In a recent trademark infringement case(1) culminating in what can reasonably be described as "David-and-Goliath-style" proceedings, the Intellectual Property Enterprise Court (IPEC) (part of the High Court) provided clarification around some important aspects of trademark infringement litigation in the United Kingdom, including counterclaims for revocation for non-use of a mark, the assessment of likelihood of confusion and the availability of the honest concurrent use defence.
In this case, the second claimant (CTL) ran a high-end Cantonese restaurant called "China Tang" at the Dorchester Hotel in Park Lane, London. The restaurant featured "opulent décor" and welcomed celebrity diners, including "Kate Moss, Sir Tony Blair and Naomi Campbell". The first claimant (Gnat) owned the trademark depicted in Figure 1, registered in 2005 in class 43 for "restaurant services; catering services; cafes; cafeterias, and self-service restaurants" (the trademark). Gnat licensed the trademark to CTL.
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Figure 1: Gnat's trademark
The second defendant (Mr Gu) ran a Chinese takeaway through the first defendant company (WLE) of which he was the owner and sole director. The takeaway was located in Barrow-in-Furness in the county of Cumbria, in the northwest of England. WLE began trading in 2009 under the name "China Tang", used without stylisation. Images of the shop front and sample menu are depicted in Figures 2 and 3.
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Figure 2: shop front
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Figure 3: sample menu
The claimants alleged that the defendants had infringed the trademark under section 10(2) and section 10(3) of the Trade Marks Act 1994 (TMA). The defendants raised the defence of honest concurrent use and counterclaimed for partial revocation of the trademark in respect of "cafes; cafeterias; and self-service restaurants" because of non-use.
Revocation for non-use
His Honour Judge (HHJ) Hacon, sitting in the IPEC, considered the counterclaim for partial revocation for non-use first.(2) This was necessary because any amendment to the specification of services resulting from a successful revocation would have an impact on the assessment of trademark infringement, as this would need to be carried out by reference to the specification of services as it should be. For the counterclaim to be successful, HHJ Hacon would need to be satisfied that the claimants had not put the trademark to genuine use in the United Kingdom during the five-year period prior to issuing the infringement proceedings in relation to the services for which it was registered, or that there were proper reasons for non-use. The claimants had the burden of proving use during the relevant period.
The claimants accepted that they had not used the trademark for "self-service restaurants" and agreed that this should be deleted from the specification. The claimants also accepted that they could not show genuine use of the trademark for "café or cafeteria services", but argued that the judge should not simply delete these from the specification but adopt instead a "fair trade mark specification".
The claimants referred to the judgment of Arnold J in Stichtung(3) in which he set out an eight-step test to arriving at a fair specification, the fifth step of which required a court to "inform itself about the relevant trade and then decide how the average consumer would fairly describe the goods or services in relation to which the trade mark has been used". Hacon agreed that a fair specification approach should be adopted and, after considering dictionary definitions of "café" and "cafeteria", found that the average consumer would understand these to be a "type of restaurant".(4) He held, therefore, that deleting either term from the specification would by implication limit the scope of "restaurant services", and that restaurant services was not in any event such a broad term that it should be "sliced and diced into subsets".(5) Accordingly, Hacon dismissed the counterclaim to limit the specification of the trademark beyond the agreed deletion of "self-service restaurants".
This aspect of the judgment is interesting for trademark proprietors who are on the wrong end of a non-use revocation action. It may be possible to persuade a court to reject a "blue pencil" approach whereby aspects of the specification are simply struck out, but instead to take a more holistic view and consider the broader impact of any deletion of goods or services on the overall scope of protection conferred by the trademark to more accurately reflect actual use.
Likelihood of confusion
The claimants alleged that the defendants' use of the "China Tang" sign infringed the trademark under sections 10(2) and 10(3) of the TMA.
A successful claim under section 10(2) required the claimants to show that the defendants were using a sign identical or similar to the trademark for identical or similar services, and that there was a likelihood of confusion in that the average consumer might believe that WLE's services came from the same undertaking as those of the claimants or from an undertaking economically linked to the claimants.
Hacon was satisfied that WLE's takeaway services were "closely similar"(6) to "restaurant services" in the trademark specification, and that the trademark and WLE's "China Tang" sign were visually similar and aurally and conceptually identical. The question for the Court, therefore, was whether the similarities were such to create a likelihood of confusion.
The defendants raised a number of arguments against a finding of likelihood of confusion, but two are worth highlighting here.
First, the defendants submitted that there was no evidence of actual confusion having arisen over the course of 12 years of simultaneous trading. It pointed out that in Stichting,(7) Arnold J had held that:
absence of evidence of actual confusion is not necessarily fatal to a claim . . . [but] the longer the use complained of has gone on in parallel with use of the trade mark without such evidence emerging . . . the more significant it is.(8)
However, Hacon warned against "generalis[ing] the observation of Arnold J . . . into a principle of law that he did not intend to formulate"(9) and highlighted a number of factors that may well have prevented confusion arising in the real world. This included the likelihood that the claimants' reputation did not extend to Barrow-in-Furness and differences in the claimants' and defendants' trading styles. In Hacon's view, absence of actual confusion did not preclude a finding that a likelihood of confusion existed.(10)
Second, the defendants asked the Court to bear in mind the context of use of the trademark and WLE's sign. They argued that WLE's modest takeaway had little in common with the claimants' opulent Park Lane restaurant. Hacon, however, referred to the case of Compass(11) in which Laddie J had held that in the assessment of confusion:
the court must consider notional use [of the trademark] extended to the full width of the classification of goods or services . . . [and] notional use on a scale where direct competition between the proprietor and the alleged infringer could take place.(12)
In other words, this required the Court to assume that the claimants were using the trademark right across the "restaurant services, cafe, cafeteria" spectrum (right through to "low-end" restaurants) and assess the likelihood of confusion in that context. Hacon explained it this way:
The comparison between trade mark and sign in the context of s.10(2) requires consideration of the sign only in the particular circumstances of the alleged infringement, but consideration of the trade mark as used across any part of its specification, most relevantly as used for the type of product or service closest to that of the alleged infringement.(13)
Hacon was satisfied that Compass remained good law and held that:
in the present case, the likelihood of confusion is to be approached by considering the perception of the average consumer who is aware of both (a) low price restaurants trading under the Trade Mark and (b) WLE's takeaway using the "China Tang" trading name.(14)
In light of these conclusions, Hacon held:
because of the aural identicality of the Trade Mark and the sign, the close visual similarity between them and the close similarity between WLE's services and the restaurant services of the Trade Mark specification, in particular the services of low cost restaurants which typically offer takeaway services, I take the view that there is a likelihood of confusion.(15)
Accordingly, the claim for trademark infringement under section 10(2) succeeded.
Unfair advantage and detriment
Hacon was quick to dismiss the claim under section 10(3) of the TMA. To succeed, the claimants had to show that:
- the trademark had a reputation in the United Kingdom;
- there was a link between the trademark and WLE's sign in the mind of the average consumer;
- use of the sign took unfair advantage of, or was detrimental to, the distinctive character or the repute of the trademark; and
- such taking advantage or detriment was without due cause.
On reputation, Hacon took the view that the evidence filed by the claimants did not go far enough to show that the trademark was known by a significant part of the relevant UK public. The claimant's share of the UK restaurant business was "tiny": just a single restaurant had operated under the trademark (and then only for four years before WLE began trading), and the sums spent on advertising were "very small".(16) The finding on likelihood of confusion established that there was a link in the mind of the average consumer between the trademark and WLE's sign, but there was no evidence of unfair advantage or detriment. On the former, Hacon was not prepared to accept the claimant's "assertion"(17) that WLE's takeaway traded off the back of the fame, exclusivity and prestige of the claimants' restaurant. This erroneously implied that where a claimant has a business upmarket from that of the defendant, unfair advantage must inevitably follow. Hacon said that "some reason must be given by a claimant in support of the suggestion that the reputation of the trade mark is being exploited".(18) No such reasons had been given in this case.
On the latter point of detriment, the claimants argued that customers of their restaurant would get the impression from WLE's business that it was operating a franchise of high street takeaways. Hacon held that this was "mere supposition".(19) Proof of detriment required proof of change (or serious likelihood of change) in the economic behaviour of the average consumer of the services, but the claimants had provided no analysis or evidence of this.
Honest concurrent use
The defendants raised the defence of honest concurrent use to the finding of infringement under section 10(2). This defence applies where two separate entities have co-existed for a long period, honestly using the same or closely similar names, such that the inevitable confusion that arises may have to be tolerated. Hacon approved Arnold J's checklist of factors for assessing honesty in the context of this defence, as set out in the case of Samuel Smith Old Brewery,(20) but confirmed that an additional factor should also be considered in this assessment.
Hacon observed that, in cross-examination, Gu had admitted that when he chose the name for his business, neither he nor anyone else had carried out a trademark search for "China Tang" or an internet search for restaurants of that name. Hacon's view was that this was a serious omission, and he held that failure to carry out searches should be another factor to be weighed in the balance in the assessment of honesty. He said:
I have sympathy for Mr Gu. But in the modern climate of easy trade mark and internet searches, I think that if a party starts to use a trading name without appropriate advice and simple searches, such use will not have been honest concurrent use without some reason why it should be taken to have been so. There was no such reason in the present case.(21)
Hacon emphasised that the requirement to carry out clearance searches applied to all businesses of all sizes, saying:
I can see no principled reason for a cut-off related to the size of the enterprise below which such a failure remains in accordance with honest practices. Setting up even the smallest business is likely to require competent legal advice on a variety of matters and that should include the trading name. A public register of other parties' rights is there to be consulted, in part so that those rights may be respected.(22)
Accordingly, the defence of honest concurrent use failed.
Director liability
The claimants alleged that Gu was jointly liable with WLE for trademark infringement because he had at all times been the sole director and shareholder of WLE and the owner of the freehold in WLE's business premises. From this, the claimants inferred that Gu had at all material times been the controlling mind and will of WLE.
Hacon referred to his own comments in Grenade(23) in which he had observed that where an individual alleged to be jointly liable is the sole director, sole shareholder and acknowledged to be a "one-person" company, an evidential burden is on that individual to show why the acts of company complained of were not initiated and controlled by them. He held that Gu had such an evidential burden, but had not provided any evidence on this point. Accordingly, he held that Gu was jointly liable with WLE for the acts of infringement of the trademark.
The following points can be taken from this ruling:
- Perhaps first and foremost, clearance searches continue to be essential before a business begins to trade (including keeping records of such searches carried out).
- Second, allegations of infringement under section 10(3) must be substantiated with solid evidence around reputation, unfair advantage and detriment. This includes recognising that there is a difference between publicity of a high-end celebrity venue potentially rendering goods or services "high profile" and such goods and services having generated reputation among average consumers for the goods and services as registered that would be taken advantage of by use of the later mark.
- Third, revocation for non-use is a useful strategic counterclaim, but parties should remember the judicial preference for a fair specification rather than a blue pencil approach, and consider the specification of goods and services as a whole when assessing whether the counterclaim is likely to be successful.
- Finally, absence of actual confusion does not preclude a finding of likelihood of confusion under section 10(2). Parties should remember that the assessment of confusion will be made around the trademark as used for the type of product or service closest to that of the alleged infringement, according to the scope of the specification.
These are all complex issues and early advice should be sought, firstly before a mark is adopted and secondly – if and when a conflict occurs – before infringement proceedings are contemplated.
For further information on this topic please contact Gill Dennis or Sarah Jeffery at Pinsent Masons by telephone (+44 20 7418 8250) or email ([email protected] or [email protected]). The Pinsent Masons website can be accessed at www.pinsentmasons.com.
Endnotes
(1) (1) GNAT and Company Limited (2) China Tang London Limited v (1) West Lake East Limited (2) Honglu Gu [2022] EWHC 319 (IPEC).
(2) See section 11A of the TMA.
(3) Stichtung BDO v BDO Unibank Inc [2013 EWHC 418 (Ch).
(4) [2022] EWHC 319 (IPEC) at paragraph 16.
(7) Stichtung BDO v BDO Unibank Inc [2013 EWHC 418 (Ch).
(9) [2022] EWHC 319 (IPEC) at paragraph 41.
(11) Compass Publishing BV v Compass Logistics Ltd [2004] EWHC 520 (Ch).
(13) [2022] EWHC 319 (IPEC) at paragraph 34.
(20) Samuel Smith Old Brewery (Tadcaster) v Lee [2011] EWCH 1879 (Ch).
(21) [2022] EWHC 319 (IPEC) at paragraph 88.
(23) Grenade (UK) Limited v Grenade Energy Limited [2016] EWHC 877 (IPEC).
