YELLOW HOLDINGS LTD v EUROBELT LTD

High Court, Brewer J, 8 June 2016, 29 June 2016, [2016] NZHC 1448

Interim injunction – restraining injunction – mandatory injunction

Domain names – passing off – whether registration of domain name passing off – whether anticipated sale of domain name would be passing off – domain name as instrument of fraud

Domain names – Fair Trading Act 1986 (NZ) – whether registration of domain name misleading/deceptive conduct – whether anticipated sale of domain name would be misleading/deceptive conduct

Facts:

The plaintiff (Yellow Holdings Ltd) was the registered proprietor of New Zealand trade marks comprising or including the word and/or colour YELLOW. It claimed that members of the relevant purchasing public, seeing the word and/or colour YELLOW used as a trade mark in relation to a business directory or information, or computer and technology related products and services, would associate the mark exclusively with the plaintiff. It had registered the domain name www.yellow.co.nz.

The defendant (Eurobelt Ltd) was the owner of the domain name www.yellow.net.nz. This domain name had been registered since 1998.

At some point the plaintiff discovered the existence of the defendant’s domain name. The Domain Name Commission prevented the plaintiff registering the domain name www.yellow.nz, considering it to be too close to the defendant’s domain name. The plaintiff then attempted to buy the domain name www.yellow.net.nz from the defendant but was unsuccessful. The plaintiff also tried to achieve transfer of the defendant’s domain name using the Domain Name Commission’s dispute resolution procedure but was unsuccessful.

The plaintiff sued the defendant in relation to the domain name, alleging that the defendant’s domain name was an instrument of fraud “in that it was registered to enable passing off and/or is adapted to be used for passing off and/or if used, is likely to be fraudulently used.” The plaintiff applied for an interim injunction restraining the defendant from using the trade mark YELLOW or the domain name www.yellow.net.nz or any similar domain name, and requiring the defendant to assign the domain name www.yellow.net.nz to the plaintiff.

Held, granting interim restraining injunction against defendant but declining interim mandatory injunction:

(1)      Serious question to be tried

           Passing off

  1. The relevant date for determining whether the plaintiff had established the necessary goodwill or reputation in YELLOW was at the commencement of the conduct complained of [16]. The relevant date was therefore in May 1998, when the defendant registered its domain name [18]

    Cadbury Schweppes Pty Ltd v Pub Squash Co Pty Ltd [1981] 1 All ER 213 (PC) and Frucor Beverages v Red Bull GmbH (2010) 88 IPR 198 (HC) followed; British Telecommunications Plc v One In A Million [1999] 1 WLR 903 referred to.

  2. The plaintiff had not established sufficient goodwill in 1998 in YELLOW so that registration of yellow.net.nz rendered the defendant liable for passing off. This was despite the fact that in 1998 the business predecessor to the plaintiff had obtained an injunction against a defendant that had been operating a website at www.yellowhomepages.co.nz and later www.yellowweb.co.nz. The websites at www.yellowhomepages.co.nz and www.yellowweb.co.nz had presented as business directories which the plaintiff’s trade mark registrations related to. In the present case the defendant’s domain name www.yellow.net.nz was inactive [24].

    Telecom Corporation of New Zealand Ltd v Yellow Web Ltd HC Auckland M316-SW99, 14 April 1999 distinguished.

  3. Although the Court was reluctant to find no serious question to be tried on the issue of passing off by registration of the domain name, the plaintiff’s case was weak [25].

  4. The situation was different when it came to threatened use of the defendant’s domain name, requiring consideration of whether the plaintiff had sufficient goodwill in YELLOW to give rise to a claim of passing off if the defendant began to use its domain name in some way; and whether the evidence showed there was a threat of future use [26].

  5. It was seriously arguable that the plaintiff had established sufficient goodwill in the name YELLOW to support its contention that any future use of the defendant’s domain name would amount to passing off. There was therefore a serious question to be tried [29].

  6. The defendant in this case could not fairly be described as a “dealer in domain names” and there was no evidence that it had approached anyone to sell the domain name [31]. However, the director of the defendant had indicated that she intended to wind up the defendant, which could include sale of the domain name. It was seriously arguable that such a sale would amount to passing off as the defendant would be equipping another person with a name, the use of which would be likely to give rise to a false representation that the user was in some way associated with the plaintiff [32].

    British Telecommunications Plc v One In A Million [1999] 1 WLR 903 referred to.

  7. At the substantive stage of the proceedings due consideration would have to be given to the likelihood of the apprehended act occurring. At the interim stage, it was only necessary to consider whether it was seriously arguable that the defendant should be restrained quia timet [33].

  8. Cases that declared domain names to be “instruments of fraud” were not applicable because those cases involved plaintiffs who had clearly established goodwill in the domain name at the time of the impugned registration [34]. 

    Fair Trading Act

  9. It was unlikely that registration in 1998 of the domain name yellow.net.nz amounted to misleading or deceptive conduct. However, it was seriously arguable that using or selling the domain name would constitute misleading or deceptive conduct given the goodwill that the plaintiff had accumulated in YELLOW in recent years [35].

(2)      Balance of convenience

            Restraining injunction

  1. As the defendant was not using the domain name, the only way it would be inconvenienced by a restraining injunction would be that it would not be able to sell the domain name as part of the winding up of its assets. Damages, while potentially difficult to quantify, would not be impossible to value and would provide adequate compensation [40]. In contrast, if the defendant did sell the domain name to a third party then the plaintiff would have to consider taking legal action against that party to prevent use of the domain name, which it said would erode its goodwill [41]. The balance of convenience therefore favoured the plaintiff [43].

    Mandatory injunction

  2. Allowing the plaintiff to take possession of the defendant’s yellow.net.nz domain name so as to allow the plaintiff to secure the yellow.nz domain name would significantly reduce the value of yellow.net.nz to the defendant if it prevailed at the substantive stage. The risk was that the defendant would be stripped of its bargaining strength even though the Court may later find that it had a legitimate right to its domain name. That risk weighed heavily in the balance of convenience [47]. The risk that the defendant would be deprived of a legitimate opportunity to exploit the full value of its domain name yellow.net.nz outweighed the risk of injustice to the plaintiff [49]. There was insufficient evidence before the Court to conclude that any real harm would come to the plaintiff’s reputation if it failed to secure yellow.nz in the period leading up to the substantive judgment [51]. In relation to the application for a mandatory injunction, the balance of convenience therefore favoured the defendant [52].

(3)      Overall justice

  1. The overall justice of the case militated against allowing the mandatory injunction at the interim stage. This was not a case where the plaintiff’s goodwill attaching to its name was “so manifest and the conduct of the defendant so deceptive” that the plaintiff was entitled to immediate relief.

    Qantas Airways Ltd v The Domain Name Company Ltd HC Auckland CP26-SD99, 12 December 1999 distinguished.

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