Lifestyle choices for recovery – UK Court of Appeal Decides Application to Register Trade Mark Licences Necessary to Recover Losses

This article was first published in IPSANZ journal [Issue No. 145 - September 2026].

Lifestyle choices for recovery – UK Court of Appeal Decides Application to Register Trade Mark Licences Necessary to Recover Losses.

Summary

In a latest decision in this long-running case, the United Kingdom (“UK”) Court of Appeal in Lifestyle Equities CV & Anor v Frasers Group Trading Limited (formerly called Sportsdirect.com Retail Limited) & Ors)¹ overturned the High Court’s decision to find that licensees’ losses cannot be taken into account in proceedings brought by the proprietor where no application has been made to register the licences. The judgment makes it clear that such recovery is for the protection of licensees rather than proprietors, and only available where an application to register has been made (notwithstanding the legal “black hole” which results). Following the decision, those engaging in trade mark licensing (particularly intragroup licensing) have greater reason to consider licence registration as a sensible Lifestyle choice – or risk losing out on significant damages where their trade marks are infringed.

Introduction

Lifestyle Equities CV is a Dutch brand management firm and proprietor of the “Beverly Hills Polo Club” trade marks (“the Marks”, see pictured below). Lifestyle Licensing BV, a wholly owned subsidiary of Lifestyle Equities CV (together, “Lifestyle”), holds the registered exclusive licence to the Marks, and Lifestyle Licensing BV then sub-licenses the marks to a pool of licensees. These sub-licences are unregistered for the purposes of the Trade Marks Act 1994 (UK) (“the TMA 1994”).

Following a 2018 finding that the Appellants (collectively, “Frasers”) had infringed the Marks, Lifestyle elected for an inquiry as to the amount of damages payable. The present decision follows from an application for summary judgment from Frasers, who sought to prevent Lifestyle from including losses suffered by their sub-licensees in the assessment of damages payable.

Legislative Context

In the UK (as with many other jurisdictions), the registration of trade mark licences is voluntary² – and as the Court of Appeal noted in this case, several provisions within the TMA 1994 have the effect of encouraging the registration of licences.³ For example, s.25(3)(a) TMA 1994 makes a licence ineffective against a person claiming a conflicting interest in the registered trade mark until the licence is registered, and s.25(4) TMA 1994 prevents a licensee from recovering costs in infringement proceedings where an application for registration is not made within six months of the transaction. 

The main issue in these proceedings concerned whether licensees’ losses were recoverable as damages in a claim brought by the proprietor. It is worth noting at the outset that even though the case relates to “sub-licensees” on the facts, the relevant law here applies to non-exclusive licensees in the same way. This article therefore refers to “licensees” generally.

Two provisions from the TMA 1994 are relevant here. The first of these is s.30(6) TMA 1994, which provides that losses suffered by licensees shall be taken into account in infringement proceedings brought by the proprietor of a registered trade mark:

(6) In infringement proceedings brought by the proprietor of a registered trade mark any loss suffered or likely to be suffered by licensees shall be taken into account; and the court may give such directions as it thinks fit as to the extent to which the plaintiff is to hold the proceeds of any pecuniary remedy on behalf of licensees. (emphasis added)

Section 30(6) TMA 1994 is then qualified by s.25(3)(b) TMA 1994, which provides that:

Until an application has been made for registration of the prescribed particulars of a registrable transaction – […]

(b) a person claiming to be a licensee by virtue of the transaction does not have the protection of section 30 or 31 (rights and remedies in relation to infringement). [Emphasis added].

The Court’s Analysis

Given the legislative background above, the two main questions for the High Court and Court of Appeal can be described as follows: (1) whether the protections conferred by s.30(6) TMA 1994 were only available on application for registration of the licences; and (2) if an application for registration was necessary, whether a licensee could retrospectively obtain this protection by applying to register the licence after the event. The answer to these questions are important to licensors claiming damages for obvious reasons, as the ability to take licensees’ losses into account can significantly increase the amount of damages recoverable. These will be losses which licensors engaged in intragroup licensing will be particularly interested in recovering from the infringer.

High Court Decision

The summary judgment application was unsuccessful for Frasers, as the High Court found that the relevant protections conferred were for the benefit of the proprietor, and so were available notwithstanding the fact that no application had been made to register the licences.⁴

Regarding the first question, the High Court found somewhat surprisingly that registration was not necessary for the losses of licensees to be taken into account under s.30(6) TMA 1994 in infringement proceedings brought by the proprietor. The Court took two steps of reasoning to reach this conclusion: First, Smith J observed that the qualification under s.25(3)(b) TMA 1994 applied “only to the licensee and not to the proprietor”, as evidenced by the wording of the legislation which denied section 30 and 31 protections to “a person claiming to be a licensee by virtue of the transaction” (emphasis added).⁵ As such, he found that s.25(3)(b) TMA 1994 only prevented the application of s.30(6) TMA 1994 insofar as it was a protection conferred on the licensee, rather than a protection conferred on the proprietor. 

Next, the High Court found that part of s.30(6) TMA 1994 was a protection for the proprietor rather than the licensee. This interpretation was based on reading s.30(6) TMA 1994 in two halves – the High Court considered that it was the first half, or the “opening words”, of s.30(6) TMA 1994 which were relevant, which read as follows:

In infringement proceedings brought by the proprietor of a registered trade mark any loss suffered or likely to be suffered by licensees shall be taken into account […]

According to Smith J, this part of s.30(6) TMA 1994 is a protection conferred on the proprietor rather than the licensee, for two reasons: First, on Smith J’s interpretation of the provision, the court is required to take into account licensees’ losses “when assessing the proprietor’s claim” (emphasis added), rather than a licensee’s claim. Second, this section was characterised as being “intended to avoid” a “black hole” problem where a licensee has no ability to bring a claim in respect of their losses suffered, while the licensor has the ability to bring a claim but has not suffered the loss. According to the High Court, allowing unregistered licensees’ losses to be taken into account in a proprietor’s claim under s.30(6) TMA 1994 helps to plug this gap. As such, it was found that non-registration of a licence was “no bar” to the court taking into account licensees’ losses in infringement proceedings brought by the proprietor of a registered trade mark. It was therefore open to Lifestyle to take these losses into account.

Regarding the second question, the High Court found that a licensee can retrospectively obtain protection under s.30(6) TMA 1994 by applying to register the licence after the event. Smith J relied on the fact that there are no restrictions on late registration in the TMA 1994, and found that the time frame for an application to register is “open-ended”. He concluded that there is no time limit for an application for registration of a licence in order for a licensee to obtain the protection of s.30 TMA 1994.

Court of Appeal Decision

The Court of Appeal rejected the High Court’s conclusions on both questions, with the result that Lifestyle was not able to have their licensees’ losses taken into account in the damages assessment.

Regarding the first question on whether registration was necessary for licensees’ losses to be taken into account in infringement proceedings brought by the proprietor, the Court of Appeal was willing (in principle) to accept the High Court’s reading that s.25(3)(b) TMA 1994 only prevented the application of sections 30 and 31 insofar as it related to protection for the licensee rather than the proprietor. However, the Court of Appeal rejected the High Court’s two-part reading of s.30(6) TMA 1994, arguing instead that the provision had to be read in its entirety. The High Court had disregarded the second half of s.30(6), which enables a court to give directions that all or part of the proceeds are held for the benefit of the licensees, and reads as follows:

(6) […] and the court may give such directions as it thinks fit as to the extent to which the plaintiff is to hold the proceeds of any pecuniary remedy on behalf of licensees.

Here, the Court of Appeal observed that the two parts of s.30(6) TMA 1994 cannot be read as separate halves, as there “will only ever be proceeds [to hold on behalf of licensees] by reason of the first half of the subsection”. As such, the Court reasoned that the second half of s30(6) TMA 1994 was best seen as “the procedural mechanism” for giving effect to the substantive benefit conferred by the words in the first half of the subsection. The Court of Appeal also rejected Lifestyle’s argument that the second half of s.30(6) TMA 1994 was discretionary and so only benefitted the licensee when exercised by the court, noting that this did not change the fact that the discretion existed for the protection of licensees. The Court of Appeal read s.30(6) TMA 1994 as a whole as a protection for licensees, and that as such, s.25(3)(b) TMA 1994 prevented the protection from applying where an application for registration of the licences had not been made. It was therefore not open to Lifestyle to seek losses suffered by its licensees to be taken into account.

Regarding the second question on time limits for registration, Lifestyle did not disagree with Smith J’s conclusion that there is no time limit for the registration of a licence in the TMA 1994, nor that registration of a licence could have retrospective effect. However, the Court of Appeal agreed with Frasers’ submission that the time limits as prescribed under the Limitation Acts for the bringing of proceedings would still apply.

As such, the Court of Appeal found that in order for the s.30 TMA 1994 protections to apply, the proprietor or licensee had to make an application to register the licence prior to the expiry of the limitation period applicable to the infringement claim (typically six years from the date of infringement).⁶ On the facts of this long-running case, the limitation period had long passed and so it was no longer open to Lifestyle to seek s.30 TMA 1994 protections by making an application to register. 

Practical Takeaways / Brief Comment

Practical Takeaways

The Court of Appeal decision makes it clear that an application to register a licence is necessary for recovering licensees’ losses in a trade mark claim brought by the proprietor. Parties engaged in trade mark licensing agreements now have one additional and significant factor weighing towards applying to register such licenses, as this decision shows that they could be missing out on significant damages if the trade marks are infringed and licences have not been put in place with the relevant application to register.

Of course, there are many commercially prudent reasons for not wishing to register trade mark licences. Examples include licences where confidentiality is critical to the parties involved, where registration is impractical due to e.g., the number of licences, or simply where doing so is administratively cumbersome or disproportionately expensive. It is not unusual for group companies to consider it acceptable for one company in the group to own the trade marks, without putting in place any written licence agreements with the subsidiaries exploiting those trade marks. What this decision means is that parties engaging in licensing agreements will have to weigh up the convenience of this against any potential losses which may not be recoverable in infringement proceedings. It is also worth noting that the relevant application to register does not need to happen at the time of the transaction, but rather within the limitation period for the licensees’ claim.

There are other benefits to having written licences in place. Reliance on s.30(6) TMA 1994 is unnecessary where there is a contractual relationship between the licensee and proprietor which enables the licensee to claim any losses suffered against the proprietor. This is because in such cases a proprietor is able to bring damages for any contractual losses suffered as its own losses (this is explicitly highlighted by the Court of Appeal). The present issue arises where a licensee does not have these contractual rights against the proprietor (nor a claim in tort against the infringing third party).

Case Comment

This decision seems to produce a policy result wherein licensors will now face greater challenges in recovering losses suffered by their licensees. As the High Court puts it, a “black hole” emerges where an actionable wrong (in this case trade mark infringement) has been committed by a third party X where the licensor has the right to claim against X but it is only the licensee who has suffered the loss. In such a case, the licensor has the right to bring the claim but has suffered no loss; whereas the licensee has no claim to recover the loss they have suffered. The High Court suggested that this issue was one which s.30(6) TMA 1994 was intended to solve, by allowing licensees’ losses to be taken into account in an action brought by the proprietor. The Court of Appeal judgment disagrees.

It is submitted that notwithstanding the “black hole” that remains after the Court of Appeal’s reading of s.30(6) TMA 1994, this is the more coherent outcome. The “black hole” as described by the High Court relates to the fact that a licensee cannot bring a claim to recover the loss they have suffered. It follows that for this “black hole” to be addressed, the licensee must then actually recover the losses it has suffered. This could be dealt with via commercial arrangements after damages are recovered, but this is dealt with by private parties, rather than by the legislation itself. However, as the Court of Appeal rightly points out, the way s.30(6) TMA 1994 addresses this is through the “second half” of the provision which allows any windfall to the proprietor from s.30(6) TMA 1994 to be ordered to be held for the benefit of licensees.

In any case, the outcome for parties engaging in licensing arrangements is clear – if a proprietor intends to be able to recover its licensees’ losses, this decision shows that registration is now a prerequisite.