Intellectual Property cases update and Competition Law update
July 2010
In this edition:
Trademarks
- What constitutes ‘unfair advantage’ when looking at trademark infringement
- Update on key cases affecting the use of trademarks
- Trade mark owner successful in protecting its brand
- Trade mark owners regain control
Competition
- Resume of new Vertical Agreements Block Exemption
Welcome to the latest edition of our brand and trade mark protection update – Brandhawk. In this issue, you can read our updates on some of the cases we have been following, which are of particular interest to brand owners.
We have also included, as an extra, our comments on the new Vertical Agreement Block Exemption (VABE), because of the implications for brand owners of the VABE in regulatory issues, such as distribution and pricing.
What constitutes ‘unfair advantage’ when looking at trademark infringement?
Whirlpool Corporation v Kenwood Ltd [2009] EWCA Civ 753 and Daimler AG v Sany Group Co Limited [2009] EWHC 1003 (Ch)
We look at how it appears that brand owners now have limited protection, applying L’Oreal v Bellure in the above recent cases.
Whirlpool Corporation v Kenwood Ltd [2009] EWCA Civ
http://www.bailii.org/ew/cases/EWHC/Ch/2008/1930.html
It was alleged by Whirlpool that the shape of a new electric stand mixer launched by Kenwood, was similar to that of their existing stand mixer, which had been on the market for some time, so as to cause confusion to the public as to the origin of the product. Accordingly, Whirlpool alleged that there was trademark infringement and passing off, as they had a reputation in the community for the product and Kenwood’s product took unfair advantage of or was detrimental to the distinctive character or repute of Whirlpool’s Community Trade Mark (“CTM”) (a shape trademark which depicted the overall shape of Whirlpool’s stand mixer), under Article 9(1)(b) and 9(1)(c) of Council Regulation 40/94.
The Court of Appeal held, however, that there was no infringement. When applying the test as to whether unfair advantage has been taken or detriment has been caused to the distinctive character of the CTM, the court held that although there was enough in common for there to be a link between the products, the similarity was not enough to affect the distinctiveness of the mark. Further, the consumer would have known that the new product had a different origin to that of the Whirlpool’s product, given that there was previously only one product on the market.
The Court of Appeal distinguished this case from L’Oreal v Bellure, where it was shown that there was a clear intention of the Defendant to take advantage of L’Oreal’s trademark. In this case, however, it was established that Kenwood had goodwill and a reputation in the market in any event and did not, therefore, need to ride on the coat tails of Whirlpool.
Comment
It appears, therefore that it is difficult to demonstrate unfair advantage; unless there is a clear intention to take advantage. Further, it reinforces the view that ‘shape trade marks’ are difficult to enforce.
Daimler AG v Sany Group Co Limited [2009] EWHC 1003 (Ch)
http://www.bailii.org/ew/cases/EWHC/Ch/2009/1003.html
Daimler owned the trademark of the world famous renowned Mercedes Benz logo (star in circle logo), which is used on their vehicles including lorries, vans and luxury cars. Daimler alleged that Sany Group’s trademark (also a pointed star in circle logo), which was used on construction equipment and machinery, was in breach of their trademark.
The court held that when looking at whether there has been an ‘unfair advantage’ the court has to look at a number of factors to include:
- The degree of similarity between the marks.
- The nature of the goods for which the respective marks are being used.
- The degree of strength of the marks.
- The distinctive character of the marks.
- Whether there is any confusion to the public as to the origin of the product.
In this case the court held that there was no similarity between the marks. It was apparent from the judgment that the court was influenced in its view by the fact that the marks being compared were exhibited/carried on quite distinctive products (i.e. for Daimler’s mark, lorries, vans and cars and for Sany’s mark construction equipment and machinery). There was also witness evidence from the relevant markets that in fact consumers were not apparently confused regarding the origin of the products, notwithstanding any alleged similarity between the marks themselves. This was a somewhat surprising conclusion, given the distinctiveness of Daimler’s mark. Further, the court went on to say that even if there was a similarity, there was no unfair advantage being taken by Sany; and distinguished from previous cases where such was found, on the basis that Sany had spent money on promoting and advertising its goods, which was enough to demonstrate that it was not exploiting Daimler’s mark.
Comment
Accordingly, at this stage it appears that the court in England and Wales has restricted the scope of trademark infringement in relation to highly distinctive and famous marks to cases where there is substantial similarity between the goods and/or products bearing the competing marks. Thus, even where in this case a renowned mark was involved, the court still held that there was no link where the goods involved were different in nature. It should be noted that the court attributed a lot of weight to the witness evidence of a third party who said that there was no confusion. It is hoped, therefore, that if witness evidence can be produced that confusion has been caused, a brand owner will then succeed even where goods of a different nature are involved.
Update on current key cases affecting the use of trademarks
L‘Oreal v eBay - High Court of England and Wales
(neutral citation number [2009] EWHC 1094(Ch))
eBay has been successful in defending the claim brought against it by L'Oreal before the English High Court for selling or allowing the sale of counterfeit and parallel goods on its website. Similar claims were brought by L'Oreal against eBay in France (see further details below), Belgium, Germany and Spain, as well as in England and Wales.
It was L'Oreal's case that eBay had a duty to be more proactive in preventing the sale of counterfeit goods and should be held personally liable for any counterfeit sales given that it benefited directly from them in the way that it is remunerated.
eBay argued in defence that it is merely a trading platform for independent sellers and is not involved in the selling itself as it does not act as agent for the sellers. eBay also argues that it should not realistically be expected to police individual sales.
Decision
On 22 May 2009, The High Court handed down its Judgment (together with another Judgment about Google AdWords; Interflora v Marks and Spencer PLC and Flowers Direct Online Limited).
The Court agreed with eBay's position and held that it was not jointly liable for infringements of L'Oreal's trademark rights which were committed by its customers through sales of certain counterfeit products.
Although siding with eBay, Judge Arnold suggested some actions that eBay could take to deal with future sales of counterfeit goods as he noted that eBay could probably do more to stop such infringements, although he indicated that it was not necessarily legally obliged to do so.
The specific question as to whether eBay had infringed L'Oreal's Link Marks by allowing its customers use of sponsored links is yet to be answered. This issue has been referred on to the European Court of Justice ("ECJ"), who will no doubt generally consider the application of the EC Trademarks Directive in its decision.
Interflora v Marks and Spencer (M&S)
http://www.bailii.org/ew/cases/EWHC/Ch/2009/1095.html
This case raised similar issues to that in L’Oreal v eBay. Interflora alleged that M&S had breached its trademark by sponsoring the words “Interflora”; “Intaflora” and “Inter – Flora” as a Google “adword”. Interflora maintains that the use of its trademark is detrimental to its mark, in that the public will be confused as to the origin of the goods. Further, that the Defendant was obtaining an unfair advantage from the use of the mark as they benefitted from the reputation which Interflora has established in its mark and brand.
The court would not grant an interim injunction against M&S, to stop them using the above sponsored adwords. However, the court referred some questions to the ECJ to include whether the use of a trademark as sponsored links constituted trade mark infringement.
The decision of the ECJ is also awaited.
Louis Vuitton Moet Hennessy v Google – Paris Court of Appeal
Advocate General’s opinion
On 22 September 2009, Advocate General (AG) Maduro gave his opinion in respect of the questions referred to the ECJ.
AG Maduro found that Google did not cause any damage to the LVMH brand by allowing advertisers to purchase key words relating to the brand, as the adverts which are listed in the result of a key word search are private adverts. The advertiser is, therefore a consumer, as opposed to selling in the course of trade at this stage, as no product or service is sold until the general public clicks onto the link and makes a purchase. Accordingly, as there is no unfair use, it follows that there is no trade mark infringement.
Further, AG Maduro felt that the sponsored links did not cause confusion as to origin of goods, as the assessment of origin would be made from the advert themselves and not from the fact that they were a result from the search of the trade mark. The paid adverts, for example the sponsored links, are clearly distinguished in any event from the natural adverts. The internet user would expect there to be results other than those of the trade mark owner.
AG Maduro went on to reject the argument that Google was liable for contributing to infringing acts of the third parties who purchase the keywords and have sponsored links.
It should be noted that the questions referred to the ECJ only related to use of the keywords as opposed to the use of trade marks in the advertisements themselves and the sale of goods resulting from the adverts.
ECJ’s decision
There was nothing positive for trade mark/brand owners to take away from the opinion of Advocate General. However, there is some comfort to be taken from the ECJ’s decision, handed down on 23 March 2010, which has afforded some protection to brand owners.
The ECJ held that Google was not liable for trademark infringement through the sale of ‘adwords’, to include trademarks to third parties, as the sale of the adwords was held not to be ‘use of a trade mark’ under Article 5(1)(a) of the EC Trade Marks Directive. Further, Google was exempt from liability for trade mark infringement under the E Commerce Directive, as it is an internet “referencing service provider”, whose conduct is neutral and technical. Unless Google plays an active role, i.e. it is aware that the data it holds for advertisers is unlawful and it then fails to remove or disable access to data which is in breach of trademark, it is exempt from liability under the Directive.
Accordingly, it follows that if Google are notified of breaching data, i.e. a sponsored link which is in breach of trade mark, and do not act quickly in taking down the offending link, they could become a co-respondent for trade mark infringement.
The ECJ held, however, that a trade mark owner can prevent a third party (namely an advertiser) from using a trade mark in its advert or for purchasing a keyword, if the advert does not enable a reasonable internet user to ascertain whether the goods or services originated from the trade mark owner or, if the origin of the goods is confusing from the advert. The ECJ has not, however, provided any guidelines as to how liability is assessed and accordingly for the time being it will be a decision for the national court as to whether trade mark infringement has occurred on a case by case basis.
It is advisable for brand owners to regularly carry out searches on the most popular search engines. If there are any infringing links, they should immediately notify the third party, to include but not limited to Google of the alleged infringing advert. If no action is then taken by Google, the brand owner could potentially have a claim against Google as well as the third party.
Trade mark owner successful in protecting its brand
Wasabi Frog Ltd v Miss Boo Lt and another [2009] EWHC 2767 (Ch) http://www.bailii.org/ew/cases/EWHC/Ch/2009/2767.html
Wasabi Frog Ltd owned the CTM’s boohoo, boohoo.com and boo. It launched its website in 2006, selling clothing for young women. The CTM’s quickly obtained a good reputation in the market and were well known. This was demonstrated through ASOS’s bidding for boohoo as a keyword.
In October 2009 the Claimant expanded its business and brand by launching a clothing range for 25 to 30 year olds, under the name “Boo”. However, in September 2009 the Defendant had launched a website missboo.co.uk, selling similar clothing to that of boohoo.com. The Defendant advertised in the same publications as to that of the Claimant and targeted the same market as the Claimant.
The Claimant sought an injunction against the Defendant, to restrain them from trading under the marks or domain names of “Miss Boo” and “missboo.co.uk” or under the Claimant’s CTM’s.
The court granted the injunction as it held that the Claimant had a distinctive mark as it was very different to any other name in the fashion market. Accordingly, there was a likelihood of confusion to associate the respective parties’ goods and the Claimant had provided relevant evidence of the same. The Claimant also had an excellent reputation and was well known. Accordingly, the court held that the Claimant had a strong case for trade mark infringement and case for passing off and granted the injunction sought.
Trade mark owners retain control
Makro Zelfbedienings groothandel CV ("Makro"), Metro Cash & Carry BV, Remo Zaandam
BV v Diesel SpA, Case C-324/08, 15 October 2009.
Diesel brought proceedings, in the Netherlands, against Makro, as it was selling good’s bearing Diesel’s mark without, Diesel say, their consent.
Under Article 7 (1) of the Trade Mark Directive 89/104 a trade mark owner is not entitled to prohibit the use of its trade mark on goods, which have been put on the European Economic Area (“EEA”) by the owner or with their consent.
It was Diesel’s position that no consent, either expressed or implied, was given to Makro for the sale of its goods. Makro argued, however, that implied consent could be inferred from the relevant facts and accordingly Diesel had renounced its exclusive trade mark rights.
The national court had to consider the conditions set out in the joined cases of Zino Davidoff and Levi Strauss, when considering whether implied consent had been given. The national court, however, sought clarification from the ECJ, as to whether when considering the conditions set out in Davidoff, whether there is a distinction to be drawn between goods that have been first marketed outside EEA to those first marketed inside the EEA.
The ECJ held that trade mark owners should have control over the first placing of goods within the EEA even if they have previously been marketed outside the EEA. Accordingly, “the purely factual question whether the goods bearing the trade mark…. were marketing for the first time within the EEA or outside it is not… relevant for the purposes of the application of the exhaustion rule laid down in Article 7 (1).”
It follows, therefore, that trade mark owners retain the control of the first placing of its goods in the EEA.
Comment
This case is useful for brand owners wishing to police/prevent grey market imports into the EEA which might arguably already have previously been placed on the market legitimately and with their consent in non EEA markets such as within the Far East or the USA.
New Vertical Agreements Block Exemption Now Adopted
The European Commission has adopted a new Vertical Agreements Block Exemption, to replace the previous version which expired at the end of May 2010.
Buyer market share test
The change which appeared to spark the most controversy during the consultation process leading up to the adoption of the new block exemption, was the introduction of a buyer market share test (in addition to the existing supplier market share consideration).
The old Regulation required parties to only consider the market share of the supplier (i.e. if this was below 30% the block exemption would apply). The new Regulation has also now required the market share of the buyer to be considered (this must also be below 30%).
This proved unpopular during the pre-adoption consultation process, amongst both lawyers and industry contributors alike, principally because of the ambiguity over how the buyer’s market share should be calculated, but also due to the likely non-availability of buyer market share information for suppliers and their advisers and in many cases also for buyers themselves.
The Commission felt however that the new test was justified on the basis that large retail buyers may also use their market power to impose vertical restrains on suppliers, which would ultimately disadvantage consumers, and so the test remained.
Online sales
A more broadly welcomed change is the attempt to clarify the law regarding online sales. The old Regulation recognised that “passive” online sales should generally always be permitted (as being part of the single market imperative) and therefore restrictions in vertical agreements on responding to passive online sales enquiries were banned. Given the development of sales on the internet over the past 10 years, however, there has been some ambiguity over when online sales may actually be considered “active” (for example where websites are deliberately targeted at overseas territories, by including overseas currencies or delivery details).
There was also a degree of opinion amongst operators of selective distribution systems, that some ability to restrict online sales should be permitted where it was necessary to protect the brand and quality associated with the goods being sold.
The new Guidelines attempt to introduce some clarifications to the law on online sales and while a total ban is still only likely to be permitted in very limited circumstances, clarifications in some areas, for example the exemption of requirements on authorised dealers in a selective distribution system to also have a “brick and mortar” outlet, have been made.
Examples of clearly prohibited behaviour described in the Guidelines, include requirements on distributors to automatically re-route customers to the manufacturer’s or to another distributor’s website, or to provide for termination of purchases if credit card data reveals that a customer is based outside the distributor’s territory.
The Guidelines do however recognise that although restrictions on passive sales will always remain a hardcore restriction under the block exemption, they may under limited circumstances be permitted under Article 101(3) of the Treaty on the Functioning of the European Union (“TFEU) (for up to 2 years) where a distributor is the first to sell a new brand or product or the first to sell on to a new market, to allow it to recoup any substantial cost outlay associated with the start-up.
Resale price maintenance
A possibly surprising change has been in the Commission’s attitude to the previously untouchable “hardcore” restriction on imposing minimum resale prices on buyers. As with restrictions on passive sales, while this is still considered a “hardcore” restriction under the new block exemption, the Commission has introduced a small degree of flexibility by intimating that in some circumstances it may again be objectively justified under Article 101(3) TFEU if efficiency gains can clearly be proved (for example if used during a coordinated short-term low price campaign in a franchise network, or use in a retail network to fund additional pre-sale services).
Other changes
Two new types of possible vertical restraint have also been introduced as falling specifically within the scope of the block exemption (subject to the market share thresholds). Upfront access payments (fees paid by distributors to obtain access to a supplier’s distribution network) may in some cases by covered by the block exemption, as will category management agreements (whereby a supplier takes responsibility for marketing a particular category of products sold by the distributor).
Comment
The changes introduced by the new block exemption are likely to require manufacturers or suppliers to review the content of their current distribution agreements to an extent, not least if they can ascertain that any buyer or distributor with which they have contracted, has a market share (on the buyer market) of greater than 30%.
Agreements containing provisions related to online sales should also be reviewed in light of the more specific guidance now provided (particularly if they purport in any way to restrict passive online sales).
For further information on these cases and any other IP law issues, please contact Clive Lee or Cassandra McCarthy by emailing Clive or Cassie or by calling them on 08450 990045, or speak to your usual contact in the Commercial Disputes Team.