BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY ENTERPRISE COURT
Fetter Lane, London, EC4A 1NL
B e f o r e :
(sitting as a Judge of the Intellectual Property Enterprise Court)
|(1) PLITEQ INC|
|(2) PLITEQ (UK) LIMITED||Claimants|
|(1) IKOUSTIC LIMITED|
|(2) MR RICKY LEE PARSONS||Defendants|
Chris Aikens (instructed by Appleyard Lees IP LLP ) for the Defendants
Hearing dates: 23 and 24 June 2020 (trial held remotely, by Microsoft Teams)
Crown Copyright ©
Miss Recorder Amanda Michaels:
a. UKTM 3246779, registered as of 28 July 2017: GENIECLIP
b. UKTM 3246778, registered as of 28 July 2017: GENIEMAT
c. EUTM 7592892, registered as of 10 February 2009: GENIECLIP and
d. EUTM 8501918, registered as of 20 August 2009: GENIEMAT.
The Marks are all registered for a range of goods, in particular goods in Class 17. The GENIECLIP mark specifications include construction clips of various materials for fixing panels to walls, etc, and the GENIEMAT mark specifications include acoustic mats.
The issues before me
Trade Mark Infringement
(1) (a) Has the Defendants' use of the Signs ["GENIEMAT" and "GENIECLIP"] at all times been in relation to goods which have been put on the market in the European Economic Area under the Trade Marks by the First Claimant or with its consent?
(b) If so, does the First Claimant have legitimate reasons to oppose the further commercialisation of those goods in the ways complained of in the Amended Particulars of Claim?
(2) Has the Defendants' use of the Signs had any effect on the functions of the Trade Marks?
(3) Has the Defendants' use of the Signs taken unfair advantage of the distinctive character or repute of the Trade Marks?
(4) Was the Defendants' use of the Signs with due cause?
(5) Are the Claimants owners of a separate and distinct goodwill in and to the products shown in the photographs of the Claimants' products?
(6) Have the Defendants made an actionable misrepresentation by their use of the Signs?
(7) Have the Defendants made an actionable misrepresentation by using a photograph of the Claimants' goods in connection with the Defendants' product?
(8) Effect of section 25 of the Act/Article 27 of EUTMR.
The allegations of trade mark infringement
a) The Defendants used sponsored Google ads. See Annex A. There was no claim that the advertisements were confusing or deceptive. Instead, the complaint was about what happened once the user landed on iKoustic's website. The Defendants admitted having made some use of the Marks as keywords but said that the advertisements were generated by Google's "dynamic ads" service, in which the keyword was chosen by Google, not by the Defendants. This was not their use of the Marks.
b) The Claimants complained of instances when the landing page was either an "Existing Customers Login" page, with contact details, or a page for the particular product stating that it was unavailable to buy online, with a Contact link. Examples were pleaded at various dates in 2019. See Annex B. These were admitted. The Defendants said that when a product was out of stock the relevant webpage would be removed, and the search engine result would default to the Existing Customers Login page, which shows neither side's products. A product would be shown as unavailable to buy online in particular where advice was required before purchase.
c) The Claimants alleged that a list of the Defendants' own products was displayed on the site to potential customers of the Claimants' goods. The Defendants said that such a list was only displayed when a customer clicked on/hovered over a "Products" tab on the main menu of the website. Alternatively, their products were at times displayed beneath the Claimants' product under the heading "Related Products," which was said to be a legitimate advertisement for a competing product.
d) The Claimants complained that in late September 2019 the website was changed to show the FF10 mat in stock, though no stock was then held by iKoustic. It is now accepted that throughout 2019 iKoustic had a single roll of FF10 in stock and the change to the site was not pursued as an infringement.
e) The Claimants complained about a blogpost on the iKoustic website on 30 September 2019 which said, "The wall below shows how the cutting-edge technology of a Genie Clip works … iKoustic is one of only two suppliers of this technique in the UK." The Claimants pleaded that at that date, iKoustic was not a supplier of GenieClips. This point was not pursued at trial. The Claimants also complained that on the same date a webpage stated that iKoustic no longer stocked the GENIECLIP, but included a link to the MuteClip, described as iKoustic's new alternative isolation clip. See Annex C. The Defendants said that when that post was on the site, they still had GenieClips in stock and that it would be plain to a customer that an alternative product was on offer.
f) The Claimants concentrated at trial on the claim that iKoustic was luring internet users into purchasing its products, by advertising the Claimants' products when it was unable to provide them. Its use of the Marks was for the purpose of selling iKoustic's goods. This was denied. The Defendants said that the Marks were used only to advertise and sell the Claimants' products and when they were not in stock the products were not displayed on the iKoustic website. A purchaser would have to consciously select a link containing the MuteMat/MuteClip name to purchase those goods, so that no-one would be confused into doing so.
g) The Claimants alleged that similar "bait and switch" tactics were used directly to consumers, and gave examples. This was alleged to damage the origin function by encouraging purchasers to use the Marks to identify competing products, genericising the Mark, and to damage the advertising and investment functions of the Marks. The Defendants denied that they had used the Marks inappropriately and denied any impact on any of the Marks' functions. All of the Defendants' uses fell within the exhaustion defence of section 12(1) of the Act/Article 15(1) of the EUTMR. In the Reply, the Claimants denied that those defences applied, as they had legitimate grounds to oppose the further commercialisation of their goods.
h) The Claimants alleged that the Defendants' use of the Marks infringed under s 10(3) /Article 9 (2)... c) as it took unfair advantage of them, due to the "bait and switch" selling, whether or not the alternative trade origin was discernible. This was denied and the Defendants claimed due cause to use the Claimants' Marks to sell the Claimants' products.
a. There must be use of a sign by a third party within the relevant territory.
b. The use must be in the course of trade.
c. The use must be without the consent of the proprietor of the trade mark.
d. The use must be of a sign which is identical to the trade mark.
e. The use must be (a) in relation to goods or services (b) which are identical to those for which the trade mark is registered.
f. The use must affect, or be liable to affect, one of the functions of the trade mark.
"35 … it must be borne in mind that the essential function of a trade mark is to guarantee the identity of the origin of the marked goods or service to the consumer or end user by enabling him to distinguish the goods or service from others which have another origin (judgment of 23 March 2010, Google France and Google, C-236/08 to C-238/08, EU:C:2010:159, paragraph 82 and the case-law cited). It serves in particular to guarantee that all the goods or services bearing it have been manufactured or supplied under the control of a single undertaking which is responsible for their quality, which it does in order to fulfil its essential role in the system of undistorted competition (see, to that effect, the judgments of 12 November 2002, Arsenal Football Club, C-206/01, EU:C:2002:651, paragraph 48, and of 12 July 2011, L'Oréal and Others, C-324/09, EU:C:2011:474, paragraph 80).
36 The function of investment of the mark includes the possibility for the proprietor of a mark to employ it in order to acquire or preserve a reputation capable of attracting customers and retaining their loyalty, by means of various commercial techniques. Thus, when the use by a third party, such as a competitor of the trade mark proprietor, of a sign identical to the trade mark in relation to goods or services identical with those for which the mark is registered substantially interferes with the proprietor's use of its trade mark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty, the third party's use adversely affects that function of the trade mark. The proprietor is, as a consequence, entitled to prevent such use under Article 5(1)(a) of Directive 2008/95 or, in the case of an EU trade mark, under Article 9(1)(a) of Regulation No 207/2009 (see, to that effect, the judgment of 22 September 2011, Interflora and Interflora British Unit, C-323/09, EU:C:2011:604, paragraphs 60 to 62).
37 As to the function of the advertising of the mark, it is that of using a mark for advertising purposes designed to inform and persuade consumers. Accordingly, the proprietor of a trade mark is, in particular, entitled to prohibit a third party from using, without the proprietor's consent, a sign identical with its trade mark in relation to goods or services which are identical with those for which that trade mark is registered, where that use adversely affects the proprietor's use of its mark as a factor in sales promotion or as an instrument of commercial strategy (see, to that effect, the judgment of 23 March 2010, Google France and Google, C-236/08 to C-238/08, EU:C:2010:159, paragraphs 91 and 92)."
"63 In a situation in which the trade mark already enjoys such a reputation, the investment function is adversely affected where use by a third party of a sign identical with that mark in relation to identical goods or services affects that reputation and thereby jeopardises its maintenance. As the Court has already held, the proprietor of a trade mark must be able, by virtue of the exclusive right conferred upon it by the mark, to prevent such use (L'Oréal SA v eBay International AG (C-324/09)  ETMR 52 at ).
64 However, it cannot be accepted that the proprietor of a trade mark may—in conditions of fair competition that respect the trade mark's function as an indication of origin—prevent a competitor from using a sign identical with that trade mark in relation to goods or services identical with those for which the mark is registered, if the only consequence of that use is to oblige the proprietor of that trade mark to adapt its efforts to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty. Likewise, the fact that that use may prompt some consumers to switch from goods or services bearing that trade mark cannot be successfully relied on by the proprietor of the mark."
"92 …, although the protection afforded by art.5(1)(a) is "absolute", the exercise of the right conferred is reserved for cases in which the use of the sign by a third party adversely affects or is liable adversely to affect one of the functions of the trade mark, and that is so whether that function is the essential function indicating the origin of the goods or services covered by the mark, or one of the other functions, such as that of guaranteeing the quality of the goods or services concerned or that of communication, investment or advertising.
97 Guidance on the effect on advertising function is set forth in the decision from –. The Court restated that the use of a sign identical to another person's trade mark in the Google referencing service did not adversely affect the advertising function of that mark, even though it might have repercussions on the use of the mark in advertising. In this connection the Court recognised that the use of such a sign as a keyword meant that the proprietor of the trade mark might have to pay a higher price per click than the competitor if it wished to ensure that its advertisement appeared before that of the competitor. But this did not necessarily mean that the trade mark's advertising function was adversely affected
"57. However, the mere fact that the use, by a third party, of a sign identical with a trade mark in relation to goods or services identical with those for which that mark is registered obliges the proprietor of that mark to intensify its advertising in order to maintain or enhance its profile with consumers is not a sufficient basis, in every case, for concluding that the trade mark's advertising function is adversely affected. In that regard, although the trade mark is an essential element in the system of undistorted competition which European law seeks to establish (see, in particular, Case C-59/08 Copad SA v Christian Dior Couture SA  E.C.R. I-3421;  FSR 22 at ), its purpose is not, however, to protect its proprietor against practices inherent in competition.
58. Internet advertising on the basis of keywords corresponding to trade marks constitutes such a practice in that its aim, as a general rule, is merely to offer internet users alternatives to the goods or services of the proprietors of those trade marks (see, to that effect, Google France  RPC 19 at ).
59. The selection of a sign identical with another person's trade mark, in a referencing service with the characteristics of "AdWords", does not, moreover, have the effect of denying the proprietor of that trade mark the opportunity of using its mark effectively to inform and win over consumers (see, in that regard, Google France  RPC 19 at  and )."
98 Again this is a significant passage for it shows an appreciation by the Court that internet advertising using keywords which are identical to trade marks is not an inherently objectionable practice. On the contrary, its aim is, in general, to offer to internet users alternatives to the goods or services of trade mark proprietors and it is not the purpose of trade marks to protect their proprietors from fair competition.
100. …the investment function does not provide a means to protect trade mark proprietors against the effects of fair competition, even if such competition means that these proprietors have to adapt their efforts to acquire or preserve a reputation capable of attracting and retaining customers …
135 …the Court has now held in a long line of decisions that the right under art.5(1)(a) (and art.9(1)(a)), though "absolute", is conferred to enable the trade mark proprietor to protect his interests as proprietor, that is to ensure the trade mark can fulfil its functions. The exercise of the right must therefore be reserved to cases in which a third party's use of the sign adversely affects, or is liable adversely to affect, one of those functions."
Bait and switch selling
"82 ... the defendant deliberately uses the claimant's trade mark as a bait to attract the consumer's attention, and then exploits the opportunity thus created to switch the consumer's purchasing intention to his own product or service."
Arnold J described initial interest confusion more generally at  as
"87 … confusion on the part of the public as to the trade origin of the goods or services in relation to which the impugned sign has been used arising from use of the sign prior to purchase of those goods or services, and in particular confusion arising from use of the sign in advertising or promotional materials.
88 Before turning to the arguments on article 9(1)(b), it is important to bear in mind that in double identity cases falling within article 9(1)(a) a likelihood of confusion is presumed … In general, it is therefore immaterial whether there is a likelihood of confusion in fact, although the jurisprudence of the Court of Justice does require that there be an effect on the one of the functions of the trade mark... In a double identity "bait-and-switch" case, such an effect will not be hard to find."
He went on
"90. Counsel for the defendants pointed out that "initial interest confusion" can encompass a range of different situations and submitted that it was important to differentiate between them. In particular, he argued that it was important to distinguish between situations in which the user of the sign was intentionally targeting the trade mark proprietor's customers and situations where initial interest confusion was caused entirely innocently. He did not dispute that "bait-and-switch" use of a similar sign should be actionable, but submitted that this did not militate the conclusion that it should be actionable under art.9(1)(b). Instead, he submitted that this would be more appropriately dealt with under art.9(1)(c). He argued that "likelihood of confusion" was restricted to confusion at the point of sale.
93. In Whirlpool Corp v Kenwood Ltd  EWHC 1930 (Ch);  RPC 2;  ETMR 5, Whirlpool was the proprietor of a Community trade mark for a representation of a food mixer. It claimed that Kenwood had infringed the trade mark by marketing a similar design of mixer pursuant to art.9(1)(b) and (c). Geoffrey Hobbs QC sitting as a Deputy High Court Judge held at :
"It is sufficient for the purposes of Art.9(1)(b) to establish the existence of a likelihood of confusion in only part of the Community. The concept of 'using in the course of trade' is amplified by Art.9(2) in a way that appears to make it sufficient for the purpose of establishing liability under Art.9(1)(b) for there to be 'a likelihood of confusion on the part of the public' at any material stage or in relation to any material aspect of the commercialisation of the sign in question. From that I think it follows that 'bait and switch' selling can be prevented under Art.9(1)(b) on the basis that the process of buying goods or services should, from selection through to purchase, be free of the distorting effects of confusion. I mention that because Whirlpool's claim under Art.9(1)(b) relied on the proposition that there would be a likelihood of confusion unless and until the branding of the kMix as a KENWOOD product impinged upon the consciousness of interested consumers: the shape and appearance of the kMix would initially tell them it was a 'KitchenAid' product and the KENWOOD branding would not tell them otherwise until after they had gone down the road of selection with a view to purchase. It is possible for a claim to succeed on that basis. However, I do not accept that in the present case there will be any initial confusion in the mind of the relevant average consumer. There will, in my view, be nothing more than an awareness that the product they are looking at is not the one it reminds them of."
The principal authority cited in fn.56 was BP v Kelly. The judgment of the Court of Appeal ( EWCA Civ 753,  RPC 2) did not touch upon this question."
"154 As the passage of the main judgment we have cited immediately above makes clear, the judge considered the doctrine of initial interest confusion in some detail in his judgment in Och-Ziff Management Europe Ltd v OCH Capital Ltd  EWHC 2599 (Ch);  ETMR 1. As he there explained, initial interest confusion is an expression which derives from US trade mark law and has been used to encompass a range of situations, and the doctrine it identifies is highly controversial. For the purposes of that decision, he defined it (at ) as confusion on the part of the public as to the trade origin of the goods or services in relation to which the impugned sign has been used arising from use of the sign prior to purchase of those goods or services, and in particular confusion arising from use of the sign in promotional or advertising materials. He went on to hold (at ) that, as so defined, it was actionable under art.9(1)(b) of the Regulation.
155 In our judgment it is not helpful to seek to import the doctrine of initial interest confusion into EU trade mark law, at least so far as it applies to the use of a sign the same as or similar to a trade mark as a keyword in an internet referencing service, and it has the potential positively to mislead. We say that for the following reasons. The Court of Justice has already enunciated in clear and unambiguous terms the test that must be applied under the Directive and the Regulation in determining whether the accused sign has an adverse effect on the origin function of the trade mark. As we have seen, it did so first in Google France in addressing art.5(1)(a) of the Directive (and art.9(1)(a) of the Regulation) and then again in BergSpechte and Portakabin in addressing both art.5(1)(a) and (b) (art.9(1)(a) and (b)). In either case it must be shown that the advertisement does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the trade mark proprietor or an undertaking economically connected to it or, on the contrary, originate from a third party. Of course, art.5(1)(a) and art.9(1)(a) also afford protection against use in this way of a sign identical to the trade mark if that use is liable adversely to affect one of the other functions of a trade mark, as the Court elaborated in its decision in Interflora (CJEU).
156 These tests have been formulated by the Court with great care and reflect the importance of trade marks in developing a system of undistorted competition whilst recognising that their purpose is not to protect their proprietors against fair competition. Moreover, the Court has acknowledged that internet advertising on the basis of keywords corresponding to trade marks is not inherently objectionable because its purpose is, in general, to offer to internet users alternatives to the goods or services of the trade mark proprietors. The tests enunciated by the Court therefore incorporate appropriate checks and balances. In particular, the national court is required to consider the matter from the perspective of the average consumer, a concept we have discussed, and to decide whether the advertiser has enabled that average consumer to ascertain the origin of the advertised goods or services and so make an informed decision. We would emphasise it is not the duty of such advertisers to avoid confusion.
157 Returning now to the doctrine of initial interest confusion, it is, as the judge recognised, highly controversial and, as he also recognised, it has been applied to a range of situations in which a sign which is the same as or similar to a registered trade mark is used by a third party in advertisements for goods or services for which it is registered. They extend from, at one end of the spectrum, initial attraction of consumers based upon some kind of association of advertised goods or services with those of the trade mark proprietor or even mere diversion, to, at the other end of the spectrum, initial confusion which gives rise to a real risk that consumers will actually buy the advertised goods or services even though they know they are not the goods or services of the trade mark proprietor. Second, and significantly, it does not incorporate the checks and balances to which we have referred.
158 In our view the doctrine of initial interest confusion is therefore an unnecessary and potentially misleading gloss on the tests the Court has articulated and we think it should perform no part of the analysis of our national courts in claims of the kind before us. We consider the judge was therefore wrong to approach the matter as he did."
"39. Mr Bloch QC, counsel for Lush, submitted the matter was straightforward. Not only could the average consumer not tell without difficulty (cf Google France at  and [29.5] above) that the goods referred to in the ad did not come from Lush, but he was positively being told that the goods did come from Lush and these genuine goods could be bought on Amazon.
40. Mr Carr QC, counsel for Amazon, contended however that the matter was not so simple. He submitted that sponsored ads were a familiar feature of life to the internet user, that if that user were at all interested in the ad he would click through and in a moment he would learn that the goods had nothing to do with Lush at all. Further, he submitted that the reference in Google France to the concept of "without difficulty" embraced the notion of some inquiry being made, albeit not an inquiry of any difficulty. That simple inquiry would reveal that Amazon was not offering Lush goods but was offering equivalents.
41. Mr Carr argued that this was not a case of infringement as a result of initial interest confusion of the "bait and switch" variety (cf. Och-Ziff Management Europe Ltd v Och Capital LLP  EWHC 2599 (Ch);  FSR 11 at – per Arnold J.), the reasons being (i) the ease with which a consumer can click away from Amazon as soon as he realises he is not being offered products of interest – contrast, for example, the physical situation of a consumer having been lured into a shop, and (ii) the familiarity the consumer has with sponsored ads including the fact that many sponsored ads are ads for competitor products.
42. In my judgment, Lush establishes infringement with respect to this class of case. I consider that the average consumer seeing the [Google] ad […] would expect to find Lush soap available on the Amazon site and would expect to find it at a competitive price. Moreover, I consider that it is likely that if he were looking for Lush soap and did not find it immediately on the Amazon site, then he would persevere somewhat before giving up. My reason is that the consumer is likely to think that Amazon is a reliable supplier of a very wide range of goods and he would not expect Amazon to be advertising Lush soap for purchase if it were not in fact available for purchase. Thus, on the facts of this case, I reject Mr Carr's argument to the effect that the average consumer would, without difficulty, ascertain that the goods referred to by the ad were not the goods of or connected with Lush, the claimants."
"68. … Amazon assumes the consumer is looking for Lush products, or, at least, intended to search for Lush products and thereafter, without a further indication that such products are not available, offers competing products to the consumer. In these circumstances I do not consider the average consumer would ascertain without difficulty that the products he is shown are not the Lush products of the claimants. Indeed, in my judgment it illustrates that Amazon is using the Lush trade mark as a generic indicator of a class of goods, conduct which attacks head on the ability of the mark to act as a guarantee of origin in the claimants and nobody else."
The merits of the case on infringement
Use of the Marks
The Google advertisements
"21 …, where a person operating in the course of trade orders, from the operator of a referencing website, the publication of an advertisement the display of which contains or is triggered by a sign which is identical with or similar to another person's trade mark, that person must be considered to be using that sign, within the meaning of Article 5(1) of Directive 2008/95 (see, to that effect, judgment of 3 March 2016, Daimler, C-179/15, EU:C:2016:134, paragraphs 29 and 30).
22 By contrast, that person cannot be held liable, under Article 5(1) of Directive 2008/95, for the independent actions of other economic operators, such as those of referencing website operators with whom that person has no direct or indirect dealings and who do not act by order and on behalf of that person, but on their own initiative and in their own name (see, by analogy, judgment of 3 March 2016, Daimler, C-179/15, EU:C:2016:134, paragraphs 36 and 37).
23 The term 'using' in Article 5(1) of Directive 2009/95 involves active conduct and direct or indirect control of the act constituting the use.
27 In that regard, it must be noted that, in a situation where the website operators reproduce an advertisement on their own initiative and in their own name, the economic operator whose goods or services are thus promoted cannot be regarded as their customer.
30 Finally, as regards the fact, referred to in the order for reference, that, in the case which gave rise to the judgment of 3 March 2016, Daimler (C-179/15) EU:C:2016:134, the advertisement which infringed another person's trade mark was initially lawful, whereas the advertisement at issue in the dispute in the main proceedings infringed another person's trade mark from the outset, it is sufficient to note that that circumstance is irrelevant as regards the only question under consideration in the present reference for a preliminary ruling, which is, where an advertisement infringing another person's trade mark is reproduced, who is using the sign which is identical with or similar to that mark."
"an advertiser cannot be held liable for the independent actions of other economic operators, such as those of referencing website operators with whom the advertiser has no direct or indirect dealings and who do not act by order and on behalf of that advertiser, but on their own initiative and in their own name."
"84. The function of indicating the origin of the mark is adversely affected if the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party (see, to that effect, Céline, para.27 and the case-law cited).
85. In such a situation, which is, moreover, characterised by the fact that the ad in question appears immediately after entry of the trade mark as a search term by the internet user concerned and is displayed at a point when the trade mark is, in its capacity as a search term, also displayed on the screen, the internet user may err as to the origin of the goods or services in question. In those circumstances, the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark (see, by way of analogy, Arsenal Football Club Plc v Reed (C-20/01)  ECR I-10273;  R.P.C. 9, para.56, and Case C-245/02 Anheuser-Busch Inc v Budejovicky Budvar národní podnik (C-245/02)  ECR I-10989;  ETMR 27, para.60).
86. Still with regard to adverse effect on the function of indicating origin, it is worthwhile noting that the need for transparency in the display of advertisements on the internet is emphasised in the European Union legislation on electronic commerce. Having regard to the interests of fair trading and consumer protection, referred to in recital 29 in the preamble to Directive 2000/31, Art.6 of that Directive lays down the rule that the natural or legal person on whose behalf a commercial communication which is part of an information society service is made must be clearly identifiable.
87. Although it thus proves to be the case that advertisers on the internet can, as appropriate, be made liable under rules governing other areas of law, such as the rules on unfair competition, the fact nonetheless remains that the allegedly unlawful use on the internet of signs identical with, or similar to, trade marks lends itself to examination from the perspective of trade-mark law. Having regard to the essential function of a trade mark, which, in the area of electronic commerce, consists in particular in enabling internet users browsing the ads displayed in response to a search relating to a specific trade mark to distinguish the goods or services of the proprietor of that mark from those which have a different origin, that proprietor must be entitled to prohibit the display of third-party ads which internet users may erroneously perceive as emanating from that proprietor."
Use of the Marks on iKoustic's website
Other uses – direct to customers
a) First, they said that the Defendants' motivation in using the Marks was not genuinely to sell their stocks of the Claimants' goods, but to attract custom for their competing goods. I think it was common ground that this question was to be judged by reference to whether the average consumer would see the advertisement/use of the Mark as distinguishing the Claimants' or someone else's goods, and the average consumer of the Claimant's goods was agreed to be a professional rather than a domestic customer. Mr Downey accepted that the small domestic customers served by iKoustic would be less likely to know of the Claimants' goods by name, and would be more likely than professionals to find their way to the iKoustic website by use of generic search terms rather than use of the Marks.
b) Secondly, the Claimants said that the exhaustion defence could not apply where the Defendants had no stock of goods bearing the Marks, or insufficient stock to satisfy a normal order.
Bait and switch selling?
a) A sale of MuteMat to Rainbow Master Builders in January 2019: on 28 January 2019, an email was sent to Mr Woodhouse by Mr Dabrowski of RMB (plainly an existing customer or contact as they were on first name terms) to order 200m2 5mm GENIEMAT. Mr Woodhouse replied the following day explaining that the price of GENIEMAT had increased, and quoting for "a couple of options" namely the GENIEMAT and the cheaper MuteMat alternative. A flurry of emails followed between Mr Woodhouse and a Mr Walczak, apparently an employee of Mr Dabrowski's company. The client bought the MuteMat. It is abundantly clear from an email from Mr Walczak sent on 29 January that he appreciated that this was a different product.
b) A sale of MuteMat to Baillie Homes again in January 2019: an existing customer Mr Baillie asked for a quote for GENIEMAT RST05 and was sent a quote both for the GENIEMAT and for MuteMat. At that time, iKoustic had more than enough RST05 to have supplied it to the customer had he chosen to buy it. The email from Mr Youngson of iKoustic made it clear that the latter was a new product, and described it as cheaper and better performing than the GENIEMAT. Mr Baillie bought the MuteMat. In my view, the emails show that he understood that this was a different product from the GENIEMAT.
c) A sale of MuteClips to a Mr Trobridge, a domestic, repeat customer, in February 2019: Mr Silverleaf QC cross-examined Mr Parsons about this sale on the basis that the original specification for the work given on 3 January 2019 included both GENIECLIPS and furring channels, but MuteClips were supplied instead.
The evidence does not show how it was that Mr Trobridge was offered or chose to buy the Claimants' goods, so there was no "bait" shown, but there was use of the Marks at least in the specification. In cross-examination, Mr Parsons said that he recalled the sale and the change was made for technical reasons. Both parties submitted brief additional points in writing about this transaction. The Defendants said that the MuteClips were supplied because Mr Trobridge wished to cut the costs of the project, and it is clear from the email exchanges that Mr Trobridge was price sensitive as well as rather unhappy about some delays in installation. In various emails in January, Mr Woodhouse said that they might use a cheaper GENIECLIP, or he suggested "If the new clips are in stock, we will swap to the new clips and refund the difference." Those emails could only have made sense to Mr Trobridge if someone from iKoustic had told him about the new products, presumably in a telephone call or visit.
The Claimants contended that Mr Parsons' explanation for the substitution was not consistent with the documents and there was no evidence that the nature of the substitution was made clear to Mr Trobridge or that he was told that the new clips were of different trade origin. They suggested that this meant that there was infringement by substitution after sale, but I am satisfied that the substitution would have been clear to the customer, and he would have realised that the goods were of a different trade origin, from the emails and from the credit note he received following supply of "our more competitively priced MuteClip XP and MuteClip Channels."
Alternatively, the Claimants said that this was infringement by use of the Claimants' Mark in relation to its goods in circumstances where the intention was, having made a sale using the Mark, to substitute the Defendants' goods, so that the Claimants could object to the re-commercialisation of their goods under Article 15(2) of the EUTMR. I consider this point below in relation to the Article 15 defence.
d) After receipt of the draft of this judgment, the Claimants invited me to deal with an additional example of alleged switching. Cambridge Garden Studios appears to have placed an online order for 195 GenieClips, and some furring channels on 12 April 2019, and paid by credit card. iKoustic did not have sufficient stock to satisfy that order. The invoice shows that the customer was supplied with MuteClips and channels, and states "Original online order was £2,333.57. Materials were altered and refund of £219.67 was refunded back to card by RW." RW was plainly a reference to Mr Woodhouse. Mr Parsons was cross-examined about this. He appeared not to be familiar with the transaction, which was unpleaded and not referred to in the evidence, though identified in the Schedule. He said that there would have been a telephone call to the customer about the order. The Claimants submitted that this explanation was unconvincing, and this was one of the instances in which (they said) Mr Parsons was making things up as he went along. However, Mr Parsons was not taken to a copy of an email also dated 12 April 2019, sent by Mr Woodhouse to Cambridge Garden Studios, in which he referred to a telephone conversation with them, as well as to the alteration in the order and the refund. In the circumstances, it seems to me that the substitution was more likely than not agreed with the customer, and the Claimants have not proved that the MuteClips were substituted for the GenieClips without the client's knowledge and consent.
The section 12/Article 15 defences
Exhaustion of the rights conferred by an EU trade mark
1. An EU trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the European Economic Area under that trade mark by the proprietor or with his consent.
2. Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market.
Legitimate reasons to oppose use of the Marks
"43. The damage done to the reputation of a trade mark may, in principle, be a legitimate reason, within the meaning of Article 7(2) of the Directive, allowing the proprietor to oppose further commercialisation of goods which have been put on the market in the Community by him or with his consent. According to the case-law of the Court concerning the repackaging of trade-marked goods, the owner of a trade mark has a legitimate interest, related to the specific subject-matter of the trade mark right, in being able to oppose the commercialisation of those goods if the presentation of the repackaged goods is liable to damage the reputation of the trade mark (Bristol-Myers Squibb, cited above, paragraph 75).
45. As regards the instant case, which concerns prestigious, luxury goods, the reseller must not act unfairly in relation to the legitimate interests of the trade mark owner. He must therefore endeavour to prevent his advertising from affecting the value of the trade mark by detracting from the allure and prestigious image of the goods in question and from their aura of luxury.
48. In view of the foregoing, the answer to be given to the third, fourth and fifth questions must be that the proprietor of a trade mark may not rely on Article 7(2) of the Directive to oppose the use of the trade mark, by a reseller who habitually markets articles of the same kind, but not necessarily of the same quality, as the trade-marked goods, in ways customary in the reseller's sector of trade, for the purpose of bringing to the public's attention the further commercialisation of those goods, unless it is established that, given the specific circumstances of the case, the use of the trade mark for this purpose seriously damages the reputation of the trade mark."
"54. In this respect, it must first be recalled that, according to the settled case law of the court referred to in  of the present judgment, use of the adverb "especially" in para.2 of art.7 of the Directive indicates that alteration or impairment of the condition of marked goods is given only as an example of what may constitute legitimate reasons (Bristol Myers Squibb at  and , and Parfums Christian Dior at ).
55. Accordingly, the court has already held that damage done to the reputation of a trade mark may, in principle, be a legitimate reason, within the meaning of art.7(2) of the Directive, allowing the proprietor of the mark to oppose further commercialisation of luxury goods which have been put on the market in the EEA by him or with his consent (see Parfums Christian Dior at , and Bayerische Motorenwerke AG v Deenik ( C-63/97)  ECR I-905;  ETMR 339 at ).
56. It follows that where a licensee sells goods to a discount store in contravention of a provision in the licence agreement, such as the one at issue in the main proceedings, a balance must be struck between, on the one hand, the legitimate interest of the proprietor of the trade mark covered by the licence agreement in being protected against a discount store which does not form part of the selective distribution network using that trade mark for commercial purposes in a manner which could damage the reputation of that trade mark and, on the other hand, the discount store's legitimate interest in being able to resell the goods in question by using methods which are customary in its sector of trade (see, by analogy, Parfums Christian Dior at )."
"78 It follows from the foregoing that a trade mark proprietor is not entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with, or similar to, that trade mark, which the advertiser has chosen for an internet referencing service without the consent of the proprietor, the resale of second-hand goods originally placed on the market in the EEA under that trade mark by the proprietor or with his consent, unless there are legitimate reasons, within the meaning of art.7(2) of Directive 89/104, which would justify that proprietor's opposition to such advertising.
79 Such a legitimate reason exists, inter alia, when the advertiser's use of a sign identical with, or similar to, a trade mark seriously damages the reputation of that mark (Parfums Christian Dior  E.T.M.R. 26 at , and BMW  ETMR 339 at ).
80 The fact that the reseller, through its advertising based on a sign identical with, or similar to, the trade mark, gives the impression that there is a commercial connection between the reseller and the trade mark proprietor, and in particular that the reseller's business is affiliated to the proprietor's distribution network or that there is a special relationship between the two undertakings, also constitutes a legitimate reason within the meaning of art.7(2) of Directive 89/104 . Advertising which is liable to give such an impression is not essential to the further commercialisation of goods placed on the market under the trade mark by its proprietor or with his consent or, therefore, to the purpose of the exhaustion rule laid down in art.7 of Directive 89/104 (see, to that effect, BMW  ETMR 339 at  and , and Boehringer Ingelheim KG v Swingward Ltd (C-348/04)  ECR I-3391;  E.T.M.R. 71 at )."
"25 … Counsel for JSC pointed out that the CJEU had gone on in Copad to hold at  that the trade mark proprietor could oppose the resale of goods "only if it can be established that, taking into the particular circumstances of the case, such resale damages the reputation of the trade mark [emphasis added]". He submitted that, first, the burden of proof lay on the trade mark proprietor in this respect, and secondly, damage to reputation must be established. I am content to assume that both submissions are correct, but this does not assist JSC.
26. So far as the first point is concerned, there was debate before the judge as to whether there was an initial burden on JSC to show that the packaging was not liable to damage the reputation of the Trade Marks (as suggested by Case C-348/04 Boehringer Ingelheim KG v Swingward Ltd [EU:C:2007:249]), but as can be seen the judge simply asked himself whether it was likely that the packaging would damage their reputation. Turning to the second point, as counsel accepted, English procedural law takes facts as established if they are more likely than not, and the judge concluded that damage to the reputation of the Trade Marks was likely."
Similarly, I do not think anything turns on the question of the burden of proof here.
"the judge was wrong, I think, to proceed on the basis that the plaintiffs were not alleging that they have a goodwill which was affected by the use of the photographs. In truth, … the goodwill was asserted and demonstrated as the photographs were shown and was at the same moment misappropriated by Custom Built."