15 May 2012

Passing off - Lumos Skincare Ltd v Sweet Squared Ltd.

In Stannard v Reay [1967] RPC 589, and Stacey v 2020 Communications [1991] FSR 49.it had been established that even a very modest goodwill can support an action for passing off.  Just how modest such goodwill can be was tested in Lumos Skincare Ltd v Sweet Squared Ltd and Others [2012] EWPCC 22 (10 May 2012).

This was a claim by a skincare distributor which markets a "pure redesnsifying serum", a "pure regenerating serum", a "deep exfoliating mask" and a "pure firming serum" under the brand names "Lumos one" to "four" to beauty salons and through its online shop against the manufacturer and distributor of a range of nail care products.  As Mr. Recorder Campbell noted at paragraph [35] of his judgment, the women's skincare market is huge. He referred to an undated article in The Times which stated that "sales of women's facial skincare products in Britain are expected to generate about £1 billion this year".  Lumos Skincare's share of that market
"averaged about £2000 per quarter from the beginning of 2008 until September 2009, and then gradually rose to about £10 000 per quarter in September 2010. Nearly all of this was due to trade sales. Internet sales averaged only around £1 000 per quarter."
The prices of those products at that time were even higher than they are now. "Lumos one" which now retails for £78 a bottle once sold for £120 (see paragraph [25]). The learned recorder divided those sales figures by 100 to conclude that the claimant was selling about 100 bottles of its potions a quarter, mainly to the trade.   "Very modest use" concluded Mr. Campbell at paragraph [35] and "very small in absolute terms but are also very small as a proportion of the skincare industry."

The defendants sold "top coat" and "bottom coat" nail care products for £10 per bottle mainly to nail technicians.  The recorder found at paragraph [58] "a degree of overlap in terms of the outlets through which the products were sold, in that some of the salons where the Defendants' products were sold also sold skincare products" but although there were some salons that sold both the claimant's products and the defendants' none were found that stocked both the claimant's skin care and the defendants' nail care products.

Mr Campbell concluded at paragraph [87] that there had been no confusion for the following reasons:
"(1) As at October 2010 the Claimant's Lumos mark had only a very modest reputation and goodwill, which was limited to high end anti-ageing products in the skin care industry.
(2) In addition the reputation and goodwill of this mark was substantially limited to the Claimant's small customer base and in particular to those with whom the Branns had personally dealt. There is no evidence that the mark had made any significant impact outside this group. The Claimant's promotional activities, such as the Daily Mail article, had had only a modest and temporary effect on sales.
(3) Accordingly the number of people who were in a position to whom the Defendants' activities could even amount to a material misrepresentation was very limited.
(4) There is a clear division between the skincare industry and the nail care industry, although both form part of the beauty industry generally and there are some trade outlets which offer both skincare and nail care products and/or services. This clear division is recognised in the industry's own classification tools, in trade magazines, and in the way in which exhibitions are organised.
(5) The Claimant's case depends upon establishing that a substantial number of members of the public would be misled into purchasing the Defendants' product in the belief that it was the Claimant's product but the Claimant did not show that there was even a single person in this category. There is nothing like the sort of evidence of customer confusion which was obtained in Neutrogena. Nor is there any mass of emails demonstrating customer confusion, such as there was in Phones4U.
(6) Moreover, Neutrogena, Phones4U, and indeed Stacey all involved companies which were both in the same industry. It is more difficult to accept that there is a likelihood of deception where the relevant industries are distinct. It is true that they are both part of the overall beauty industry, but this umbrella term covers a number of distinct areas. The Claimant was unable to give any examples of any other skincare brands being successfully transplanted into the nail care industry.
(7) The high point of the evidence of confusion was Ms MacMillan's email. As I have said, the evidential weight of this email is small given the lack of cross-examination and the fact that it is not to be interpreted as strictly as a legal document. It is unclear whether Ms MacMillan herself was deceived, or merely confused, and in any event unclear how far her views were influenced by plans for commercial collaboration. Moreover the emails from Ms Danin and Ms Mendez suggest that Ms MacMillan's view was a minority one even within the Claimant's small number of customers.
(8) The lack of evidence of customer confusion is not in itself surprising bearing in mind the lack of side by side trading. However I noted that the Claimant went out of its way to exhibit hearsay evidence which it said demonstrated confusion among its customers, whilst not calling any direct evidence from its customers.
(9) Certainly if there had been any deception among the Claimant's 25 or so actual customers then it seems likely that the Claimant would have been the first to know about it, and would have been able to clarify the position before any damage was suffered: see Teleworks Ltd v Telework Group plc [2002] RPC 27, a decision of Christopher Floyd QC as he then was.
(10) As it is, the lack of any such evidence suggests to me that the Claimant's customers may have known that the Defendants were not connected with the Claimant. This certainly appears to have been the view of both Ms Danin and Ms Mendez. Their views cannot be ignored since their emails formed part of the very material which Mr Brann had chosen to include in his evidence on confusion."
There being no misrepresentation the action failed.

This is but the latest example of the efficient yet fair way in which the Patents County Court disposes of actions of passing off. Before October 2010 a claim like this would have taken months if not years to come on, consumed the better part of a week and cost a bomb in the Chancery Division. Thanks to the new rules for litigation in the Patents County Court the cost of intellectual property litigation is plummeting like the cost of skincare (see my article "New Patents County Court Rules" 1 Oct 2010). If anyone wants to discuss this case with me they should call me on 0800 862 0055 or contact me through Facebook, Linkedin, twitter or Xing, or through my contact page.

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