Passing off? It would take a Miracle ...

A hearty katpat goes to guest blogger Rebecca Gulbul for providing the following analysis of a fascinating decision in a passing-off action that forms part of the growing body of case law in which this Kat's favourite doctrine of 'initial interest confusion' is raised -- and then lowered again. Rebecca writes:

"Last week, Judge Hacon of the Intellectual Property Enterprise Court, England and Wales, gave judgment in Moroccanoil Israel Limited v Aldi Stores Limited [2014] EWHC 1686.

Facts

Moroccanoil (MIL) made and sold various hair products worldwide. These products have been sold in the UK since 2009. MIL's star product of is a hair oil, marketed under the name Moroccanoil and sold in a brown bottle with a blue label. In March 2012, Aldi started selling a new hair oil product called Miracle Oil. This was sold in a similarly-shaped bottle, also embellished with a blue label. MIL alleged that this amounted to passing off and commenced proceedings accordingly.

The law

Had there been passing off? Judge Hacon reiterated the principles of this cause of action before analysing whether that tort had been committed.

The Jif Lemon principles (Reckitt & Colman Products Ltd v Borden Inc [1990] 1 WLR 491) are the starting point for any passing off action. In this case, it meant showing that

i. MIL’s business of selling Moroccanoil in the UK enjoyed goodwill, both through the name of the product and its get-up (that is, the shape, colour, packaging, etc), making it recognisable by the public as a distinctive product of MIL;ii. There had been misrepresentation (whether intentional or not) by Aldi as to the source of their product; andiii. The misrepresentation had caused damage to MIL’s goodwill.

MIL alleged three types of misrepresentation. The first was that a substantial proportion of the public would take Miracle Oil to be Moroccanoil (as in Jif Lemon). The second was that, although the public might distinguish MIL’s products from those of Aldi, they would nevertheless assume a connection between the two, such as a common manufacturer (as in United Biscuits (UK) Ltd v Asda Stores Ltd [1997] RPC 513 where this was successfully pleaded). Their third argument was that the public might assume that Miracle Oil had been produced under licence from the same manufacturer as Moroccanoil.

Judge Hacon observed that there has sometimes been a misunderstanding as to whether ‘confusion’ or ‘deception’ is the test needed to establish passing off. Aldi argued that confusion wasn’t enough and that deception was required for passing off to succeed. Judge Hacon noted that the Trade Marks Act 1994, Trade Mark Directive 2008/95, its predecessor Council Directive 89/104 and Regulation 207/2009 on the Community Trade Mark all require a likelihood of confusion on the part of the public for a trade mark infringement action to succeed. Usually actions of trade mark infringement and passing off are argued together and the evidence used to establish the likelihood of confusion in trademark infringement cases has often also been used to show misrepresentation in passing off, creating uncertainty in the terminology used. He emphasised that the concepts of confusion and deception have different meanings -- but there is an overlap between the two terms. He then cited Reed Executive plc v Reed Business Information Ltd [2004] RPC 40 in which Jacob LJ explained that there was a distinction in law between an assumption on behalf of the relevant public and a wondering on their part. Judge Hacon said that, in this case, what mattered was for misrepresentation to be proved by showing whether the public would assume one of the three forms of misrepresentation, namely (i) that Miracle Oil is Moroccanoil, (ii) that it is made by the same manufacturer or (iii) that it is licensed.

The proportion of the public making this assumption must be substantial.  Interflora Inc v Marks and Spencer plc [2012] [noted by the IPKat here] established that, even if most people are not deceived, passing off can still be proved. The proportion need not therefore be more than half of the public. In this case, counsel for each party agreed that 15-20% of the public would be enough to make up a substantial amount. However, Judge Hacon pointed out that it is virtually impossible to assess how many people constitute the relevant public and therefore how many form part of the agreed percentage. Instead he suggested a different approach where the evidence relating to the assumptions should be considered, its cogency, the broad size and nature of the market and the sales channels. Then it should be determined whether it is likely that sufficient individuals will make the false assumption, hence causing damage to the goodwill of MIL.  

‘Initial interest confusion’, which was at issue in Och-Ziff management v OCH Capital [2010] EWHC 2599 (Ch) [and noted by the IPKat here], was also discussed in light of Professor Wadlow’s book The Law of Passing Off: Unfair Competition by Misrepresentation. That concept refers to a situation where a purchaser is initially misled but the misunderstanding is cleared before he makes a purchase: if a defendant successfully induces the public to do business with him by making a misrepresentation, that is enough to constitute damage, and it is irrelevant whether the misrepresentation is later rectified. In contrast, where the confusion is dispelled before it is acted upon (by making a purchase for instance), then there is no damage and no possible claim of passing off.

The court also said that there would be damage even if there was no competition between two businesses and no diversion of sales. The misrepresentation will cause damage to a business in a passing off case, if the false belief that the two businesses are associated is damaging to the goodwill or if it erodes the distinctiveness of the claimant’s name.

Addressing the similarities between Moroccanoil and Miracle Oil, the court cited Specsavers International Healthcare Ltd v Asda Stores Ltd [2012] EWCA Civ 24 [noted briefly by the IPKat here], where two different situations were distinguished: the first where a defendant has taken a conscious decision to ‘live dangerously’ (see United Biscuits) and the second where there was an intention to cause deception and deliberately seek to take benefit of another trader’s goodwill. In the first situation, the trader has appreciated the risk of confusion and has done his best to develop his product at a safe distance away. Whether it is dissimilar enough will depend on the facts of each particular case and several factors including the subjective intention of the defendant. As for the second case, it is easily recognisable as passing off.

The decision

The first limb of passing off is that the claimant enjoys goodwill in its business. This was no problem to establish, given the press attention Moroccanoil had received since coming on the market, the celebritiy endorsements it had enjoyed and the amount of money that had been spent on its marketing in the UK. Judge Hacon said that the goodwill was primarily attached to the name of the product, but acknowledged that the get-up of the product added some additional value to it.

Misrepresentation is the second element of the classic trinity. The main evidence that was produced by MIL to show misrepresentation consisted of extracts from beauty blog reviews of the two products. After analysing them, Judge Hacon concluded that these only showed that the public who became aware of Miracle Oil did not believe that it was the same as Moroccanoil or that it came from the same manufacturer. He said that at most, the blog extracts showed that the public thought that Aldi’s product was cheeky or that it infringed the copyright or design of Moroccanoil, but they were not confused about it being the same product or coming from the same manufacturer.

It appeared that Aldi had made a conscious decision to package Miracle Oil so that it was reminiscent of Moroccanoil to some real extent, in particular with the colour theme. Judge Hacon believed that Aldi succeeded in creating a product that brought MIL’s product to mind, but that this was not unlawful. Aldi’s product being cheeky or potentially infringing copyrights and design rights did not make it passing off: ‘living dangerously’ was not therefore relevant here. As for the two other forms of misrepresentation, no evidence had been submitted from which it could be inferred that there was a public belief of a common manufacturer or that Miracle Oil was produced under licence.

Further points were taken into account such as the fact that Moroccanoil is a high-end salon product, not one that the public would expect to find in Aldi. Miracle Oil costs about £4 but a bottle of Moroccanoil is worth about £30 and customers would therefore not view the product as being the same thing. Judge Hacon also pointed out that there were many differences between the get-ups of the two products, such as the striking M logo on the MIL product.

... and a young court will not learn how
to protect prestige brands against lookalikes

The court thus concluded that the evidence submitted did not show that members of the public were likely to assume that Miracle Oil and Moroccanoil were the same product, that it had the same manufacturer or that the two products were linked by a licence agreement. Judge Hacon said that even if there were any such members of the public, they would be too few in number to cause damage to MIL’s goodwill. Although Aldi tried to make the public think of Moroccanoil when they saw Miracle Oil with packaging and successfully did so, it was unlikely that purchases of Miracle Oil would have been made with a false assumption in mind. Initial interest confusion was not applicable here and there was no actionable form of misrepresentation. Since no misrepresentation could be established, there was also no damage. MIL’s claim of passing off therefore failed and the action was dismissed.

Note
There are currently invalidity proceedings before the Office for Harmonisation in the Internal Market (OHIM) for a Community trade mark owned by MIL. This case did not therefore deal with the trade mark infringement allegation as per Art.104 of Regulation 207/2009 (which deals with stays of national proceedings where validity is in issue before OHIM) and focused solely on the passing off action. Being a common law action, and thus unconstrained by statutory boundaries, passing off is a flexible action which can encompass various arguments, such as those put forward in this case. Here, get-up did not play a significant part in establishing passing off and cases succeeding on this basis are quite rare, Jif Lemon case being one of those exceptions since its packaging was so distinctive. Had the case been argued on the basis of design infringement, the decision may have been different, but in this case, the High Court’s reasoning on the elements of passing off seems logical and fair".

This Kat notes that this judgment contains a lively debate on the subject of initial interest confusion, in which the shift in position taken by Professor Wadlow between the third and fourth editions of his book, together with the citation of cases on "switch selling", takes a substantial part.  Given the facts that (i) initial interest confusion will continue to be extensively and not always accurately cited at trial in both trade mark and passing off actions until clear guidance is issued by an appellate court, and that (ii) various people to whom this Kat has unscientifically shown the respective get-ups, including the highly influential Mrs Kat, thought they were confusingly similar, this feline would not be unduly shocked if an appeal were to be lodged on the application of initial interest confusion either this time round or in the near future.

Cat oil here