Trade Marks - D & M Winchester Ltd. v Coleburn Distillers Ltd.

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Jane Lambert

Puter House, Court of Session (Lord Braid) D & M Winchester Ltd. v Coleburn Distillery Ltd  [2023] ScotCS CSOH_66, [2023] CSOH 66

This was an appeal by D & M Winchester Ltd. ("Winchester") from the decision of Mark Bryant on behalf of the Registrar of Trade Marks in Re COLEBURN trade mark D & M Winchester Ltd, v Coleburn Distillers Ltd. BL O/923/22 29 Oct 2022 under s76 (2) of the Trade Marks Act 1994.   According to para [11] of the judgment, this was only the second appeal to the Court of Session from the Trade Marks Registry under that provision. The first had been  CCHG Ltd t/a Vaporized v Vapouriz Ltd 2017] ScotCS CSOH_100, 2017 SLT 907.

Proceedings in the Trade Marks Registry
Winchester had applied to register the word COLEBURN as a UK trade mark for various goods and services in classes 32, 33, 39, 40. 41, 43 and 44  under trade mark number UK3600183.  Coleburn Distillers Ltd. ("Distillers") opposed Winchester's application under s.5 (1),, and s.5 (2) (a) of the Trade Marks Act 1994 relying on its earlier trade mark number  UK3051460 for COLEBURN in classes 33, 39 and 40 and also under s.3 (6).  Winchester applied for revocation of UK3051460 and its re-registered mark UK912792214 under s.46 (1) (b).  The opposition and revocation proceedings were conjoined and came on before Mr Bryant.  By para [91] of his decision Mr Bryant revoked UK3051460 and UK912792214 in respect of all goods and services except certain ones in class 39. By para [93] he allowed the opposition in respect of Distillers's application for goods and services in classes 33, 39 and 40.  As both sides had been partially successful the hearing officer made no order for costs.

The Issues
The appeal came on before Lord Braid who listed the following issues at para [7[ of his judgment:

"Question 1:  

Was the hearing officer incorrect to find that the respondent had demonstrated genuine use of the [Distillers] trade marks in respect of the Revised Specification? Should he have revoked the [Distillers] trade marks in their entirety under section 46 (1) (a) or (b) of the 1994 Act?

Question 2

Was the hearing officer incorrect in his assessment of whether the goods and services were identical and accordingly incorrect to refuse the appellant's application for the [Winchester] trade mark in respect of goods and services not connected with warehousing under section 5 (1) of the Act?

Question 3

Was the hearing officer incorrect to find that there was similarity between the Revised Specification and the class 3, 39 and 40 goods and services?

Question 4

Was the hearing officer incorrect to find that there was a likelihood of confusion on the part of the average consumer in terms of section 5 (2) (a) of the Act?

Question 5

Was the hearing officer incorrect to find the appellant had made its application in bad faith and accordingly incorrect to refuse the application on the basis of section 3 (6) of the Act?"

Judgment

His lordship decided the first 4 issues in the negative and the 5th in the affirmative.  Since Winchester had been partially successful albeit to a limited extent the judge has invited the parties to address him on the form of the order including liability for expenses (the Scottish term for costs).  

The Appeal

As the appeal had been brought under s76 (2) of the Trade Marks Act 1994, Rule 55.19 (10) of the Court of Session Rules required the appeal to be a re-hearing.  It was common ground that the following principles should apply: 

"(i) (As just noted) an appeal under section 76 of the Trade Marks Act 1994 is a rehearing. However, it is not a rehearing in the fullest sense. The form of the appeal is in substance one of a review of the decision. The court is permitted to look at the evidence that was led before the hearing officer.

(ii)  The court may interfere with findings of primary fact where it is shown that there was an error of principle or that the hearing officer was wrong.

(iii) "Wrong" in this context means that the hearing officer has made an error of law which might involve asking the wrong question, failing to take account of relevant matters or taking into account irrelevant matters.

(iv) Absent an error of law in that sense, the court would be justified in concluding that the decision of the hearing officer was wrong only if the hearing officer's conclusion was 'outside the bounds within which reasonable disagreement is possible'. (This formulation is derived from the Supreme Court case Actavis Group PTC v ICOS Corporation [2019] UKSC at [81] discussed below)."

The judge directed himself that the court's task would be "to ascertain, first, whether the hearing officer erred in the sense conveyed by the second and third of the agreed principles; failing which, to ask whether the decision was outwith the bounds of reasonable disagreement."  He observed at para [15] that the agreed statement of principles complicated matters unduly. He said he would proceed on the basis that the court may intervene if the hearing officer had erred in principle,.  Such an error could be an error of law or a decision which lay outside the bounds within which reasonable disagreement was possible.

"Question 1:  Was the hearing officer incorrect to find that the respondent had demonstrated genuine use of the [Distillers] trade marks in respect of the Revised Specification? Should he have revoked the [Distillers] trade marks in their entirety under section 46 (1) (a) or (b) of the 1994 Act?"

His lordship set out s.46 (1) (a) and (b):

"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"

He considered Mr Justice Arnold's judgement in Walton International Ltd and another v Verweij Fashion BV  [2018] EWHC 1608 (Ch), [2018] RPC 19, [2018] ETMR 34) for the following applicable principles::

"(I) Genuine use means actual use of the trade mark by the proprietor or by a third party with authority to use the mark.

(ii) The use must be more than merely token, that is to say, serving solely to preserve the rights conferred by the registration of the mark.

(iii) The use must be consistent with the essential function of a trade mark, which is to guarantee the identity of the origin of the goods or services to the consumer or end-user by enabling them to distinguish the goods or services from others which have another origin. Accordingly, affixing of a trademark on goods as a label of quality is not genuine use unless it guarantees, additionally and simultaneously, to consumers that those goods come from a single undertaking under the control of which the goods are manufactured and which is responsible for their quality.

(iv) Use of the mark must relate to goods or services which are already marketed or which are about to be marketed and for which preparations to secure customers are underway, particularly in the form of advertising campaigns: internal use by the proprietor does not suffice, [nor] does the distribution of promotional items as a reward for the purchase of other goods and to encourage the sale of the latter.
(v) The use must be by way of 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'etre of the mark, which is to create or preserve an outlet for the goods or services that bear the mark.
(vi) All the relevant facts and circumstances must be taken into account in determining whether there is real commercial exploitation of the mark, including:
(a) whether such use is viewed as warranted in the economic sector concerned to maintain or create a share in the market for the goods and services in question;
(b) the nature of the goods or services;
(c) the characteristics of the market concerned;
(d) the scale and frequency of use of the mark;
(e) whether the mark is used for the purpose of marketing all the goods and services covered by the mark or just some of them;
(f) the evidence that the proprietor is able to provide; and
(g) the territorial extent of the use.
(vii) Use of the mark need not always be quantitatively significant for it to be deemed genuine. Even minimal use may qualify as genuine use if it is deemed to be justified in the economic sector concerned for the purpose of creating or preserving market share for the relevant goods or services. For example, use of the mark by a single client which imports the relevant goods can be sufficient to demonstrate that such use is genuine, if it appears that the import operation has a genuine commercial justification for the proprietor. There is no de minimis rule.
(viii) It is not the case that every proven commercial use of the mark may automatically be deemed to constitute genuine use.
(ix) The burden lies on the registered proprietor to prove use.
(x) When it comes to proof of use for the purpose of determining the extent (if any) to which the protection conferred by registration of a trade mark can legitimately be maintained, the hearing officer must form a view as to what the evidence does and just as importantly what it does not show (per section 100 of the Act) with regard to the actuality of use in relation to goods or services covered by the registration."

The learned judge reviewed the hearing officer's approach to this issue,  Winchester had criticized him for accepting a witness statement as sufficient evidence and not insisting on supporting documentation.  It referred to Daniel Alexander QC's dicta on the quality of evidence in para [22] of his decision in Awareness Limited v Plymouth City Council, Case BL O/236/13 and his observation in para [34]  that it is unsafe to rely on generalized statements in a principal witness statement without independent support. Winchester also argued that the hearing officer had failed to have regard to the economic market and sector with regard to whisky warehousing. Had he done so he would have found that Distillers's services were of use only to people who already owned a cask of whisky. It was clearly a niche market. The services were provided to people who were already customers.  Users of those services associated those services with the brand of one of Winchester's lessees and not with the appellant.  Distillers pointed to the evidence that indicated genuine use in relation to the services in class 39 for which the registration had not been revoked.

Lord Braid did not consider that the hearing officer could be said to have erred in finding genuine use. The hearing officer had reached a nuanced decision.  He had set out and applied the correct legal principles. Referring to para [56] of the General Court's judgment in Case C-252/15 P, Naazneen Investments v OHIM  EU: C:2016:178, ECLI:EU: C:2016:178, [2016] EUECJ C-252/15 the judge said that there is genuine use of a trade mark where the mark is used in accordance with its essential function, which is to guarantee the identity of the origin of the goods or services for which it is registered.  When assessing whether use of the trade mark is genuine, regard must be had to all the facts and circumstances relevant to establishing whether the commercial exploitation of the mark in the course of trade is real.  That is precisely the exercise that the hearing officer carried out.  He had regard to all the facts and circumstances.  As to Winchester's point on the evidence, additional evidence might well have been available but the decision in Awareness did not require it always to be used.  Winchester's criticism amounted to nothing more than a disagreement with the hearing officer.  Even if other hearing officers might have reached a different conclusion Mr Bryant's decision could not be said to "lie outside the range of reasonable disagreement."

"Question 2: Was the hearing officer incorrect in his assessment of whether the goods and services were identical and accordingly incorrect to refuse the appellant's application for the [Winchester] trade mark in respect of goods and services not connected with warehousing under section 5 (1) of the Act?"

As it had been accepted that the specifications were identical in so far as they related to whisky warehousing and bottling services, the dispute between the parties related to "tours".

The judge referred to s.5 (1) of the Act:

"A trade mark shall not be registered if it is identical with an earlier trade mark and the goods or services for which the trade mark is applied for are identical with the goods or services for which the earlier trade mark is protected."

Referring to para [29] of the General Court's judgment in Case T-133/05  Meric v OHIM [2006] ECR II-2737, EU: T:2006:247, [2006] EUECJ T-133/5, ECLI:EU: T:2006:247, [2006] EUECJ T-133/05  the parties had agreed that services can be considered as identical when the services designated by the earlier mark are included in a more general category designated by the trade mark application, or when the services designated by the trade mark application are included in a more general category designated by the earlier mark. His lordship found that the hearing officer had quoted, and had regard to, the Meric principle. 

Winchester contended that Mr Bryant had not had regard to the make up of the average consumers of Distillers's services.  They consisted of investors who owned casks of whisky or brokers.  They were discerning and paid close attention to the services they were purchasing like those in Tomatin Distillery Ltd v Tomatin Trading Company Ltd  2022] ECC 24, [2022] ScotCS CSIH_28, [2022] CSIH 28, 2022 SCLR 316, 2022 SLT 745, 2022 GWD 20-286.  Winchester argued that the hearing officer had erred in concluding that sightseeing tours were identical to whisky warehouse tours.

The judge rejected those contentions. In his view, the hearing officer had identified and correctly applied the Meric principle.  If Winchester's mark could be registered for sightseeing tours it would be entitled to use the same mark as Distillers for whisky warehouse tours which would inevitably lead to confusion.

"Question 3: Was the hearing officer incorrect to find that there was similarity between the Revised Specification and the class 3, 39 and 40 goods and services?"

Lord Braid cited s.5 (2) (a):

"A trade mark shall not be registered if because—

(a) it is identical with an earlier trade mark and is to be registered for goods or services similar to those for which the earlier trade mark is protected, 

............................................

there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the earlier trade mark."

The parties agreed the following principles:

“(i) There is no minimum level of similarity required under section 5 (2) (a) of the Act

(ii) In respect of assessing whether services are "similar" the hearing officer must consider:

(a) The respective uses of the respective services;
(b) The respective users of the respective services;
(c) The physical nature of the acts of service;
(d) The respective trade channels through which the services reach the market; and(e) The extent to which the respective services are competitive. This inquiry may take into account how those in trade classify services, for instance, whether market research companies, who of course act for industry, put the services in the same or different sectors,"

His lordship held that the hearing officer had identified the above principles. The question was whether he had erred in applying them. Mr Bryant had held that there was a low to medium degree of similarity between Winchester's goods which were drinks and Distillers's services which were tours and warehousing.  There was however a high degree of similarity between tours of whisky distilleries and tours relating to whisky warehousing.

Winchester submitted that it offered a good while Distillers offered a service.  They were not in competition nor even complimentary.  They were marketing to different publics, those wishing to drink and those wishing to invest.  The appellant argued that the hearing officer had erred by failing to identify the average consumer of the respondent's services and in describing distillery and warehouse tours as closely related.

The learned judge did not consider that the hearing officer made any error of principle. He identified the correct principles and applied them in a discriminating and nuanced fashion. His lordship could detect no error of law,  Mr Bryant's conclusion that there was similarity was the result of a multifaceted assessment.  He took into account all the factors relied upon by Winchester. The decision could not be said to lie outside the bounds to which reasonable disagreement was possible,

"Question 4:  Was the hearing officer incorrect to find that there was a likelihood of confusion on the part of the average consumer in terms of section 5 (2) (a) of the Act?

The judge directed himself that to the extent that the parties' respective goods and services are similar, it was necessary to consider the second part of section 5 (2) (a), namely whether such similarity gives rise to a likelihood of confusion on the part of the public.

The parties agreed that the following principles apply:

"(i) The likelihood of confusion must be appreciated globally;

(ii) The matter must be judged through the eyes of the average consumer of the services in question

(iii) The average consumer is deemed to be reasonably well informed and reasonably circumspect and observant. Their attention varies according to the category of services in question;

(iv) A lesser degree of similarity between the services may be offset by a greater degree of similarity between the marks, and vice versa (the interdependency principle);

(v) There is a greater likelihood of confusion where the earlier mark has a highly distinctive character, either per se or because of the use that has been made of it;

(vi) Mere association, in the strict sense that the later mark brings the earlier mark to mind, is not sufficient. If the association between the marks creates a risk that the public might believe that the respective services come from the same or economically linked undertakings, there is a likelihood of confusion;

(vii)  Account must be taken of the fact that, in view of the nature of the services concerned and in particular their price and their highly technological character, the average consumer displays a particularly high level of attention at the time of purchase of such services;

(viii) The assessment must take into account the manner in which these services are likely to be selected by the average consumer in the course of trade;

(ix) Where it is established in fact that the objective characteristics of a given product mean that the average consumer purchases it only after a particularly careful examination, it is important in law to take into account that such a fact may reduce the likelihood of confusion between marks relating to such services at the crucial moment when the choice between the services is made,"

The judge reviewed the hearing officer's approach to this issue.  Winchester argued that the average consumer of Distillers's services was a well-informed broker paying close attention to the services on offer who was unlikely to be confused.  The hearing officer had failed to identify the average consumer which was an error of law.  Distillers replied that the hearing officer had carried out a multifactorial assessment having regard to the average consumer identified by Winchester.  The judge could see no error in the hearing officer's reasoning and answered the fourth question in the negative.

"Question 5 - Was the hearing officer incorrect to find the appellant had made its application in bad faith and accordingly incorrect to refuse the application on the basis of section 3 (6) of the Act?"

Lord Braid noted that s,3 (6) provides as follows:

"A trade mark shall not be registered if or to the extent that the application is made in bad faith."

The parties agreed the following principles:

"(i) In order to determine whether the appellant acted in bad faith, the hearing officer was required to make an overall assessment, taking into account all the factors relevant to the case;
(ii) The relevant time for determining whether there was bad faith on the part of the appellant is the time of filing the application for registration;
(iii) Bad faith includes not only dishonesty, but also dealings which fall short of the standards of acceptable commercial behaviour. The appellant's own standards of honesty (or acceptable commercial behaviour) are irrelevant to the enquiry;
(iv) A person is presumed to have acted in good faith unless the contrary is proved;
(v) The onus is on the respondent to establish bad faith. The standard of proof is on the balance of probabilities, but cogent evidence is required due to the seriousness of the allegation. It is not enough to prove facts which are also consistent with good faith."

The judge reviewed the hearing officer's decision in some detail.  He noted that Mr Bryant had approached the issue by posing the following questions:

"(a) What, in concrete terms, was the objective that the applicant has been accused of pursuing?

(b)  Was that an objective for the purposes for which the contested application could not possibly be filed?

(c)  Was it established that the contested application had been filed in pursuit of that objective?"

Distillers had submitted that Wincehester's objective was to prevent to from distilling whisky under the COLEBURN mark.  Winchester had taken steps to build a hotel on the site but not initially to produce whisky there,  A company called Arco which was controlled by the principal shareholder in Distillers had leased a warehouse from Winchester and spent a considerable sum on refurbishing it with a view to using the building as a distillery.  As Winchester had shown no signs of developing a distilling business, the hearing officer concluded that the objective of Winchester's trade mark application was to undermine Arco#s existing and legitimate business.

Winchester challenged the hearing officer's conclusion on the ground that he had failed to consider the position as of 24 Feb 2021.  At that time  Distillers was operating out of only one of several warehouses with limited space and without the right to distil whisky.  By contrast, Winchester had drawn up plans to start whisky production.  The hearing officer had held that it was up to Winchester to prove good faith which was an inversion of the burden of proof.  

Distillers denied that the hearing officer had erred.   He had identified the right principles and had carried out a multifactorial assessment.   There was no basis on which the court could interfere with his decision,.

The judge found the hearing officer's reasoning on bad faith hard to follow,  He did not properly answer the questions that he had posed.   He could see no basis for reversing the burden of proof.    In Tomatin the Inner House had held that it was up to the party asserting bad faith to prove it,  It was a high test and had not been met.  There was no evidence that Winchester did not intend to use the mark.   On the contrary, it was the likelihood that Winchester might start whisky production under the COLEBURN mark that had prompted the opposition.

Comment

Winchester's successful appeal against a finding of bad faith will not make any difference to the outcome of the litigation because the hearing officer's findings on s.5 (1) and (2) (a) were upheld.  Anyone wishing to discuss this article may call me on 020 7404 5252 during office hours or send me a message through my contact form.