Summary

In Diageo v Intercontinental Brands, the High Court held yesterday that an alcoholic drink manufacturer who marketed vodka mixed with other spirits product under the brand name "Vodkat" was passing off its goods as vodka.

  • In doing so, Mr Justice Arnold held that "vodka" denotes a clearly defined class of goods (under EC Regulation 110/2008/EC on the definition, description, presentation, labelling and the protection of geographical indications of spirit drinks) which had a reputation giving rise to a protectable goodwill.
  • Diageo as the market leader in the supply of vodka to the UK market would undoubtedly have suffered lost sales as a result of the branding of Vodkat and its presentation as a vodka.
  • There was evidence that consumers thought it to be a pure vodka product and that wholesalers and retailers categorised it as such and displayed it on shelves alongside pure vodkas.
  • The get-up of the product were such as to create an impression that Vodkat was vodka (rather than just contained vodka) and the labelling and marketing did insufficient to dispel this idea.
  • In relation to the damage suffered by Diageo, Arnold J found it hard to quantify what sales Smirnoff would have lost to Vodkat as opposed to other cheap vodkas. Nevertheless even if there was no evidence of lost sales, he considered that it was clear that ICB's marketing of VODKAT was "likely to erode the distinctiveness of the term 'vodka'. It will cease to be a term reserved for 37.5% ABV spirits, and will come to be seen as a term applicable to lower strength products which include fermented alcohol. Indeed, I think there is some evidence that this is already starting to happen. The advent of the me-too products like VODKOVA is likely to accelerate this trend if it is not checked". This was therefore sufficient "damage" to support passing-off.
  • Arnold J also commented on the trap purchases and survey evidence used in the case.

Business Impact

The decision will be a welcome one for alcoholic beverage producers and other food brands with a defined classification, who may be able to tackle rival or "me-too" products attempting to "piggy-back" on their reputation and goodwill.

This decision puts Vodka in the same class of protectable product descriptions as Champagne, Sherry, Scotch whisky, Advocaat and Swiss chocolate and opens the door to other extended passing-off claims for other food and drink products with sufficiently defined qualities and associated goodwill.

For those attempting to compete with "defined" products, Arnold J gave some indication of what might be acceptable. He acknowledged that if more effort had been made to inform purchasers that Vodkat only contained vodka but was not pure vodka, it "would probably have been possible for ICB to use the name without misrepresentation". This would have required:

  • prominent labelling and a get-up that was in no way reminiscent of vodka;
  • ICB to "consistently" instruct the trade to display the product amongst the liqueurs and speciality drinks and well away from the vodkas; and
  • the product to have been advertised and promoted in a way that educated the public as to what the product was.

Background

Vodkat was not a pure vodka but a mixture of vodka and neutral fermented alcohol. It was 22% alcohol by volume (ABV) product, and was classified in a different category for duty purposes, allowing it to be sold at a significantly lower price.

The EC Regulation governing spirits sold within the EU (now Council Regulation No. 110/2008/EC) set a minimum alcoholic strength by volume of 37.5%.

ICB accepted that the purpose of a name that started with Vodka was to associate the product with vodka, although it maintained that this referred to the fact that the product contained vodka. Vodkat began to be sold in the UK during 2005 and for the year ended June 2009 was 5th in the top 10 liqueurs and specialities.

Diageo sells a range of vodkas and related products under the umbrella of the SMIRNOFF name.

Trap purchases

Diageo advanced a considerable body of evidence which established not only a likelihood of confusion, but also actual confusion, amongst a substantial number of members of the public. In particular, Diageo put forward evidence from trap purchases.

Mr Justice Arnold commented that, in general, what matters in respect of trap purchases is that the defendant be given a proper chance to investigate and test the claimant's evidence and to adduce contrary evidence. In the Judge's view, there were certain cases why immediate notice of the allegations is essential.

Where Diageo made trap purchases from shopkeepers, ICB claimed that such evidence had little probative value since the shopkeepers were not immediately notified of the incidents. However, the judge held that since the shopkeepers were promptly informed in writing some days later, albeit not immediately, and ICB were given adequate opportunity to investigate and test the evidence (but failed to do so), this trap purchase evidence did indeed have probative value.

In contrast, where trap purchases were made by Diageo in pubs and bars, the bar staff were mostly notified immediately, i.e. when serving Vodkat in response to an order of vodka and tonic.

Survey Evidence

ICB advanced survey evidence as to the perception of the relevant consumers with regard to vodka and claimed that Diageo were estopped from advancing specific criticisms of the survey that had not been advanced in correspondence between the parties at the time that ICB sought Diageo's consent to the full-scale survey and had applied to the court for permission to conduct the survey.

Diageo had refused its consent to the survey and although it had not made specific criticisms of it, it did state that ICB's survey would not serve a useful purpose.

Mr Justice Arnold held that Diageo were not estopped from advancing specific criticisms at trial but commented that it would have been more helpful if these criticisms had been articulated at the point when permission was sought.

Mr Justice Arnold stated that one of the main reasons for requiring parties to seek permission to carry out a survey is so that consideration can be given to the probative value and cost of the evidence before the bulk of the money is spent. That objective may be defeated if the opposing party saves its criticisms for trial, since by then it is too late to modify the survey in response.

Mr Justice Arnold also criticised ICB's survey for sampling respondents that were not properly representative of the relevant consumers. This did not mean that the survey had no weight; rather the survey had to be treated with caution.