The case below is very interesting, not so much because I love F1 racing, but the final paragraph.
Security for costs is an order made by a court against a Claimant when there is some evidence that the Claimant may not be able to meet an adverse costs award if they were to lose their claim.
It is not an automatic order, the Defendant’s legal team have to make an application to the court and explain the reasons behind the application. The result however is that quite often, a Claimant will be discouraged from proceeding with a claim if they are ordered to make such a payment.
I have seen such applications used to great effect with the result being that the Claimant cannot proceed because they do not have the funds to pay into court.
Richard Howlett - Partner
Sponsorship deals are commonplace in the sporting world and are underpinned by trade mark licensing agreements. In one important High Court case, a judge has analysed one such agreement by which a sports car manufacturer allowed the use of its name by a financially troubled Formula One racing team.
The team was licensed to name itself after the manufacturer and to emblazon the latter’s trade mark on the side of its cars. However, after the team became mired in debt, the manufacturer’s financial backing and its trade mark licence were withdrawn. The team nevertheless continued to use the manufacturer’s name in the new racing season. It did so in order to collect $90 million in prize money which would only be payable if the team continued to race in Formula One.
The manufacturer launched trade mark infringement proceedings and argued that the team had no viable defence to the claim. The Court agreed that the latter’s arguments that the manufacturer had consented to or acquiesced in the continued use of its name stood no reasonable prospect of success.
The team’s lawyers further submitted that the trade mark enjoyed minimal public recognition or reputation within the European Union and that its use of the same gave rise to no likelihood of confusion. The trade mark was also said to have become so closely associated with the team that, in accordance with honest practices, it had become its own name.
The Court found that those defences were unlikely to succeed but that they could not be dismissed without a full trial. In the circumstances, the team was ordered to pay £1.75 million as security for legal costs before it would be permitted to pursue its remaining defences to the manufacturer’s claim.
