This case review from our trade mark expert, Maria-Elena Cacace, highlights the pitfall of failing to do a thorough trade mark clearance search and then being clobbered several years down the line by a major brand owner.
On 16 February 2022, Hacon HHJ handed down judgment1 for a case heard in the IPEC on 2 December 2021. The dispute was in relation to the UK registered series mark no. UK00002415093 (the “Mark”) in the following form with word elements “CHINA TANG”:
The Mark was owned by the first claimant from 29 August 2005 and registered in class 43 in respect of “Restaurant services; cocktail lounge services; bars; cafes; catering services; snack bars; self-service restaurants; mobile catering services; cafeterias; tea houses” The Mark was licensed to the second claimant, who runs the “China Tang” restaurant at the Dorchester Hotel on Park Lane in London. The claimants alleged infringement of the Mark contrary to sections 10(2) and (3) of the Trade Marks Act 1994 (the “TMA 94”) and passing off.
The defendants operated a Chinese takeaway in Barrow-in-Furness also under the name “China Tang”. In their Defence, the defendants pleaded honest concurrent use on the basis that they had been using the name “China Tang” since 2009 and had no knowledge of the claimants' business when selected the name. They also counterclaimed for partial revocation of the Mark for non-use, insofar as it was registered for “cafes; cafeterias; and self-service restaurants”.
Trade mark infringement is assessed through the eyes of the average consumer and both counsel agreed that the average consumer is a user and/or potential user of restaurant or catering services, meaning almost every adult and child in the UK.
Hacon HHJ first dealt with the counterclaim because under s11A TMA 94, non-use can be a defence in infringement proceedings. The claimants did not argue that the Mark had been put to genuine use in relation to “cafes and cafeterias”. Instead, they relied on the approach to a “fair trade mark specification”2, saying that a fair specification would include services provided by cafes and cafeterias. Hacon HHJ agreed dismissing the counterclaim and said that the average consumer
would consider both a cafe and a cafeteria to be a type of restaurant and that deleting either would limit the scope of “restaurant services” by implication.
s10(2) TMA 94 Infringement
The dispute in relation to s10(2) was whether there was a likelihood of confusion between the Mark and the defendants' “China Tang” sign.
Some of defendants' arguments included:
- that there would be a low level of confusion because the average consumer would select their food with a high level of attention;
- that there have been no instances of confusion over the past 12 years during which both have traded; and
- that takeaway food services are not the same as the services in the Mark's specification.
The Court recognised that the well-known restaurant had little in common with the take away but the correct application of the law was to consider the notional use of the Mark across its whole specification. Hacon HHJ held that while the differences in trading styles could prevent confusion and the reputation of the restaurant was unlikely to extend to the defendants' customers, there was a likelihood of confusion because the sign and the mark were visually similar, aurally identical and the services involved were closely similar.
s10(3) TMA 94 Infringement
In relation to s10(3) infringement, the defendants alleged that the claimants failed to satisfy the four requirements, namely
- reputation of the Mark in the UK;
- a link between the Mark and the defendants' sign in the mind of the average consumer;
- that use of the sign takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the Mark; and
- that such taking advantage or detriment is without due cause.
The Court dismissed the claims on the basis that the claimants failed to establish the economic element of reputation finding that it was unlikely that the Mark was known by a significant part of the UK population concerned with restaurant services. Further, there was no evidence to suggest that the take away had taken unfair advantage of the claimants' repute in the Mark or detrimental to the Mark's distinctive character.
Honest Concurrent Use
The Court found that the defendants were not entitled to a defence of honest concurrent use because their conduct was not in accordance with honest practices. This decision was based on the defendants' failure to carry out any trade mark or internet searches to check whether the name “China Tang” was free to use before they commenced trading. Hacon HHJ said:
“Setting up even the smallest business is likely to require competent legal advice on a variety of matters and that should include the trading name. A public register of other parties' rights is there to be consulted, in part so that those rights may be respected.”
The defendants accepted that the claimants had goodwill in their business associated with their trading name, however argued that this was confined to London. Hacon HHJ referred to Caspian Pizza3, noting that goodwill can be limited geographically and found that it was unlikely to extend to the 3-mile radius of the defendants' take away business. The Court also found that during the period of the 12 years of the parties' concurrent trading of their respective businesses, there was no evidence of deception or doubt as to a connection between the two. Accordingly, misrepresentation was not established meaning there was no damage to the claimants and the claim for passing off was dismissed.
The second defendant, Mr Gu, was found to be liable for the act of infringement as a joint tortfeasor. Mr Gu was at all material times the sole director and shareholder of the first defendant and consequently, the controlling mind and will behind the acts of the company complained of. Mr Gu could not rebut the evidential burden that he did not personally select “China Tang” as the trading name of the second defendant and did not personally procure the use of that name.
The finding of trade mark infringement under s10(2) TMA means that the claimants will be entitled to remedies. The most common financial remedy for infringement of intellectual property rights is an award of damages. The claimants will be able to elect for an inquiry into damages or an account of profits, which will be determined in the subsequent quantum phase of the proceedings. Further, the defendants will be accountable for a portion of the claimants' legal costs.
Given that the Court found that there was a ‘likelihood of confusion', the defendants will also be required to undertake a complete rebrand of their trading name. A rebrand can be an expensive and potentially damaging exercise to a business. The lesson that can be learnt from this, is that problems can be avoided by carrying out trade mark clearance searches prior to the commencement of trade. Engaging an experienced IP practioner to assist in this process is advisable; to provide guidance on strategy, trading name and trade mark registration for additional protection.
The defence of honest concurrent user was always going to be an uphill task. This is a difficult defence to make out. Furthermore, as this case highlights, this defence is not available to those businesses that fail to carry out clearance searches before commencing trading under a new name.
It is also an important reminder that officers of a company can be personally liable (particularly in the field of intellectual property) if their involvement in the commission of a tort can be shown to intend, procure and share a common design that the infringement takes place. This is even more pertinent for small businesses which may only have one director and shareholder, as set out by Hacon HHJ in Grenade (UK) Limited4 because an evidential burden is raised on the individual to show that, contrary to expectation, why the acts of the company complained of were not initiated and controlled by the individual.
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1 As discussed by Pumfrey J in Decon Laboratories Ltd v Fred Baker Scientific Ltd  RPC 17
3 Caspian Pizza Ltd & Ors v Shah & Anor  EWCA Civ 1874
4 Grenade (UK) Limited v Grenade Energy Limited  EWHC 877 (IPEC)
Originally Published 08 April 2022
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.