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Tuesday, 9 February 2016

Arnold J's latest judgment flags down the iconic (but not distinctive) London black cab

In warmer times, the AmeriKat can be found on Broadway
hailing the iconic yellow cabs to take her to Bloomingdales
for some light shopping.
Outside her window this morning, the AmeriKat is watching the iconic yellow cabs of New York racing workers and tourists up and down the island.  The New York yellow cab's equally iconic cousin is the black cab of London.  Its color and shape is as familiar and iconically British as beefeaters and Big Ben and far more useful than either when the London skies are pouring with rain. But would your average Londoner hailing a taxi know (or care) if it was a TX1or a Metrocab? More importantly, is such a Londoner the "average consumer" of the taxis for the purposes of trade mark law? This was just one of the many questions dealt with by Mr Justice Arnold in The London Taxi Corporation Limited trading as the London Taxi Company v (1) Frazer-Nash Research Limited and (2) Ecotive Limited [2016] EWHC 52 (Ch). The AmeriKat thanks up and coming IP enthusiast, Jemma Trainor, for the full story:
Background: The TX models v the Metrocab  
In typical fashion, Mr Justice Arnold's decision provides a colourful and detailed history of the London cab (from 1621 to the present no less).  The important point for these purposes is that, by 2015, the licensed London taxi fleet was dominated by certain models of taxis manufactured by the claimant. These were the TX4, the TXII and the TX1. In contrast, the humble old Metrocabs manufactured by the defendants, made up only 1.7% of the London fleet.  

FNR, one of the defendants, had been trying to design a new Metrocab (without much success) since the early 2000s. By 2010 it had settled on a design vision - to produce a car which was both recognisable as a licensed London cab but distinct from the LTC cabs that were widely used in the market. The design process culminated in a new model of Metrocab which had certain distinguishing features (a large “M” on the front and sides, a panoramic glass roof affording views of the city to passengers) but was also “instantly recognisable as an iconic London Hackney Cab”. See the picture below for a comparison – the new Metrocab is on the right, with LTC’s TX4 on the left.  
LTC's TX4 (left) and Metrocab (right)
The claimant, LTC held three-dimensional trade marks for the shapes of the Fairway (an old model it stopped producing in 1997) and the TX1/TXII taxis. The Fairway trade mark was a CTM registered for motor vehicles, accessories and parts. The TX1/TXII mark was a UKTM registered for cars, the shape which was its subject was also protected as a registered design. In addition LTC claimed goodwill in these models, as well as the TX4.  
LTC argued that the defendants intended to deceive the public as to the origin of the new Metrocab by adopting a shape which closely resembled LTC taxis and that, by marketing the Metrocab, they would commit trademark infringement and passing off. The defendants counterclaimed for invalidity of LTC’s trade marks.  
Deception as to origin  
Knocking the first argument on its head, Arnold J had “no hesitation” in rejecting the allegation of fraud made against the defendants in that they had adopted a shape which closely resembled the LTC taxis in an attempt to deceive the public as to the origin of the new Metrocab. Although it was found that images of certain LTC models were used in specific, but limited, ways in the Metrocab design process, Arnold J had not been satisfied that the defendants had instructed its designers to update or face-lift LTC’s TX4 model. The design of the new Metrocab differed in many respects from the LTC taxis and the intention imputed to the defendants was “deeply implausible”.  
The average consumer 
Arnold J agreed with LTC that the reasonably well informed, reasonably observant and circumspect average consumer of taxis for the purposes of assessing validity and infringement of the marks would be taxi drivers – the persons who actually purchased the goods in question. However, he rejected its submission that members of the public would also be considered average consumers of taxis for these purposes. Whilst taxi drivers would be careful and knowledgeable purchasers of the taxis, members of the public were merely "users of the service provided by the consumer of the goods" who were likely to pay low levels of attention to the actual taxis themselves. 
Distinctive character 
The defendants argued that the CTM for the Fairway shape of LTC cab was invalid because it was devoid of inherently distinctive character. In Bongrain SA’s Trade Mark Application [2004] EWCA Civ 1690 at [26]-[28], Jacobs LJ had, interpreting various European case law including Joined Cases C-456/01P and C-457/01 P Henkel v OHIM EU:C:2004:258, rejected the idea that a “fancy” or unusual shape of goods would automatically be taken by the public as a trade mark denoting trade origin. It was not that a shape of goods could never become a trade mark, but that mere use of an unusual shape (in that case, the flower-like shape of a particular cheese) would not be considered distinctive in the trade mark sense unless it could be shown that the average consumer had come to believe that the shape indicated the product’s origin. Arnold J considered the reasoning behind this to be correct, summarising that “the fact that the shape of a product is unusual is a necessary, but not a sufficient condition for it to have inherent distinctive character.” 
Arnold J accepted that LTC’s trade marks looked different to normal cars and that they resembled a type of 1950s car.  However, neither point was sufficient to show that the average consumer would perceive the marks as anything more significant than a variation on the theme of a London taxi. Even had the marks departed significantly from the norm and customs of the sector, the average consumer would not consider them as designating the origin of the taxis. Hence, both the CTM and the UKTM were considered devoid of distinctive character. 
Had the trade marks acquired inherently distinctive character under Article 3(3) of the Trade Marks Directive? No, held Arnold J, who reviewed the CJEU guidance he had recently applied in Société des Products Nestlé SA v Cadbury UK Ltd [2016] EWHC 50 (Ch) (as digested by IPKat here), Arnold J considered that it had not been made out that, at the relevant date, a significant proportion of taxi drivers in the UK perceived the Fairway and TX1/TXII taxis as originating from LTC because of the trade marks in question. Evidence advanced, including advertisements which described the taxi as an “icon” might show that the taxis were well known, but not that their shape denoted their origination from LTC. Furthermore, even taking into account LTC’s argument that the trade marks had become distinctive to a significant proportion of consumers of taxi services (remember, who were not “average consumer”), Arnold J pointed out that these consumers had no reason to care about the trade origin of the taxis they used – they would not see their shape as a trade mark. 
Shapes which gave substantial value to the goods 
Excerpt from the UKTM
On the argument that the CTM and UKTM consisted exclusively of the shapes which gave substantial value to the goods, Arnold J first considered the UKTM for the TX1/TXII which was also a registered design. He considered the fact that the shape was protected as a registered design was a relevant, but not determinative consideration.  This point could be inferred from the reasoning of the Advocate General and the CJEU in Case C-205/13 Hauck GmbH & Co KG v Stokke A/S, which indicated that an important purpose of Article 3(1)(e)(iii) of the Trade Marks Directive was to prevent the use of indefinite trade marks protection to extend the time-limited protection of other intellectual property rights. Hauck, had concerned a trade mark for the shape of a child’s high chair (the “Tripp Trapp”) the design of which was also protected by copyright. In finding that the mark consisted of the shape that gave the product substantial value, the CJEU stated that this concept was not limited to the shape of products having only artistic or ornamental value and that it also covered products with “essential functional characteristics”. 
Bearing in mind the various assessment criteria (as considered in Paragraph 93 of Advocate General Szpunar’s Opinion in Hauck), such as the artistic value of the shape, the dissimilarity of the shape from other shapes in common use and the price of the goods, Arnold J held that the shape of the TX1 did add substantial value to the goods. Relevant factors in the analysis included the fact that the design of the TX1 was regarded as “iconic” and a “design classic” and marketed as such, and its shape was generally dissimilar to other cars at the relevant time. The CTM was not protected by a registered design, but nevertheless the same conclusion was reached in respect of it. 
Non-use of the CTM 
As if it wasn’t enough to find the marks invalid on the other two grounds, Arnold J also agreed that the CTM for the Fairway should also be revoked for non-use in accordance with Articles 15(1) and 51(1)(a) of the CTM Regulation. The Fairway model had stopped being produced in 1997 and had only been available to purchase second hand after that date. Assuming for a moment that the sale of used vehicles could constitute use of a trade mark (which in itself was a difficult question that the CJEU would have to finally resolve), LTC had not displayed genuine use of the Fairway mark.
Excerpt from the UKTM
Arnold J held that the sales of used Fairways simply amounted to recirculating goods which had already been put on the market under the CTM. The limited average price of resale did not help to create or maintain a share of the market for the Fairway cars (as noted above production of the vehicles had long since ceased) and the territorial extent of the CTM’s use had been essentially confined to the UK. Furthermore (in case there was any doubt) disposing of Fairways for scrap was did not constitute genuine use, rather it was “the antithesis” of use of a trade mark. 
On the question of whether the sale of TX1s, TXIIs and TX4s during the relevant period constituted use of the Fairway CTM in a form different in elements which did not alter its distinctive character, Arnold J held that any distinctive character attributable to the CTM derived from the totality of its appearance. The other LTC models of cars were clearly different from the Fairway (and therefore the CTM) in a number of respects.
Entertaining the possibility for a moment that the marks were valid and capable of being infringed, Arnold J found that they would not have been infringed. He noted that a visual comparison of the two taxis showed that the Metrocab was distinct from the Fairway and TX1/TXII in a number of respects. It was bigger, it bore prominent Metrocab advertising and the rear and side views of the cars were quite different. Taking into account the overall impression of the new Metrocab, it did look a London taxi but not like an LTC taxi or either of the marks. As such, the average consumer was not likely to be confused – the marks had little distinctive character and there was ultimately a low degree of similarity between the new Metrocab and the trade marks. 
Neither the CTM nor the UKTM had acquired a reputation and, even if they had, Arnold J was not satisfied that the new Metrocab would have cause detriment to their distinctive character. The average consumer would consider the Fairway, the TX1/TXII and the Metrocab to be “species of the genus London taxi” but this was not be detrimental to LTC’s marks. Arnold J also refused to accept that the defendants intended to gain unfair advantage by exploiting, or riding on the coat-tails of the trade marks. 
Passing off 
Excerpt from the UKTM
Turning to the passing off claim, which was LTC’s final attempt to put the brakes on the development of the new Metrocab, Arnold J noted that LTC’s claim to goodwill was based on abstractions which described the common features of the various models (e.g. a large and upright windscreen, a tapering bonnet, a prominent grill, etc.) rather than specific features of shape. Arnold J agreed that there was considerable force in LTC’s submission that consumers would perceive these features as indicating that the vehicle was a London taxi but, to establish goodwill, these features needed to indicate the source of the taxi model. Unsurprising, given his findings above, Arnold J held that this claim failed for “essentially the same reasons” as in relation to the marks’ lack of distinctive character. Further, there was no misrepresentation because there was no evidence that the shape of the new Metrocab would make consumers believe it came from the same source as LTC’s taxis and Arnold J had already held that the defendants had not intended to deceive the public. 
The case represents a resounding win for Metrocab’s manufacturers and a full set of flat tires for LTC. However, the one-sided nature of the result should not be equated with simplicity in either fact or law –the length of the judgment itself (just short of 300 paragraphs) speaks volumes as to number and complexity of the issues raised before the High Court in this outing. Coming swiftly after the latest Nestle v Cadbury installment (another judgment of Mr Justice Arnold’s that came out in January) this decision provides a further practical application of the CJEU’s guidance that, in establishing whether a trade mark has acquired distinctive character, it must be shown that “the relevant class of persons perceive the goods or services designated exclusively by the mark applied for, as opposed to any other mark which might also be present, as originating from a particular company” (EU:C:2015:604). As LTC will have appreciated, the case is also a further example of the uphill struggles for proprietors of three dimensional trade marks seeking to assert that consumers perceive the often unusual and commercially distinctive shapes of their products as trade marks indicating the product’s origin.

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