In what are challenging economic times, concentric diversification is increasingly being considered by businesses as a way of gaining an advantage over competitors. In the automotive sector in particular, manufacturers are expanding their offerings, particularly in the after-sales market, to supplement sales of traditional products.

The recent High Court decision in Bentley 1962 Ltd v Bentley Motors[1] acts as a warning to manufacturers that, when diversifying, putting brand strategy front and centre of any expansion plan is a must.

The case

The claimants, Bentley 1962 Ltd and Brandlogic Limited (together “Bentley Clothing”), were able to successfully argue that the luxury car manufacturer Bentley Motors Limited (“Bentley Motors”) had infringed two of their trade marks (a word mark for “BENTLEY” and a figurative mark containing the word “BENTLEY”) through Bentley Motors’s use of its famous mark (the “BM Mark”) on a range of branded clothing and headwear.

One sign or two signs?

The key question in the case was whether the BM Mark was one sign or two separate signs combined together (i.e. the “B-in-wings” being one sign and the word “BENTLEY” being the other).

In the court’s view, the average consumer would perceive the BM Mark to be two separate and distinct signs. Therefore, subject to any successful defence, Bentley Motors’s use of the “BENTLEY” element of the BM Mark in relation to the sale of clothing and headwear was an infringement of Bentley Clothing’s registered trade marks under section 10(1) of the Trade Marks Act 1994.

Likelihood of confusion?

The court also considered whether there was a likelihood of confusion for the purposes of a section 10(2) infringement in case it was wrong and the BM Mark was, in fact, one sign. On this issue, the court, again, found in Bentley Clothing’s favour and determined that, despite Bentley Motors’s extensive reputation, on the assumption that Bentley Clothing had made a notional and fair use of its trade marks, there was a likelihood of confusion between Bentley Clothing’s marks and the BM Mark. If Bentley Clothing’s claim had failed on the section 10(1) infringement, it would therefore have been successful under section 10(2).

Defences

Bentley Motors raised two defences to the claim; both of which were ultimately unsuccessful. The court’s finding in relation to the second defence was particularly interesting. In the court’s view, the honest and concurrent use defence was unavailable as Bentley Motors had engaged in a policy of “grandmother’s footsteps”. In other words, Bentley Motors had made a conscious decision to develop the use of “BENTLEY” in relation to their range of clothing and headwear such as to increase the prominence of the sign, but in incremental stages in the hope not to provoke a reaction from Bentley Clothing.

Comment

As this case emphasises, the consequences of failing to consider brand strategy when diversifying can be grave, both in financial and practical terms. Not only will Bentley Motors inevitably be liable for damages (unless they successfully appeal), they may have to destroy all stock incorporating the BM Mark, redesign their brand and take other undesirable steps, such as redesigning employee uniforms etc.

To mitigate against the risks associated with entering new markets, manufacturers would be well advised to ensure that diversified brands are afforded the same level of attention and protection as main brands receive. In particular, manufacturers should undertake appropriate due diligence prior to developing a new brand to ensure that the new brand is not likely to infringe the rights of a third party, and ensure that, where possible, all important intellectual property rights in the new brand or product are protected with registered rights.