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This case review from our trademark expert, Maria-Elena Cacace, highlights the pitfall of not doing a thorough trademark clearance search and then being beaten many years later by a major trademark owner.
On February 16, 2022, Hacon HHJ issued a judgment1 for a case heard by IPEC on December 2, 2021. The dispute concerned UK registered serial mark no. UK00002415093 (the “To mark”) in the following form with the verbal elements “CHINA TANG”:
The Mark belonged to the first applicant since August 29, 2005 and was registered in class 43 with respect to “catering services; cocktail lounge services; bars; coffees; catering service; cereal bar; self-service restaurants; mobile catering services; cafeterias; tea houses“The mark has been licensed to the second plaintiff, who runs the restaurant “China Tang” at the Dorchester Hotel on Park Lane in London. The plaintiffs have alleged infringement of the mark contrary to Articles 10(2) and (3 ) of the Trade Marks Act 1994 (the “TMA 94”) and passing.
The defendants operated a Chinese restaurant in Barrow-in-Furness also under the name “China Tang”. In their defense, the defendants pleaded fair concurrent use on the grounds that they had been using the name “China Tang” since 2009 and had no knowledge of the plaintiffs’ business when choosing the name. They also requested a partial revocation of the Mark for non-use, insofar as it was registered for “coffees; cafeterias; and self-service restaurants”.
Trademark infringement is assessed from the perspective of the average consumer and both attorneys agreed that the average consumer is a user and/or potential user of restaurant or catering services, i.e. almost all adults and children in the UK.
Hacon HHJ first dealt with the counterclaim because under s11A TMA 94 non-use may be a defense in an infringement proceeding. The Claimants have not argued that the Mark had been the subject of serious use in relation to “cafes and cafeterias”. Instead, they relied on the approach of a “specifications of the fair trade mark”2, claiming that a fair specification would include services provided by cafes and cafeterias. Hacon HHJ agreed to dismiss the counterclaim and said the average consumer
would consider both a café and a cafeteria a type of restaurant and that removing either would limit the scope of “catering service” by implication.
s10(2) Violation of MTL 94
The dispute relating to Article 10(2) was whether there was a likelihood of confusion between the Mark and the sign “China Tang” of the defendants.
Some of the defendants’ arguments included:
- that there would be a low level of confusion because the average consumer would select his food with a high level of attention;
- that there have been no instances of confusion in the past 12 years in which the two have spoken; and
- that the take-out catering services are not the same as the services in the Brand’s specifications.
The Court recognized that the well-known restaurant had little in common with take-out, but the correct application of the law was to consider the fictitious use of the Mark in its entire specification. Hacon HHJ held that although the differences in business styles might prevent confusion and the restaurant’s reputation was unlikely to spread to the defendants’ customers, there was a risk of confusion because the sign and the mark were visually similar, phonetically identical and the services involved were very similar.
s10(3) Violation of MTL 94
With regard to the violation of Article 10(3), the defendants alleged that the plaintiffs failed to meet the four requirements, namely
- the reputation of the Brand in the United Kingdom;
- a connection between the Mark and the sign of the defendants in the mind of the average consumer;
- that the use of the sign unduly takes advantage of or harms the distinctive character or the reputation of the Mark; and
- that such benefit or harm is without cause.
The Court dismissed the claims on the ground that the claimants had failed to establish the economic element of reputation, concluding that the mark was unlikely to be known to a significant part of the British population concerned with the services of restoration. Moreover, there was no evidence to suggest that the removal had unduly benefited from the plaintiffs’ reputation in the Mark or harmed the distinctive character of the Mark.
Honest concurrent use
The Court held that the defendants were not entitled to an honest competing use defense because their conduct did not conform to honest usage. This decision was based on the fact that the defendants did not carry out any trademark or Internet research to verify whether the name “China Tang” was free to use before they began to market. Hacon HHJ said:
“Setting up even the smallest business will likely require competent legal advice on a variety of issues and this should include the business name. A public register of the rights of other parties is there to be consulted, in part so that these rights are respected.”
The defendants admitted that the plaintiffs had goodwill in their business associated with their trading name, but argued that this was limited to London. Hacon HHJ mentioned Caspian pizza3, noting that the goodwill may be limited geographically and concluded that it was unlikely to extend to the 3-mile radius of the defendants’ takeout business. The Court also found that during the 12-year period of concurrent business activity of the parties in their respective businesses, there was no evidence of deception or doubt as to a connection between the two. Accordingly, the misrepresentation was not established, meaning that there was no prejudice to the plaintiffs and the deceptive marketing claim was dismissed.
The second defendant, Mr. Gu, was found liable for the act of infringement as a joint tortfeasor. Mr. Gu was at all relevant times the sole director and shareholder of the first defendant and, therefore, the mind and will controlling the acts of the defendant company. Mr. Gu could not rebut the burden of proof that he did not personally choose “China Tang” as the second defendant’s trade name and did not personally obtain the use of that name.
A finding of trademark infringement under Article 10(2) of the LMT means that plaintiffs will be entitled to remedies. The most common financial remedy for infringement of intellectual property rights is an award of damages. Plaintiffs will be able to opt for a damages inquiry or a profit count, which will be determined in the subsequent quantum phase of the proceedings. In addition, defendants will be responsible for a portion of plaintiffs’ legal costs.
Given that the Court found that there was a “likelihood of confusion”, the defendants will also be required to undertake a complete overhaul of their business name. A rebranding can be a costly and potentially damaging exercise for a business. The lesson that can be learned from this is that problems can be avoided by conducting trademark clearance searches before trading begins. It is advisable to engage an experienced IP practitioner to assist you in this process; provide advice on strategy, business name and trademark registration for additional protection.
Defending the honest concurrent user was always going to be a daunting task. This is a difficult defense to understand. Further, as this case points out, this defense is not available to companies that do not conduct clearance searches before beginning to trade under a new name.
It is also an important reminder that corporate officers can be personally liable (particularly in the area of intellectual property) if it can be shown that their involvement in the commission of a crime was intended, procured and shared a common purpose that the offense takes place. This is even more relevant for small businesses which can only have one director and shareholder, as Hacon HHJ pointed out in Grenada (UK) Limited4 because a burden of proof is imposed on the individual to show that, contrary to what might be expected, why the acts of society complained of were not initiated and controlled by the individual.
#trademarklawyer #trademarklaw #brandlaw #clearancesearch #trademark #trademarkinfringement
1 As discussed by Pumfrey J in Decon Laboratories Ltd v Fred Baker Scientific Ltd  CPR 17
3 Caspian Pizza Ltd & Ors v Shah & Anor  EWCA Civil 1874
4 Grenada (UK) Limited v Grenada Energy Limited  EWHC 877 (IPEC)
Originally published on April 08, 2022
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.