A titanic appeal sunk by an ice cube; miniscule use supports an EU registration and UK common law rights

Kat friend Ian Gill reports on how miniscule trademark use may be enough to support a passing off claim and maintain a EU trademark registration.

Don’t be fooled: decision O/050/21 is not just another unsuccessful appeal to the UK Appointed Person (approximately 85% of such appeals are unsuccessful). Underlying the decision of the UK IPO O/315/20 are miniscule levels of use that can support a UK passing off claim and be used to maintain an EU trade mark registration, which should cause concern for anyone trying to clear a mark in the UK.

Also, while in most cases where both registered and unregistered rights are pleaded, the decision on unregistered rights follows the decision on registered right, this decision did not follow that pattern.

Belfast Gin Distillery Limited (Belfast Gin) registered the mark ‘Titanic Gin’ in relation to spirits and liquors and the service of distillery services. Danny Boy Label LLP (Danny Boy) applied to invalidate this registration based on a prior European registration of the mark TITANIC for ‘alcoholic beverages (except beer)’ and that the use of the mark would be contrary to the law of passing off. Belfast Gin put Danny Boy to proof of use, as the earlier registration was more than five years old at the date of the claim.

It was not disputed that Danny Boy made genuine use if its mark, at least in relation to whisky, until 2011. At that point, the distillery supplying Danny Boy closed and Danny Boy had tried but failed to find an alternative supplier.

The relevant use period was October 2013 to October 2018. Evidence was provided of £15,000 of sales of existing stock, mostly in Belfast, a city in Northern Ireland. The last sale was in February 2017, but there was peripheral evidence of continued interest in the mark, such as the commissioning of artwork for new labels.

Use, or non-use?

Merken BV v Hagelkruis Beheer BV, Case C-149/11 indicates the use needed to support an EU registration, as follows:

a) Territorial scope of use is one of the relevant factors;

b) It cannot be ruled out that use in a single member state can support an EU registration;

c) Use needs to be sufficient or create or maintain a market share;

d) No de minimus level of use can be defined.

Other factors to consider include the scale and frequency of use, the nature of use, and the nature of the goods and the market for them. The Hearing Officer referred to Jumpman BL O/222/16, which found that sales of 55,000 pairs of training shoes through one shop in Bulgaria was insufficient to show genuine use. In that context, the Hearing Officer’s decision that £15k of sales, mostly in Belfast, was insufficient, was unsurprising. This aspect of the Hearing Officer’s decision was not appealed.

However, the result based on unregistered rights was different. It was accepted that highly localised sales can give rise to a protectable goodwill. Moreover, the fact that a business ceases trading does not mean that any goodwill associated with that business automatically dissipates. The question of whether there is protectable residual goodwill in such a situation is a matter of fact and degree.

Ms Emma Himsworth QC, sitting as the Appointed Person, declined to interfere with the Hearing Officer’s finding of fact that the use was sufficient to establish protectable goodwill. If that was the case, however, it is not unfair to state that such level of use must have been on the cusp of acceptability. Indeed, it was noted that such use was “scant”, being of a quality that would not register on the index of market share and concentrated, as it was, in Belfast.

But in the EU IPO ...

Moreover, after the UK decision at first instance the EU IPO ruled on the validity of the EU registration based on essentially the same evidence in a case brought by another entity, Horvath's Spezereyen Kontor und Lebensmittelproduktion GmbH. At first instance, the use was found by the EU IPO to be insufficient, but on appeal (R 109/2020-1) that ruling was overturned.

The Board of Appeal in that case felt it was important that the mark was used for Irish whisky. Although Ireland is a major producer of whisky, according to the Board of Appeal, this is not the case for Northern Ireland. It was also held that the market for Irish whisky was smaller than the market for Scotch whisky.

As a result, the Board of Appeal declined to follow the decision at first instance that the extent of use would qualify merely as “token” use. This is so, despite that there is no indication that the Board of Appeal had evidence before it of the size of the Irish whisky market, or that this was a distinct market from Scotch whisky.

The Board of Appeal also noted the importance of taking into account evidence of activity, rather than actual sales, such as a “quite good rating” on a Dutch website. The evidence from the proprietor was that it had been trying, since the loss of their supplier in 2011, to maintain a market share.

This was found to be ‘convincing’ and, in combination with the sale of old stock, was sufficient to maintain the existing market share created prior to 2011. (Recall that the Appointed Person took the view that the level of sales would not register on the index of market share.) The Board of Appeal even went on to state the evidence of lower sales might have been sufficient. Against this backdrop, the registration was cut back from ‘alcoholic beverages (except beer)’ to ‘whisky’, but it was not cancelled.

Comment

The different findings made by the UK IPO relating to registered rights and unregistered rights, respectively, are primarily due to the fact that the registered right was an EU, not a UK right. Different considerations applied when looking at the validity of the EU registration versus the local UK right of passing off.

Once it is accepted in the circumstances that the use is not a sham merely to maintain the registration, then it seems that almost any level of use, however small, might be sufficient. In this case, there had been no sales for 16 months and the overall use was miniscule in the context of the market.

The upshot seems to be: Anyone trying to clear a mark for use in the UK or EU will need to be wary as existing right holders might successfully rely on levels of use that are miniscule in the context of the market.

The actual sales of just £15,000 were sufficient in the context of a European whisky market valued at approximately £15,000,000,000 p.a. This level of use equates to a market share of 0.0000001%. Based on the size of an average iceberg, is roughly the equivalent of the Titanic being sunk by an ice cube.

The picture on the right is in the public domain.

The picture the left is by Darren Hester and is licensed under the Creative Commons Attribution-Share Alike 2.5 Generic license.