Gill Dennis August 1 2022 Timely reminder? High Court judgment clarifies scope of section 10(3) trademark infringement injuries in context of digital watch face apps Pinsent Masons | Intellectual Property - United Kingdom Gill Dennis Intellectual Property IntroductionFactsIssuesDecisionIntroductionThe High Court recently considered trademark infringement in the context of apps.(1) The judgment is noteworthy both for its assessment of the elements of infringement in that specific online environment and its consideration of the scope of the injuries in section 10(3) of the Trade Marks Act 1994 (TMA) on which there is still relatively limited case law. An infringement judgment in favour of the trademark owner such as this may give optimism to rights holders seeking to rely on an argument of detriment to the distinctive character and/or repute of their mark, particularly where there is a marked difference in quality between their goods and those of the defendant.FactsThe claimants in this case (Swatch) were all members of the Swatch group of Swiss watch makers, and included brands such as Tissot, Longines, Omega, Breguet, Blancpain, Glashütte Original and Jaquet Droz, watches in the latter brands costing many hundreds of thousands of Swiss francs. Each claimant owned trademarks for their brand, registered in class 9 and/or class 14. The registrations in class 9 covered (depending on the mark) "computers worn on the wrist, electronic apparatus incorporating a time display, smartwatches or smartphones in the shape of a watch" and the registrations in class 14 covered (again depending on the mark) "watches, horological and chronometric instruments, timepieces and chronometric instruments; smart watches with extended functionality and connected watches, or watches that communicate data to smartphones" (the Swatch trademarks). Throughout the judgment, it was acknowledged that the majority of watches manufactured and sold by Swatch were high end, prestigious and (in some cases) luxury, and all were certainly desirable to consumers.The defendant (Samsung) was the parent entity of the well-known technology group. Samsung manufactured and sold a smartwatch (the Galaxy Watch) and operated a dedicated app store (the SGA store) from which Galaxy Watch owners could download apps of their choice to enhance the look or functionality of their Galaxy Watch. A number of third-party digital watch face apps were made available in the SGA store which, when downloaded, would replicate the face of one of the Swatch watches on the face of the Galaxy Watch. For example, if an app for Breguet faces was downloaded, the Galaxy Watch would display a Breguet watch face. Each app-generated watch face displayed one of the Swatch trademarks – two examples are shown in Figure 1. Some of the watch faces available for download included the registered word mark for the watch brand, whereas others replicated the look and feel of the Swatch brand watch face.Figure 1: app-generated watch facesThe ability for a Galaxy Watch owner to make their smartwatch look like one of the much more expensive and prestigious Swatch watches was facilitated by the "always on" Galaxy Watch feature. The evidence showed that the digital watch face apps had been downloaded from the SGA store around 160,000 times.Crucially, these digital watch face apps were created by third-party developers. Samsung provided the platform to enable the app development work to take place and would review any app submitted to it (albeit the evidence showed that the review was cursory and undertaken by a small and inexperienced team) before it was added to the SGA store. The SGA store included an app search facility. Some of these apps were made available to Galaxy Watch owners for free, but if a download did incur a charge then Samsung was, according to its contract with the app developer, entitled to a share of the revenue. Samsung provided ongoing tech support if users encountered any issues with the apps.Swatch issued proceedings for trademark infringement and the matter came before Mrs Justice Falk in the High Court. The Swatch trademarks were all EU trademarks (EUTMs), the infringement having occurred prior to Brexit, and so in her judgment Falk J discussed trademark infringement in the context of the infringement provisions in article 9(2) of the EUTM Regulation (2017/1001). However, the provisions of article 9(2) are replicated in section 10 of the TMA and so the issues discussed in this judgment read directly onto the infringement of UK trademarks too.IssuesSwatch issued proceedings under:article 9(2)(a) – double identity infringement, section 10(1) of the TMA being the equivalent;article 9(2)(b) – use of a sign at least similar to the Swatch trademarks in relation to goods or services at least similar to those for which the Swatch trademarks were registered, giving rise to a likelihood of confusion, section 10(2) of the TMA being the UK equivalent; andarticle 9(2)(c) – use of a sign at least similar to the Swatch trademarks in relation to goods or services, giving rise to a "link" between the sign and the Swatch trademarks in the mind of the average consumer, leading to at least one of three types of injury – namely, detriment to the distinctive character of the Swatch trademarks, detriment to the repute of the Swatch trademarks, or unfair advantage being taken of the distinctive character or repute of the Swatch trademarks (in each case without due cause).Swatch alleged infringement as a result of both the Swatch trademarks appearing on the digital watch faces generated by the apps, and being included in the name of each app in the searchable SGA store.Samsung raised the hosting defence in article 14 of the e-Commerce Directive (2000/31/EC), which was transposed into English law by the Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/2013).DecisionThe judgment comprised a careful analysis by Falk J of the elements of each of the tests for infringement under article 9(2) and is noteworthy for some of the conclusions reached, which could be extrapolated beyond apps into assessing trademark infringement more generally in an online environment."Use"Falk J was called upon first to assess whether Samsung's activities amounted to "use" in a trademark sense of the Swatch trademarks. EU case law seemed to be against Swatch and in Samsung's favour on this issue, which led to detailed discussion in Swatch and Samsung's submissions. Google France,(2) L'Oreal v eBay(3) and Coty(4) were all referred to. These well-known judgments of the Court of Justice of the European Union (CJEU) established (among other things) that an online service provider or marketplace does not itself "use" a trademark for the purposes of trademark infringement by providing an AdWords service (where the keywords used replicate third-party trademarks) or by enabling users to advertise their goods for sale. The CJEU held that "use" requires a party to use a trademark in its "own commercial communication" and some additional "active behaviour and direct or indirect control of the act constituting the use".Placing particular emphasis on L'Oreal, Samsung contended that none of the individual acts it carried out amounted to "use" in a trademark sense. It argued that reviewing watch face apps for upload did not amount to use at all and that it was the app providers, and not Samsung, that placed the apps in the SGA store by uploading them. Downloads of apps were procured by customers for their own personal use, and not by Samsung, and it was the customer who affixed the watch face by installing it.Swatch sought to distinguish the case law, arguing that there was both active behaviour and control by Samsung around the creation and provision of the apps, and use of the Swatch trademarks by Samsung in its own commercial communications. It relied on the High Court decision in Cosmetic Warriors(5) in which it was held that Amazon had infringed trademarks owned by the cosmetics company Lush in that typing "Lush" into the Amazon search resulted not only in the display of goods for sale by third parties where sales would be fulfilled by those third parties, but also products sold by Amazon or where Amazon itself provided fulfilment services. The judge in that case concluded that Amazon's search engine was designed to maximise the sale of goods from the site, and that Amazon was doing much more than merely enabling customers to display third-party trademarks on its website. Swatch argued that Samsung's role was akin to that of Amazon in the Cosmetic Warriors case.Falk J agreed and held that Samsung did "use" the Swatch trademarks. In her view, although the apps were created by third-party developers, Samsung had a symbiotic relationship with those parties. The developers created the apps, but Samsung facilitated the creation, reviewed and approved the apps, and provided ongoing technical support for users. Samsung benefitted from sharing the revenue from downloads with the developers, but beyond that gained broader commercial advantages from the availability of the apps, including enabling Samsung to highlight the use of functions or interfaces unique to its devices, making ownership of a Galaxy Watch more desirable. These advantages the judge found were more valuable to Samsung that the revenue itself. Falk J said:[Samsung] is not just providing the necessary technical environment to allow the apps to be uploaded, displayed in the SGA store and downloaded. It has a clear commercial interest in the watch face apps in the SGA store, their availability, presentation and use by consumers. As regards watch face apps, I do not consider that the SGA store is simply an online marketplace like eBay. Rather, Samsung's activities go beyond that . . . . in my view there was active behaviour by Samsung in relation to the apps and control by it of their availability, and Samsung was using the apps, and the signs contained in them, in its own commercial communications.(6)It is common for apps appearing in app stores to be developed by third parties rather than the provider of the app store itself. However, the takeaway from this judgment could be that unless the store provider really does not benefit financially or commercially from the apps (which is unlikely – otherwise, why operate the store in the first place?) then it could potentially be liable for trademark infringement in respect of trademark uses in an app or app name.Identity of goods and servicesSwatch alleged trademark infringement in respect of use by Samsung of the Swatch trademarks on both the digital watch faces and in the app names. On the question of identity/similarity of goods, the former use was straightforward. The Swatch trademarks were registered in class 9 for, in essence, watches. Falk J was satisfied, therefore, that use of the Swatch trademarks on the digital watch faces was use in relation to identical goods.More difficult was use of the Swatch trademarks in the app names. Falk J concluded that apps were not identical goods to "computers worn on the wrist, electronic apparatus incorporating a time display, smartwatches or smartphones in the shape of a watch" covered by the class 9 Swatch trademarks and she noted that software (which would have been more akin to apps) was not specified in the registration of most of the Swatch trademarks. However, Falk J was satisfied that the watch face apps were similar goods to smartwatches on the basis of complementarity. This requires a close connection between goods "in the sense that one is indispensable or important for the use of the other in such a way that customers may think the responsibility for those goods lies with the same undertaking".(7) She concluded that the watch face apps and the Galaxy Watch were not only intended to be used together but were essential for each other's operation. The apps were specifically designed for the Galaxy Watch and appeared in the official Samsung store. They would appear to the average consumer to have a common commercial origin as both could be obtained from Samsung – directly in the case of the apps in the SGA store, and either directly or indirectly via another retailer in the case of the Galaxy Watch. The display of the app provider's name in the app store was not sufficient to displace this consumer perception.The conclusion reached by Falk J on the similarity of smartwatches and apps is interesting. There was clearly difficulty in being able to say that apps and smartwatches were similar per se, which caused her to fall back on the concept of complementarity. This aspect of the decision could have wide applicability on the basis that apps will complement most items of technology, potentially extending the reach of trademark registrations for seemingly unrelated items, such as watches.Likelihood of confusion and "injury"Two additional issues on the assessment of the elements of trademark infringement are worth noting.First, in relation to likelihood of confusion under article 9(2)(b) of the EUTM Regulation/section 10(2) of the TMA, Falk J was satisfied that Swatch had shown a likelihood of confusion in relation to the digital watch faces and app names. In particular, she pointed to the fact that Galaxy Watch owners would regard the SGA store (and the apps within it) as officially offered by Samsung and assume that some sort of commercial collaboration between Samsung and Swatch existed. In relation to consumer confusion more broadly and beyond Galaxy Watch owners, Falk J held that anyone seeing one of the digital watch faces in use would make a similar assumption about there being a licensing or other economic arrangement in place between Samsung and Swatch.While this is not new law, the post-sale context is not commonly referred to by the English courts in relation to the assessment of likelihood of confusion. This judgment is a useful reminder to claimants to assess the possibility of confusion at all stages of the transaction process as the potential for confusion may be found at the use stage if not at the purchase stage.Second, Falk J discussed the three types of injury required to establish infringement under article 9(2)(c) of the EUTM Regulation/section 10(3) of the TMA. These are:detriment to the distinctive character of the marks (commonly referred to as "dilution");detriment to the repute of the marks ("tarnishing"); andunfair advantage being taken of the distinctive character or repute of the marks ("free riding").Swatch relied on all three forms.There is still relatively limited case law on what each of these injuries actually comprises. However, the judgment of Falk J suggests that the bar to establish at least the first two forms of injury is relatively low. She said:[T]he impact or at least potential impact on brand reputation resulting from use of signs identical or similar to the [Swatch trademarks] seems to me to be obvious . . . [the Swatch watches] are intended to be, and are marketed as, exclusive, beautifully crafted Swiss-made products, produced (in the case of prestige products) in limited numbers and with an emphasis on heritage and longevity. In contrast, the Samsung smartwatch is a commoditised gadget with a short life and, despite work on its aesthetics, in a wholly different league as a product. The damage can be regarded as a form of dilution or tarnishment . . . . the association of [the Swatch brands] with smartwatches could inevitably have an impact on their reputation . . . it could taint their perceived value and exclusivity.(8)The judgment is arguably controversial in relation to detriment to distinctive character or "dilution". As the essential function of a trademark is to guarantee the origin of goods/services, it is reasonable to assume that dilution refers to actions adversely affecting the ability of a trademark to perform that function. However, in this case, Falk J accepted something less than that – specifically, damage to the exclusive and desirable nature of the Swatch watches. The result is that there is little or no real distinction between dilution and the separate injury of tarnishment. It is clear, however, that the legislature did intend these to cover different and independent heads of damage. This aspect of the judgment may be appealed, but in the meantime sets a potentially low bar to claimants establishing dilution as it may be sufficient for them to show that a defendant's goods are merely of lower quality than their own.Hosting defenceFor the sake of completeness, it is worth noting here that Samsung's article 14 hosting defence failed. Article 14 provides that an "information society service provider" will not be liable for "information stored at the request of a recipient of the service" on the condition that the provider does not have actual knowledge of illegal activity or information and acts expeditiously to remove or to disable access to the information once gaining such knowledge.Falk J again considered Google France, L'Oreal v eBay and Coty. She noted that those cases had established that the storage of information referred to in article 14 required an information society service provider to limit its conduct to that of a technical, automatic and passive nature and not undertake any active role. In light of that, she held that the defence failed, applying the same reasoning as she had applied in relation to the assessment of "use". She said:Based on the approach taken in the existing case law, it is far from clear that what Samsung did in this case was limited to acts of a "mere technical, automatic and passive nature" such that it lacked knowledge of or control over the data. Rather, in addition to the functional and safety review, [Samsung] performed a relatively detailed content review . . . Further . . . Samsung also took active steps, including in relation to facilitating and encouraging the design of apps, and marketing its smartwatches by reference to the availability of watch face apps in the SGA store. The commercial benefit it derived from doing so was from sales of its products, rather than any form of charge for storage. It has also promoted some of the apps.(9)Falk J was satisfied that the app review process would have resulted in the reviewer, and through them Samsung, becoming aware of the app name and the appearance of the digital watch face, and so would have "alerted a diligent economic operator to the infringement". As Samsung had not acted on the basis of that acquired knowledge to remove the infringing content, the article 14 defence was unavailable.The article 14 defence is often relied upon by platform providers in online IP infringement proceedings. The takeaway from this judgment for those providers is that the success of the defence depends initially on inaction and then prompt action if notified of infringement. Where an app host is assisting in the creation of apps, the defence may well be unavailable because of the active role they are taking. Passivity and lack of direct commercial benefit is key. Some app hosting platforms may need to review their business model if they want to ensure that this defence is open to them should they be on the wrong end of infringement proceedings.For further information on this topic please contact Gill Dennis at Pinsent Masons by telephone (+44 20 7418 8250) or email ([email protected]). The Pinsent Masons website can be accessed at www.pinsentmasons.com.Endnotes(1) (1) Montres Breguet SA (2) Blancpain SA (3) Montres Jaquet Droz SA (4) Omega SA (5) Compagnie Des Montres Longines, Francillon SA (6) Tissot SA (7) Mido SA (8) Hamilton SA (9) Swatch SA (companies incorporated in the Swiss Confederation) (10) Glashütter Uhrenbetrieb GmbH (a company incorporated in Germany) v (1) Samsung Electronics Co Ltd (a company incorporated in South Korea (2) Samsung Electronics (UK) Limited  EWHC 1127 (Ch).(2) C-236/08 to C-238/08.(3) C-324/09.(4) C-567/18.(5) Cosmetic Warriors Limited & Anor v Amazon.co.uk Ltd & Anor  EWHC 181 (Ch),  FSR 31.(6)  EWHC 1127 (Ch) at para 109.(7) Boston Scientific Ltd v Office for Harmonization in the Internal Market (Trade Marks and Designs) (OHIM) Case T-325/06, EU:T:2008:338.(8)  EWHC 1127 (Ch) at paras 183 and 184.(9) Id at para 218.