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No CTMs, no problem as Sofa Workshop wins passing off claim against competitor

09/07/2015
In a battle between competing furniture retailers, The Sofa Workshop Limited ("the Claimant") has succeeded in a passing off claim against Sofaworks Limited ("the Defendant"), but not before having In a battle between competing furniture retailers, The Sofa Workshop Limited ("the Claimant") has succeeded in a passing off claim against Sofaworks Limited ("the Defendant"), but not before having two of its Community Trade Mark registrations revoked for non-use and declared invalid in the process.  The full text of the decision of the Intellectual Property Enterprise Court ([2015] EWHC 1773) can be found here.

Background

The Claimant has operated a furniture retail business under the name SOFA WORKSHOP since 1986.  The business is firmly rooted in the UK and the SOFA WORKSHOP name is the subject of two separate Community Trade Marks registrations which cover a range of furniture, textile and leather products and connected retail services ("the CTMs").  The registrations have filing dates of 1 August 1996 and 11 February 2005.

The Defendant is also a UK based furniture retailer.  In December 2013, it changed its name from CSL to SOFAWORKS.  This was met with objection from the Claimant, who allege that use of SOFAWORKS infringes the CTMs and amounts to passing off.  The Defendant counterclaimed, seeking: (i) revocation of the CTMs on the basis of non-use in the European Union; and (ii) a declaration that the CTMs be ruled invalid due to the descriptive meaning of SOFA WORKSHOP.

Non-use

Hacon J found in favour of the Defendant on non-use.  Following a detailed analysis of the Court of Justice decision in Leno Merken BV v Hagelkruis Beheer BV (C-149/11), Hacon J observed that: "in order to maintain a Community mark, some evidence should be required that the mark has been used to create or maintain a share in the market for the relevant goods or services across a section of the EU extending beyond one Member State. Looked at another way, an applicant for a Community mark must be taken to intend to use it outside one Member State and has five years in which to justify his presumed intention. Otherwise he risks having to make do with a national mark by conversion and leaving the sign in question free for use elsewhere in the Community."

The Claimant filed a large amount of evidence which clearly showed use of SOFA WORKSHOP within the UK.  There was also evidence of magazine advertisements featuring the mark which had been circulated within the EU (but outside the UK) and of a single sale to a Danish hotel.

Hacon J deemed this use to fall short of the above test.  Viewed objectively, Hacon J found that the advertisements were targeted at readers in the UK, but not outside.  They featured a telephone number that was appropriate for UK customers only, and included an invitation to "pop" in to one of the Claimant's UK based shops.  The advertisements would, at best, have been taken by non-UK readers as an insight into the types of furniture products available to consumers in the UK.  Regarding the sale to a Danish hotel, there was no evidence that the purchase was made in response to marketing material received in Denmark.  Indeed, it was quite possible that the order was made while the hotel representative was in UK.  For these reasons, Hacon J found that the SOFA WORKSHOP trade mark had not been used in the five years leading up to the Defendant's counterclaim for the purpose of creating or maintaining a market share in the EU, despite having been used extensively in the UK.  The CTMs were revoked as a result.

If he was wrong to revoke the CTMs in their entirety, Hacon J was prepared to amend the specifications so that they cover only those goods and services for which use had been shown.

Invalidity

Hacon J went on to consider whether the term "SOFA WORKSHOP" is descriptive of the goods and services claimed and whether the CTMs are invalid as a result.  There was no dispute over the meaning of the two words separately: a "sofa" is an item of furniture and a "workshop" is a premises where goods are manufactured and repaired and from which they are sold.  At issue was how consumers would perceive the two words together.

The Defendant filed evidence that the term "sofa workshop" was used descriptively by others in the furniture trade, and that similar names have also been adopted by third parties (for instance "Blinds Workshop" and "Curtain Design Workshop").  In fact, there was evidence that the Claimant itself used the term "workshop" in a descriptive sense, to indicate the place in which its products are made and to highlight the level of craftsmanship that goes into making its products.

Taking these factors into account, Hacon J took the view that both of the CTMs "consist exclusively of signs which may serve in trade to designate a characteristic of the goods claimed" and are therefore invalid.

In defence, the Claimant argued that its SOFA WORKSHOP mark had acquired distinctiveness through use and that the CTMs should remain validly registered as a result, even though the mark has inherently descriptive character.  Pointing again to its evidence of use, the Claimant was able to persuade Hacon J that its mark has acquired distinctive character in the UK.  But that was not enough – Hacon J found that a mark which is descriptive to a native English speaker is liable to be descriptive in all EU member states where English is widely used, including Ireland, Malta, the Netherlands, Cyprus and the Scandinavian countries.  To succeed in its defence, the Claimant would have to show that its mark had acquired distinctiveness in all these countries.  It could not and so Hacon J dismissed the Claimant's defence.

Infringement

In case he was wrong to revoke the CTMs and declare them invalid, Hacon J considered whether use of SOFAWORKS by the Defendant infringed the Claimant's registered rights.  He found that because SOFA WORKSHOP and SOFAWORKS are similar, "a proportion of relevant actual consumers is likely to believe that the respective goods of [the Claimant] and [the Defendant] come from the same or economically-linked undertakings. My impression is that this proportion is well above de minimis but markedly below half."  It follows that this would damage the ability of the SOFA WORKSHOP mark to act as an indication of trade origin.  As a consequence, Hacon J would have found that Defendant has infringed the Claimant's CTMs, had they been validly registered and used in the EU.

Passing off

Having effectively lost its registered CTM rights, the Claimant was left with passing off as its saving grace.  This ground was given brief attention by the parties, and by Hacon J, but it turned out to be crucial.

Hacon J accepted that the Claimant had goodwill in its SOFA WORKSHOP business in England and Wales.  He previously found that the mark had acquired distinctiveness in the UK so a finding of goodwill was the logical conclusion.  On the question of misrepresentation and damage, and for the reasons given in relation to infringement, Hacon J stated that use of SOFAWORKS by the Defendant "results in a representation to a proportion of the relevant public in England and Wales that the goods and services of [the Defendant] come from a source which is the same as, or is associated in the course of trade with, [the Claimant].  That proportion is sufficient for [the Defendant's] acts to cause material damage to [the Claimant's] goodwill. It therefore constitutes a substantial proportion, that is to say enough to warrant a finding of misrepresentation on the part of the [Defendant]."  The Claimant thus succeeded on passing off.

Comment

Although one can see Hacon J's justification for revoking the CTMs, the result means that a large number of Community trade marks that are legitimately used in a single member state could become vulnerable to a revocation action.  The decision suggests that this could apply equally to a Community trade mark owned by a business who operates a single shop in a remote town, or one owned by a substantial business with enough goodwill across the UK to succeed in a passing off claim.  In an extreme case, a business whose customer base is larger than the population of several smaller EU member states, might still have its Community trade mark revoked for lack of use if that customer base is located solely in one member state.  There is a significant question mark as to whether Hacon J is correct in his interpretation of the Leno Merken case.  However, it remains to be seen whether the decision will be appealed.

From a practical perspective, whilst the trade mark owner could always convert the Community trade mark to a national right, doing so would represent a significant reduction of the geographical scope of its rights.  It also means that trade mark owners should think carefully about whether to file nationally or EU-wide when seeking protection for its mark.  If there is no immediate intention to trade beyond a single member state, the safer route may be to simply file a national application rather than a Community trade mark application that could become vulnerable once five years have passed from registration.

The assessment of evidence also serves as a reminder that trade mark owners should take care not to use their marks, or elements of them, in a descriptive sense.  This may open the mark up to challenge on the basis that it is descriptive or generic and not validly registered.

 

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