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European IP Bulletin, Issue 1, April 2003 - Trade Marks

TRADEMARKS

High Court Applies ECJ Repackaging Rules

In Glaxo Group Ltd. and The Welcome Foundation Ltd. v Dowelhurst Ltd. [2003] EWHC 110(Ch), Laddie J applied the preliminary ruling of the ECJ (Case C-143/00, [2003] Ch 27, [2002] ETMR 78) on the repackaging issues raised by this case. The judge discussed the conditions on which the re-packager can use the originators trade marks on repacked pharmaceuticals, such use must be proportionate to the need to achieve market penetration, and must not lead to brand association.

Repackaging

Laddie J acknowledged that, contrary to his approach in the initial trial ([2000] EWHC Ch 134), also regarding use of proprietor's mark, the ECJ started with the presumption that every act of repackaging is deemed prejudicial to the specific subject matter of the proprietor’s trade mark rights, even if no actual harm to the goods or the mark’s origin-denoting function can be shown. Therefore, prima facie, a proprietor can oppose all acts of repackaging.

Nevertheless, this right to oppose repackaging disappears if repackaging is necessary because re-labelling alone would not enable products to gain effective access to a national market. Forbidding repackaging there would partition the internal market. The national court must decide whether re-labelling would achieve market access or whether the more intrusive step of repackaging is necessary. There is no presumption on this issue.

Where repackaging is allowed, it must not harm the legitimate interests of the trade mark owner, including the condition of the products and the reputation of the mark. Only repackaging that inflicts the minimum amount of damage to the claimant’s mark and is as unobtrusive as possible is tolerable e.g.:

• imitating the original packaging, including changes with no trade mark significance e.g. translating text into another language.
• plain boxes depicting nothing but the claimant’s trade mark.
• additional markings required by national law or ECJ jurisprudence must be allowed, but must be applied in a way that does the least damage to the trade mark proprietor’s interests e.g. the re-labeller’s name should not be more prominent than the claimant’s trade mark.
• Dowelhurst had bought pharmaceuticals labelled DEROXAT in France which were sold under the SEROXAT mark in the UK. It was acceptable for Dowelhurst to change the name to SEROXAT in its translation of the patient information leaflet because patients would not realise that the two products were the same and would be alarmed if they though they were getting a different drug to that which they had been prescribed.

Laddie J also gave examples of unacceptable repackaging that coincided with the defendants’ activities:

• "debranding," where the re-packager removes or masks the claimant’s mark, if undertaken to an extent that it reduces the claimant’s ability to build up public awareness around his mark. However, if the mark is completely removed, there is no trade mark use and hence no infringement.
• "co-branding," where the re-packager uses his own mark or get-up alongside the claimant’s in order to build up a reputation in his mark or get-up at the expense of the claimant’s goodwill in his mark.

However, these activities are permissible if they are necessary for market penetration.

The judge found that applying a sticky label to original packaging does not carry the same risk of interference with the product as repackaging. Therefore, unlike repackaging, the claimant must show that the over-stickering will cause real harm to his rights before he can prevent it.

Notice must be given in both repackaging and re-labelling cases. However, because re-labelling does not involve the same risk to the subject matter of the mark and all the proprietor need do is examine a label applied to his own packaging, seven working days notice should be enough, compared to fifteen days for repackaging.

The claimant had assured the defendant that it would not rely on the defendant’s failure to give notice of the repackaging, so the lack of notice could not form the basis of an injunction or a claim for damages. An injunction against future failure to give notice was also refused because the notice procedure is short and easy, so there was no reason to believe the defendant would not give notice in the future.

The defendant had repackaged the claimant's products in an impermissible fashion, entitling the claimants to an injunction restraining infringement. However, they were only entitled to delivery up of the infringing packaging and not of the goods themselves, as they were obtained legitimately abroad, meaning that the claimant had already benefited from the payment of the sale price abroad by the defendant. The defendant was also ordered to provide the claimant with information enabling them to decide whether to opt for an account of profits.

Laddie J admitted defeat on the need for actual harm to the trade mark owner before repackaging at least can be prevented, even though he thought the ECJ’s approach "creates an irrebuttable legal fiction unconnected with the facts." The courts can no longer take a liberal approach to repackaging by arguing that the repackaging does not harm the trade mark. However, they may still take a wide view of when it is "necessary" to repackage in order to penetrate import markets. The ECJ provided some guidance on the meaning of necessity (paras. 46-54) but it remains to be seen how national courts will apply this. Additionally, although the judge said repackaging without using the original mark is not trade mark infringement, it may be reverse passing off, a possibility acknowledged in the referring judgment ([2000] FSR 529).

Summary Judgment Refused in Repackaging Case Glaxo Group Ltd & The Welcome Foundation Ltd v Europharm of Worthing Ltd & Eurochem Ltd [2003] EWHC 116 (Ch)

Following the Glaxo v Dowelhurst case (above, "Dowelhurst"), the defendants applied for summary judgment under CPR rule 24.2. The defendants argued that, because the claimants had lost on the necessity to repackage issue in Dowelhurst, they had no reasonable prospect of success here and there was no compelling reason for the case to be tried. Laddie J in the High Court disagreed. The necessity for repacking will be examined on a case by case basis. The judge made some comments on the procedure adopted by the defendant in its application.

The defendants only gave the claimants three days notice of their application, rather than the fourteen days the CPR requires. Their arguments that the claimant would not be prejudiced by the short notice and that costs would be saved because the application would be heard while the claimants and their counsel were already in court for the Dowelhurst trial were rejected. The defendants had ignored the CPR in not giving a satisfactory explanation for their failure to give notice on the correct date. The fact that a trial at the present moment was viable did not make up for the defendants’ previous omission.

Was there no chance of success for the claimant after Dowelhurst?

Laddie J held that, despite the finding that repackaging was necessary in Dowelhurst, the claimants should be given a chance to show that repackaging was unnecessary in this situation. Necessity is a question of fact. Before a different judge and with different evidence, the claimants may be able to show repackaging was unnecessary. There was no issue estoppel because the parties here were different to those in Dowelhurst. If the claimants’ decision to go ahead with the argument on necessity was ultimately found to be unreasonable, this could be reflected in any order for costs, rather than preventing the argument from being made at all. Also, neither party would be significantly adversely affected by the cost of going to trial.

Laddie J’s unwillingness to assume necessity in a summary trial, and his holding that it is an issue of fact reflects his finding in Dowelhurst that there is no legal presumption about necessity. As noted above, factual findings of necessity could control when repackaging is permissible.

Court of Appeal Dismisses Appeal and Cross Appeal in the Registered Trade Mark Case of West (trading as Eastenders) v Fuller Smith & Turner plc [2003] EWHC Civ 48; 2003 WL 116973

The Court of Appeal dismissed the appeal and cross appeal by the parties and affirmed the earlier decision in David West (t/a Eastenders) v Fuller Smith & Turner PLC, [2002] EWHC 122; [2002] FSR 55; 2002 WL 346991 (Ch D), which dismissed West’s challenge to the validity of Fuller’s trade mark ESB (holding it was not devoid of distinctive character) and ordered a partial revocation of the mark in respect of all goods except bitter beers, the latter being the only goods for which the mark had been used. This case has a bearing on partial revocation for non-use, and its effect.

The appeal put forward by West argued that the judge had been incorrect in his application of section 3(1) of the Trade Marks Act 1994 on the issues of validity of the mark. This was rejected and it was held that Fuller’s ESB mark in the eyes of the relevant public acted as a trade mark applied to Fuller’s Products and was therefore not ‘devoid of any distinctive character. The argument that the mark was purely descriptive failed because it was held that ‘descriptiveness and distinctiveness in fact are not mutually exclusive’. Fuller’s mark was found to have both descriptive qualities and the additionally required distinctive character. West also failed to establish that the initials were a sign or were generic in language or established practices of the trade.

The cross-appeal by Fuller contented the extent of the revocation of the mark for non-use. Fuller claimed that bitter was only a segment of the market and there were no specific criteria to distinguish between types of beer. The mark was registered in respect of ‘beer’, however it was noted that ‘Beer drinkers in the main drink either lager or bitter, but not both. There is little overlap of trade marks between those two classes.’ Consequently the relevant customers are accustomed to seeing lager and bitter bearing different marks. As such, non-use of the mark was held to have occurred and the partial revocation was sustained.

A New-look Community Trade Mark System?

The European Commission has recently presented a proposal for a Regulation which aims to modify existing procedures for the granting of Community Trade Marks (CTMs) by the Office for Harmonisation in the Internal Market (OHIM). The Regulation would abolish the system of searches, amend the regime for professional representation before the OHIM and expand the current system to include means by which the Boards of Appeal can further improve the way they function. The proposal also includes the abolition of the nationality and reciprocity conditions for allowing an application of a CTM thereby removing the nationality and residential restrictions on access to the system.

The two main changes the new Regulation would introduce to the existing CTM Regulation 40/94/EC (CTMR) are the removal of the search system (deleting Article 39) and the amendment of Article 89(2)(c) to bring it in line with the principles of freedom of establishment and freedom to provide services under the EC Treaty. The proposed amendment is based on a report submitted by the Commission after launching a public consultation.

The Commission reached the conclusion that the system of searches established by Article 39 CTMR is a costly one, especially to SMEs, which unnecessarily prolongs the registration procedure of CTMs and imposes an administrative burden on national offices, OHIM and applicants, without providing applicants with a valuable and cost-effective tool to help them monitor effectively the possible existence of prior conflicting rights. It is estimated that the delay of about six months between the date of filing a CTM and the publication of the application can be reduced to about a month and a half if the search system is abolished.

On the issue of professional representation before OHIM, Article 89 CTMR allows for legal or other qualified persons of applicants to register or oppose trade marks. The Regulation required the Commission to examine the system at the end of a period of three years from the date on which OHIM began to accept the filing of applications. Hence, in June 1999 the Commission launched a consultation which, in its view, revealed the need for amendment. It considered some aspects of the current professional representation requirement to be contrary to the freedom of establishment (Articles 43 et seq. of the EC Treaty) and the freedom to provide services (Articles 49 et seq. of the EC Treaty) and aims to bring them into line. This would mean that once professional representatives are registered to appear before OHIM, regardless of where they are domiciled or conduct their business in the EU, they would retain their registration. Also, as a general recommendation, the Commission would ask OHIM to provide Member States, and candidate countries, with the necessary advice and guidance to ensure that national representatives all over the European Union have equal access to the information and know-how on the CTM system of protection.

Finally, the Commission would like to propose to the Non Governmental Organisations with which OHIM co-operates to study the need to adopt a voluntary, non-binding code of conduct for professional representatives before OHIM. The Commission and OHIM would provide assistance in drawing up such measures if necessary.

To conclude, on the issue of searches, instead of completely abolishing the search system, the Commission should consider making it optional, as a number of respondents to the Commission’s consultation paper suggested. This option can then be abolished after a trial period if the Commission still comes to the conclusions mentioned in paragraph three above.

Spain’s Cidesport Loses to Nike in Chinese Trade Mark Case

A trade mark is infringed where it is applied, even if all of the goods are for export to a country where the impersonation of the goods bearing the mark is not an infringement. The trade mark NIKE is split, with different owners in Spain and China, the owner of the latter being the well-known US company. It succeeded in obtaining an injunction to prevent the Chinese manufacturer applying the NIKE trade mark in China for goods destined for the Spanish market.

In one of the most significant international intellectual property cases in China since it joined the WTO in 2001, a local court has ruled that US sports clothes company Nike can prevent Cidesport from manufacturing in and exporting from China sportswear bearing the Nike name.

The dispute dates back to 1991 when Spanish sportswear company Cidesport, which has held the Spanish trade mark Nike since 1932 and has been Nike’s rival in trade mark cases for over a decade, applied to cancel Nike’s NIKE trade mark registration in Spain. The Spanish Supreme Court found in Cidesport’s favour in 1999, and Nike has been prohibited from using its trade name on clothing in Spain since then.

Cidesport proceeded to apply for trade mark registration of the name Nike in various jurisdictions and, due to the "first in time" standard adopted by most countries, its activities have posed a threat to Nike, the giant in the global sport clothing market.

Nike, the proprietor of the registered Nike trade mark in China, sued Cidesport for trade mark infringement in 2000. It claimed that Cidesport exported raw materials to mainland China and authorised a local clothing manufacturer to process men’s skiing coats using the name Nike, before another local trading company exported the finished products back to Spain for sale.

CidesPORT 24,148,31,20,132,94

This case concerns the BUD trade mark, which was split between Czech and US owners, neither of whom was able to oust the other. The judgment deals with what constitutes genuine use of a trade mark, for the purpose of revocation for non-use.

The protracted legal feud over the right to use the Bud trade mark in the UK has come to a conclusion, albeit an unsatisfactory one for both parties. US firm Anheuser-Busch has failed in its attempt to have Czech brewer Budvar’s Bud trade mark revoked and a House of Lords ruling has denied it from taking further action, effectively bringing the ownership issue to a stalemate.

After failing in an earlier passing off action and unsuccessfully opposing Budvar’s initial application, Anheuser-Busch applied for revocation of Budvar’s Bud registration on the grounds of non-use over a period of five years under section 46 of the Trade Marks Act 1994.

Budvar was victorious in 2002 (EWCA Civ 1534) when it was held that the use of Bud in block capitals on packaging did constitute ‘genuine use’ of the trade mark. The US brewer’s last-ditch appeal was scuppered by the House of Lords’ ruling on 17 February 2003.

The bad blood between these two breweries dates back to the nineteenth century when an American brewer of German origin chose the name ‘Budweiser’ to benefit from the popularity and renown of German beer. However, the Czech town of Budvar claim to have brewed ‘Budweiser’ beer since the fourteenth century and, as Budvar was formerly known by its German name ‘Budweis’, ‘Budweiser bier’ is a designation of origin.

Trade mark laws were in a fledgling stage at the end of the nineteenth century, and, in 1876, Anheuser-Busch was first off the mark to register the name ‘Budweiser’ in the US. The US and Czech breweries initially agreed to divide the market geographically, but this was a temporary solution.

Budvar’s claim improved significantly when it registered Budweiser as an appellation of origin for beer in accordance with the Lisbon Agreement in 1967. This afforded trump card protection to the Czechs, as many countries accord appellations of origin precedence over trade marks.

The fall of Communism in Czechoslovakia in 1989 allowed Budvar to enter new markets and set in motion legal disputes all over the world regarding the exclusive rights to use Budweiser and Bud. These conflicts demonstrate the uncertain relationship between trade marks and geographical indications and those between reputation and tradition.

The UK’s situation is unique in this respect, resulting from the island’s traditionally strong ties with both the US and Continental Europe. Anheuser-Busch and Budvar have independently acquired goodwill in their products, and their honest concurrent use allowed them both to register Budweiser and Bud for the same class of goods. This conflict has now reached a deadlock and the two brewers must reluctantly learn to coexist. This battle may be over, but, with over forty similar lawsuits proceeding around the world, the war goes on.

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