Use of trade marks by a competitor

United Kingdom

In certain circumstances, a proprietor’s trade mark can be used by a third party without consent, and without liability for infringement.

Most typically such use arises in comparative advertising, when marks are used to identify the goods/services of the proprietor for the purposes of a comparison, typically explicitly or impliedly unfavourable, with a competitor’s equivalent goods/services. Two decisions in 2005 (although both only at an interim stage) gave further guidance on the interpretation of the relevant rules, as well as suggesting that the defence under section 10(6) of the Trade Marks Act 1994 may well be of much wider application than initially thought.

A fair comparison?

In O2 Limited v Hutchinson 3G UK Limited, O2 objected to a comparative advertisement which took the form of a price comparison between O2’s mobile phone prices and those of mobile operator “3” concerning pay-as-you-go tariffs. The advertisement in question began with a shot of bubbles set out in a circle which expanded to full screen together with a voice over saying “on O2 pay-as-you-go the first three minutes peak rate call each day could cost you 75p”. This was accompanied by detailed text on screen and a further voice over “or, with freepay that exact same call could cost you 15p”.

O2 objected to the price comparison (75p as opposed to 15p) as being grossly misleading and an over-simplification of any legitimate comparison. It based its claim on a mix of UK national marks and CTMs, being word marks for O2 and various device marks featuring bubbles. 3 argued that the comparison was accurate, alternatively fair, and that Section 10(6) of the Trade Marks Act 1994 applied.

Different regimes

Although there were two interim hearings before the Court, the more interesting application was before Pumfrey J. As is typical, several references were made to the last major comparative advertising case, British Airways plc v Ryanair Limited. However, an unusual aspect of the O2 case was that it concerned CTMs as well as domestic UK marks. Further, the time for compliance and implementation of the Comparative Advertising Directive, Directive 97/55 EC had passed (see S.I. 2000/914).

A key difference between the national and CTM regimes often overlooked by brand owners is that Section 10(6) of the Trade Marks Act is a “home-grown” provision of relevance only to UK marks. As far as CTMs are concerned, the relevant provision is Article 12(b) of the Community Trade Mark Regulation (use in the course of trade of indications concerning the kind, quality, intended purpose etc. provided use is made in accordance with honest practices).

“Honest” Use?

Section 10(6) may only be relied upon as
a defence to trade mark infringement if the competitor has acted in accordance with “honest practices” in the relevant market. In this regard, Pumfrey J. referred to Cable & Wireless v BT plc in 1998 which had set out a list of considerations which were largely restated in the BA v Ryanair case. In particular he emphasised that the test is objective and has to be gauged against what is reasonably to be expected by the relevant public of advertisements for the goods and services in issue, that the general public are used to the methods of advertisers, but that an advertisement which is significantly misleading is not honest. Further, the advertisement must be considered as a whole, and a minute textual examination is not appropriate.

“Take Home” message

An interesting element of O2 was that Pumfrey J. approached the various marks relied upon differently. As far the O2 word marks were concerned, the Court found that in the relevant section of the market to which the defendant directed their advertisements, on a preliminary assessment of the matter the “take home” message for consumers was true – 3 were significantly cheaper, albeit subject to restrictions. It was therefore found that there was no arguable case for infringement of the O2 mark as far as an interim injunction application was concerned.

An unfavourable comparison

However, separate considerations applied in relation to the bubbles marks. The Court commented that the use of the bubbles in the advertisement was “certainly gratuitous” and would not be indispensable to the making of any comparison. Although the image used in the advertisement was by no means identical to the registered marks, Pumfrey J. noted a “strong suspicion that the defendants had used the bubbles as a way of emphasising the unfavourable nature of the comparison”. For the purposes of an interim assessment, it was found that there was an arguable case for infringement of the bubbles marks.

The claimant’s case for an injunction failed on the balance of convenience – there was no real evidence of dishonesty, the case for confusion concerning the bubbles marks was weak and the damage caused to the claimants was on any view small. The Court was not satisfied that the disruption caused by an injunction would be proportionate to the damage caused and for that reason refused to grant interim relief.

ECJ reference declined

Subsequently O2 sought the referral of a number of questions to the ECJ on a wide range of issues, not just those related to comparative advertising. The Court declined to make the reference on the basis that a reference at the interim stage was premature, likely to be incomplete and would delay the trial, which might impact on the quality of the evidence. The threshold of the test under Article 234 of EC Treaty had not been met - a reference “must be necessary for the national Court to give judgment”.

A wider application of section 10(6)?

The High Court considered an application for an interim injunction for an entirely different type of use by a competitor in Wolters Kluwer (UK) Limited v Reed Elsevier (UK) Limited. Wolters Kluwer (UK) Limited (trading as CCH) published an online subscription-based seminar service for accountants, called “CCH Seminars”. Wolters were the proprietors of a trade mark for the words CCH in classes 9, 16, 35 and 41. Until July 2005, the content for the service was provided by a company called Online Tutors Limited. CCH then switched to an alternate supplier.

Use of mark

Reed (Lexis/Nexis) subsequently contracted Online Tutors to provide content for a competing service called “Tolley’s Seminars Online”. The dispute originally arose from the following advertisement: “Subscribers to CCH Seminars Online, the former name of the service, should call 0208 662 2000 and LexisNexis will honour their existing subscription free of charge until its expiry”.

When CCH complained, Reed issued correction notices making it clear that CCH was continuing with its own service, and that the LexisNexis service was an alternate, competing offering, not a re-branding. A subsequent advertisement made reference to the agreement with Online Tutors as “...the company behind the former version of CCH Seminars Online”, repeating the offer to existing subscribers of CCH for free access.

CCH applied for an interim injunction against LexisNexis for infringing the mark CCH under section 10(3) of the Trade Marks Act 1994. (The substantive proceedings also contained allegations of libel and malicious falsehood.) Reed accepted the use of CCH in the advertisement did prima facie infringe section 10(3), but claimed a defence under section 10(6).

A purposive construction

The application for an interim injunction was dismissed by Mann J. His judgment makes for an interesting review of the wider application of section 10(6). Mann J. noted that although the principal intention of section 10(6) was to permit comparative advertising, the wording was capable of applying to circumstances outside of comparative advertising. What mattered was the way in which LexisNexis was using the CCH mark – if the mark was being used to identify the goods and services which were those of the proprietor of the mark, then it was permitted; if it was being used to identify the goods and services of someone else, then it was not.

On the facts, and despite their clearly wider commercial purpose (to obtain the proprietor’s subscribers), Mann J concluded that LexisNexis’s use of the CCH mark was on its face permitted. If so, was the LexisNexis use honest in industrial and commercial matters? Mann J considered that CCH had failed to establish any strong or reasonable argument of dishonesty under section 10(6) – in his view LexisNexis’ use of the CCH mark was no more commercially dishonest than “proper” comparative advertising; it was not seeking to prey unfairly on CCH’s reputation, but offering an alternative service.

Use to indicate origin

The Court also considered that LexisNexis’ use of the CCH mark in its advertisements to indicate the origin of its service, by identifying Online Tutors as the provider of the material, was also not an infringement. Again, the mark was being used to describe CCH’s (former) service and was permitted by section 10(6).

In terms of the balance of convenience for the injunction, damages would be an adequate remedy for CCH (following American Cyanamid) since LexisNexis was a substantial company and any loss suffered by CCH should be possible to calculate if at trial LexisNexis was found to infringe.

Purposive, or permissive?

It is interesting to note that the decision in Wolters continues the line of authority on section 10(6) where the Courts have generally taken a very permissive approach, stating that the intention of the section is as far as possible to permit comparative advertising, rather than restrict it. This approach is therefore in line with more recent decisions such as O2 and Ryanair, and consistent with the older authorities such as RBS Advanta and Cable & Wireless. It is notable that, because of the application of section 10(6), very few brand owners have been successful in infringement actions concerning comparative advertising although it remains to be seen how the Courts will treat a similar case which deals with CTMs alone, rather than UK marks. Certainly, the minor discrepancies between the treatment of UK and CTM registrations can work both for and against brand owners in differing situations.

This article first appeared in our UK Brands Review March 2006. To view this publication, please click here to open it as a pdf in a new window.