The London High Court ruling contained guidance for trademark owners regarding the nature and quality of evidence they might need to submit to prove their trademark reputation. He also provided lessons for potential defendants in trademark cases, with the judge confirming that if a business does not conduct clearance searches to verify that the intended name for the business is not the same or similar to an existing trademark in their industry, they may not have access to certain defenses against trademark infringement.
Furthermore, the judgment highlighted the risk of personal liability of individual entrepreneurs in infringement proceedings.
According to Gill Dennis and Sarah Jeffery of Pinsent Masons, the judge’s ruling underscores how failure to conduct trademark clearance searches prior to negotiation is likely to undermine any “honest competing use” defenses a company might wish to present against allegations of trademark infringement.
His Honor Mr Justice Hacon raised the issue of searches in a case involving an award-winning upscale London restaurant and takeaway restaurant in Barrow-in-Furness, in the North West of England.
In court, Cantonese restaurant ‘China Tang’, which operates out of the Dorchester Hotel in London’s Park Lane, successfully claimed that Barrow-in-Furness takeaway restaurant ‘China Tang’ was liable for breaching the mark which he holds in the name under section 10(2) of the Trade Marks Act 1994. The trademark owner convinced the judge that the takeaway company was using a mark identical to his own for similar services for which his mark was registered, and that there was a likelihood of confusion in the eyes of the average consumer between the two brands.
The owner of the take-out business had raised a trademark infringement defense of ‘honest competitive use’. This defense essentially provides for cases where a company can demonstrate that its use of the same mark is fair, does not unfairly compete with the interests of the owner of the mark or does not infringe on the notoriety of its mark. , nor does it negatively affect the ability of the average consumer to discern who owns the mark.
In his ruling, His Honor Justice Hacon suggested that failure to conduct clearance searches will often undermine an honest competing use defense – regardless of the size of the business handling that defense. It ruled that the defense could not be invoked by takeout company China Tang and its owner, Honglu Gu, in the case.
The judge said, “Mr. Gu didn’t even do a basic Internet search for ‘China Tang’. If he had, he probably would have found the claimants website and/or reviews and comments about it. Honest practices would then have required that Mr. Gu obtain a legal opinion on the intended trade name for his business. I have sympathy for Mr. Gu. But in the modern climate of easy marks and internet searches, I believe that if a party starts using a trade name without proper guidance and simple research, such use will not have been honest concurrent use without a reason for which it should be brought to were so. There was no such reason in this case.
In arguing against allegations that it was responsible for trademark infringement, the China Tang takeaway in Barrow also pointed to the fact that its business operates in a different market segment than the China Tang in Dorchester. However, the judge said this was irrelevant to the question of whether there was a likelihood of confusion in this case.
Gill Dennis said: “The judge endorsed case law from 2004 which confirms that the full scope of trademark rights under the specification of the goods or services for which the trademark has been registered must be taken into account when assessment of the likelihood of confusion. In this case, that meant the China Tang of the Dorchester was considered entitled to assert its trademark rights on low-cost restaurants, not just the high end of the market, and the judge said the average consumer – whose impression of the market is relevant to the issue of likelihood of confusion – would know both ends of the market.
“This discovery is a warning to other companies who may think that operating in a different segment of the same market will protect them from trademark infringement claims,” she said.
While the owners of the “China Tang” trademark were successful in their likelihood of confusion claim, they were unsuccessful with other aspects of their case against Barrow Takeaway, including its trademark infringement claim under of section 10(3) of the Trade Marks Act 1994.
Sarah Jeffery said the judge’s findings on this aspect of the case provide further lessons for brand owners.
Under section 10(3) of the Trade Marks Act 1994, businesses are liable for infringement if the proprietor of the mark can show that his mark has a reputation in the UK, that he there was a link between the mark and the alleged infringer’s sign in the mind of the average consumer, and that the use of the sign by the alleged infringer takes unfair advantage of or damages the distinctive character or reputation of the mark, and that this use is without just cause.
In this case, the judge was not satisfied with the evidence provided to support claims about the brand’s reputation in the UK. He said China Tang at the Dorchester had failed to provide sufficient evidence to show that his name was “known to a significant part of the British public concerned with catering services”.
“The ruling shows that reputational claims in a mark must be well substantiated and underscores the importance of good record keeping in this regard,” Jeffery said. “Press clippings and copies of promotional materials used can help demonstrate a brand’s reputation, but brand owners will want to go further to demonstrate the level of consumer engagement with media coverage and marketing campaigns. – if possible in the specific geographic area of the alleged infringer operates, precisely.
The ruling also highlights a particular risk that sole traders face in trademark litigation after His Honor Justice Hacon found Honglu Gu jointly liable with his company for trademark infringement.
Jeffery said: “In this case, China Tang of the Dorchester successfully argued that Mr. Gu was jointly liable with his company for trademark infringement on the grounds that he was ‘the controlling mind and will’ of the society. The onus was on Mr. Gu to demonstrate otherwise, which the judge found he was unable to do.
“The facts of this case differ from another recent case where a brand owner was censured by the High Court and ordered to pay the cost of a rival company director’s legal fees after the court found no motive or evidence to suggest that the man – who was one of several directors of the allegedly offending company – was a controlling mind in the company,” Dennis added.