A tricky legal question with potentially awkward ramifications for UK owners of Community Trademarks (CTMs) has recently emerged from a decision of Mr Justice Hacon in the UK’s Intellectual Property Enterprise Court ( EWHC 1773 (IPEC)) relating to CTM use.
A UK company Sofa Workshops owned two CTMs for the words SOFA WORKSHOPS covering, inter alia, furniture. They sold sofas and other furniture items under the mark on a significant scale throughout the UK. They brought infringement and passing off proceedings under their CTMs against a company Sofaworks who had recently started trading in the same goods under that name in the UK.
Sofaworks counterclaimed that the CTMs were invalid under the Community Trademark Regulation on the basis that they lacked distinctive character or consisted of a sign or indication which designated a characteristic of the goods. They also applied to revoke the marks on the basis of non-use under the Regulation, the ground being that there had been no genuine use in the EU within the previous 5 years.
On the first ground the judge took the view that the marks did designate a characteristic of the goods, though he also found that on the basis of the evidence of use submitted, the marks had acquired distinctiveness, though only in the UK. In the light of existing case law, this was not sufficient in his view to validate the CTMs throughout the EU. He did however believe that the mark Sofaworks was confusingly similar to SOFA WORKSHOPS and so, had the marks not been liable to invalidation, trademark infringement would have been found.
However, it is the non-use decision that has caused the greatest interest. There had clearly been substantial use in the UK. EU case law to date has clearly established that the territorial borders of EU member states should be disregarded when assessing whether there has been genuine use of a CTM (see the Leno Merkencase -  E.T.M.R. 16). However, the Leno case had also suggested (in para 54) that
“whilst it is reasonable to expect that a Community trade mark should be used in a larger area than a national mark, it is not necessary that the mark should be used in an extensive geographic area for the use to be deemed genuine…”.
Judge Hacon felt this ambiguous and that it referred back to an earlier statement in the same case that
“50. Whilst there is admittedly some justification for thinking that a Community trade mark should – because it enjoys more extensive territorial protection than a national trade mark – be used in a larger area than the territory of a single Member State in order for the use to be regarded as 'genuine use', it cannot be ruled out that, in certain circumstances, the market for the goods or services for which a Community trade mark has been registered is in fact restricted to the territory of a single Member State. In such a case, use of the Community trade mark on that territory might satisfy the conditions both for genuine use of a Community trade mark and for genuine use of a national trade mark."
He interpreted the expression “some justification for thinking” in a context which implied that
“in the general run of things - in the absence of one or more countervailing considerations – genuine use in just one Member State will not be sufficient to qualify as genuine use in the Community as a whole.”
This he felt underlined the implied default requirement that use beyond one Member State was a necessary ingredient of genuine use in the Community..
Having gone down this road and since the evidence showed there had effectively been only one sale and no clear intention by Sofa Workshops to target consumers outside the UK, he decided that the CTMs should be revoked on the basis they had not been used during the five year period up to the date of the counterclaim to maintain or create market share within the Community for the goods or services covered by the marks.
This may send some shockwaves towards numerous CTM owners who have traded only in the UK and rely only on a CTM for protection. The UK is one of the most populous and highly commercial states within the Community and one of the attractions of the CTM in its infancy was the belief that genuine use in one EU country would effectively validate the mark throughout the whole EU. Doubt has now been cast on this, though efforts by UK owners to trade beyond the shores of the UK would clearly assist their position. Barring any clarifying appeal, this decision is one that existing CTM holders and future applicants should bear in mind. It is also possible to apply to convert CTMs into national registrations in countries where they would be valid so that protection may not altogether be lost.
This was a Court of first instance decision and an appeal might be welcomed so that greater clarity can be established. This may not happen as all was not lost for Sofa Workshops. They did achieve success under the last limb of their claim, namely passing off. The judge did feel that the two sides’ marks were similar and that, despite the descriptive nature of the claimants’ trading name, they had established clear goodwill in it in the UK. There was some evidence of actual confusion and he found that misrepresentation had occurred and that passing off was therefore established.