In Diageo North America Inc v Intercontinental Brands (ICB) Ltd  EWHC 17 (Ch), Mr Justice Arnold held that "vodka" is a term that is capable of distinguishing a particular class and quality of product. In branding a vodka-blend as "VODKAT" and marketing it in a manner that did not make clear to the public that this was not vodka, the judge held Intercontinental Brands (ICB) Ltd was liable for passing off.
Diageo owns the SMIRNOFF brand, which has been marketed in the United Kingdom since the 1950s and is the United Kingdom's best-selling vodka brand. ICB markets a clear, almost tasteless alcoholic drink under the name VODKAT. VODKAT is not a vodka and Diageo's claim against ICB was to prevent it from applying the name VODKAT to its non-vodka beverage.
EXTENDED PASSING OFF
The applicable law is known as "extended" passing off and the line of cases to which this dispute belongs began in 1960, when Danckwerts J in Bollinger v Costa Brava Wine Co Ltd  1 WLR 277 held that the word "champagne" meant sparkling wine produced in the Champagne region and that the phrase "Spanish champagne" in relation to Spanish sparkling wine was likely to mislead people into believing that the Spanish wine was, in fact, champagne.
In Erven Warnink BV v Townend & Sons Ltd  AC 731, the House of Lords approved the earlier case law and its extension beyond descriptions with a geographical element to protect ADVOCAAT. In the Advocaat case, Lord Diplock held that where a class of members was severally entitled to the goodwill that attached to a term, the larger the class, the broader must be the range and quality of products to which it had been applied and the harder it would be to show that it denoted a product with recognisable qualities that distinguished it from competing products of inferior quality. Since 1989, the nature of vodka has been regulated by European legislation, currently Regulation 110/08/EC. The Regulation provides that vodka must inter alia comprise at least 37.5 per cent alcohol by volume (ABV).
VODKAT is a mixture of vodka and neutral fermented alcohol made from orange juice, which has an ABV of 22 per cent VODKAT was launched in April 2005, and was marketed in the bottle on the left below. Minor labelling changes were made by ICB after pressure from Trading Standards, the Department for Environment, Food and Rural Affairs, and the Gin and Vodka Association. Three months before trial, ICB materially changed the packaging of Vodkat to that in the second photograph.
The dispute did not come to trial until December 2009, by which time VODKAT had been on the market for over four years and sold 13 million bottles. It was agreed that the delay was important because if confusion were likely, one would expect to see actual confusion over such a protracted period of time.
The judge held that the evidence clearly established that vodka had passed the "Advocaat test” of acquiring a reputation as a "drink with recognisable qualities of appearance, taste, strength and satisfaction".
Arnold J held that the name VODKAT plainly suggested that the product was either vodka or contained vodka and that VODKAT was not described in a clear and comprehendible way, thereby failing to educate the public as to what it was.
Arnold J held that the marketing of VODKAT was calculated to deceive a substantial number of members of the public into believing that the product was vodka and that an additional section of the public was likely to have been deceived into believing that it was a weaker version of vodka. Arnold J also held that ICB took insufficient care to neutralise the risk of confusion.
Arnold J accepted Diageo's evidence that it had lost sales of Smirnoff to VODKAT and that, even discounting the majority of these as being due merely to competition from a cheaper product, he was satisfied that there would have been at least some sales lost due to confusion. He also accepted that, even if there had been no loss of sales to Diageo, there was damage to Diageo because ICB’s marketing of the VODKAT brand was likely to erode the distinctiveness of the term "vodka," since "vodka" would cease to be a term reserved for 37.5 per cent alcoholic strength by volume spirit and would come to be seen as a term applicable to lower strength products which include fermented alcohol.