sixty days after being given a written notice containing full particulars of the breach and requiring it to be remedied.

…….

 5.6    If the Licensee ceases to Use the Trade Marks or any of them in respect of the Products for a continuous period of 5 years or more the Licensor shall be entitled to terminate this Licence in respect of such Trade Mark or Trade Marks.”

“all rights, title and interest in the Domain with full title guarantee together with all rights of action, remedies, powers and benefits relating to the Domain….”

Right to serve the Notices and to bring proceedings; equitable defence

i)                    The first issue is whether GNIC, which was not the Licensor under the LA, was entitled to serve the Notices and to bring and these proceedings.  

ii)                  The second issue is whether the Notices are sufficiently clear and unambiguous validly to exercise the termination provisions of clause 5 of the LA.

iii)                The third issue is whether these proceedings can continue to be maintained by GNIC.  GNIC, as at best an equitable assignee of the Licensor’s rights under the LA, must, in the language of the old cases, come to the Court with clean hands.  H&B’s case is that GNIC does not do so and that this Court should refuse to give effect to GNIC’s equity.  The “clean hands” issue requires amendment to the pleadings.  Mr Bloch has made an application to amend which is heavily contested.  Following discussion at the hearing, this aspect of the case is being put aside until after I have given judgment on the other issues.  If the application proceeds, further argument will be inevitable.

Entitlement to serve the Notices and bring proceedings

i)                    a Contribution, Assignment and Assumption Agreement (“CAAA”);

ii)                  a Bill of Sale and Assignment (“BSA”); and

iii)                an Assumption Agreement (“AA”).

“… Assignor does hereby sell, assign, transfer, and set over unto Assignee the entire right, title and interest in, to an under the Trademarks, together with the goodwill of the business symbolized by the Trademarks and in accordance with which the Trademarks are used, together with all common law rights of Assignor, including, without limitation, the right to bring action and recover for past infringement, if any, of the Trademarks.”

i)                    First, that as a matter of equitable principles, GNIC as equitable assignee of the benefit of the LA could not invoke clauses 5.2(a), 5.2(b) and 5.6 against H&B in advance of providing H&B with notice of the alleged assignments;

ii)                  Secondly, that as a matter of construction of the LA, GNIC is not entitled to invoke those clauses against H&B in advance of providing such notice; and

i)                    the assignment is absolute; and

ii)                  express notice, in writing, has been given to the debtor, trustee or other person from whom the assignor can claim the debt, or from whom the other chose in action is enjoyed.  In the context of the LA, this includes the right to serve a notice of termination under clause 5.

“(as an assignee in equity under English law) stands in the shoes of GNIC Arizona Oldco so as to be entitled to the benefits enjoyed by the Licensor under the Agreement”.

“It is said that that [ie exercise by the assignee] is a valid exercise of the option. My answer is that it is not such a valid exercise.  My reason for that answer is that the only rights that an equitable assignment can create in the equitable assignee are rights against his assignor who thenceforth becomes trustee of the benefit of the option for the assignee, and the assignor could, of course, be compelled in equity to exercise those rights for the benefit of the assignee.”

“….. it seems to me that the fatal obstacle in the way of Mr Drake’s [he appeared for the assignee] contention is that when [the assignee] purported to exercise the option by the letter of August 7, 1973, there was no contractual relation in existence between [the assignee] and Stewart [who had granted the option].  Where there is a contract between A and B, and A makes an equitable but not a legal assignment of the benefit of that contract to C, this equitable assignment does not put C into a contractual relation with B, and consequently, C is not in a position to exercise directly against B any right conferred by the contract on A. The equitable assignment may be converted into a legal assignment by notice to B: see section 136 of the Law of Property Act 1925; but, so long as the assignment remains equitable only, C has no more than a right in equity to require A to protect the interest which A has assigned and to do so by exercising the option himself.”

i)                    Once notice of the assignment has been given to H&B, GNIC is able to invoke the termination clauses in the LA against H&B.   I agree with Mr Bloch that the provision of such notice is not, and would not have been, an onerous or difficult step for either GNIC Arizona Oldco or GNIC to have taken or now for GNIC to take.

ii)                  Even in the absence of such notice, it was at all times open to GNIC Arizona Oldco (subject only to its voluntary administrative dissolution and the relevant applicable laws), to invoke the terms of the LA against H&B (either on its own behalf or as trustee for GNIC).

“Unless the licence provides otherwise, it is binding on a successor in title to the grantor’s estate.”

i)                    First, it is not a licence agreement which is made binding by section 28(3), it is the licence granted under any such agreement.  The benefit of and burden of the terms under which the licence is granted are, I consider, to be governed by ordinary contractual principles.  The assignee of the benefit a trade mark licence agreement is in no better a position to enforce the terms of the agreement than the assignee of the benefit of any other contract. 

ii)                  Secondly, the assignee would be able to police the licence agreement.  All the assignee would need to do would be to give notice of the assignment to the licensee to give full effect to the assignment to him.

iii)                Thirdly, a trade mark owner might transfer some, but not all, of the marks subject to a trade mark licence to another person.  Unless the licence is somehow severable, how the terms of the licence are to be enforced is just the sort of matter which has to be dealt with by the agreement between transferor and transferee and is not the direct concern of the licensee.

iv)                Fourthly, the need for notice is demonstrated when regard is had to the position of a licence which provides, in contrast with the LA, for a periodic licence fee.  Until the licensee is given notice of the assignment, he will not know that he ought to be making his payment not to the party with whom he contracted, but with some third party.  It is not simply a procedural requirement that notice be given: rather, until it is given, the debtor’s only contractual obligation is to the assignor.

i)                    The court did not overrule Warner Bros or hold that it was wrongly decided.   Rather, the case was side-lined by Peter Gibson LJ who placed emphasis upon the analysis of Lord Denning which, as mentioned, focused on the issue of notice and the ability, or inability, of an equitable assignee to invoke a contractual right in advance of notice of the assignment;

ii)                  On the facts of Three Rivers, no issue about notice arose.  Notice did not result in the equitable assignee becoming an assignee at law under section 136 LPA 1925, because the debts in question had only been partially assigned, rather than absolutely assigned.

i)                    Halsbury’s Laws of England, Vol 13 (2009) “Assignment of Choses in Action” at para 41:

“In order to make the assignee’s title effective against the debtor or fundholder and third parties notice of the assignment must be given to the debtor or fundholder, though no assent or acquiescence on the part of the debtor or fundholder is necessary. Thus an equitable assignee of a contractual option who has not given notice is not entitled to exercise the option in his own name.”

ii)                  Chitty on Contracts, 32^nd Edition, at 19-005:

“A statutory assignee can sue the debtor without joining the assignor as a party to the action, whereas an equitable assignee often cannot do this. Furthermore, it must be observed that whereas a statutory assignment passes a legal right to the assignee, an equitable assignment passes only an equitable right. In practice, as already observed, this usually makes little difference as a matter of substantive law to the efficacy of the assignment; but there are some situations where the distinction can prove of practical importance. For example, it has been held that an assignee of an option to renew a contract for services who had not given notice of his assignment to the other contracting party could not exercise the option: the reasoning is based on the fact that the assignment was equitable only.”

iii)                Snell’s Equity, 33^rd Edition, at 3-021 to 3-023:

“3-021. The effect of an equitable assignment depends upon whether or not the whole interest in the chose has been vested in the assignee.

3-022. (a) Whole interest assigned. When the chose is merely equitable and the whole interest in it has been vested in the assignee, equity has always permitted him to sue in his own name without joining the original creditor….

3-023. (b) Some interest outstanding. The rule is otherwise if the assignment leaves some interest outstanding. This occurs where there is an equitable assignment of part of the chose, or an equitable assignment of a legal chose; for in the latter case, even if the whole chose is assigned, the original creditor still owns the chose in law, holding it in trust for the assignee….

Further, an equitable assignee of a legal chose in action cannot exercise contractual rights such as an option conferred on the original creditor. Nor can he give an effective discharge to the debtor unless authorised to do so by the Assignor.”

i)                    The first is that Clause 5 of the LA also enables H&B to give notice of termination, including notice without cause on 3 months’ notice.  It is obvious, I venture to suggest, that if GNIC Arizona Oldco had not been dissolved, a notice served on it by H&B under clause 5 would be effective in the absence of notice to H&B of any assignment to GNIC.  It is probably the case that, once notice had been given, such a notice should be served on GNIC rather than GNIC Arizona Oldco; that, at least, is the mirror of GNIC’s case concerning the giving of notice to, rather than by, H&B.  This demonstrates the importance of notice in the context of equitable assignment.  It seems to me that H&B is entitled both to give notice to and to receive notice from the entity with which it contracted in situations where it has no reason to believe that the benefit of the LA has been assigned.

ii)                  The second is that I have not relied on any confusion which may have arisen as a result of the shared name of the assignor and the assignee – General Nutrition Investment Company, both incorporated in Arizona and both having the same corporate address.  I address this potential confusion in the next part of this judgment, dealing with an alleged lack of clarity in the Notices.

Clarity of Notices

i)                    A letter dated 5 August 2014 (“the First Notice”): this purported to terminate the LA under Clause 5.2(a), a large number of breaches being specified in the schedule to the letter.  It also relied on Clause 5.6 (termination for non-use) in relation to a number of specified marks.  These are the Unused Marks referred to in paragraph 6 above.  The First Notice is addressed to H&B (under its then name NBTY Europe Ltd).  It was signed by a Mr Stubenhofer, Chief Legal Officer and Secretary, for and on behalf of “General Nutrition Investment Company” whose address was given as 1002 South 3^rd Avenue at Buckeys, Phoenix, Arizona, 85043.  This was the address given in the LA for the Licensor (GNIC Arizona Oldco under its then name General Nutrition Investment Company).

ii)                  A letter dated 19 September 2014 (“the Second Notice”): this was given without prejudice to the First Notice.  This notice was given in case any of the breaches specified in the First Notice were capable of remedy; it was a notice under Clause 5.2(b) of the LA requiring the breaches to be remedied so far as capable of remedy and so was not a notice actually purporting to terminate the LA. The addressee and the signatory were as under the First Notice.

iii)                A letter dated 6 October 2014 (“the Third Notice”): this relied on the First Notice as a 60-day notice under Clause 5.2(b) of the LA.  It alleged that no steps had been taken to remedy the breach and purported to terminate the LA under that same provision.  The addressee and the signatory were as under the First and Second Notices.

iv)                A letter dated 2 December 2014 (“the Fourth Notice”): this relied on breaches concerning sponsorship agreements (which I will come to in more detail later).  This notice purported to terminate the LA under both clauses 5.2(a) and (b) of the LA.  The letter was addressed to H&B and was signed for and on behalf of “General Nutrition Investment Company” at the same address as under the earlier Notices.

v)                  A letter dated 23 December 2014 (“the Fifth Notice”): this was a “belt and braces” notice relying on various alleged breaches to justify a further notice of termination under clause 5.2(b).  The addressee and the signatory were as under the Fourth Notice.

“Prima facie one would expect that if a notice unambiguously conveys a decision to determine a court may nowadays ignore immaterial errors which would not have misled a reasonable recipient”

“On the face of each notice, Life was said to be the tenant as successor in title to Direct and that, if true, could only have become about as a result of an assignment without consent.  But such an assignment would be effective to make the assignee the lessee for the purposes of clause 7(x) [the break clause exercisable by “the lessee”].  The reasonable recipient could not know in the absence of proof of the assignment whether Life was the lessee.  It might have been.  If Life was not in fact the lessee but Direct was, the reasonable recipient could not know whether Amery-Parkes [Life’s solicitors] were authorised by Direct to act for it and to serve the break notice, contrary to the express terms of the notice.  To my mind, because it is not obvious from each notice that there was an error in the name of the lessee, nor is it obvious who the actual current lessee was, nor whether [the solicitors filing the notice] were authorised by anyone other than Life, it is impossible as a matter of construction to cure what we now know to be the defect by substituting Direct for Life as the person on whose behalf Amery-Parkes were giving each notice.”

Other points of construction

i)                    Is H&B bound by contract not to use the Trade Marks other than in accordance with the LA?

ii)                  In clause 5.2(a), do the words ‘to an extent likely to cause material loss to the Licensor’ qualify the whole of the clause or merely the last three lines?

iii)                In clause 3.1(d), what is meant by incorporation by addition? 

iv)                Does the scope of the licence in relation to products allow the promotion of products by the sale of different products?

v)                  Does the LA include an obligation of good faith on the parties?

vi)                Are the Trade Marks and goodwill associated therewith held on trust by GNIC for H&B? 

vii)              Will use by GNIC of the Unused Marks after termination of the LA be an implied derogation from grant, ie a breach of contract?

I take those questions in turn.

The Substantive case – introductory remarks

“First off, GNC foolishly, while owned by a PE firm some 15 years ago, sold the Brand name and the rights for GNC in the UK to Holland & Barrett. Similar to the old La Senza issue. So we have nothing to do with the stores there except to have people believe it is part of our company! Trying to get the name back now. Will take a while…”

The Witnesses and documentary evidence generally

GNIC’s witnesses

i)                    Mr Green had no involvement in the transaction which resulted in the LA;

ii)                  he did not have intimate knowledge of the terms of the LA;

iii)                during the many years he was employed by GNC in the US, he never had occasion to look at the LA;

iv)                he was not involved in the discussion which led to the issue of the First to Fifth Notices;

v)                  he knew no one who was involved in those discussions, beyond GNIC’s attorneys and solicitors;

vi)                he had not spoken to the business side of the GNC Group in relation to any of the alleged breaches; and

vii)              the United Kingdom was not a country for which he was responsible at any time during his employment with the GNC Group.

i)                    Mr Green asserted in his first witness statement that H&B benefits enormously from GNC’s global reputation and goodwill. Mr Bloch says that he had no basis for doing so, correctly pointing out Mr Green’s explanation in cross examination that this was an assumption premised upon the number of flights between the US and London, and the nature of the global economy generally.

ii)                  Mr Green adopted, in his first witness statement the claims of Mr O’Connor (whose evidence I come to in a moment) as regards the “very serious consequences” said to flow from the use of the GNC brand by one local partner (ie a franchisee) in the territory of another. Mr Bloch suggests that there is no basis for taking any of those assertions seriously, particularly as none of GNIC’s witnesses could think of any examples at all of such consequences so far as promotion or marketing was concerned. Moreover, the relevant paragraph of Mr O’Connor’s witness statement is described by Mr Bloch as misleading.  I will be considering that point when addressing Mr O’Connor’s evidence.  Jumping ahead, there is some force in Mr Bloch’s criticism of Mr O’Connor and therefore force in the corresponding criticism of Mr Green.  Either Mr Green focused on the point in which case his evidence is misleading in the same way as that of Mr O’Connor; or he adopted Mr O’Connor’s evidence on this point without focusing on the particular aspect now under consideration, in which case his evidence is of no assistance. 

iii)                In relation to the damage said to flow from assertions of ownership in the marks, Mr Bloch relies on unsubstantiated assertions made by Mr Green in his first witness statement.  In the context of suggestions by GNC that H&B was asserting ownership of some of the Trade Marks, Mr Green said that he had “no doubt that this will damage GNC’s brand equity in a significant way”.  I am bound to say that this reader of that part of his evidence was left with the impression that Mr Green was relying on assertions of ownership by H&B which he had identified for himself and that he considered those assertions to be damaging.  However, in cross-examination, it became apparent that he was speaking only of matters of principle and not of the examples which are relied on by GNIC; he had not looked at the particular instances where such ownership was said to have been asserted by H&B or the effect which those assertions might have.  In other words, all that he was saying was that assertions of ownership by H&B had the potential for causing damage.  Whether damage would be caused would obviously, I add, depend on the context in which an assertion of ownership of the Trade Marks was made.

iv)                Mr Green further asserted in his second witness statement that GNC takes care to balance different forms of advertising or promotional activity to ensure that no one section of its customer base is targeted at the expense of others.  Mr Bloch maintains, correctly in my view, that cross-examination exposed that Mr Green was completely unable to explain how that worked in practice. I agree with him that it was in fact clear from Mr Green’s answers that the group simply attempts to exploit all opportunities to increase the profile of the mark as may arise.  That is all Mr Green meant by balance.

i)                    In his first witness statement, he claimed that the parties “in all material respects have conducted themselves in the mutual understanding that the Claimant has, at all material times, been the Licensor.”  Mr Bloch submits that there was no basis at all for that assertion.  I agree.  Indeed, Mr O’Connor eventually accepted that the letter on which he particularly relied (a letter from Mr Dave Sullivan to H&B dated 7 November 2003) was not evidence of a mutual understanding at all material times.  Reading the relevant paragraph of Mr O’Connor’s witness statement prior to the hearing, I certainly gained the impression that the documentation to which he referred would demonstrate the mutual understanding; but when taken to it, I learned that my impression was wrong.

ii)                  Mr O’Connor suggested that were numerous occasions over the years when legitimate competition had spilled over into illegitimate tactics by H&B.  He asserted that the “only reasonable conclusion” to draw from these tactics was that “at some level” within the H&B group a decision had been taken either intentionally and repeatedly to encroach upon the rights of the GNC Group or to “sail as close to the wind as possible”.  Having heard his answers to Mr Bloch’s questioning, I do not consider that Mr O’Connor had any proper evidential basis on which to make these serious criticisms, especially in the light of Mr Craddock’s evidence.

iii)                Mr O’Connor stated in his first witness statement that the GNC Group had “active franchisees” in Serbia, Montenegro and a number of other countries.  Mr Bloch says that this was simply misleading so far as concerns Serbia and Montenegro.  I agree.  The position is this.  In fact, as Mr O’Connor accepted, there was no franchisee operating in the territory at the relevant time (the date of the television broadcasts complained of, to which I will come) and even today there are no stores opened by that franchisee.  More importantly, Mr O’Connor attempted to justify his statement relating to a franchisee or franchisee in Serbia and Montenegro by reference to intending franchisees who had entered into contracts but who had not yet opened stores.  One might have hoped that Mr O’Connor would have explained that in his witness statement instead of giving the impression that franchises were actually in operation; however, that does not matter much since at the time of the broadcasts complained of, no contract had been signed so that, even on Mr O’Connor’s definition, there was no active franchisee in Serbia or Montenegro. 

iv)                Mr O’Connor asserted in his first witness statement that there were a number of “very serious consequences” resulting from what can be described as leakage from one territory to another of marketing or promotional activities.  Mr Bloch pressed him about this; he asked whether there was any example where GNC had needed to address an issue (ie a complaint from a franchisee) “simply as a result of one franchisee… objecting to the way in which the brand is represented in a broadcast or other marketing and promotional activity that has spilled over from one territory to another”.  Mr O’Connor was unable to think of a single example.  He accepted that what he had said in his witness statement was really directed at sales from one territory into another; and he accepted that he could not think of an occasion where damage had occurred solely because of cross-territory marketing.  Nor was Mr O’Connor able to think of an example of what he described as “relationship strain” other than where direct sales were made into another territory. 

v)                  And so, Mr Bloch submits, Mr O’Connor’s evidence simply does not assist the Court.

i)                    He accepted that one of the reasons for the failure of the Discount Supplements venture was the inability of GNC to use the GNC marks in the UK.

ii)                  He accepted that the possibility of GNC acquiring the H&B’s GNC brand and business had been considered within GNC.  He was not personally involved in any discussions (the existence of which, but not any detail, I should state is apparent from the documents), although the question whether GNC could “buy our old stores back” was raised with him in August 2013 by Margaret Peet.

iii)                Insofar as the GNC group was interested in acquiring the GNC UK business, this was not because anyone in the business was saying that damage was being caused to the brand, whether by the use of an inconsistent brand image or spillover. 

iv)                Rather, acquisition of the UK business would have resulted in a consistent approach to the use of the brand across different countries and would have made easier his task of explaining to potential business partners and franchisees the differences between the UK and elsewhere.

v)                  He had given consideration to the possibility of obtaining the “gnc.london” domain.  In an email exchange with Margaret Peet, he commented “Buy to stop NBTY”.  He saw having this domain name “as one more thing that was out of the control of [H&B]” and one less thing to deal with when explaining to potential partners the difference between GNC UK and GNC US.  He gave this telling answer to Mr Bloch’s questioning about confusion between the GNC US business and the UK business conducted by H&B:

“My personal view on that is, if we had at least something that we could control and portray in a similar manner, or at least have control or approval over and present the brand in a particular way that was consistent with the US, that could potentially force, at least Holland & Barnett/NBTY Europe, to move to something that was a level of consistency of what we had in the US, and then at least that would be a small win.”

vi)                Mr Cupples suggested, before giving that answer, that to have control of the domain name would help, if only in a small way, to minimise the risk of confusion between GNC US and GNC UK.  Mr Bloch expressed difficulty understanding that since, as he put it, “gnc.london is going to be associated with the UK, is it not?” to which Mr Cupples answered “potentially, or London, Ontario, I do not know”.   Shortly thereafter, Mr Cupples eschewed the proposition that the reason for snapping up this domain name related to the possibility that London would be seen as a reference to London, Ontario”.  This is a small point.  I labour it only because Mr Bloch relies on it as an indication that Mr Cupples was willing to argue a case, however ridiculous, so that I should approach his evidence with caution.  I do not accept that as a fair characterisation of Mr Cupples’ answers.  A reading of the entirety of the relevant passages of the transcript does not lead to that conclusion.

vii)              GNC had also considered expanding its business into the UK and Ireland selling own-brand products.  The products included the “GNC Herbal Plus” range.  It went as far as announcing a launch of these products.  I understand that GNC did not in the end in fact sell products in the UK under the GNC Herbal Plus label, GNC having given an undertaking in the course of these proceedings not to do so in the face of objections from H&B.   Mr Cupples accepted that, had the launch been pursued, it would potentially have forced H&B to the table. 

i)                    First, without necessarily having an agenda to force H&B to sell its GNC business to GNC or to become a franchisee, GNC was constantly looking for ways to protect and enhance its own position, including (a) taking business opportunities in the UK in competition with H&B and (b) blocking H&B from taking steps which, in GNC’s view, might lead to confusion with its US business.  If permissible steps under (a) would have the result of “forcing H&B to the table” then GNC’s attitude was “so be it, all well and good”.

ii)                  Secondly, there was no suggestion that GNC’s wishes and attempts to expand into the UK market in 2013/14 were driven by concerns that H&B was causing any damage to the GNC brand anywhere in the world.  The same can be said for its acquisition of the gnc.london domain name.

i)                    Mr Bloch contends that Ms Wilson recognised the historical stereotype of the GNC brand referred to by Jeff Hennion, the Chief Marketing and E-Commerce Officer at GNC Holdings Inc.  This is a reference to what Mr Hennion is reported (in an online edition of the Pittsburgh Post-Gazette for 20 May 2016) as saying in a speech to the Pittsburgh Technology Council entitled “Transitioning GNC marketing to a Data-Driven Culture”.  This speech concerned the use of customer analytics to drive marketing.  The relevant paragraph of the report reads as follows:

“GNC, he said, wants to shake the “historical stereotyping” image of an intimidating storefront tailored for body builders. In that respect, the company’s 87 per cent brand familiarity “is not always a good thing when you’re trying to change a brand.””

ii)                  One of the slides used by Mr Hennion for that speech was headed “Customer Goals” and included this: “Listening to our customers drove critical goals that aligned with our segments, including: ….. The need to drive an increased number of female customers….. Reducing the reliance on hard core sports customers (the old GNC bodybuilders)”.

iii)                Mr Baldwin does not dispute that Mr Hennion said what he is reported as saying nor does he deny that the slide was included in the presentation.   What he does say is that, taking what Mr Hennion actually said with the slide, it is a misrepresentation by Mr Bloch to characterise the evidence in the way that he does, that is to say as a recognition that GNC was perceived as a sports nutrition brand.   The relevant part of the presentation was about customer goals as the slide makes clear.  According to Mr Baldwin, what Mr. Hennion was saying in the slide was that GNC wanted to reduce reliance on sales to bodybuilders and expand on sales to, for example, female customers.  He is talking about the customers that he thinks GNC should focus upon.

iv)                However, I think that rather more than that can be taken from Mr Hennion’s presentation.  I accept that in the US (which is what Mr Hennion was talking about), whatever the position was in the UK, GNC was not an exclusively sports nutrition brand.  But equally it is clear that part of the brand was, indeed, sports nutrition including bodybuilding.  From what Mr Hennion was saying, it is clear that he, at least, thought that an important part of that brand in the perception of consumers was its bodybuilding image.  He acknowledged the historical stereotyping image of intimidating storefront tailored for bodybuilders and he acknowledged the need to reduce reliance on hard-core sports customers (the old GNC bodybuilders); this was a historical stereotyping as he described it and therefore not something, I infer, which had recently come about.  Whatever the actual spread of business may have been, the perception of consumers as Mr Hennion presented matters was that the hard-core sports element was significant (exemplified by the historical stereotypical shop front) and the business reliant on that element (reducing reliance on hard core sports customers).  And so Mr Hennion, as reported, said that GNC’s “87% brand familiarity is not always a good thing when you are trying to change a brand” and “I’d like to introduce a brand to the consumer for the first time again”.  These statements – in the absence of evidence from Mr Hennion himself to explain how his words should be read – are consistent, in my view, only with the view that at least one significant image of the GNC brand was that of a hard-core sports nutrition retailer and that he wished GNC to get away from that image. 

v)                  After that digression, I return to Ms Wilson. Mr Bloch is correct to describe her as recognising the historical stereotype of the GNC brand as explained by Mr Hennion.  Mr Bloch showed her the newspaper report and asked her the question “You recognise what he is talking about there do you not?” to which she answered “Yes, I do”.  Moreover, when asked about the slide, she was directed to the goal of “Reducing the reliance on hard core sports customers (the old GNC bodybuilders)” and again said that she could recognise the image that Mr Hennion was referring to.  I do not think much of Mr Baldwin’s point that Ms Wilson was not saying whether she agreed or disagreed with what Mr Hennion was saying.  It is surely implicit: she did not say words to the effect “Oh no, I did not see things like that at all”.  However, recognition of those aspects does not indicate that she considered the GNC brand in the UK was focused sports nutrition and bodybuilding.  It is, however, recognition that the GNC brand included those elements.  It is also a necessarily implicit recognition that there was a stereotypical image of GNC as a hard-core sports nutrition retailer – not exclusively hard-core sports nutrition or even sports nutrition more generally but with a focus on that element of its business -  and that there was a need to reduce reliance on the hard-core sports customers. 

vi)                To be fair to Ms Wilson, in response to Mr Bloch’s suggestion that GNC wanted to get away from the image that Mr Hennion was referring to, Ms Wilson responded in this way:

“I think it is re-aligning with the original message that, with our original message.  I think with any company you sometimes deviate with different management teams, and I think it is about getting back to the core business.  That is how I have interpreted it.”

And in response to Mr Bloch’s question “It is historical.  Is it that different management, at different, times, have taken different views on these things?”, she agreed. 

vii)              These answers, it seems to me, only go to reinforce my conclusion that the image of the GNC business by at latest 2014 the time when Ms Wilson re-joined GNC was as described by Mr Hennion.  Although I do not suggest that GNC was not a retailer of a wide range of health products, a significant part of its image was perceived to be in the area of sports nutrition.  

viii)            Mr Bloch’s questioning then moved to Ms Wilson’s evidence in her witness statement about the position in 2003 where she said that GNC (in the UK) was a general health and wellness brand and its message was directed to a wide range of consumers of all ages and levels of fitness.  She made no mention of the historical stereotyping or old body builder image referred to by Mr Hennion in his speech.  She gave an interesting answer to Mr Bloch’s suggestion that she should have mentioned these aspects to give a complete picture:

“I think sports nutrition, to my recollection, back then, its beginnings were in bodybuilding and then, over time, as that became, sports nutrition becomes more mainstream, and so therefore it morphs into a different version.  So, it is true to say, that is where sports nutrition was born, if you like, with bodybuilding”

ix)                Ms Wilson then accepted Mr Bloch’s suggestion that the meaning of sports nutrition has changed over the years and now has a much broader meaning than many years ago.  And she agreed with Mr Bloch that that is why “one can, as we have seen in the advertisements in the GNC US campaign, use “sports nutrition” and “wellness” together”. 

x)                  Ms Wilson accepted that GNC in the US was a market leader in sports nutrition in 2003.  She also accepted that the GNC UK business was one of the first retailers in the UK to carry a comprehensive Sports Nutrition product offering, (something which Mr Craddock categorised as its “unique selling point” or “USP”). 

xi)                As regards the development of the GNC UK business after the acquisition by H&B, Ms Wilson’s actual knowledge was very limited: 

a)                  She left the GNC UK business three months after the 2003 acquisition, citing the ‘very different ethos’ of H&B as her reason.

b)                 She explained that she had visited ‘just a few’ of the GNC UK stores since 2003.  There is nothing to suggest that her knowledge of what was sold in the stores, and in what proportions, went beyond what she had seen for herself in those specific stores.

c)                  She could not speak for how successful GNC UK had been since 2003 because she had not been closely involved in their business.

d)                 It would appear that she had learned of the re-branding of the GNC UK stores as MET-Rx stores from a supplier.  What she says is that she reported to her employers the rebranding of a store as a MET-Rx store when she had learned of it; it is implicit that if she had known about such rebranding generally before that instance, she would have reported that.  I cannot imagine that she would not have said so to me if that had been the case.

xii)              Ms Wilson did not regard herself as qualified to comment on matters relating to local, in-country, advertising and promotion, or how the group sought to control its presentation by others. 

xiii)            Ms Wilson accepted, in relation to her store visits, that if she had seen anything in the way in which the GNC brand was being used in the GNC UK stores which caused her serious concern, she would have reported it.  She could recall no occasion on which she had made such a report.  I add that there is no other evidence of any such reports by anyone. 

H&B’s witnesses

“This was particularly apparent when dealing with the parts of Ms Cockerill’s evidence that H&B had indicated Mr Craddock would adopt, and had indicated that he could speak to.  So for example when it was suggested that H&B had set about trimming away all of those products that were not sports-related, his response was to state that this was “complete rubbish”.  It was only when it was pointed out that this was what Ms Cockerill’s evidence (in a passage he had indicated that he could speak to) was, that he was forced to try and claim that his denial had been because he thought the question was related to a slightly different period in time.”

“Q.  Were you aware that after the purchase H&B set out to     rationalise the product range of GNC?

A.  Yes.  We removed, as I previously referred to, from the stock file the lines which we found on the recent stocktakes were effectively, there was no stock that actually existed, the stock had had to be destroyed because it was out-of-date, or it was so short dated or damaged that it did not exist, so that was removed from the stock file.  We also removed or we put as future delete all of the really slow-moving lines, where there was absolutely no purpose in continuing with the business with them.  In our view, the business was completely unmanageable with the scale of SKUs [stock keeping units] that it carried.       

Q.  What was happening was that in order to reflect H&B's desire to position GNC UK as a sports nutrition brand, it set about trimming away all of those products that were not sports-related; that is correct, is it not?     

A.  Complete rubbish.

Q.  Can we look at what Ms. Cockerill says in paragraph 64?  ….. "As explained in paragraphs 27 to 33 above, the position was exactly the same ... prior to the acquisition.  A very wide range of SKUs were being sold in GNC stores when we acquired them in 2003.  Over the years, we have condensed and rationalised the products sold in the stores to ensure that they are more closely aligned with sports nutrition.  This has in no way damaged the GNC brand: it has enhanced it."  Are you saying Ms. Cockerill is talking absolute rubbish?      

A.  No.  This paragraph deals with over the years.  The question           you directed to me was in relation to what happened immediately following the 2003 acquisition.”

“Q.  Is this what you are saying, as I understand it, you are now           agreeing with Ms. Cockerill, but when you are saying that she says a wide range of SKUs were being sold, you have rationalised them so they are more closely aligned, are you saying the process was two-fold: first, you got rid of a whole lot of SKUs; and then you rationalised to make them more closely focused to sports nutrition?

A.  Yes, it was a two-stage process……  [Mr Craddock goes on to explain the first stage in some detail] …. There was then a process over a number of years, or has been a process over a number of years, where we have condensed and rationalised the stock file still further, because of the fact that the sports nutrition market has increased proportionally, or proportionate to the general health and well-being market; so, we have tended to focus on that market over the years since then….”

“Absolutely not; quite the opposite.  In 2003, you could, there           was not the market to sell just sports nutrition.  GNC sold a range of products that specialised in sports nutrition.  It was known as a sports nutrition retailer.  That was its USP.  Since then the sports nutrition market has grown and developed.  There are more products and there are more consumers wanting to buy sports nutrition.  So, effectively, you can sell either greater quantities of sports nutrition products and/or a wider range of sports nutrition products; so, you do not need to carry the slow-selling lines to actually attract the consumers any more…”

i)                    Mr Baldwin considers that in many respects her evidence is helpful - she gave evidence that the sports nutrition products stocked by GNIC at the date of the Acquisition formed a small number of the listed SKUs (less than 10% - 495 out of a total of over 5000), figures which can be compared with those for H&B, which currently has around 17.5% sports nutrition products in its range, but is fairly and squarely a general health and wellness retailer.

ii)                  She also gave evidence that H&B had trimmed the product range of GNC products to “to ensure they are more closely aligned with sports nutrition”.  That is true, but only over a period of years: see what I have already said about this when considering Mr Craddock’s evidence.  Mr Baldwin submits that, although she maintained the H&B line that in 2003 GNC was a “sports nutrition specialist”, it is fair to infer that this claim would have gone the way of H&B’s other witnesses’ similar claims.  By that, Mr Baldwin means that the suggestion that GNC was indeed a sports nutrition specialist is wrong.  I do not consider that it is fair to make that inference.  Had she been cross-examined, her evidence may have stood up and, if it had done so, it would have supported the evidence in chief of Mr Craddock and Ms Hobbs.  It is right, however, that I treat her evidence on this point with considerable caution.

iii)                Mr Baldwin suggests that there is one paragraph of Ms Cockerill’s evidence which is on its face potentially misleading.  He suggests that that paragraph appears to seek to give the impression that half the floor space of a typical store was taken up with sports nutrition adding that such was the exact proposition that was repeated by Mr Craddock a number of times in his evidence.  What the paragraph says is that half the floor space was taken up with “products in the Sports Nutrition and VHMS categories with the other half being taken up with products in the Food and Personal Care categories”.  I think that the paragraph is clear: it cannot sensibly be read as meaning that half the floor space is taken up with sports nutrition products on their own. I do not see it as potentially misleading and needing a careful reading to correct an incorrect impression as Mr Baldwin fears.

iv)                I should add in relation to this last point that Mr Craddock, in giving his evidence about the floor space taken up by sports nutrition products, was relying on his own impression and expressly disavowed reliance on Ms Cockerill’s evidence.  He supported his view by reference to photographs in the bundle.

Absence of evidence

i)                    Ms Peet’s family founded what became the GNC UK business. She had an intimate knowledge of that business, as its managing director, at the time of its acquisition by GNC US, and thereafter until its acquisition by H&B in 2003. 

ii)                  Ms Peet was later involved in the discussions within the GNC Group of the possible reacquisition of the GNC UK business in 2013 and 2014, having been retained by the GNC Group as EMEA Business Development Consultant, based in the UK.

iii)                The email exchanges in 2013 reveal that she had been monitoring the GNC UK business and thought that the GNC Group should consider buying it back. 

iv)                None of GNIC’s witnesses could identify any reason why Ms Peet could not appear to give evidence before the Court.

v)                  Mr Baldwin rejects any criticism on this score.  The real point, he says in respect of which any issue might arise on which Ms Peet’s evidence might be helpful was the state of the GNC UK business prior to the LA in 2003.  Mr Baldwin submits that GNIC in fact called the witness best placed to assist the court on that issue, namely Ms Wilson.  But as I have already observed, Ms Wilson did not regard herself as qualified to comment on matters relating to local in-country advertising and promotion, or how the group sought to control its presentation by others.  Ms Peet might have been able to do so.

vi)                I have enough evidence from the witnesses on each side and from the contemporaneous websites and photographs to form an assessment about whether or not GNC UK was a general health and wellness brand.  What is more difficult is to assess, assuming that it was such a brand, is whether its USP was nonetheless sports nutrition (there being no inconsistency between being a general health and wellness brand and having a sports nutrition USP).  Since Ms Wilson could not comment in relation to advertising and promotion and since she said nothing about whether GNC UK’s USP was sports nutrition, evidence from Ms Peet might have been helpful.

vii)              Whilst not agreeing that Ms Wilson was GNIC’s most suitable witness, Mr Bloch does not accept that, even if she was, it is an answer to his point.  Ms Peet is, he says, the witness who was best positioned to describe the impact of the breaches. She is the person who had the ear of top management. She is the person we see Mr. Cupples defer to in relation to certain issues. She is the person who was interested in the acquisition of the business.  She was formally a consultant, but plainly, Mr Bloch submits, an intimate part of the GNIC or GNC US team and the person on the ground in the UK: she is a material witness but she has not been called.

viii)            Whilst on this topic, but not directly related to Ms Peet, he notes that it was Mr Green – a person no longer employed by GNC – who has given evidence about (to use the words in his witness statement) “the breaches which, from my knowledge and experience of GNC's franchising operations, would be of the greatest assistance to GNC”.  Mr Bloch’s point is that one might expect such evidence to come from someone within the claimant or GNC UK more widely who could speak to what GNIC actually considers would be “of the greatest assistance to GNC” whatever that phrase may mean.  Mr Bloch’s submission is that GNIC had to use Mr Green because they have not called the people on the branding side who could speak to that.

The alleged breaches

“Q. The branded T-shirt serves a marketing or promotional purpose, does it not?

A. Yes, that is correct.

Q. The person who see it in the street will not know whether the particular shirt that is being worn was sold to the wearer or given away to him, will they?

A.  No.

Q. It performs the same marketing or promotional function in both cases, does it not?

A. Yes it does.”

“MR. JUSTICE WARREN:  ……  There seemed to be a complaint which involves Kit Bag and Canterbury because they were   manufacturing and distributing and were charging for it.  You see these things for sale on the website.  They were being sold in the club shop, presumably to make some money.

MR. BALDWIN:  Yes.

MR. JUSTICE WARREN:  Is there a distinction, do you rely on that   over and above, would it be different if they had been free?

MR. BALDWIN:  No.

MR. JUSTICE WARREN:  The same point?

MR. BALDWIN:  Yes.

MR. JUSTICE WARREN:  Okay.

MR. BALDWIN:  The fact that they were charging, Ms. Hobbs made the point, that Holland & Barrett were not getting anything out of it; which they were not.  We have the same point if they are free, but it is significant that they are not free, because some third party sub-licensee of Holland & Barrett is making money out of it.  The case is a fortiori because they are goods out of which somebody is making a profit.  I can make all the same points if they were giving them away, but if they are giving them away, it is more clearly just promotional stuff; but if they have a business in them, we are in a much stronger position, because it is clearly sub-licensing, somebody is making a profit, it is not us, and you have damage.

When it comes to the reasonableness of that being stopped, and the steps that they took, what is significant, they made no effort to stop Canterbury or its distributors stopping this.  That is why they are still available for sale today.  What they did is they bought up Kit Bag stock and with Kit Bag, the evidence is that they got Kit Bag to agree not to get any more, but they did not do the same with Canterbury and   they did not enquire of Canterbury of the distributions Canterbury had made to their distributors or to other people.”

The Sponsorship Agreement

“When you are referring to "entirely conventional marketing         activities", by that, am I right in thinking that you mean these are the sort of activities you might well do with the Holland & Barrett brand?

Ms Hobbs answered “Yes”.  I do not consider that Mr Baldwin can take this response as an acceptance by Ms Hobbs that what she said in her witness statement (these were “entirely conventional activities”) can be taken as being restricted to activities by a brand-owner.  If Mr Baldwin had gone on to ask whether Ms Hobbs regarded it as conventional for a licensee to carry out such activities, she might have disagreed, she might have agreed or she might have said that her experience did not qualify her to give an answer.  The answer she would actually have given would have clarified what it was that she was saying in her witness statement; none of those answers would have been inconsistent with the witness statement but would have be clarificatory of it.  I do not consider that Mr Baldwin can take from Ms Hobbs’ response that she would have regarded this sort of promotional activity as unconventional for a licensee.  In my view, she is to be taken as saying, in her witness statement, that these were entirely conventional activities for anyone marketing the relevant goods.  If Mr Baldwin wished to suggest, as he now does, that she was saying nothing about such activities on the part of a licensee, he should have put the point to her.  He did not do so, so I take the position to be that these promotional activities were the sort of activity which it would be entirely conventional for GNC to undertake.  Of course, it must do so in accordance with the terms of its licence.  But the point here is that the scope of the licence may be assessed in the light of what is and what is not conventional.

i)                    The implementation and delivery of the Sponsorship Rights, that is to say the rights set out in Schedule 2.2.

ii)                  Inclusion in the Club’s non-commercial presentations (the Annual Report and Club and Club-related literature).

iii)                Use in relation to the Club’s licensing programme for Club-related products, including the right to use the Sponsor’s Mark in and on such products and/or at the Ground.

“The package of sponsorship benefits under negotiation also included sponsorship rights for the team’s non-match day training kit under the GNC mark, two pages of advertising in each match programme (one of which we intended for GNC and one for HOLLAND & BARRETT), some very limited GNC signage on the East Stand, corporate entertainment, the opportunity to supply GNC-branded VHMS product to the team (amongst other products) and, most importantly, the right to use player quotes and Club imagery to promote the product-categories sold by GNC UK.”

i)                    First, H&B put forward a clause restricting the Club’s right to use of the GNC marks in the UK only.  I add that the Club’s original draft had included a worldwide licence of all the marks licensed, which included H&B’s own trade mark “Holland & Barrett” in stylised form. 

ii)                  The Club countered with an addition to the clause which had been proposed by H&B.  That addition was an exception from the UK-only restriction, namely that H&B

“acknowledges that the Club may use the ‘GNC’ Sponsor Mark in the delivery of rights under this Agreement and such use may mean that such ‘GNC’ Sponsor Mark appears outside the United Kingdom.”

Examples of that exception are given.  For instance, the Mark may appear on the Club’s non-match training kit worn by players for fixtures outside the UK, in images featuring the kit and broadcasts featuring perimeter hoardings.

iii)                H&B’s position was that it could not accept this proposed wording.  Mr Craddock’s manuscript note on the draft reads “We cannot agree to this”; and the Club’s solicitor, reporting to his client, records that Mr Craddock “is not comfortable committing to any contractual wording that potentially places [H&B in breach of [the LA]”.  I add that the solicitor went on to say that Mr Craddock recognised the Club’s need to use the GNC brand to deliver the sponsorship rights (including outside the UK where relevant) and was happy to provide an indemnity.  I will come to what Mr Craddock had to say about this in a moment.

iv)                Mr Baldwin states that H&B agreed to revert to the Club’s original clause 4.1 and it deleted its proposed clause restricting the Club’s rights to the UK. 

v)                  That is not quite right.  Indeed, as he acknowledges, by way of a footnote to his written submission, the words “world-wide” were removed.  The excision of those words was more than cosmetic.  Although as a matter of construction the licence might be construed as world-wide, the actual intended use outside the UK was not world-wide and was incidental.

i)                    Although the Club’s proposed wording of clause 4 referred to a worldwide licence, he was comfortable that use by the Club outside the UK (if any) would in reality be absolutely minimal.  As he saw matters (and I have no doubt that he did see matters this way) the Sponsorship Rights provided by the Club were locally-focused in Leicester. It also seemed to him (a perception with which I agree) to be very unlikely that the Club’s Annual Report and Club-related corporate literature (that is to say, the matters referred to in clause 4.1.2) would have a widespread distribution.

ii)                  As regards the Club’s licensing programme for Club-related products (referred to in clause 4.1.3) he understood this to refer to any items which listed all of the official sponsors of the Club, such as the match programmes and promotional boards deployed at the Club’s ground on match days. Given the Club’s local supporter base, it seemed to him to be very unlikely that this would involve use of the GNC mark outside the UK.  I accept that those were his understandings and perceptions.

iii)                Out of an abundance of caution, he proposed inserting an express provision limiting the Club’s right to use the GNC mark to the UK, reflecting the extent of GNC UK’s rights under the LA.

iv)                The Club was uncomfortable about the change that he had proposed to its clause 4 wording (which was a standard term in its sponsorship agreements), expressly limiting the Club’s right to use the GNC mark in the UK. The Club had concerns with this limitation in light of three specific situations in which the Club considered that there was a risk that the GNC mark might appear outside the UK.

v)                  These situations were as follows: images of the team in non-match day training kit or in broadcasts of matches in which shots of the perimeter hoardings around the pitch were included; on the Club’s non-match day training kit worn by players outside the UK; and in the Club’s delivery of online and new media rights. In light of these concerns, the Club wanted to revert to its standard wording in clause 4.

i)                    First of all, Mr Craddock’s evidence was that the secondary perimeter hoardings were covered up during Heineken cup matches, being the only matches which might reach an overseas audience.  This fails to take account of the fact that Aviva premiership matches, where the secondary perimeter boards were available for all to see, were broadcast abroad too.  Even if Mr Craddock were not aware of this fact, the Club certainly would have been.  It is these boards which the Club considered to be the most valuable in the context of TV exposure, and so it cannot be suggested that the Club would have considered such exposure minimal.

ii)                  Secondly, it is evident from screen shots of the various matches that use of the sign GNC SPORTS NUTRITION at the ground was far more extensive than Mr Craddock believed.  

iii)                Thirdly, the fact that Mr Craddock was apparently unaware of the fact that Aviva Premiership matches are broadcast all over the world mean that although he purported to give evidence about how minimal was the exposure of GNC SPORTS NUTRITION branding overseas, he was giving that evidence in ignorance of the true facts about broadcasting overseas.  

iv)                Fourthly, it is clear that Mr Craddock made no or minimum efforts to establish the facts about overseas use prior to abandoning his requirement for a limitation to the UK of the Club’s rights and its substitution with an indemnity.

v)                  What Mr Baldwin invites me to conclude from all of this is that the only credible explanation of the deletion of the word “worldwide” from the licence grant in clause 4.1 is that H&B did not want the contractual wording to show a breach of the LA.

Complaints and argument

i)                    The GNC Group itself promoted body building products.  Mr Hennion, one of the most senior executives, was concerned about dispelling the body building image: see paragraph 154 above).  Even if one were to take Mr Baldwin’s explanation of what Mr Hennion was saying (namely that GNC wanted to reduce reliance on sales to bodybuilders and expand on sales to, for example, female customers) as correct, which I do not, a move away from body-building does not entail a move away from or putting a brake on a move towards sports nutrition.

ii)                  The GNC Group promoted (and so far as I am aware still promotes) sports nutrition as one of its focuses.  I have been shown photographs of advertising hoardings in the US using the words “sports nutrition” with the GNC mark, albeit that other words such as “wellness” were also used.  I find it difficult to see how GNIC can now contend that “sports nutrition” would put off customers interested in health and wellness products.

iii)                The GNC Group advertised at sporting events, including ice-hockey.  Ms Wilson’s evidence was that she considered ice hockey and rugby football to be of equivalent levels of physical violence.  I find it difficult to see how GNIC can now contend that potential customers of GNC health and wellness products would be put off by an association between the GNC mark and sporting activities and thus by an association with sports nutrition.

Alpha additions

i)                    The use complained of by GNIC did take place.  It started in 2013.  It can be seen on carrier bags used in the stores (a picture of which appears in the bundle); it appears on the hoardings, banners and signage at the Welford Road Ground and it appears on replica training kit and T-shirts.  The logo appearing on the replica kit was designed in-house by H&B and was provided to the kit manufacturer, Canterbury Clothing Ltd, by Ms Hobbs.  It also appears on T-shirts. 

ii)                  On the carrier bags, the letters GNC are in large black upper case letters across the bag; the words SPORTS NUTRITION appear in smaller black upper case letters underneath GNC.  On the replica kit and T-shirts, which are green, the letters GNC appear in large white upper case letters.  Underneath the letters GNC in small yellow letters appears “sports nutrition” although I am unable to see from the photographs whether that is in upper case or not.  The overwhelming impression of the logo on this kit is the GNC element.  At Welford Road, the letters GNC appear in large upper case letters with “Sports Nutrition” following on in smaller lettering in a different colour.  In contrast with the kit which I have just mentioned, the words “sports nutrition” form a significant part of the impression of the hoardings, banners and signage.

Replica kit and T-shirts

Materiality

i)                    In paragraph 17, she explains that she took over marketing and promotional strategy in 2009.  There was little “above the line” advertising of the GNC brand other than some advertisements in local newspapers.  GNC did not have a big enough presence in the UK from a brand perspective to justify large advertising campaigns.

ii)                  In paragraph 19, she explains that the primary marks used by GNC UK as product brands since 2003 have been GNC and GNC LIVE WELL.

iii)                In paragraph 20 she explains that the words “Sports Nutrition” were used (she describes it as a “strapline” which was “by way of educating consumers about the brand, as the GNC brand is not a well-recognised name in the UK.  The strapline was adopted purely to improve recognition and inform consumers about the brand identity of the GNC brand in the UK”.   This use started in 2013 (at least, no reliance is placed on any pre-2013 use if there was any), initially on social media and then extended into other advertising and promotional material including the signage at Welford Road.

“the reason I do not see a problem with that is that I do not necessarily feel that because he happens to be a rugby player that that is detrimental, and the reason for that is it is aspirational. You do not have to be completely focused on sports nutrition to have a brand ambassador who is a sports personality, if you like. There are many brands, for example, in the United Kingdom that would not be perceived to be a sports nutrition brand, and yet have ambassadors that are sporting personalities. It is commonplace and that is largely because the general public, I believe, aspire to be famous, they aspire to be fit and well and they hold these people in great esteem as examples of how to do it well. And that is why brands chose sports people, because they are famous and there is a great deal of interest in them. So, you do not have to be a sports-orientated supplement company; you could just be a multivitamin company and still have a brand ambassador that is a sporting hero.”

i)                    45% of all products sold by GNC US fall within that category, on their own definition of the category.  This appears from Mr Green’s cross-examination;

ii)                  the market is an increasingly valuable one in the US and elsewhere in the world (in the sense that it continues to grow) as Mr O’Connor accepted;

iii)                the market is highly competitive; and

iv)                as he put it, the GNC Group would be a fool not to put a big effort into attracting sports nutrition customers.

i)                    the words SPORTS NUTRITION are not considered by the GNC Group to alienate consumers or damage the association of the GNC brand with “wellness”.  This is something which Ms Wilson accepted in cross-examination;

ii)                  “sports nutrition”, as a category, has a wide appeal. The billboards show a wide range of individuals, pursuing a wide variety of fitness related activities.  This was illustrated by Ms Wilson’s evidence concerning the appeal of sports nutrition products to the woman on the “Live Hot” billboard where she gave examples of sports nutrition products that female consumers wishing to emulate that woman would buy.

i)                    firstly, the GNC Group is not concerned that the GNC mark, as its all-important umbrella brand, will be undermined by its association with sports nutrition specific sub-brands. Ms Wilson, when asked, agreed that there was nothing in the use of the GNC mark with “Pro Performance” in the window of the Qatar store which was damaging to the GNC brand equities generally.  The picture there also shows “SPORTS NUTRITION” in conjunction with GNC Pro Performance AMP over photographs of one man lifting weights and another either sprinting or hurdling. Mr Baldwin says that this is all irrelevant because GNIC’s complaint is about the change in the brand message.  The fact that GNC US or other countries may have sold sports nutrition products is nihil ad rem.  But as I have endeavoured to show, the “change-of-message” argument is faulty;

ii)                  secondly, the GNC Group is not concerned that the GNC mark will lose its distinctiveness, as a mark, by the use of that mark alongside sub-brands, such as “Pro Performance” or “Beyond Raw”, which might themselves be distinctive, and which have been registered in combination with the GNC.  Mr Bloch submits that, in that respect, they should, on GNIC’s case, be even more damaging than the generic words “sports nutrition”; and

iii)                thirdly, the GNC Group is sufficiently unconcerned in this respect to deploy such sub-brands alongside the GNC mark not only upon signs and promotions, but upon the products being sold themselves.

i)                    Clause 4.1.1 specifies as a purpose the implementation and delivery of the Sponsorship Rights.  For present purposes, those are H&B’s naming rights in various locations in the stadium.  This clause is not concerned with replica kit and T-shirts.  H&B retains control of how the naming rights are exercised.  If, on the one hand, H&B were to exercise the rights in a way which did not breach the LA (for instance by using GNC rather than GNC SPORTS NUTRITION) it is immaterial that it has licensed the Club to use the mark so as to give effect to those naming rights.  Just as with any advertising, it is implicit that the person showing the advertisement is able to do so without thereby infringing the mark.

ii)                  Clause 4.1.2 specifies as a purpose inclusion in the Club’s non-commercial presentation.  I do not know if, and if so how, the Club has actually used the marks for this purpose; if it has, no specific complaint is pursued.  It is not easy to see how the grant of this right could be viewed as a material breach of the LA and in my judgment it is not.

iii)                In any case, consent to a sub license to the Club for those two purposes could not be unreasonably withheld: see clause 2.2 of the LA.  If and insofar as a sub-licence is needed at all in relation to the first purpose, I do not think that consent could reasonably be refused (in relation, of course, only to an implementation of the Sponsorship Rights which did not infringe the LA).  So far as concerns the second purpose, again I do not see how consent could reasonably be refused, it being implicit that the Club would make only reasonable and proper use of the marks.

Whether breaches remediable and if so whether remedied

The Unused Marks

i)                    UK 1468996 for the device (the Silhouette device):

ii)                  UK 2263388 for the device:

iii)                CTM 183475 for the device:

iv)                UK 1468832 for the device:

v)                  UK 2101307 for the device:

Unused Marks – use of GNC constitutes use of other marks

“use of the Community trade mark in a form differing in elements which do not alter the distinctive character of the mark in the form in which it was registered”

Unused Marks – GNIC not entitled to use the marks notwithstanding termination of H&B’s licence in respect of them

Unused Marks – use by GNIC giving rise to trade mark infringement or passing off

Unused Marks – conclusion

The Counterclaim

“Having reflected upon the evidence, H&B does not pursue its claim in relation to the Threats (at ¶¶342 to 367 of its opening submissions) in its own right, though it asks the Court to take notice of the correspondence, upon which the threats claim was factually founded, as one relevant factor, to the extent that it is necessary to consider H&B’s bad faith claim.”

“What good faith requires is sensitive to context.  That includes the core value of honesty….”

“Arguably, as least, that dichotomy is too simplistic.  While it seems unlikely that any duty to disclose information in the performance of a contract would be implied where the contract involves a simple exchange, many contracts do not fit this model and involve a longer term relationship between the parties which they make a substantial commitment.  Such “relational” contracts, as they are sometimes called, may require a high degree of communication, cooperation and predictable performance based on mutual trust and confidence and involve expectations of loyalty which are not legislated for in the express terms of the contract but are implicit in the parties’ understanding and necessary to give business efficacy to the arrangements. Examples of such relational contracts might include some joint venture agreements, franchise agreements and long-term distributorship agreements.”

i)                    the LA is of potentially perpetual duration, subject to the provisions of clause 5:

ii)                  although the Licensor retains very limited control over the exploitation of the marks, there are a variety of respects in which the parties are expected to communicate and cooperate on an ongoing basis. In particular, the parties are required to combine and cooperate in the protection of the marks, under clauses 4.1 to 4.3 of the Licence Agreement;

iii)                the agreement is one of trust, insofar as the Licensor holds the goodwill in the marks on behalf of, and for the benefit of, the Licensee for the duration of the agreement;

iv)                the parties owe each other express ongoing duties of confidentiality under clause 9 of the Licence Agreement;

v)                  the acquisition and operation of the GNC UK business is dependent upon the exercise by the Licensor of its rights under the LA in good faith. As is demonstrable from the conduct of GNIC, the exercise of such rights in bad faith is capable of seriously disrupting the operation of the GNC UK business and curtailing its future development; and

vi)                such a duty is consistent with, and does not conflict with, the express provisions of the Licence Agreement.

i)                    the Notices, and the present proceedings, were issued in reliance upon a plethora of contrived allegations which cannot have been maintained sincerely and which GNIC has chosen not to pursue (or to pursue with any vigour) at trial;

ii)                  such conduct formed part of a wider strategy on the part of the GNC Group to re-enter the UK business under the GNC brand, and to force H&B to sell its business or become a franchisee. Pursuant to that strategy, GNIC was content, at the time the notices were served, to run any point that, in Mr O’Connor’s words, had (in their view) ‘an arguable colourable chance to prevail’;

iii)                having put forward Mr Cupples in order to explain the commercial strategy of the GNC Group in respect of the UK, the motives of Mr Cupples, in the context of discussing the gnc.london domain name, were revealing:

“My personal view on that is, if we had at least something that we could control and portray in a similar manner, to at least have control and approval over and present the brand in a particular way that was consistent with the US, that could potentially force, at least Holland & Barrett/NBTY Europe, to move to something that was a level of consistency of what we had in the US, and then at least that would be a small win.”

iv)                the abuse by GNIC of whatever rights it may otherwise have under the Licence Agreement for such a purpose undermine the central object and effect of that agreement. This is to permit H&B to use the Trade Marks in the operation and development of the GNC UK business, which it bought free from the type of operational control, and vassal-like status, that the GNC Group now wishes to impose.

i)                    Clause 2.5: if GNIC does not want to take steps which might be needed to protect H&B’s interests in relation to registration, it will assign to H&B the registrations for it to take steps to protect the registration.

ii)                  Clause 2.6: this imposes an express obligation on GNIC to pursue opposition to applications for registration of marks which are the same or similar to the Trade Marks.

iii)                Clause 3.1(a): H&B is subject to some control under this clause but this is limited by the requirement that the Licensor’s directions must be reasonable.

iv)                Clause 4.3: H&B is entitled to defend proceedings where GNIC fails to do so.

Summary of overall conclusions