Lord Justice Arnold's Guidance on Trade Mark Law in the Lidl v Tesco Appeal
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Yesterday I discussed the Court of Appeal's judgment in Lidl Great Britain Ltd and Another v Tesco Stores Ltd and Another (Rev1) [2024] EWCA Civ 262 (19 March 2024) in Trade Marks - The Appeal in Lidl v Tesco. I explained that Lord Justice Arnold had delivered the lead judgment which consisted of 196 paragraphs. He set out the grounds of the appeal by Tesco Stores Ltd and Tesco Plc ("Tesco") against Mrs Justice Joanna Smith's findings on trade mark infringement and passing off at para [122] and its grounds of appeal against her findings on copyright infringement at para [188]. Paras [123] to [161] addressed the appeal against the judge's findings on passing off, paras [162] to [170] the appeal against her findings on trade mark infringement and paras [189] to [195] her findings on trade mark law. Tesco had counterclaimed at trial for a declaration of invalidity or revocation of Lidl Stiftung & Co KG's wordless mark which the judge had allowed. Lidl Stiftung & Co KG and Lidl Great Britain Ltd ("Lidl") had appealed against that finding. Lord Justice Arnold addressed Lidl's appeal between para [171] and para [187].
Lord Justice Arnold's Guidance
The first part of Lord Justice Arnold's judgment contained some valuable guidance on trade mark, passing off and copyright law. I did not mention it yesterday because I did not need to refer to it to explain the reasons for his lordship's decision on the appeal. Had I done so my case note would have been much longer and much more complicated and his lordship's reasoning on the appeal might have been obscured. Nevertheless, those passages merit discussion as they are the words of our most senior intellectual property judge. I promised to deal with them in supplementary articles. Today I shall address Lord Justice Arnold's observations on trade mark law. Over the next few days, I shall discuss his guidance on those other areas of law.
The first part of Lord Justice Arnold's judgment contained some valuable guidance on trade mark, passing off and copyright law. I did not mention it yesterday because I did not need to refer to it to explain the reasons for his lordship's decision on the appeal. Had I done so my case note would have been much longer and much more complicated and his lordship's reasoning on the appeal might have been obscured. Nevertheless, those passages merit discussion as they are the words of our most senior intellectual property judge. I promised to deal with them in supplementary articles. Today I shall address Lord Justice Arnold's observations on trade mark law. Over the next few days, I shall discuss his guidance on those other areas of law.
Trade Mark Issues
The trade mark issues in this appeal were whether Tesco had infringed Lidl's trade marks under s.10 (3) of the Trade Marks Act 1994, and whether the registration of Lidl's wordless mark was invalid under s.47 of the Act. In his guidance Lord Justice Arnold addressed those points separately in different parts of his judgment.
The S.10 (3) Claim
Lord Justice Arnold observed in para [12] of his judgment that s.10 (3) had extended trade mark protection in contrast to s.10 (2) which had addressed confusion of origin, He noted that s.10 (3) implemented art 10 (2) (c) of Council Directive 2015/2436/EU of 16 Dec 2015 and the equivalent provisions of previous trade mark directives. The case law of the Court of Justice of the European Union ("CJEU") up to 31 Dec 2020 interpreting those provisions and the corresponding provisions in the EU trade mark regulations are now "assimilated law" within the meaning of s.5 of the Retained EU Law (Revocation and Reform) Act 2023.
Requirements for a Claim under S.10 (3)
In the next paragraph, he said that the following requirements must be satisfied if a claim under s.10 (3) is to succeed:
(ii) there must be use of a sign by a third party in the relevant territory;
(iii) the use must be in the course of trade; (iv) it must be without the consent of the proprietor;
(v) it must be of a sign which is identical with or similar to the trade mark;
(vi) it must be in relation to goods or services;
(vii) it must give rise to a link between the sign and the trade mark in the mind of the average consumer; (viii) it must give rise to one of three types of injury, that is to say,
(a) detriment to the distinctive character of the trade mark,
(b) detriment to the repute of the trade mark, or
(c) unfair advantage being taken of the distinctive character or repute of the trade mark; and
(ix) it must be without due cause.
In the present case, the types of injury relied upon by Lidl are detrimental to the distinctive character of the Trade Marks and unfair advantage being taken of the reputation of the trade mark.
Trial Judge's Statement of the Law
Lord Justice Arnold endorsed at para [14] the following principles from the authorities which Mrs Justice Joanna Smioth had discerned from the authorities to which she had been referred:
"1) As an overarching point, it is first important to identify the sign to which the trade mark is being compared. Both parties rely on the reasoning in Julius Sämaan Ltd v Tetrosyl Ltd [2006] FSR 42 per Kitchin J at [48][5]:
"1) As an overarching point, it is first important to identify the sign to which the trade mark is being compared. Both parties rely on the reasoning in Julius Sämaan Ltd v Tetrosyl Ltd [2006] FSR 42 per Kitchin J at [48][5]:
'Article 5 requires a comparison of mark for sign. The analysis must therefore begin with the identification of the sign used by Tetrosyl. This was the first area of dispute between the parties. The claimants contended that I should consider the sign to be the shape of the Christmas tree but discounting the words 'CarPlan Air Care' which appear in the roundel on the tub. Tetrosyl contended that the sign was the whole tree including the tub and the roundel including the words 'Car-Plan Air Care'. I have no doubt that Tetrosyl is correct. The matter must be considered from the perspective of the average consumer. The tree is fixed into the tub and the two are presented as a composite whole. Further, the roundel clearly has some trade mark significance. It cannot simply be disregarded as descriptive material which is not part of the sign.
Similarity (condition v)
2) The comparison between trade mark and sign must normally be carried out by reference to the visual, aural and conceptual similarities of the marks having regard to the 'overall impressions created by the marks' and bearing in mind their distinctive and dominant components (Specsavers International Healthcare Ltd v Asda Stores Ltd [2012] EWCA Civ 24 per Kitchin LJ at [52(d)]). It is not appropriate to concentrate on the similarities to the exclusion of the differences between the mark and the sign or, where there is a composite mark comprised of both graphic and word elements, systematically to regard the word elements as dominant. One cannot assume that because an element of the mark and the sign is identical the mark and sign are similar unless the identical part constitutes the dominant element in the overall impression created by each mark, such that all other components are insignificant (Kerly's Law of Trade Marks and Trade Names ('Kerly'), Sixteenth Edition at 11-089).
3) It is only when all other components of a complex mark are negligible that it is permissible to make the comparison solely on the basis of the dominant elements (Specsavers at [52(d)]);
4) Nonetheless, the overall impression conveyed to the public by a composite trade mark may, in certain circumstances, be dominated by one or more of its components (Specsavers at [52 (e)]).
5) In considering whether a sign is "similar to" the trade mark, the assessment must be undertaken through the eyes of the average consumer of the goods or services in issue (Specsavers at [52 (b)]).
6) The key is to 'consider any relevant class of consumer and not to average them' (The London Taxi Corporation Ltd v Frazer-Nash Research Ltd [2017] EWCA Civ 1729 per Floyd LJ at [31]); a relevant class of consumer will be 'any class of consumer to whom the guarantee of origin [the central purpose of the trade mark] is directed and who would be likely to rely on it, for example in making a decision to buy or use the goods' (The London Taxi Corporation at [34] and Sky plc & Ors v Skykick UK Ltd & Anor [2018] EWHC 155 at [274]-[275]). In other words, the average consumer is a member of the general public who is familiar with the trade mark and exposed to and likely to rely upon the allegedly infringing sign.
7) The average consumer:
a) is a hypothetical person or legal construct; she has been created to strike the right balance between the various competing interests including, on the one hand, the need to protect consumers and, on the other hand, the promotion of free trade in an openly competitive market and also to provide a standard, defined in EU law, which national courts may then apply (Interflora Inc v Marks & Spencer Plc [2014] EWCA Civ 1403 per Kitchin LJ at [113]). She will normally be representative of people with a spectrum of attributes such as gender, age, ethnicity and social group (Enterprise v Europcar at [137]).
b) is not a statistical test. The court must exercise its own judgment to determine the perceptions of the average consumer in any given case in light of all the relevant circumstances (Interflora at [114]). The notion of the average consumer provides the court with 'a perspective from which to assess the particular question it has to decide' (Interflora at [118]). The average consumer provides 'a normative benchmark with regard to the standard of perspicacity to be applied, but this does not require the court to assume that all the persons of whom the average consumer is representative perceive either the trade mark or the allegedly infringing sign in the same way' (Jack Wills Limited v House of Fraser (Stores) Limited [2014] EWHC 110 (Ch) per Arnold J at [63]). The average consumer test does not restrict consideration to the reactions of a single hypothetical person (see Enterprise v Europcar at [135]).
c) is 'deemed to be reasonably well informed and reasonably circumspect and observant, but…rarely has the chance to make direct comparisons between marks and must instead rely upon the imperfect picture of them he has kept in his mind…[his] attention varies according to the category of goods or services in question' (Specsavers at [52 (b)]);
d) 'normally perceives a mark as a whole and does not proceed to analyse its various details' (Specsavers at [52 (c)]).
8) By assessing matters from the perspective of the average consumer who is reasonably well-informed and reasonably observant and circumspect, the perspective of those who are ill-informed or unobservant is discounted (see Enterprise v Europcar [2015] F.S.R. 128 per Arnold J at [132], referring specifically to confusion).
9) However, the level of attention exercised by the average consumer depends on the nature of the goods and services in issue (Enterprise v Europcar at [138] and Julius Sämaan at [51(vii)]).
10) In a case concerning ordinary goods or services, 'the court may be able to put itself in the position of the average consumer without requiring evidence from consumers, still less expert evidence or a consumer survey. In such a case the judge can make up his or her own mind about the particular issue he or she has to decide in the absence of evidence and using his or her own common sense and experience of the world' (Interflora at [115]).
11) If it is shown that the claimant's trade mark has a distinctive character, or an enhanced distinctive character, amongst a significant proportion of the relevant public, then it is necessary to consider the impact of an allegedly infringing sign upon the proportion of the relevant class of persons to whom the trade mark is distinctive. However, this does not require the court to assume that the mark is equally distinctive to all such persons (Enterprise v Europcar at [136]).
A Link between mark and sign (Condition vii)
12) Infringement under section 10 (3) requires a degree of similarity between the mark and the sign such that the average consumer makes a connection between them. It is not necessary that the degree of similarity be such as to create a likelihood of confusion, but it must be such that the average consumer establishes a link between the mark and the sign, and this is to be assessed globally having regard to all the circumstances of the case: Specsavers at [120]; Adidas-Salomon. The fact that for the average consumer the sign would call the mark to mind is tantamount to the existence of such a link (Specsavers at [122]; Intel Corp Inc v CPM United Kingdom Ltd (C-252/07) [2008] ECR I-8823; [2009] RPC 15 at [60] and Comic Enterprises at [110]).
13) Factors relevant to all the circumstances of the case will include: (i) the degree of similarity between the conflicting marks; (ii) the nature of the goods or services for which the conflicting marks were registered, including the degree of closeness or dissimilarity between those goods or services, and the relevant section of the public; (iii) the strength of the earlier mark's reputation; (iv) the degree of the earlier mark's distinctive character, whether inherent or acquired through use; and (v) the existence of the likelihood of confusion on the part of the public (Intel Corp Inc at [42]).
14) Insofar as likelihood of confusion is to be considered as a relevant factor in assessing whether there is the necessary link, "the court must consider the matter from the perspective of the average consumer of the goods or services in question and must take into account all the circumstances of that use that are likely to operate in that average consumer's mind in considering the sign and the impression it is likely to make on him. The sign is not to be considered stripped of its context" (Specsavers at [87]).
Detriment (Condition viii (a))
15) Detriment is caused when the mark's ability to identify the goods or services for which it is registered and used as coming from the proprietor of that mark is weakened, since use of the later mark leads to dispersion of the identity and hold upon the public mind of the earlier mark. That is notably the case when the earlier mark, which used to arouse immediate association with the goods and services for which it is registered, is no longer capable of doing so (PlanetArt at [31] referring to Comic Enterprises at [113] and the decision of the CJEU in Intel at [29]).
16) Detriment will be established where there is evidence of a change in the economic behaviour of the average consumer of the goods or services for which the trade mark is registered or a serious likelihood that such change will occur in the future (Argos Ltd v Argos Systems Inc [2018] EWCA Civ 2211 at [107]). Detriment to the distinctive character of the mark is caused when its 'ability to identify the goods or services for which it is registered and used as coming from the proprietor of that mark is weakened since use of the later mark leads to dispersion of the identity and hold upon the public mind of the earlier mark' (Intel at [76]).
17) It is immaterial for the purposes of assessing whether the use of the later mark is or would be detrimental to the distinctive character of the earlier mark, whether or not the proprietor of the later mark draws real commercial benefit from the distinctive character of the earlier mark (PlanetArt at [31] referring to Comic Enterprises at [115]).
18) 'A serious risk of detriment may be established by deduction, but any such deduction cannot be supposition and must instead be founded properly on all the circumstances of the case and the nature of the trade in issue' (PlanetArt at [31] referring to Comic Enterprises at [118]). Actual evidence of a change in the economic behaviour of consumers is often difficult to obtain. Moreover, where the distinctiveness of a mark is whittled away, the detrimental impact can, in some circumstances, be reflected just as much in the evasive action that a proprietor needs to take to re-establish distinctiveness. Where a rival creeps up on a brand, a proprietor is sometimes forced to edge away from the new-comer at some cost or devote resources to amplifying its brand message to avoid its distinctiveness being drowned out by the alleged infringer. Where the evidence, taken as a whole, shows that damage of that kind is sufficiently likely, it is a corollary of the statement of principle in Comic Enterprises that it is not invariably necessary for there to be actual evidence that consumers have changed their behaviour as a result of the adoption of the rival mark (PlanetArt at [32]).
19) Descriptiveness of the respective marks is the key element. A trader has less right to complain that its brand is being diluted if it has chosen a mark which is of limited distinctiveness in the first place. Nor can a trader complain that precisely because its brand is so vulnerable to loss of distinctiveness and swamping by a newcomer using it descriptively that this gives rise to a claim for dilution, Nonetheless, these propositions must have regard to the precise marks in issue and the extent to which they only consist of descriptive terms (PlanetArt at [34]).
Unfair Advantage (Condition viii (c))
20) The concept of taking unfair advantage of the distinctive character or the repute of the trade mark, also referred to as parasitism or free-riding, relates to 'the advantage taken by the third party as a result of the use of the identical or similar sign'. It covers cases where, 'by reason of the transfer of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat tails of the mark with a reputation' (L'Oreal SA v Bellure NV at [41]).
21) In order to determine whether the use of a sign takes unfair advantage of the distinctive character or the repute of the mark, it is necessary to undertake a global assessment, taking into account all factors relevant in the circumstances of the case, which include the strength of the mark's reputation and the degree of distinctive character of the mark, the degree of similarity between the marks at issue and the nature and degree of proximity of the goods or services concerned (L'Oreal at [44]). The global assessment may also take into account, where necessary, 'the fact that there is a likelihood of dilution or tarnishment of the mark' (L'Oreal at [45]).
22) Where a third party attempts through the use of a sign similar to a mark with reputation to ride on the coat tails of that mark in order to benefit from its power of attraction, its reputation and its prestige, and to exploit, without paying any financial compensation and without being required to make efforts of his own in that regard, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark, the advantage resulting from such use must be considered to be an advantage that had been unfairly taken of the distinctive character or the repute of that mark (L'Oreal at [49] and also IG Communications at [110]).
23) Although a defendant's conduct is most likely to be regarded as unfair "where he intends to take advantage of the reputation and goodwill of the trade mark", it is not necessary to prove that the defendant subjectively intended to exploit the reputation and goodwill of the mark in order to establish that the use of the sign amounts to unfair advantage. It will be sufficient if the objective effect of the use complained of is to enable the defendant to benefit from the reputation and goodwill of the trade mark (Sky Plc v Skykick UK Ltd at [315]; Jack Wills at [109]-[110] and Monster Energy Co v Red Bull at [30]-[33]).
24) Where intention is present, it is likely to provide real assistance to a claimant's case. In the context of s.10 (2), Kitchen LJ said in Specsavers at [115]: 'In my judgment it is important to distinguish between a defendant who takes a conscious decision to live dangerously and one who intends to cause deception and deliberately seeks to take the benefit of another trader's goodwill. It has long been established that if it is shown that a defendant has deliberately sought to take the benefit of a claimant's goodwill for himself the court will not 'be astute to say that he cannot succeed in doing that which he is straining every nerve to do' see Slazenger & Sons v Feltham & Co (1889) 6 RPC 130 at p.538 per Lindley LJ'. A similar distinction was made in Planetart in the context of section 10 (3) at [39]: 'It is one thing to live dangerously, in the sense of pushing the boundaries of legitimate creep up on an incumbent. It is another to intend to deceive. The court must not confuse an intention to benefit from similarities in approach and presentation of a business with the more specific intention to benefit from the reputation and goodwill of the registered trade mark (PlanetArt at [38]).
25) To establish unfair advantage, a change in economic behaviour of customers for the defendants' goods or services, or the likelihood of such a change, must be shown. The fact of economic advantage is not enough: '[s]o to hold would be to empty the word 'unfair' of any meaning' (see Argos at [107]-[108] and Easygroup at [187]). There has to be an 'unfair' advantage, not merely an economic (or commercial) one (see PlanetArt at [35]).
Without due cause (Condition ix)
26) If detriment or unfair advantage is established then it is for the proprietor of the later sign to establish that there is due cause for the use of the later mark (Comic Enterprises at [120]). It follows that the concept of 'due cause' may not only include objectively overriding reasons but may also relate to the subjective interests of the third party using a sign which is identical or similar to the mark with a reputation (Leidseplein Beheer BV v Red Bull GmbH [2014] ETMR 24 at [41]-[46]).
27) The concept of due cause 'involves a balancing between, on the one hand, the interests which the proprietor of a trade mark has in safeguarding its essential function and, on the other hand, the interests of other economic operators in having signs capable of denoting their products and services' (Comic Enterprises at [123]; Leidseplein at [41])."
Average Consumer
Referring to Case C-342/97 Lloyd Schuhfabrik Meyer & Co. GmbH v Klijsen Handel BV [1999] ECR I-3819 at [26] and subsequent authorities, Lord Justice Arnold noted at para [15] of his judgment that many issues in trade mark law, including the issues arising on claims for infringement, must be assessed from the perspective of the 'average consumer' of the relevant goods and/or services, who is 'deemed to be reasonably well informed and reasonably observant and circumspect'. Chapter 3 of Kerly discusses the characteristics and role of the average consumer. It is the only authority for the following propositions:
(1) The average consumer is both a legal construct and a normative benchmark.
(a) He or she is a legal construct in that consumers who are ill-informed or careless and consumers with specialized knowledge or who are excessively careful are excluded from consideration.
(b) He or she is a normative benchmark in that he or she provides a standard which enables the courts to strike a balance between the various competing interests involved, including the interests of trade mark owners, their competitors and consumers.
(para [16] of Lord Justice Arnold's judgment).
(para [16] of Lord Justice Arnold's judgment).
(2) The average consumer represents consumers who have a spectrum of attributes such as age, gender, ethnicity and social group. He or she is not a single hypothetical person. Nor is he or she some form of mathematical average, Assessment from the perspective of the average consumer does not involve a statistical test (para [17]).
(3) Assessment from the perspective of the average consumer is designed to facilitate adjudication of trade mark disputes by providing an objective criterion, by promoting consistency of assessment and by enabling courts and tribunals to determine such issues so far as possible without the need for evidence (para [18]).
(4) The average consumer's level of attention varies according to the category of goods or services in question (para [19]).
(3) Assessment from the perspective of the average consumer is designed to facilitate adjudication of trade mark disputes by providing an objective criterion, by promoting consistency of assessment and by enabling courts and tribunals to determine such issues so far as possible without the need for evidence (para [18]).
(4) The average consumer's level of attention varies according to the category of goods or services in question (para [19]).
(5) The average consumer's level of attention varies according to the category of goods or services in question (para [20]).
Link
One of the requirements for liability under s.10 (3) of the Trade Marks Act 1994 which Lord Justice Arnold discussed in para [13] was the need for a link between the sign and the trade mark in the mind of the average consumer. He considered what was meant by a "link" in para [21] of his judgment. He referred first to para [30] of the CJEU's judgment in Intel Corp:
'The types of injury referred to in Article 4 (4) (a) of the Directive, where they occur, are the consequence of a certain degree of similarity between the earlier and later marks, by virtue of which the relevant section of the public makes a connection between those two marks, that is to say, establishes a link between them even though it does not confuse them (see, in relation to Article 5 (2) of the Directive, General Motors, paragraph 23; Adidas-Salomon and Adidas Benelux, paragraph 29, and adidas and adidas Benelux, paragraph 41).'
One of the requirements for liability under s.10 (3) of the Trade Marks Act 1994 which Lord Justice Arnold discussed in para [13] was the need for a link between the sign and the trade mark in the mind of the average consumer. He considered what was meant by a "link" in para [21] of his judgment. He referred first to para [30] of the CJEU's judgment in Intel Corp:
'The types of injury referred to in Article 4 (4) (a) of the Directive, where they occur, are the consequence of a certain degree of similarity between the earlier and later marks, by virtue of which the relevant section of the public makes a connection between those two marks, that is to say, establishes a link between them even though it does not confuse them (see, in relation to Article 5 (2) of the Directive, General Motors, paragraph 23; Adidas-Salomon and Adidas Benelux, paragraph 29, and adidas and adidas Benelux, paragraph 41).'
Next, he referred to para [41] of the same judgment:
'The existence of such a link must be assessed globally, taking into account all factors relevant to the circumstances of the case (see, in respect of Article 5 (2) of the Directive, Adidas-Salomon and Adidas Benelux, paragraph 30, and adidas and adidas Benelux, paragraph 42).'
'The existence of such a link must be assessed globally, taking into account all factors relevant to the circumstances of the case (see, in respect of Article 5 (2) of the Directive, Adidas-Salomon and Adidas Benelux, paragraph 30, and adidas and adidas Benelux, paragraph 42).'
Finally, he referred to para [63]:
'The fact that for the average consumer, who is reasonably well informed and reasonably observant and circumspect, the later mark calls the earlier mark with a reputation to mind is tantamount to the existence of such a link, within the meaning of Adidas-Salomon and Adidas Benelux, between the conflicting marks.'
'The fact that for the average consumer, who is reasonably well informed and reasonably observant and circumspect, the later mark calls the earlier mark with a reputation to mind is tantamount to the existence of such a link, within the meaning of Adidas-Salomon and Adidas Benelux, between the conflicting marks.'
Detriment and Unfair Advantage
Requirement (viii) is that the use of the allegedly infringing sign
"must give rise to one of three types of injury, that is to say,
(a) detriment to the distinctive character of the trade mark,
(b) detriment to the repute of the trade mark, or
(c) unfair advantage being taken of the distinctive character or repute of the trade mark."
Lord Justice Arnold considered the meaning of detriment in paras [22] to [24] and unfair advantage in para [25].
Detriment to the Distinctive Character
For the meaning of "detriment to the distinctive character ........... of the trade mark" Lord Justice Arnold referred to these other paragraphs of Intel:
"[29] As regards, in particular, detriment to the distinctive character of the earlier mark, also referred to as 'dilution', 'whittling away' or 'blurring', such detriment is caused when that mark's ability to identify the goods or services for which it is registered and used as coming from the proprietor of that mark is weakened, since use of the later mark leads to dispersion of the identity and hold upon the public mind of the earlier mark. That is notably the case when the earlier mark, which used to arouse immediate association with the goods and services for which it is registered, is no longer capable of doing so.
...
[67] The more immediately and strongly the earlier mark is brought to mind by the later mark, the greater the likelihood that the current or future use of the later mark is taking unfair advantage of, or is detrimental to, the distinctive character or the repute of the earlier mark.
[68] It follows that, like the existence of a link between the conflicting marks, the existence of one of the types of injury referred to in Article 4 (4) (a) of the Directive, or a serious likelihood that such an injury will occur in the future, must be assessed globally, taking into account all factors relevant to the circumstances of the case, which include the criteria listed in paragraph 42 of this judgment.
69. ... the stronger the earlier mark's distinctive character and reputation the easier it will be to accept that detriment has been caused to it
..........
[77]. ... proof that the use of the later mark is or would be detrimental to the distinctive character of the earlier mark requires evidence of a change in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered consequent on the use of the later mark, or a serious likelihood that such a change will occur in the future.
[78]. It is immaterial, however, for the purposes of assessing whether the use of the later mark is or would be detrimental to the distinctive character of the earlier mark, whether or not the proprietor of the later mark draws real commercial benefit from the distinctive character of the earlier mark."
[77]. ... proof that the use of the later mark is or would be detrimental to the distinctive character of the earlier mark requires evidence of a change in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered consequent on the use of the later mark, or a serious likelihood that such a change will occur in the future.
[78]. It is immaterial, however, for the purposes of assessing whether the use of the later mark is or would be detrimental to the distinctive character of the earlier mark, whether or not the proprietor of the later mark draws real commercial benefit from the distinctive character of the earlier mark."
As for evidence of detriment, Lord Justice Arnold cited paras [42] and [43] of the CJEU's judgment in Case C-383/12 Environmental Manufacturing LLP v Office for Harmonisation in the Internal Market (Trade Marks and Designs) [EU: C:2013:741]:
"[42[ Admittedly, Regulation No 207/2009 and the Court's case-law do not require evidence to be adduced of actual detriment, but also admit the serious risk of such detriment, allowing the use of logical deductions.
[43] None the less, such deductions must not be the result of mere suppositions but ... must be founded on 'an analysis of the probabilities and by taking account of the normal practice in the relevant commercial sector as well as all the other circumstances of the case'."
His lordship said that the approach articulated in [43] was also applicable to the question of whether there had been a change to the economic behaviour of the average consumer.
Unfair Advantage
As for "unfair advantage" Lord Justice Arnold cited the following paragraphs of Case C-487/07 L'Oréal SA v Bellure NV [2009] ECR I-5185:
"[41] As regards the concept of 'taking unfair advantage of the distinctive character or the repute of the trade mark', also referred to as 'parasitism' or 'free-riding', that concept relates not to the detriment caused to the mark but to the advantage taken by the third party as a result of the use of the identical or similar sign. It covers, in particular, cases where, by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation.
...
[43] It follows that an advantage taken by a third party of the distinctive character or the repute of the mark may be unfair, even if the use of the identical or similar sign is not detrimental either to the distinctive character or to the repute of the mark or, more generally, to its proprietor.
[44] In order to determine whether the use of a sign takes unfair advantage of the distinctive character or the repute of the mark, it is necessary to undertake a global assessment, taking into account all factors relevant to the circumstances of the case, which include the strength of the mark's reputation and the degree of distinctive character of the mark, the degree of similarity between the marks at issue and the nature and degree of proximity of the goods or services concerned. ... the more immediately and strongly the mark is brought to mind by the sign, the greater the likelihood that the current or future use of the sign is taking, or will take, unfair advantage of the distinctive character or the repute of the mark ..."
"Due Cause"
The last requirement of a claim under s.10 (3) was that the use should be "without due cause". Lord Justice Arnold said at [26] that where the owner of a registered mark has shown that there is either actual and present injury to its mark or, failing that, a serious risk that such injury will occur, it is for the user of the sign to establish that there was due cause for such use. For guidance on the issue, he turned to the following paragraphs of the CJEU's judgment in Case C-65/12 Leidseplein Beheer BV v Red Bull GmbH and Red Bull Nederland BV [EU:C:2014:49]:
"[45] It follows that the concept of 'due cause' may not only include objectively overriding reasons but may also relate to the subjective interests of a third party using a sign which is identical or similar to the mark with a reputation.
[46] Thus, the concept of 'due cause' is intended, not to resolve a conflict between a mark with a reputation and a similar sign which was being used before that trade mark was filed or to restrict the rights which the proprietor of that mark is recognised as having, but to strike a balance between the interests in question by taking account, in the specific context of Article 5 (2) of Directive 89/104 and in the light of the enhanced protection enjoyed by that mark, of the interests of the third party using that sign. In so doing, the claim by a third party that there is due cause for using a sign which is similar to a mark with a reputation cannot lead to the recognition, for the benefit of that third party, of the rights connected with a registered mark, but rather obliges the proprietor of the mark with a reputation to tolerate the use of the similar sign.
47. The Court thus held in paragraph 91 of the judgment in Interflora and Interflora British Unit (a case concerning the use of keywords for internet referencing) that where the advertisement displayed on the internet on the basis of a keyword corresponding to a trade mark with a reputation puts forward - without offering a mere imitation of the goods or services of the proprietor of that trade mark, without being detrimental to the repute or the distinctive character of that mark and without, moreover, adversely affecting the functions of the trade mark concerned - an alternative to the goods or services of the proprietor of the trade mark with a reputation, it must be concluded that such a use falls, as a rule, within the ambit of fair competition in the sector for the goods or services concerned and is thus not without 'due cause'."
Declarations of Invalidity
S.47 (1) of the Trade Marks Act 1994 provides:
One of those grounds is s.3 (6):
"A trade mark shall not be registered if or to the extent that the application is made in bad faith."
"A trade mark shall not be registered if or to the extent that the application is made in bad faith."
S.10 (3) implements art 4 (2) of Directive (EU) 2015/2436.
Bad Faith
Lord Justice Arnold said that the Court of Appeal had already considered this issue in Lidl Great Britain Ltd v Tesco Stores Ltd [2022] EWCA Civ 1433, [2023] FSR 12 and noted that Mrs Justice Joanna Smith had quoted the relevant part of her judgment at para [238]:
"[15] The provisions on bad faith contained in the Directives and in the Regulations have been interpreted by the Court of Justice of the European Union in four cases: Case Chocoladefabriken Lindt & Sprungli AG v Franz Hauswirth GmbH (C-529/07) EU: C:2009:361, Case Malaysia Dairy Industries Pte Ltd v Ankenaevnet for Patenter og Varemaerker (C-320/12) EU: C:2013:435, Case Koton Magazacilik Tekstil Sanayi ve Ticaret v EUIPO (C-104/18) EU: C:2019:724 and Case Sky plc v SkyKick UK Ltd (C-371/18) EU: C:2020:45 ("Sky CJEU"). There is also a body of case law of the General Court, including Case Psytech International Ltd v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) (T-507/08) EU: T:2011:253, Case pelicantravel.com sro v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) (T-136/11) EU: T:2012:689, Case Target Ventures Group Ltd v EUIPO (T-273/19) EU: T:2020:510 and Case Hasbro Inc v European Union Intellectual Property Office (EUIPO) (T-663/19) EU: T:2021:211. All of this case law except for Hasbro is retained EU law, and neither party suggested that this Court should depart from it. As for Hasbro, this constitutes persuasive authority, particularly since it is a decision of an Extended Composition of the Sixth Chamber of the General Court (permission to appeal from which was refused by the CJEU by order dated 1 December 2021 [EU: C:2021:983]), and neither party suggested otherwise.
[16] In Sky Ltd (formerly Sky Plc) v Skykick UK Ltd [2021] EWCA Civ 1121 ("Sky CA") Sir Christopher Floyd, with whom Newey and Nugee LJJ agreed, set out at [67] 13 points of principle established by the cases I have listed in paragraph 15 above (with the exception of Target Ventures, which was not referred to in Sir Christopher's judgment and may not have been cited) as follows (so far as relevant for present purposes):
Lord Justice Arnold said that the Court of Appeal had already considered this issue in Lidl Great Britain Ltd v Tesco Stores Ltd [2022] EWCA Civ 1433, [2023] FSR 12 and noted that Mrs Justice Joanna Smith had quoted the relevant part of her judgment at para [238]:
"[15] The provisions on bad faith contained in the Directives and in the Regulations have been interpreted by the Court of Justice of the European Union in four cases: Case Chocoladefabriken Lindt & Sprungli AG v Franz Hauswirth GmbH (C-529/07) EU: C:2009:361, Case Malaysia Dairy Industries Pte Ltd v Ankenaevnet for Patenter og Varemaerker (C-320/12) EU: C:2013:435, Case Koton Magazacilik Tekstil Sanayi ve Ticaret v EUIPO (C-104/18) EU: C:2019:724 and Case Sky plc v SkyKick UK Ltd (C-371/18) EU: C:2020:45 ("Sky CJEU"). There is also a body of case law of the General Court, including Case Psytech International Ltd v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) (T-507/08) EU: T:2011:253, Case pelicantravel.com sro v Office for Harmonisation in the Internal Market (Trade Marks and Designs) (OHIM) (T-136/11) EU: T:2012:689, Case Target Ventures Group Ltd v EUIPO (T-273/19) EU: T:2020:510 and Case Hasbro Inc v European Union Intellectual Property Office (EUIPO) (T-663/19) EU: T:2021:211. All of this case law except for Hasbro is retained EU law, and neither party suggested that this Court should depart from it. As for Hasbro, this constitutes persuasive authority, particularly since it is a decision of an Extended Composition of the Sixth Chamber of the General Court (permission to appeal from which was refused by the CJEU by order dated 1 December 2021 [EU: C:2021:983]), and neither party suggested otherwise.
[16] In Sky Ltd (formerly Sky Plc) v Skykick UK Ltd [2021] EWCA Civ 1121 ("Sky CA") Sir Christopher Floyd, with whom Newey and Nugee LJJ agreed, set out at [67] 13 points of principle established by the cases I have listed in paragraph 15 above (with the exception of Target Ventures, which was not referred to in Sir Christopher's judgment and may not have been cited) as follows (so far as relevant for present purposes):
'[2]. ........ Bad faith is an autonomous concept of EU trade mark law which must be given a uniform interpretation in the EU: Malaysia Dairy Industries at [29].
[3] The concept of bad faith presupposes the existence of a dishonest state of mind or intention, but dishonesty is to be understood in the context of trade mark law, i.e. the course of trade and having regard to the objectives of the law namely the establishment and functioning of the internal market, contributing to the system of undistorted competition in the Union, in which each undertaking must, in order to attract and retain customers by the quality of its goods or services, be able to have registered as trade marks signs which enable the consumer, without any possibility of confusion, to distinguish those goods or services from others which have a different origin: Lindt at [45]; Koton Magazacilik at [45].
[4.] The concept of bad faith, so understood, relates to a subjective motivation on the part of the trade mark applicant, namely a dishonest intention or other sinister motive. It involves conduct which departs from accepted standards of ethical behaviour or honest commercial and business practices: Hasbro at [41].
[5] The date for assessment of bad faith is the time of filing the application: Lindt at [35].
[6] It is for the party alleging bad faith to prove it: good faith is presumed until the contrary is proved: Pelikan at [21] and [40].
[7] Where the court or tribunal finds that the objective circumstances of a particular case raise a rebuttable presumption of lack of good faith, it is for the applicant to provide a plausible explanation of the objectives and commercial logic pursued by the application: Hasbro at [42].
[8] Whether the applicant was acting in bad faith must be the subject of an overall assessment, taking into account all the factors relevant to the particular case: Lindt at [37].
[9] For that purpose it is necessary to examine the applicant's intention at the time the mark was filed, which is a subjective factor which must be determined by reference to the objective circumstances of the particular case: Lindt at [41] - [42].
[10] Even where there exist objective indicia pointing towards bad faith, however, it cannot be excluded that the applicant's objective was in pursuit of a legitimate objective, such as excluding copyists: Lindt at [49].
[11] Bad faith can be established even in cases where no third party is specifically targeted, if the applicant's intention was to obtain the mark for purposes other than those falling within the functions of a trade mark: Koton Magazacilik at [46].
[12] It is relevant to consider the extent of the reputation enjoyed by the sign at the time when the application was filed: the extent of that reputation may justify the applicant's interest in seeking wider legal protection for its sign: Lindt at [51] to [52].
…'
[17]. Point 3 in this list requires clarification. The reference to Lindt at [45] appears to be a mistake since there is no reference to "dishonesty" in that paragraph or anywhere else in the Court of Justice's reasoning from [34] to [53]. Furthermore, the Court largely endorsed the reasoning of Advocate General Sharpston in her opinion, and specifically approved what she said in paragraph 58 (and paragraphs 66 and 67). Paragraph [58] forms part of the section of the opinion in which the Advocate General considered whether bad faith depended on subjective intention or purely objective criteria. In paragraph 57 she expressed the view that "in normal usage, the concept of bad faith implies a subjective mental state of a general nature, as outlined in the various descriptions cited by Lindt, Hauswirth and the Commission". The one cited by Hauswirth, which the Advocate General set out in paragraph 52, was the "often-quoted dictum" of Lindsay J in Gromax Plasticulture Ltd v Don & Low Nonwovens Ltd [1999] R.P.C. 367 at 379 that bad faith "includes dishonesty and … also some dealings which fall short of the standards of acceptable commercial behaviour observed by reasonable and experienced men in the particular area being examined". The Advocate General concluded in paragraph 60 that bad faith "relates to a subjective motivation on the part of the trade mark applicant - a dishonest intention or other 'sinister motive' -which will none the less normally be established by reference to objective criteria… it involves conduct which departs from accepted principles of ethical behaviour or honest commercial and business practices, which can be identified by assessing the objective facts of each case against such standards". It is this conclusion which provides the foundation (via Case T-82/14 Copernicus—Trademarks Ltd v EUIPO (T-82/14) EU: T:2016:396 at [28]) for what the General Court said in Hasbro at [41], which constitutes Sir Christopher's point 4.
[18]. As for Koton, what the Court of Justice said was as follows:
'[45] While, in accordance with its usual meaning in everyday language, the concept of 'bad faith' presupposes the presence of a dishonest state of mind or intention, that concept must moreover be understood in the context of trade mark law, which is that of the course of trade. In that regard, Regulations No 40/94, No 207/2009 and No 2017/1001, which were adopted successively, have the same objective, namely the establishment and functioning of the internal market (see, as regards Regulation No 207/2009, judgment of 27 June 2013, Malaysia Dairy Industries (C-320/12) EU: C:2013:435, paragraph 35). The rules on the EU trade mark are aimed, in particular, at contributing to the system of undistorted competition in the Union, in which each undertaking must, in order to attract and retain customers by the quality of its goods or services, be able to have registered as trade marks signs which enable the consumer, without any possibility of confusion, to distinguish those goods or services from others which have a different origin. …
[46] Consequently, the absolute ground for invalidity referred to in Article 52(1)(b) of Regulation No 207/2009 applies where it is apparent from relevant and consistent indicia that the proprietor of an EU trade mark has filed the application for registration of that mark not with the aim of engaging fairly in competition but with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, or with the intention of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark, in particular the essential function of indicating origin recalled in the previous paragraph of this judgment.'
[46] Consequently, the absolute ground for invalidity referred to in Article 52(1)(b) of Regulation No 207/2009 applies where it is apparent from relevant and consistent indicia that the proprietor of an EU trade mark has filed the application for registration of that mark not with the aim of engaging fairly in competition but with the intention of undermining, in a manner inconsistent with honest practices, the interests of third parties, or with the intention of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark, in particular the essential function of indicating origin recalled in the previous paragraph of this judgment.'
[19] Although the Court of Justice does not say so in terms in this passage, it is clear from the Court's reasoning that bad faith is not limited to dishonesty. This is consistent with the analysis of the Advocate General in Lindt and with the judgments of the General Court in Copernicus and Hasbro.
[20]. Sir Christopher's point 11 is drawn from what the Court of Justice said in Koton at [46]. The Court repeated this in Sky CJEU at [75]. The Court went on in Sky CJEU to hold at [81], and to rule in the dispositif at [2], that:
'Article 51 (1 ) (b) of Regulation No 40/94 … and Article 3(2)(d) of First Directive 89/104 must be interpreted as meaning that a trade mark application made without any intention to use the trade mark in relation to the goods and services covered by the registration constitutes bad faith, within the meaning of those provisions, if the applicant for registration of that mark had the intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark.'
[21] This confirms that the purpose of this ground of invalidity is twofold: first to prevent bad faith vis-à-vis specific third parties, and secondly to prevent abuse of the trade mark registration system (see also Hasbro at [69]-[72]). As the European trade mark system has evolved over the past three decades, abuses of the system have become more prevalent. The bad faith objection provides one of the few ways of combatting such abuses, and therefore it is important that it is not too restrictively interpreted.
[22]. A vexed question in this field is whether it is sufficient to establish bad faith to prove that the applicant for registration did not intend to use the trade mark in question in relation to the goods or services specified in the application. Having repeated what it had said in Koton, the CJEU answered this question in Sky CJEU as follows (internal citation omitted).'
[22]. A vexed question in this field is whether it is sufficient to establish bad faith to prove that the applicant for registration did not intend to use the trade mark in question in relation to the goods or services specified in the application. Having repeated what it had said in Koton, the CJEU answered this question in Sky CJEU as follows (internal citation omitted).'
[76]. Admittedly, the applicant for a trade mark is not required to indicate or even to know precisely, on the date on which his or her application for registration of a mark is filed or of the examination of that application, the use he or she will make of the mark applied for and he or she has a period of 5 years for beginning actual use consistent with the essential function of that trade mark …
[77] However, as the Advocate General observed in point 109 of his Opinion, the registration of a trade mark by an applicant without any intention to use it in relation to the goods and services covered by that registration may constitute bad faith, where there is no rationale for the application for registration in the light of the aims referred to in Regulation No 40/94 and First Directive 89/104. Such bad faith may, however, be established only if there is objective, relevant and consistent indicia tending to show that, when the application for a trade mark was filed, the trade mark applicant had the intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark.
[77] However, as the Advocate General observed in point 109 of his Opinion, the registration of a trade mark by an applicant without any intention to use it in relation to the goods and services covered by that registration may constitute bad faith, where there is no rationale for the application for registration in the light of the aims referred to in Regulation No 40/94 and First Directive 89/104. Such bad faith may, however, be established only if there is objective, relevant and consistent indicia tending to show that, when the application for a trade mark was filed, the trade mark applicant had the intention either of undermining, in a manner inconsistent with honest practices, the interests of third parties, or of obtaining, without even targeting a specific third party, an exclusive right for purposes other than those falling within the functions of a trade mark.
[23] The principles of European law identified by Sir Christopher in his points 6 and 7 are consistent with earlier domestic jurisprudence. So far as point 6 is concerned, the following statement of principle in Walton International Ltd v Verweij Fashion BV [2018] EWHC 1608 (Ch); [2018] RPC 19 at [186 (i)] is of particular relevance to the present case:
'A person is presumed to have acted in good faith unless the contrary is proved. An allegation of bad faith is a serious allegation which must be distinctly [pleaded and] proved. The standard of proof is 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 words in square brackets I have added to the quotation are supported by earlier authority: see e.g. ROYAL ENFIELD Trade Mark [2002] R.P.C. 24 at [31].
[24]. As for point 7, it is worth setting out what the General Court said in Hasbro more fully (internal citations omitted):
[24]. As for point 7, it is worth setting out what the General Court said in Hasbro more fully (internal citations omitted):
'[42]. It is for the applicant for a declaration of invalidity who intends to rely on Article 52(1)(b) of Regulation No 207/2009 to prove the circumstances which make it possible to conclude that an application for registration of an EU trade mark was filed in bad faith, the good faith of the trade mark applicant being presumed until proven otherwise ….
[43] Where EUIPO finds that the objective circumstances of the particular case which were relied on by the applicant for a declaration of invalidity may lead to the rebuttal of the presumption of good faith which the proprietor of the mark at issue enjoys when he or she files the application for registration of that mark, it is for the proprietor of that mark to provide plausible explanations regarding the objectives and commercial logic pursued by the application for registration of that mark.
[44] The proprietor of the trade mark at issue is best placed to provide EUIPO with information regarding his or her intentions at the time of applying for registration of that mark and to provide it with evidence capable of convincing it that, in spite of the existence of objective circumstances, those intentions were legitimate ….'"
[43] Where EUIPO finds that the objective circumstances of the particular case which were relied on by the applicant for a declaration of invalidity may lead to the rebuttal of the presumption of good faith which the proprietor of the mark at issue enjoys when he or she files the application for registration of that mark, it is for the proprietor of that mark to provide plausible explanations regarding the objectives and commercial logic pursued by the application for registration of that mark.
[44] The proprietor of the trade mark at issue is best placed to provide EUIPO with information regarding his or her intentions at the time of applying for registration of that mark and to provide it with evidence capable of convincing it that, in spite of the existence of objective circumstances, those intentions were legitimate ….'"
Comment
In his judgment, Lord Justice Arnold has given some important guidance on the ingredients of a successful claim under s.10 (3) of the Trade Marks Act 1994 and the meanings of "average consumer", "link", "detriment", "unfair advantage" and "due cause." He has also discussed bad faith in the context of applications for declarations of invalidity and s.3 (6) of the Act,
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