Lessons for trade mark owners from infringement ruling

Out-Law News | 27 Apr 2022 | 3:36 pm | 5 min. read

Recent litigation involving a large London restaurant and a small Chinese food outlet offers points trade mark owners can learn from, according to experts in brand protection.

The ruling by the High Court in London contained guidance for trade mark owners in relation to the nature and quality of evidence they might need to adduce to prove reputation in their brand. It also provided lessons for would-be defendants in trade mark cases too, with the judge confirming that if a business does not run clearance searches to check that their planned name for the company is not the same or similar to an existing brand in their industry, they may not have access to certain defences to trade mark infringement.

In addition, the judgment highlighted the risk of personal liability of sole traders in infringement proceedings.

According to Gill Dennis and Sarah Jeffery of Pinsent Masons, the judge’s ruling highlights how a failure to run trade mark clearance searches before trading is likely to undermine any ‘honest concurrent use’ defence a business might wish to run against claims of trade mark infringement.

His Honour Judge Hacon remarked on the issue of clearance searches in a case involving a high-end, award-winning, London restaurant and a takeaway restaurant in Barrow-in-Furness in the north-west of England.

Before the court, Cantonese restaurant ‘China Tang’, which operates at the Dorchester Hotel in Park Lane in London, successfully claimed that Barrow-in-Furness takeaway restaurant ‘China Tang’ was liable for infringing the trade mark it owns in the name under section 10(2) of the Trade Marks Act 1994. The brand owner satisfied the judge that the takeaway business used an identical mark to its own for 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.

The owner of the takeaway business had raised a defence against trade mark infringement of ‘honest concurrent use’. That defence essentially provides for cases where a business can demonstrate that their use of the same mark is honest, does not unfairly compete with the trade mark owner’s interests or encroach on the goodwill in its brand, nor has an adverse effect on the ability of the average consumer to discern who the trade mark belongs to.

In his ruling, His Honour Judge Hacon suggested that a failure to carry out clearance searches will often undermine an honest concurrent use defence – regardless of the size of the business running that defence. He ruled that the defence could not be relied on by the China Tang takeaway business and its owner, Honglu Gu, in this case.

The judge said: “Mr Gu did not even conduct a basic internet search for ‘China Tang’. Had he done so, he would likely have found the claimants’ website and/or reviews and commentary about it. Honest practices would then have required Mr Gu to obtain legal advice about the intended trading name for his business. I have sympathy for Mr Gu. But in the modern climate of easy trade mark and internet searches, I think that if a party starts to use a trading name without appropriate advice and simple searches, such use will not have been honest concurrent use without some reason why it should be taken to have been so. There was no such reason in the present case.”

In arguing against claims that it was liable for trade mark infringement, the China Tang takeaway in Barrow also pointed to the fact its business operates in a different segment of the market from the China Tang at the Dorchester. However, the judge said that this was not relevant to the question of whether there was a likelihood of confusion in this case.

Gill Dennis said: “The judge endorsed case law from 2004 that confirms that the full scope of trade mark rights under the specification of goods or services for which the mark has been registered is to be considered when assessing likelihood of confusion. In this case, that meant the China Tang at the Dorchester was considered to be entitled to assert its trade mark rights over low price restaurants, and not just at the high-end of the market, and the judge said the average consumer – whose perceived impression of the market is relevant to the question of likelihood of confusion – would be aware of both ends of the market.”

“The finding is a warning to other businesses that may think operating in a different segment of the same market will shield them from claims of trade mark infringement,” she said.

While the owners of the ‘China Tang’ trade mark were successful with their likelihood of confusion claim, they failed with other aspects of their case against the Barrow takeaway – including with its claim for trade mark infringement under section 10(3) of the Trade Marks Act 1994.

Sarah Jeffery said the judge’s findings on that aspect of the case provides further lessons for brand owners.

Under section 10(3) of the Trade Marks Act 1994, businesses are liable for infringement if the trade mark owner can show their mark has a reputation in the UK, that there was a link between the trade mark and alleged infringer’s sign in the mind of the average consumer, and that use of the sign by the alleged infringer takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark, and that that use is without due cause.

In this case, the judge was not satisfied with evidence provided to support the claims made about the reputation of the trade mark in the UK. He said China Tang at the Dorchester had failed to provide sufficient evidence to show its name was “known by a significant part of the UK public concerned with restaurant services”.

“The ruling shows that assertions of reputation in a trade mark need to be well-evidenced and highlights the importance of good record-keeping in this regard,” said Jeffery. “Press cuttings and copies of promotional material used can help demonstrate reputation in a mark, but trade mark holders will want to go further to demonstrate the level of consumer engagement with media coverage and marketing campaigns – if possible within the specific geographic area the alleged infringer operates, specifically.”

The ruling also highlights a particular risk that sole traders face in trade mark disputes after His Honour Judge Hacon found Honglu Gu jointly liable with his company for trade mark infringement.

Jeffery said: “In this case, China Tang at the Dorchester successfully argued that Mr Gu was jointly liable with his company for trade mark infringement on the basis that he was ‘the controlling mind and will’ of the company. The burden was on Mr Gu to demonstrate otherwise, which the judge held he was unable to do.”

“The facts in this case differ from another recent case where a trade mark owner was censured by the High Court and ordered to pay the cost of a rival company director’s legal fees after the court found no grounds or evidence to suggest that the man – who was one of a number of directors of the alleged infringing company – was a controlling mind of the company,” Dennis added.