Pitfalls of Buying Heritage Brands - Aiwa Co Ltd. v Aiwa Corporation

Aiwa Tape Recorder

Author: BlueBreezeWiki Licence CC BY-SA 3.0 Source Wikipedia Aiwa

Jane Lambert

Chancery Division (Mr Justice Mann) Aiwa Co. Ltd v Aiwa Corporation [2019] EWHC 3468 (Ch) (13 Dec 2019)

This was an appeal by Aiwa Co. Ltd. against Mr Mark Bryant's decision on behalf of the Registrar of Trade Marks in Re AIWA trade marks, Aiwa Co. Ltd. v Aiwa Corporation BL O/071/19 4 Feb 2019 to revoke trade mark numbers 1067377, 1313883, 1483522, 1483523  and 1500565 for non-use and to allow trade mark number 3242803 to proceed to grant in the name of Aiwa Corporation.  The appeal was heard by Mr Justice Mann on 21 Nov 2019. He delivered judgment on 13 Dec 2019. In Aiwa Co. Ltd v Aiwa Corporation [2019] EWHC 3468 (Ch) (13 Dec 2019) his lordship dismissed the appeal though for different reasons than those of the hearing officer.

There was once another company called Aiwa Co Ltd. which had been a big name in consumer electronics. That company fell on hard times and was bought by the Sony Corporation in 2003.  Sony tried to relaunch the AIWA brand for a new range of products in new markets but it failed to appeal to the public. Sony continued to use the AIWA marks to market spares.  They were also used by third parties to sell second-hand products until 2018.  In 2016 an American company known as Hale Devices Inc. acquired the Aiwa trade marks for the USA, changed its name to Aiwa Corporation and marketed a speaker under the Aiwa brand.  In 2017 a Japanese company called Towada Audio acquired Sony's AIWA trade mark portfolio and changed its name to Aiwa Co Ltd. with a view to launching a range of products under those marks.

Aiwa Corporation applied to register the word AIWA as a UK trade mark for a range of goods in class 9 on 11 July 2017.  Its application was opposed by Aiwa Co Ltd. under s.5 (1) and (2) (a) of the Trade Marks Act 1994 which relied on trade mark numbers  1067377, 1313883 and 1483522.  The American Aiwa Corporation applied for the revocation under s.46 (1) (a) and (b) of the marks that the Japanese company had acquired from Sony.  The opposition and revocation proceedings came on before Mr Bryant in the Registry.

Both parties filed evidence which Mr Bryant summarized in paragraphs 9 and 10 of his decision.  The evidence on behalf of the Japanese company

• illustrated the history of the Aiwa mark dating back from 1951 and its more recent chain of title; 
• supported the claim of widespread second-hand sales and of spares by third party traders; 
• supported the claim that plans were in train to revive the AIWA brand; 
• supported the claim that Sony Corporation had been providing a website www.aiwa.com that provided service and support for AIWA products; and
• demonstrated that the Japanese company had obtained its marks via a valid transfer from Sony Corporation

The American corporation's evidence provided 

• a history of the company and its claimed use of the AIWA mark on a global basis including in the UK since 15 December 2015; 
• set out its claims to the AIWA mark around the world; 
• stated its attempt to reach an agreement with Sony; and 
• mentioned its involvement in disputes around the world to revoke the Japanese company's  AIWA marks.

S.46 (1) of the Trade Marks Act 1994 provides:

"The registration of a trade mark may be revoked on any of the following grounds-

(a) that within the period of five years following the date of completion of the registration procedure it has not been put to genuine use in the United Kingdom, by the proprietor or with his consent, in relation to the goods or services for which it is registered, and there are no proper reasons for non-use;
(b) that such use has been suspended for an uninterrupted period of five years, and there are no proper reasons for non-use ........"

The question for Mr Bryant was whether the sale of spares and second-hand products by third parties constituted "genuine use" of the Japanese company's marks for the purposes of s.46 (1). After considering the legislation and paragraph [219] of Mr Justice Arnold's judgment in The London Taxi Corporation Ltd (t/a The London Taxi Company) v Frazer-Nash Research Ltd and another  [2016] EWHC 52 (Ch) (20 Jan 2016) Mr Bryant concluded that they did not.  The only sales and service under the Aiwa marks had been made by third parties without the trade mark owner's consent and such activity did not suffice

Aiwa Co Ltd. challenged the hearing officer's finding that there had been no consent.  The judge was not persuaded that that was a fair criticism of Mr Bryant's decision because the question of consent did not appear to have been properly argued before him. However, he had his own concern about that finding which he expressed at paragraph [21] of his judgment:

"It seems to elide the concepts of 'genuine use' and the consent of the proprietor. Paragraph 27 seems to say that because there was no proprietor consent, therefore there can be no genuine use. He does not consider any other factors which go to genuine use, despite having set out those parts of Arnold J's decision which go to genuine use. This analysis is apparent from the lead up to his critical finding and from what follows it. In the lead up, in paragraph 25 the officer cites a short passage from paragraph 220 of London Taxi in which Arnold J describes the issue in that case as concerning the sale of used cars by the trade mark proprietor, and the hearing officer emphasises the words 'by the trade mark proprietor' (the emphasis in the above extract is the hearing officer's). So he is focusing on the user element, not the use element. Paragraph 27 makes it plain that he considers that the difference between his case and Arnold J's is that his case involved sales by third parties and not the proprietor - see the second and third sentences. Although he does not underline the words 'were not made with the proprietor's consent' in the fourth sentence, a proper reading of the paragraph reveals that that is where the emphasis of the sentence lies."

Mr Justice Mann held at [23] that the hearing officer's approach had been erroneous. He added at [25] that because of "the failure to consider in a reasoned manner whether there was consent, and the automatic assumption that the absence of consent meant there was no genuine use" his decision could not stand and the issue had to be reconsidered. The Japanese company submitted that:

"(i) The concept and nature of consent was the same whether the question was non-use, exhaustion of rights or infringement. In this respect he relied on Einstein Trade Mark [2007] RPC 23, a decision of Mr Geoffrey Hobbs QC sitting as The Appointed Person.
(ii) When Sony Corporation put its marked goods on the market in the UK it exhausted its rights. That concept involved implied consent to onward sales in the UK (with the result that sales thereafter could take place without infringement).
(iii) That implied consent to onward sales was also capable of being, and was, a consent to genuine use of the mark in the course of onward sales, including second-hand sales."

The American corporation disputed that line of reasoning, challenged the analysis in Einstein, referred to the Zino Davidoff case and invited the judge to consider the circumstances in which consent was alleged to have been given.

The judge accepted that there was no material difference between "consent" for the exhaustion of rights and consent for "genuine use" but he did not accept that placing goods on the UK market implied  consent for the sale of spares or second-hand items as alleged in paragraph (iii) of Awai Co Ltd.'s submissions.  That company's argument on implied consent therefore failed.

That was enough to dispose of the appeal but the judge also considered whether the use of the mark in relation to second-hand items amounted to genuine use or even use at all.  His starting point was paragraph [219] of Mr Justice Arnold's judgment in London Taxi to which the hearing officer has also referred.  From that judgment, Mr Justice Mann discerned the following principles:

"(i) Whether the mark amounts to real commercial exploitation of the mark on the market for the relevant goods or services, that is to say, use in accordance with the commercial raison d'être of the mark, which is to create or preserve an outlet for the goods or services that bear the mark.
(ii) Is the use of the mark deemed to be justified in the economic sector concerned for the purpose of creating or preserving market share for the relevant goods or services."

The evidence of actual sales was very thin and as it was for the Japanese company to persuade the court that there had been genuine sales.   His lordship said at [57]:

"With those factors in mind, and taking the evidence in the round, and drawing the limited inferences in favour of Limited that I have referred to, I am quite 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 the mark." That was not the purpose of the use, nor the effect of what happened. The advertisement and sales were advertising and selling goods which had been marketed some time before when the original purpose was fulfilled, and there was no relevant market share to maintain any more. It is impossible to see how Arnold J's criteria were fulfilled on the facts of these advertisements and sales. In my view this case is firmly in the territory of the kind referred to by Arnold J in his paragraph 234(vii), so far as the second-hand sales are concerned."

This decision is a salutary warning to those seeking to acquire and relaunch a zombie or even distressed brand. There is not usually a problem with a quick sale from an administrator or receiver where the proprietor is still (or had until recently been) trading but reviving a great heritage brand where the portfolio has been dormant for some time will raise similar problems. The situation is not made easier by observations from both Mr Justice Mann and Mr Justice Arnold that there might be instances where dealings in second-hand goods could amount to genuine use.   It will soon cease to be possible to refer such issues to the Court of Justice of the European Union. Consequently, this issue may one day mark a fork at which British trade mark law may diverge from that of the rest of Europe.

Anyone wanting to discuss this case or trade marks generally is welcome to call 020 7404 5252 or send a message through my contact page.