UK: Walking The Tightrope - Honest Use Of Third Party Trade Marks

Your marketing department has requested advice from you – they want you to clear a proposed advertising campaign for the launch of a new product. The campaign seeks to use, in a descriptive sense, words which are similar to a third party's registered trade mark. You want to ensure that advertising of the new product is as effective as possible, but are aware that overstepping the line could potentially lead to liability for trade mark infringement.

Under European (and indeed UK) trade mark law, use of a third party's trade mark in a purely descriptive manner will not constitute trade mark infringement, providing that such use is in accordance with 'honest commercial practices'. But what does this mean - how far can an advertiser go and when will use of a third party's mark be deemed dishonest?

This article considers two recent cases – one in the UK¹ and one in Germany² - which provide helpful guidance as to the application of Article 6 of the Trade Marks Directive³ (the 'Directive') and what constitutes honest commercial practices.

The Directive

Relevant parts of the Directive are as follows:

Article 5:

Article 6(1) of the Directive provides that the registration of a trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade:

Hasbro v 123 Nährmittel

The Hasbro case concerned 123 Nährmittel's use of the words 'Play-Dough', in particular the strapline 'The edible play dough' and the phrase 'Play Dough Mix', to market its Yummy Dough product.

Hasbro issued proceedings against 123 Nährmittel for trade mark infringement, claiming that 123 Nährmittel's actions infringed Hasbro's registered Community trade mark PLAY-DOH under Articles 5(1)(a), 5(1)(b) and 5(2) of the Directive.

As a defence against the infringement claim, 123 Nährmittel alleged (among other things) that it only used the words 'Play Dough' in a descriptive manner and that such use therefore fell within Article 6(1)(b) of the Directive.

Infringement

In assessing whether 123 Nährmittel had infringed Hasbro's PLAY-DOH mark, Floyd J found that 'Play Dough' was not identical to PLAY-DOH as the visual differences between the two marks would not go unnoticed by the average consumer. The judge went on to say that the incorrect spelling of 'Dough' is part of what gives the PLAY-DOH mark its visual distinctiveness. Therefore, there could be no infringement under Article 5(1)(a) of the Directive.

With regard to Article 5(1)(b), Floyd J said that 'There is undoubtedly a class of consumers who will see or hear the sign THE EDIBLE PLAY DOUGH and be misled into thinking it is the product they knew under the mark PLAY-DOH.' On that basis, Floyd J decided that 123 Nährmittel's use of the phrase was likely to cause customer confusion and, subject to the 'descriptive use' defence, infringed the PLAY-DOH mark.

Floyd J also found in favour of Hasbro in deciding that 123 Nährmittel infringed under Article 5(2) of the Directive. He stated that PLAY-DOH is a very well-known brand, was instantly recognisable to a certain category of consumers and had achieved the status of a household name. On that basis, the PLAY-DOH mark enjoyed a significant reputation from which 123 Nährmittel would be able to profit. In effect 123 Nährmittel was 'misappropriating the cachet which is attached to the [Hasbro] marks.'

Accordingly, Floyd J decided that the phrase 'the edible play dough' took unfair advantage of the repute of the PLAY-DOH mark. Floyd J also held that the defendants' use was detrimental to the distinctive character of the PLAY-DOH mark because Hasbro's goodwill could suffer through association with the defendants' edible dough.

Considering Floyd J's findings above, there can be no doubt that Hasbro has indeed acquired a great deal of distinctiveness in the PLAY-DOH mark, however it seems reasonable to assume that the majority of this distinctiveness lies in the unusual spelling of 'DOH'. The defendants could use the fact that they did not adopt this misspelling as a possible ground for appeal against Floyd J's finding of infringement.

Descriptive Use Defence

Having found that 123 Nährmittel's use of the words 'Play Dough' fell within both Article 5(1)(b) and 5(2) of the Directive, Floyd then went on to consider whether 123 Nährmittel was entitled to rely on the Article 6(1)(b) descriptive use defence.

While 123 Nährmittel may have been using the phrase in a descriptive manner, the key question was whether they had acted in accordance with honest commercial practices. On this issue Floyd J referred to guidance from judgments of the Court of Justice, which were summarised by Arnold J in Hotel Cipriani SRL v Cipriani (Grosvenor Street) Ltd. The Cipriani case actually related to Article 6(1)(a) (the 'own name' defence), however the following principles are also applicable to Article 6(1)(b) (the 'descriptive use' defence):

1. The requirement to act in accordance with honest practices constitutes a duty to act fairly in relation to the legitimate interests of the trade mark proprietor;
2. An overall assessment of all the relevant circumstances should be carried out, in particular whether the defendant is unfairly competing with the proprietor of the trade mark;
3. Does use of the sign complained of give rise to consumer deception, or take unfair advantage of, or cause detriment to, the distinctive character or repute of the trade mark? If so, it is unlikely to constitute an honest practice;
4. Would a section of the relevant public think that the use of the mark in question indicates a link between the third party's goods/services and those of the trade mark proprietor? If so, should the third party have been aware of this?
5. Does the trade mark enjoy a certain reputation in the Member State in which it is registered, from which the third party might profit in marketing his goods or services?
6. A mere likelihood of confusion will not necessarily mean that that a practice is dishonest if there is a good reason why likelihood of confusion should be tolerated;
7. Should the defendant have been aware of the existence of deception? Once the defendant knows that his use is causing substantial deception or confusion, there can be no doubt that he must stop.

Floyd J added that a trader will compromise the extent to which confusion should be tolerated if it insists on adopting a particular form of words which are likely to cause deception when there are others words which will convey the same meaning.

In assessing whether 123 Nährmittel had acted in accordance with honest practices, Floyd J pointed to various factors which were relevant, namely:

• the PLAY-DOH mark enjoyed a reputation from which 123 Nährmittel would be able to profit;
• 123 Nährmittel was well aware of the PLAY-DOH mark;
• at the outset 123 Nährmittel indicated that it would market its product 'with the "Yummy-Dough" trade mark, as "edible dough" or "baking dough" as the case may be', but not as 'a pure play dough'. However, they went much further than that and actually marketed their product as a 'play dough';
• The evidence established that there was a genuine commercial need for 123 Nährmittel to be able to describe the nature of their new product in a pithy and accurate way to the purchaser. However, there was no explanation as to why 123 Nährmittel had to use the words 'play dough' as an extension of its brand name;
• 123 Nährmittel's CEO was aware that some people thought the use of 'play dough' might lead to customer confusion, yet he still decided to incorporate the words in marketing Yummy Dough;
• 123 Nährmittel was aware throughout that Hasbro objected to its use of the words 'play dough' and that its US distributor thought that 'edible play dough' was too close to the PLAY-DOH mark;
• 123 Nährmittel took no legal advice in the United Kingdom.

As a result of the above, Floyd J found that 123 Nährmittel's use of the phrase 'the edible play dough' was not in accordance with honest practices. It had not complied with the duty to act fairly in relation to Hasbro's rights and therefore was not entitled to rely on the Article 6 defence.

In coming to this conclusion, Floyd J stated that 123 Nährmittel had proceeded in their belief that 'the edible play dough' was a descriptive phrase, and that Hasbro would therefore find it impossible to stop them regardless of how the phrase was used and the perceptions of consumers. However, 123 Nährmittel had not considered whether making it 'an extension of the Yummy Dough brand name' would have different implications, in particular whether the context in which they were using it (on their packaging and within the toy trade) would lead people to think of the Hasbro product, or whether it would take unfair advantage of Hasbro's goodwill. In fact, not only were such matters not considered by 123 Nährmittel, but they ignored warnings to that effect.

Volkswagen (VW) v ATU Auto-Teile-Unger (ATU)

VW is the proprietor of the VW logo mark which is registered in respect of 'cars' and 'car repair and maintenance'. ATU owns and operates several hundred independent garages.

The case came about because ATU had used VW's logo in its advertisements for maintenance and repair services in relation to VW cars. VW issued proceedings against ATU claiming that its use of the VW logo in the advertisement constituted trade mark infringement. The first instance and appeal court both decided for VW and held that ATU's use of the VW logo in its advertisements infringed VW's rights.

On further appeal, the German Federal Supreme Court (the BGH) upheld the decisions of the lower courts. It found that ATU had used an identical mark for identical services in a manner that was not in accordance with honest commercial practices.

This comes as a slightly curious decision because it seems at odds with a previous judgment of the ECJ in the case of BMW v Deenik⁴. In that case, the ECJ decided that Deenik's use of the BMW logo in advertisements for the sale, repair and maintenance of BMW cars did not constitute trade mark infringement. The Court stated that the Directive did not give BMW the right to prohibit a garage business from using the BMW trade mark for the purpose of informing the public that it carries out repairs and maintenance of BMW cars or that it specialises in the second-hand sale of those vehicles. However, this would not be the case if the BMW mark was used in a way that may create the false impression that there is a commercial connection between the garage and BMW.

The grounds for the VW decision have not been issued yet and so the rationale for the BGH's findings, which appear to conflict with the ECJ's earlier decision in BMW v Deenik, is not clear. However the BGH's press release suggests that ATU's actions were not considered to be in accordance with honest commercial practices because their use of the VW logo mark went too far. It was not necessary for ATU to use the logo and they could have achieved the same result by using one of VW's word marks. In effect, the BGH thought that the use of VW's logo was gratuitous and they were seeking to gain an unfair advantage by using the logo rather than a word mark.

Practical Tips

As a result of the above cases, anyone advising on whether words that are similar (or identical) to a third party's registered mark can be used in a descriptive manner should bear in mind the following practical tips:

• The context of the advertisement should not give rise to any adverse impression in relation to the third party's mark.
• Where the third party's mark is registered in word and logo form, it is advisable to use the word form only.
• If any doubts are raised internally as to whether the use of a third party's mark could be infringing, you should seek independent legal advice otherwise your use may not be judged to be in accordance with honest commercial practices.
• You should ensure that there is a genuine commercial need for referring to the third party's mark.
• Are there any other alternative words that could be used to convey the same meaning?
• The advert should be fair and not misleading - consider how an average consumer would view it. Could they be confused into thinking that there is a link between your company and the third party or between the products/services of the respective parties?
• If using a third party's mark in the context of a comparative advertisement:
• • the comparison must be true and objectively verifiable;
  • only compare goods/services which are used for the same needs or intended purpose;
  • it must compare material, relevant and representative features of the goods/services, for example price;
  • the trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of the competitor should not be discredited or denigrated;
  • the advertisement must not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name.

Footnotes

1. Hasbro Inc (and others) v 123 Nahrmittel GmbH [2011] EWHC 199 (Ch)

2. Volkswagen AG v ATU Auto-Teile-Unger Handels GmbH & Co. KG (case reference: I ZR 33/10)

3. First Directive 89/104/EEC of the Council, of 21 December 1988, to Approximate the Laws of the Member States Relating to Trade Marks

4. Bayerische Motorenwerke AG (BMW) and BMW Nederland BV v Ronald Karel Deenik, Case C-63/97.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.