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Intel ruling sets tough dilution test for owners of famous brands

Out-Law News | 28 Nov 2008 | 12:12 pm | 4 min. read

The owner of a famous trade mark can stop a similar mark being used for completely different goods and services but must show that the new mark will have an economic impact on consumers to its detriment, the European Court of Justice has ruled.

It is easy for trade mark owners to show infringement if a rival uses a similar mark for the same goods and services. The ECJ ruled yesterday on the more difficult situation where the owner of a mark wants to stop someone using a similar mark for completely different goods and services.

The ruling will worry owners of famous brands, according to one expert, because the test set by the ECJ will be difficult to pass.

The background

Intel sued CPM, a field marketing and telemarketing company, over its 'Intelmark' trade mark, which it registered for marketing and telemarketing services. Intel has its own name registered as a trade mark for computer chips and related products and claimed that the trade mark 'Intelmark' caused confusion with its own, despite being registered for services which were in different categories to its products.

Intel failed to stop the registration at the UK Intellectual Property Office and the High Court. The Court of Appeal was scathing about its case but asked the ECJ to advise on the extent to which a trade mark in one field can be infringed by a trade mark in another.

The legislation

The key provision of Europe's Trade Marks Directive is Article 4(4)(a). It provides that a mark can be refused registration or declared invalid if it is identical or similar to an earlier mark that is in a different category.

This can happen if the earlier mark "has a reputation in the Member State concerned and where the use of the later trade mark without due cause would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trade mark," it says.

The Court of Appeal asked the ECJ to outline the circumstances under which a link between the two trade marks could be said to be made and under what circumstances that link would constitute unfair trade or detriment to the owner of the earlier mark.

The ruling

The ECJ ruled on how to interpret Article 4(4)(a). It did not say whether 'Intelmark' infringes 'Intel'. That decision must now be taken by the Court of Appeal in England, by applying yesterday's instructions.

The questions of whether there is a link between two marks, and whether a use of the later mark takes or would take unfair advantage of or be detrimental to the earlier mark must be assessed globally, taking into account all factors relevant to the circumstances of the case, it said.

If the later mark calls the earlier mark to mind "for the average consumer, who is reasonably well informed and reasonably observant and circumspect," that is tantamount to the existence of a link between the marks, said the ECJ.

It added that a huge reputation for certain specific types of goods or services is neither enough to imply a link between two marks, nor to establish that the later mark would take unfair advantage or be detrimental to the earlier one.

The ECJ said that the use of the later mark may be detrimental to the distinctive character of the earlier mark with a reputation even if that mark is not unique; and a first use of the later mark may suffice to be detrimental to the distinctive character of the earlier mark.

It concluded: "Proof that the use of the later mark is or would be detrimental to the distinctive character of the earlier mark requires evidence of a change in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered consequent on the use of the later mark, or a serious likelihood that such a change will occur in the future."

The ruling is similar to an opinion on the case that was provided by Advocate General Eleanor Sharpston in July. Advocates General give non-binding opinions in cases to help the ECJ make a ruling. Sharpston's opinion differed from the ECJ's ruling. She had suggested that there is no need to show a change in the economic behaviour of consumers.

"[It] seems to me that detriment to distinctiveness need not necessarily involve economic detriment, so that a change in economic behaviour is not essential," she wrote. "If the trade mark Coca-Cola, or a similar mark or sign, were used for a range of unrelated goods or services, its distinctiveness might well be lessened, but people might drink the beverage in undiminished quantities. Clearly, however, any evidence of actual negative change in consumer behaviour would buttress the claimant’s case."

The ECJ's guidance implies that in Sharpston's example, Coca-Cola would have to show at least a serious likelihood of a change in the economic behaviour of consumers to stop its brand appearing on unrelated goods or services.

Lee Curtis, a trade mark attorney with Pinsent Masons, the law firm behind OUT-LAW.COM, said the ruling will disappoint owners of famous brands.

"Gathering evidence to prove that your business will suffer as a consequence of someone using your brand in a completely different market from your own is not easy," he said. "The ECJ has set a difficult test to pass in this ruling."

"Proving that the use of a later trade mark results in the change of economic behaviour of consumers could be very hard. Economic behaviour is often affected by many factors unrelated to trade mark use. How can you screen these other factors out? Survey evidence could help to prove a point, but the courts in the UK at least have generally looked upon survey evidence in a dim light, because it's easy to manipulate," said Curtis.

"It's unlikely that this ruling will provide a green light for traders to trade on the back of trade marks which are obviously very well known such as Coca-Cola," he said. "If someone used the Coca-Cola name for, say, roofing tiles, I'm certain that courts would find a way to stop them. The use would upset the drinks company's licensees, for instance – and that’s economic behaviour."

"If nothing else, judges would apply their common sense. Sometimes infringement will be blatantly obvious and they still have discretion to use that," said Curtis.

"However, the problem comes with marks which, although well known in their particular segment of the market, have a less clear-cut case of infringement. The ECJ's ruling implies that the hurdles for such trade mark owners to overcome have just been raised."