A few weeks ago the UK Supreme Court rejected an appeal by Starbucks HK (not the coffee company) in a passing off case. The UKSC confirmed the fundamental requirement of goodwill in the UK in order to bring such an action in the UK. Mere reputation is not enough. You can see the update from our London team (who acted for Sky) here, and our note mentioning Arnold J’s earlier decision invalidating the NOW logo here.
The case can be seen as imposing serious limitations in terms of the ability of a passing off action to succeed in the UK where the claimant has only a reputation in the UK and not goodwill (and can be distinguished from the position at law in Australia).
Given that, in many cases, the result in passing off may follow that relating to the trade mark, is there much scope for passing off as a standalone action?
Fast forward to July 2015 and we have 2 UK cases from the Intellectual Property Enterprise Court (IPEC) in the space of a week in which earlier registered rights have been invalidated on the basis of descriptiveness, but in which the case based on passing off succeeded. Nina O’Sullivan, Counsel in our London IP team, picks up the story…
Sofa Workshop, owner of 2 CTMs for SOFAWORKSHOP (and part of the DFS stable of brands), challenged the use of Sofaworks. The brands are major competitors in the cut-throat world of sofa retailing, often played out in advertising and social media (and this case has been no exception). Sofaworks had previously traded as CSL before changing its name.
Non-use and invalidity
Sofaworks challenged the 2 CTMs for non-use and invalidity. The non-use challenge succeeded. Sofa Workshop had made extensive use of its marks in the UK, but not beyond (with 1 possible exception, namely the sale of a footstool, a chair, two sofas and a bench to a hotel in Copenhagen, the details of which were sketchy).
HHJ Hacon, the IPEC Judge, made a particularly interesting finding in relation to non-use, deciding that the requirement that there be genuine use of a CTM ‘in the Community’ required, as a default, that there be genuine use in more than one Member State (and, depending on the size of the market in question, potentially in more than two Member States). The only exception to this general requirement would be where the market for the relevant goods or services is restricted to the territory of the a single Member State.
Some will query how HHJ Hacon reached this conclusion given the Court of Justice’s (CJEU) ruling in the Onel case that “territorial borders of the Member States should be disregarded” when assessing genuine use in the Community. On the other hand, the CJEU did not say in Onel that use in one Member State is enough. A CTM will be put to genuine use within the Community, the CJEU said, when it is used in accordance with its essential function and for the purpose of maintaining or creating market share within the Community for the goods or services covered by it. This is a question for the national court to determine by reference to all the relevant facts and circumstances, of which the territorial extent of the use is just one factor.
HHJ Hacon went beyond the CJEU’s findings however, and considered two sections of the CJEU’s decision (one where it considered the possibility of conversion of a CTM, the other where it was asked to draw analogies from provisions relating to a CTM’s reputation), both of which underlined for him the ‘default requirement’ that use beyond one Member State was a necessary ingredient.
The evidence meanwhile focussed on advertorial use in a number of homes magazines which had been circulated both inside and outside the UK. However, these ads were clearly targeted at UK consumers alone – e.g., they provided telephone numbers only for UK based callers and invited readers to ‘pop into one of their shops’. As a result, the single sale outside of the UK was not enough to save the marks.
In case he was wrong on non-use, the Judge went on to say that the marks should be invalidated on the grounds of descriptiveness and lack of distinctive character, finding with little difficulty that ‘Sofa Workshop’ was descriptive of the type of place where sofas and related goods are made. Further, the marks would not be rescued on the grounds of acquired distinctiveness: due to the language of the mark (English) and the mark itself, Sofa Workshop had to show its CTMs had acquired distinctiveness in the UK, Ireland and Malta (the latter two being countries where English is an official language), and also in Scandinavia, the Netherlands, and Cyprus. Aside from the UK, it had failed to do so. The apparent onerous nature of this requirement is underlined in even more stark form in the ukulele decision discussed below.
Trade mark infringement & passing off
Once again, in case he was wrong so far, the Judge went on to consider infringement, finding that there was a likelihood of confusion, not least because of Sofa Workshop’s evidence of actual confusion. He did make one interesting observation – Sofa Workshop has recently conducted a campaign of bidding on ‘sofaworks’ as a Google AdWord. Not objectionable in itself – but the Judge suggested such a strategy may carry a risk for a claimant in a trade mark infringement or passing off action as it may neutralise any online confusion that arises.
So far, not so good for Sofa Workshop – but the final few paragraphs of the decision brought much needed relief in the form of a finding of passing off. Despite being a descriptive name, ‘Sofa Workshop’ had acquired the necessary secondary meaning such that there was goodwill and a proportion of the relevant public in the UK would conclude that the goods of Sofaworks came from the same or an associated source.
Hot on the heels of the Court’s decision, Sofaworks began a social media campaign (together with advertisements in national newspapers) in which they re-opened the war with DFS – further details of this none too sophisticated campaign can be seen on Twitter at #nealsayswhat. It also stated that it intended to change its name again, which likely means an appeal on the passing off finding is unlikely (subject to any financial remedies that Sofa Workshop may seek). Sofa Workshop meanwhile may seek permission to appeal on the CTM findings (which might lead to references to the CJEU) or may simply decide to re-file (it had failed to make an application to convert the mark to a UK one). No doubt it will also consider asking for a publicity order from the Court.
A few days after his sofa decision, HHJ Hacon issued a judgment relating to ukulele orchestras – many of the issues in this case were similar, and so certain aspects of the judgment track his earlier decision very closely.
UOGB, owner of a CTM registration for THE UKULELE ORCHESTRA OF GREAT BRITAIN, challenged the use of ‘The United Kingdom Ukulele Orchestra’ set up some years later by a German-based ukulele orchestra with UK members. Both orchestras (though there was an argument whether orchestra was the correct terminology as an orchestra usually comprises more than one instrument) follow a certain format – members wear evening dress and tell jokes, and deliver rock songs and film themes on their ukuleles. The UOGB has been very successful, particularly in the UK and Germany.
Trade mark validity
HHJ Hacon had no difficulty in deciding that the registered CTM THE UKULELE ORCHESTRA OF GREAT BRITAIN was descriptive of, and did not have distinctive character for, the concert services and CDs/DVDs of the specification. So, the key question (as in his consideration of the SOFA WORKSHOP CTMs) was whether the mark had acquired distinctive character. Again, he decided, this meant that UOGB had to show acquired distinctiveness in the UK, Ireland, Malta, the Netherlands, Sweden, Denmark, Finland and Cyprus.
On top of that, however, it was also necessary to consider Member States where another relevant language is spoken, i.e., where the English word of the CTM is sufficiently similar to its equivalent in another language that the average consumer speaking that language perceives the mark’s descriptive character.
Recognising this was potentially very onerous (e.g. how easy will it be in many cases to prove acquired distinctiveness in Malta?), the Judge stressed that it was a consequence of the CTM system itself: a more relaxed approach would result in a ‘paradox’, namely that a national trade mark application could be refused because it is descriptive in a particular Member State, but a CTM for exactly the same sign could be granted protection because it has acquired distinctiveness elsewhere in the Community. In this case, the German word for ‘ukulele orchestra’ is Ukulelenorchester, and therefore Member States where German was spoken (i.e. Germany, Austria, Luxembourg and Belgium) had to be added to the list.
UOGB made valiant efforts to demonstrate acquired distinctiveness in the UK and Germany but failed to do so for the other Member States – it therefore had failed to meet the necessary burden of proving that the mark had acquired distinctiveness.
Infringement and passing off
In case he was wrong on validity, the Judge would again have found trade mark infringement – whilst ‘Great Britain’ and ‘United Kingdom’ do not mean the same thing, pedants even in the UK itself might hesitate before getting the distinction right; the evidence in the form of disappointed concert-goers meant that the Judge had no difficulty in finding that there would have been a likelihood of confusion.
The defendants tried to rely on the defence that their use was descriptive, which required them to prove that it was in accordance with honest practices in industrial or commercial matters. As demonstrated by the Court of Appeal’s recent decision in Maier v ASOS, however, the assessment of honest practices is very much a fact-dependent one. Here, the Court concluded that the Defendants knew of the UOGB but pressed ahead without seeking their sanction or any kind of accommodation – this was not honest practices.
Again, however, the Claimant’s case was saved by the law of passing off – based on its goodwill in the trade name, and the misrepresentation and damage to that goodwill by way of the loss of control over UOGB’s reputation as performers.
A dramatic work?
Finally, an added claim of copyright infringement based on various elements of the performance (including a group of musicians in formal attire) comprising a dramatic work failed to get off the ground. Much like the famous ‘format rights’ case concerning Opportunity Knocks (Green v Broadcasting Corp of New Zealand), the alleged dramatic work lacked certainty and unity.
Thoughts – with great power comes great responsibility
The cases highlight a number of important strategy and practice points for brand owners.
- Many border-line marks that might have slipped through to registration at OHIM based on more lenient examination in earlier times (see our note on the harder line taken more recently by the Boards of Appeal here), are now being invalidated, both by the Boards of Appeal and before the national courts. The prospects of defending an invalidity attack against a CTM that is in English in these circumstances on the basis of acquired distinctiveness are much lower than defending a UK registration.
- The same conclusion applies in the context of defending a non-use action against a CTM. Whilst territorial borders are not relevant under Onel, in practice the requirements for proving genuine use are quite onerous (particularly compared against the practice in Australia).
- There is the possibility of converting a CTM into a national registration or national registrations, after the fact.
- Thus the clear advantage of registering nationally in the most important EU markets alongside CTM registrations (as discussed in our earlier note here) is reinforced.