Out-Law Analysis 5 min. read
17 Mar 2022, 11:35 am
A recent costs ruling shows that brands should think twice before claiming directors are jointly liable with their company for the infringement of their intellectual property (IP) rights.
The costs ruling concerned a dispute over trade mark rights heard recently by the High Court in London. Its judgment in the case, involving rival property management companies Urbanbubble and Urban Evolution, shows how difficult it is for brand owners to rely on evidence purportedly showing actual confusion over who operates their brand, to demonstrate trade mark infringement. It further highlights the care trade mark owners must take when engaging with other brands to avoid inadvertently giving competitors permission to use similar trade marks.
Urbanbubble registered a UK trade mark for its name in 2015 in respect of property management. In 2020, it raised a claim of trade mark infringement against rival property management services company Urban Evolution over its rival’s name, and further claimed that Urban Evolution was responsible for passing off the services it provided as those of Urbanbubble.
To prove trade mark infringement, Urbanbubble had first to demonstrate that Urban Evolution was using either an identical or similar mark for identical or similar services for which its trade mark was registered, and that there was likelihood of confusion in the eyes of the average consumer between the two marks.
There is a high bar to pass for evidence of actual confusion to support a finding that the average consumer would likely be confused
Urbanbubble claimed there was a likelihood of confusion. Its case relied heavily on emails received from investors who had enquired whether there was a connection between Urban Evolution and Urbanbubble.
However, the High Court considered the circumstances in which the emails were sent before determining that the test for establishing likelihood of confusion had not been met.
The investors’ emails were sent after Urban Evolution replaced Urbanbubble as the property lettings manager for commercial units in a building in Liverpool in which Urbanbubble continued to act as letting agents for the residential properties in the building.
“The circumstance of [Urban Evolution] replacing [Urbanbubble] for the same role in the same building and acting on the instructions of the same property developer … increased the likelihood of confusion,” said His Honour Judge Hacon. “Assuming the similarity between trade mark and sign would have been an operative cause of the confusion, which I think is likely, the confusion would have depended also on that set of circumstances. Without those circumstances, there could probably have been no likelihood of confusion.”
HHJ Hacon held that the evidence provided by Urbanbubble to support its case of likelihood of confusion “does not establish that there was a risk that the use of the Urban Evolution sign would create a fully formed belief in the mind of the average investor consumer that there was an economic link” between the two companies. The judge said that “at most there was a risk that the average consumer would regard it as a likely possibility”, but that “that does not seem to me to satisfy the test for the likelihood of confusion”.
Evidence of actual confusion of the origins of goods or services can be very hard to come by. Rights holders that believe they have such evidence will therefore think they have a strong case for trade mark infringement.
This ruling, however, is the latest in a number of judgments handed down by the courts in England and Wales that show there is a high bar to pass for evidence of actual confusion to support a finding that the average consumer would likely be confused. It is not sufficient that someone queries whether there is an economic link between the rival brands. This case shows that the courts will consider the wider context when considering whether the average consumer – in this case, property investors – do truly believe the companies are linked.
Urbanbubble’s failure to satisfy the test for showing likelihood of confusion meant its primary claim for trade mark infringement failed, but the High Court nevertheless examined the defence to infringement that Urban Evolution had advanced in the event the court had found differently – that it had consent to use its mark.
At the heart of Urban Evolution’s defence was an exchange of emails that related to a logo Urban Evolution had used when it first launched its website. Urbanbubble asked Urban Evolution to change the logo after complaining that it looked similar to its own.
Urban Evolution scrapped its original logo and adopted a new logo instead, and thereafter received an email from Urbanbubble’s sole director. The email noted the change and said that it was “time to move on”. The director also said in his email that the Urban Evolution venture had his “blessing”.
Urban Evolution cited the email as evidence that it had consent to use its trade mark from Urbanbubble, highlighting that it showed Urbanbubble had only raised an issue with its original logo and not with the company’s trading name.
Urbanbubble argued, however, that the director had objected to the use of the Urban Evolution name and had articulated that to Urban Evolution around the time of raising its objection with the logo. However, HHJ Hacon highlighted changes in the evidence given by the Urbanbubble director relating to the circumstances in which he had expressed that objection. HHJ Hacon said the new point he raised was “difficult to reconcile with his email”.
The High Court considered that Urban Evolution did not need Urbanbubble’s consent to use the Urban Evolution name but that this was “nonetheless given”.
The ruling shows that consent to the use of a trade mark can be given in the absence of a formal coexistence agreement.
This case does, however, highlight the problems that can arise if brand owners engage with others over the use of their mark and shows the care that must be taken in relation to how correspondence is worded.
After the High Court issued its judgment, Urbanbubble and Urban Evolution both made representations to the court in relation to the level of costs arising from the proceedings payable by Urbanbubble.
In considering costs, the court considered the fact that Urbanbubble had named an Urban Evolution director as a co-defendant in the case, in doing so seeking to hold her jointly liable with the company for trade mark infringement.
Unless brands have evidence that those directors were the directing mind of the IP infringement, they risk adverse costs consequences
However, the High Court said the decision to pursue the director constituted an abuse of process. It reached that view after finding that Urbanbubble had no grounds or evidence to suggest that the director was a controlling mind of Urban Evolution in respect of the alleged infringing acts. According to HHJ Hacon, where a claimant adds an allegation of joint liability against a director without proper evidence, a reasonable inference could be drawn that it was done to put unfair pressure on the defendants. It is all too easy to forget that this could cause distress, he said.
In the circumstances, the judge awarded Urban Evolution their costs of dealing with the allegations against the director free from the usual costs caps that apply to proceedings brought before the Intellectual Property Enterprise Court branch of the High Court.
The costs ruling is a lesson to brands to carefully consider adding directors as defendants in IP rights infringement cases. Unless brands have evidence that those directors were the directing mind of the IP infringement, they risk adverse costs consequences.
Pinsent Masons acted for Urban Evolution in the case.