Oatly AB – Swedish maker of the well-known oat-based drink, Oatly – has been selling oat-based milk substitutes since the 1990s, which have been branded Oatly since around 2001. The company sells its Oatly range in the UK Kingdom through its subsidiary, Oatly UK Limited (the two claimants in this case – collectively “Oatly”). Oatly has enjoyed great success in the UK market in recent years, particularly with its market-leading Barista Edition (which achieved sales of over £38m in the year to end February 2021). The brand is well known for its distinctive and fun packaging.
The defendant, Glebe Farm Foods, is a family farming business based in Cambridgeshire, which has been growing oats since 2008. They specialize in the production of certified 100% gluten-free oats (currently the only UK farm to do so) and prides itself on the purity of its oats. Glebe Farm Foods launched an oat drink in January 2019. Originally called simply Oat Drink, it was renamed PUREOATY (a play on the word “purity”) a year later, with updated product packaging.
Following this name change in early 2020, Oatly sued Glebe Farm Foods in IPEC claiming infringement of five of its trademarks under Sections 10(2) (likelihood of confusion) and 10(3 ) (damage to distinctiveness or goodwill, or unfair advantage) of the Trade Marks and Deception Act 1994. Oatly’s claim was based on its word marks for OATLY and OAT-LY!, and two device marks: the blue OAT-LY! carton mark; and the gray OAT-LY carton mark.
Oatly’s claim was ultimately dismissed by the judge, Mr Nicholas Caddick QC in its entirety.
Risk of confusion
The judge assessed whether PUREOATY was likely to be confused with each of the marks relied on by Oatly, but since Oatly’s strongest argument was whether the sign PUREOATY (whether used as a word or as a depicted on the carton) infringed both word marks OATLY, the judge spent most of his time on this assessment. The Oatly case ran into major hurdles, but a key difficulty was that the only similarity between the sign and the marks was the letters OAT, which are descriptive and therefore have no meaning in relation to commercial origin. of the products in question. This posed a problem for Oatly as the remaining elements of the respective sign and trademarks are very different – PURE and LY. Furthermore, as Mr Daniel Alexander QC helpfully explained in his judgment in Planetart LLC v Photobox ([EWHC] 713):
“consumers are less likely to think that two descriptive marks refer to businesses that are related to each other because there is a credible and dominant alternative explanation for the similarity of the marks that has nothing to do with their designation of a common commercial source, namely that the similarity is attributable to their descriptive character.
There is no hard and fast rule in UK case law that the use of a descriptive term precludes finding confusion, as this also depends on the distinctiveness and visual impact of the other elements of the mark(s) in question. question and each case must be judged on its own facts. However, such a case is probably more difficult to establish – the existence of the descriptive term goes against the existence of a likelihood of confusion. Nor was Oatly’s case helped by the fact that there was no evidence of actual market confusion to counter this.
The fact that the PUREOATY carton prominently displays the distinctive Glebe Farm Foods house logo, and therefore clearly signals the origin of the goods to the consumer, also weighed against Oatly.
The judge found no likelihood of confusion between the sign PUREOATY and its use in the context of the carton, and any of Oatly’s trademarks. The deceptive marketing claim also failed on the same reasoning.
Oatly Marks Wound
Oatly claimed all three types of infringement of its trademarks under Section 10(3), namely:
- impairment of the distinctive character of their marks (dilution);
- damage to the reputation of their brands (tarnishing); and
- unfair advantage of the distinctive character or reputation of their marks.
There was no evidence of tarnishing so little time was spent on it in the judgment, but the other two injury claims also failed.
To get its claims of harm off the ground, Oatly had to establish (among other requirements) that use of the PUREOATY sign would create a connection in the mind of the average consumer with its marks. A link can be established even if no likelihood of confusion is found. Oatly had some helpful evidence here, in the form of PureOaty product reviews, where consumers had mistakenly referred to Oatly (although they weren’t actually confused). Additionally, product comparison reviews with consumers comparing the PureOaty product with the Oatly product showed a clear link was made.
Again, the descriptive character of the common element of the sign and the parties’ marks, namely “OAT”, was a factor which undermined Oatly’s case, since in the context of a dilution request, a A brand owner has less right to complain that her brand is diluted if she has chosen a brand that has limited distinctiveness in the first place. Indeed, the judge said that if Oatly is losing sales, it would be because of the existence of a competing oatmeal beverage product in the market, not because its brands had been diminished in any way. this is through Glebe Farm Foods’ use of the PUREOATY sign. Further, Glebe Farm Foods was not taking unfair advantage of Oatly’s marks simply by using the descriptive (non-distinctive) element of those marks.
Separately, there was also a political consideration at play regarding the line to be drawn between legitimate competition on the one hand, and the exploitation of a competing brand’s reputation on the other. The judge clarified that the notion of undue advantage “is not intended to prevent a company from learning from its competitors, even to the point of adopting similarities in approach and presentation”. There is a clear distinction between a merchant who deliberately seeks to sacrifice the goodwill and reputation of another brand owner, and a merchant who makes a conscious decision to “live dangerously” (i.e. when a shopkeeper may have fully appreciated the risk of confusion and endeavored to adopt signage located at a safe distance). Also, taking note of a rival’s marketing strategy and branding, as Glebe Farm Foods did in this instance when reviewing its product’s rebranding, was considered as “an example of a business learning from a rival’s approach”, but did not constitute an intention to take advantage of the distinctiveness or reputation of Oatly’s brands. Glebe Farm Foods had a valid reason to adopt the name and brand it chose, and its actions fell on the right side of the line.
Key points to remember
- While the outcome of this case is not particularly surprising, it is a helpful reminder to trademark owners that while trademarks can be a powerful tool to protect their valuable intellectual property, trademark law cannot be used to prevent legitimate rival traders to enter the market place. Customer choice and free competition are the cornerstones of the consumer market and trademark law cannot be used as a weapon to block a competitor when there is no legal basis to do so.
- The use of descriptive terms in a product or service name to tell the busy consumer what that product or service is (i.e. it does what it says on the box) is a common practice among brands around the world. The downside is that a brand owner will have to work much harder to inform the consumer of the origin of their product/service and to enforce their rights against third parties. Best practice from a trademark law perspective is, of course, to adopt a completely unique and distinctive brand name (e.g. KODAK, often cited for cameras), but this must be balanced with practical realities. marketing a product or service in a crowded market, where the use of descriptive terms is common. In this scenario, it is strongly recommended that a brand name and logo should always be used prominently in combination with or near any descriptive material, to mitigate the risk of confusion and subsequent claims.
Oatly AB v Glebe Farm Foods Ltd  EWHC 2189 (IPEC).
This article first appeared on WTR Weekly, part of World Trade Mark Review, in December 2021.