Précis Anheuser-Busch (“AB”), an American beer producer, claimed trade mark invalidity against its Czechoslovakian rival, Budejovicky Budvar (“BB”), claiming that AB registered the mark “Budweiser” first. The primary issue before the Court of Appeal was whether honest concurrent use could be used as a defence to trade mark infringement. Following a response from the European Court of Justice (“ECJ”) on the issue, the Court of Appeal held that the defence could apply if the disputed trade mark had no adverse effect on the essential function of the earlier mark and, as a consequence, AB was not successful in its claim.

What? The competing Budweiser brands were held to both hold valid registered trade marks in the “Budweiser” name because, despite minor consumer confusion, they were clearly identifiable as separate brands. This means that, so long as each brand can successfully act as a badge of origin and inflicts no adverse effects on the other, both marks can be valid.

So what? The application of this case will be rare in practice as it is unusual for a mark to be used concurrently by two brands. However, it does indicate that trade marks do not guarantee their owner monopolistic rights where the complained of third party use of the brand has no effect on the function of its trade mark. As a consequence, there will be increasing pressure on trade mark owners to demonstrate adverse effects.

Background

Under Article 4(1)(a) of the Trade Marks Directive, a trade mark can be rendered invalid if it is identical to an earlier trade mark and the goods or services for which the trade mark is applied for, or is registered, are identical with the goods or services for which the earlier trade mark is registered. The definition of “earlier trade mark” means any mark with a date of application for registration that is earlier than the application date of the other trade mark.

The facts

Both companies had been selling their version of Budweiser beer in the UK since the 1970s and each had acquired an individual reputation. Subsequently, both companies applied to register the mark and in February 2000 the Court of Appeal granted trade mark registrations to both companies on the same day.

AB filed a claim against BB for infringement on the basis that, although both parties had been granted trade mark registration on the same day, AB’s application was made ten years earlier and was therefore protected by the Directive as a “prior mark”.

At first instance, the High Court upheld the decision of the Intellectual Property Office (IPO), declaring BB’s mark invalid. BB appealed to the Court of Appeal.

Findings

The Court of Appeal referred various questions to the ECJ, particularly focusing on the scope of “honest concurrent use”. The ECJ held that Article 4(1)(a) of the Trade Marks Directive could not invalidate an identical trade mark where there had been a long period of honest concurrent use and where the use did not have an adverse effect on the function of the earlier trade mark as a badge of origin. The Court of Appeal followed the findings of the ECJ in the decision as follows:

  1. Honest concurrent use

The Court of Appeal allowed BB’s appeal on the basis of the ECJ’s findings, particularly finding that ‘honest concurrent use’ could be pleaded as a defence in such situations.

  1. Adverse effect on the essential function

The court answered the question of adverse affect as the essential function of the trade mark by reference to levels of consumer confusion. In particular, it found that, because the two companies had co-existed profitably for many years and were different in every way but name, it was apparent that there was no real consumer confusion and they could therefore co-exist in harmony.

The Court of Appeal did not grant AB permission to appeal the decision. However, it is expected that AB will apply to the Supreme Court directly.