In a recent High Court judgment from Mr Justice Mann, second-hand sales of Sony Corporation’s (Sony) discontinued Aiwa brand were held not to constitute “genuine use”. The sales, made by a third party, were neither capable of “maintaining a market share for goods bearing the mark”, nor “preserving an outlet for the goods or services bearing the mark”. On the issue of proprietor consent, the High Court confirmed that the doctrine of ‘exhaustion of IP rights’ does not equate to implied consent from the trade mark proprietor for the purposes of establishing genuine use.

Background

Between 2003 and 2008, the Aiwa speaker brand belonged to a wholly-owned Sony subsidiary. Sony discontinued the products in 2008 and there have been no sales of new goods using the AIWA mark since then. However, Sony continued to use the AIWA trade marks to market spare parts. The trade marks were also used by third parties to promote and sell second-hand products until 2018.

In 2017, Aiwa Co Ltd (Limited) was established and acquired the AIWA trade marks from Sony in an attempt to relaunch the dormant speaker brand. However, complications arose when, in July 2017, an unrelated third party, Aiwa Corporation (Corporation), filed a UK trade mark application for AIWA (word mark). This was subsequently opposed by Limited on the basis of the senior rights it had acquired from Sony.

By way of defence, Corporation launched counter-revocation proceedings against Limited’s historic registrations on the grounds that they had not been genuinely used with the proprietor’s consent between August/September 2012 and 2017.

At first instance, the UK Trade Mark Registry (Registry) considered Limited’s evidence of use which primarily consisted of evidence of second-hand sales by third parties and some sparse evidence of repair services being provided. It concluded that the evidence did not amount to genuine use with the consent of the owner. The hearing officer accordingly ordered the revocation of Limited’s registration and dismissed the opposition against Corporation’s application. Limited appealed the Registry’s decision to Mr Justice Mann in the High Court.

What did the court say?

The High Court ultimately agreed with the Registry’s decision but disagreed with its reasoning. It concluded that the hearing officer had erroneously "elide[d] the concepts of “genuine use” and the consent of the proprietor” in finding that “because there was no proprietor consent, therefore there can be no genuine use”.

In doing so, Mr Justice Mann clearly separated out both “use” and “user” elements confirming that the two distinct, and equally important, components of establishing non-use are: genuine use and use by the proprietor or with its consent.

Consent to the second-hand sales

On the second user point, both parties agreed that Sony had not given its express consent to the second-hand sales of Aiwa products. Limited, however, sought to argue that consent should be implied on the basis that, once the products had been sold on the EEA market, Sony’s rights had become exhausted. Limited contended that implied consent to onward/second-hand sales via the doctrine of exhaustion also comprised consent to genuine use of the mark in the course of those onward/second-hand sales.

Mr Justice Mann rejected this argument holding that “once exhaustion has happened, the proprietor cannot complain about infringements of his marks in relation to goods to which his marks are properly applied not because he is taken to have consented to the use, but because he has no more rights in relation to those goods – his rights are exhausted… The provisions are not phrased in terms of consent – they are phrased in terms of not being able to claim infringement or not being able to prohibit the use of the mark”. As such, consent to genuine use of the mark could not be implied in the context of second-hand sales.

Having eliminated this line of argument, Mr Justice Mann went on to briefly consider Limited’s other evidence of use pertaining to Sony’s provision of after-sales/maintenance services together with Limited’s preparatory launch activities that were clearly acts of the trade mark proprietor and were not concerned with the issue of consent.

Genuine use

Concluding that Limited “should have done much better” in terms of its evidence of second-hand sales, Mr Justice Mann found that Limited had failed to demonstrate a healthy second-hand market in the goods. The court stated that it was “unable to find that the level and nature of activity generated in relation to second-hand sales was capable of “maintain[ing] a market share for goods bearing the mark”, or was such that it “preserve[d] an outlet for the goods or services that bear that mark”, citing the principles set out in the Court of Appeal decision of The London Taxi Corporation Ltd v Frazer-Nash Research Ltd [2016] FSR 579.

On the point of Limited’s evidence of proprietor use, Mr Justice Mann concurred with the hearing officer’s conclusions that this illustrated nothing more than “the most basic after-sales service” and that “such sparse and unparticularised activity was not sufficient to amount to real commercial exploitation of the mark in the relevant period” and, in doing so, held that such activities did not “separately, or in aggregate with the others, amount to genuine use”.

Concluding remarks - to buy or apply?

This case provides a stark illustration of how challenging it can be to resurrect a dormant brand, often referred to as a “sleeping beauty” in the fashion industry. Such brands face a real risk of being hijacked by risk-taking entities which file new trade mark applications without any involvement/consent from the legacy brand owner. Very careful consideration should be paid when acquiring and valuing such brands.

The decision, echoing London Taxi, also indicates that merely relying on second-hand sales alone, or without substantial additional evidence of market use, is very unlikely to support a claim of genuine use.