UK: Vodkat Case (Diageo v Intercontinental Brands [2010] EWCH 17 Ch)

Last Updated: 23 March 2010
Article by Chris Robinson and Martyn Fish

As one of the world's most popular spirits, the leading vodka brands continue to enjoy vast profits and the recent interest in flavoured vodka has led to wider markets and even greater sales for companies such as Grey Goose, Smirnoff and Absolut. In 2009, the UK market for vodka alone was estimated to be worth £1.2 billion. Naturally, as with any lucrative industry, the vodka market has seen an influx of competitors vying for a share of the global profits, and supermarkets, established alcoholic beverage producers and smaller independent companies have all produced their own rival vodkas. Unsurprisingly therefore, producers of popular vodkas have been determined to protect their pole market positions and the recent case of Diageo v Intercontinental Brands [2010] EWHC 17 (Ch) has seen the sale of a vodka product that was not compliant with alcoholic drinks regulations being prevented through the law of passing off.

In Diageo v Intercontinental Brands, Mr Justice Arnold ruled in favour of the claimants (Diageo), owner of a number of world famous alcoholic brands such as Guinness, Johnnie Walker, Jose Cuervo and the international best-selling Smirnoff Vodka. Intercontinental Brands have seen great success in producing a number of drinks products to rival leaders in other sectors such as the cider and rum markets in the UK. However, in following Erven Warnink BV v J Towned & Sons (Hull) Ltd (No.1) [1979] A.C. 731, a case which helped develop the extended form of passing off in relation to a form of Dutch liqueur that was being produced by an English company, extended passing off was utilised to find that Intercontinental Brands had passed off its vodka based product, 'Vodkat' as actual vodka.

Vodkat is not a 'pure' vodka, as its 22% alcohol by volume means that it classifies for a different, lower duty class (Council Regulation No. 110/2008/EC set a minimum alcoholic strength by volume of 37.5% for vodka). Vodka is a clearly defined class of goods, which has a reputation giving rise to a protectable goodwill. With a significant amount of evidence gathered by Diageo to highlight actual confusion amongst the public, Arnold J felt that the marketing of Vodkat was "likely to erode the distinctiveness of the term vodka" and would therefore satisfy the damage element of passing-off. The argument that extended passing off was only available with regard to products perceived as being of a superior quality was rebutted, largely due to the fact that this would be contrary to the main principle that extended passing off seeks to protect goodwill. Arguments proposed by the defendants such as the fact that the name was chosen merely to indicate that the product contained vodka were rejected as the product had been aimed at the vodka market and was often mistaken to be vodka.

This will no doubt be a welcomed decision by the makers of leading drinks brands and other goods producers whose products are undermined and sales lost through companies entering their markets with similar products that do not comply with relevant regulations. Indeed, with the increasing number of bars and retailers the world over, and with many alcoholic beverage companies going from strength to strength, such actions are likely to be a more frequent occurrence.

Contact:
Chris Robinson: crobinson@hgf.com
Martyn Fish: mfish@hgf.com

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