England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
INTELLECTUAL PROPERTY ENTERPRISE COURT
His Honour Judge Hacon
[2019] EWHC 599 (IPEC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		5 February 2020

Lord Justice Arnold:

Introduction

1. The Claimants ("Nomination") are two Italian companies which respectively manufacture and market combinable charm bracelets and links under the trade mark NOMINATION. The bracelets consist of a number of individual links that can be fastened together in different combinations. The links may be either plain "base" links bearing the trade mark on the one hand or decorated links or links with charms attached on the other hand. Nomination have achieved some success in the UK, increasing their turnover from £6.3 million to 2013 to £10.4 million in 2016.
2. The Defendants, who are husband and wife, trade in partnership as JSC Jewellery ("JSC"). JSC market combinable charm bracelets and links under the trade mark DAISY CHARM. JSC's links are interchangeable with Nomination's links in the sense that a JSC link will fit together with Nomination links. From April 2013 to July 2018 JSC marketed via the well-known online platform ebay bundles of two links ("the Bundles"), one of which was a JSC charm link and one of which was a genuine Nomination base link, the latter having been sourced by disassembling bracelets composed entirely of Nomination base links.
3. In these proceedings Nomination contend that JSC thereby infringed three registered trade marks and committed passing off. His Honour Judge Hacon held, for the reasons given in a judgment dated 13 March 2019 ([2019] EWHC 599 (IPEC)), that JSC had infringed Nomination's trade marks in two distinct ways. First, by supplying the Nomination base links in inferior packaging, which gave rise to a legitimate reason for Nomination to oppose further commercialisation of the goods even though they had been put on the market in the European Economic Area ("EEA") with (as the judge found) Nomination's consent. Secondly, by advertising the Bundles in a manner that amounted to use of the NOMINATION trade mark in relation to the JSC links contained in the Bundles. He also held that the latter constituted passing off. JSC appeals against these conclusions with permission granted by Floyd LJ.
4. It is important to note at the outset that, in addition to the documentary evidence, the judge heard oral evidence from three witnesses, and had the opportunity of examining some physical exhibits. This Court was not afforded the same opportunity, nor were we provided with transcripts of the oral evidence. The relevance of these points will become clear in due course.

The Trade Marks

5. Nomination relied upon (i) EU Trade Mark No. EU000456822 for the word NOMINATION, (ii) International Trade Mark (EU) No. WE00000769289, for the word NOMINATION and (iii) International Trade Mark (EU) No. WE00001069273 for a slightly stylised version of NOMINATION ("the Trade Marks"). Each of the Trade Marks is registered for at least the following goods in Class 14:

"Precious metals and their alloys and goods in precious metals or coated therewith, not included in other classes; jewellery, precious stones; horological and chronometric instruments."

Nomination's products, distribution network and packaging

6. Nomination's bracelets are illustrated in the following image from a Nomination brochure which the judge reproduced in his judgment:



7. Nomination's case is that its products are positioned as luxury jewellery which is nevertheless affordable by everyone. Some of Nomination's decorated and charm links are made of precious stones, set in 18k or 9k gold or silver, and are priced accordingly. Others are less expensive. By contrast, the base links are made of stainless steel. Although it was Nomination's position that base links should not be sold individually, the judge found that they did not impose any contractual restriction on their retail customers preventing this at the relevant time, that the retailers reasonably assumed they could do so and that they were not sanctioned for doing so. We were shown evidence that individual Nomination base links retailed for as little as 70 pence.
8. Nomination's products are sold through a large selective distribution network consisting of around 300 independent retailers in the UK. In addition, by 2018, Nomination had eleven of their own stores, including one at 35 Moulton Street, London. The products are also sold online, but it appears that this was and is not Nomination's preferred route to market.
9. The judge made the following findings concerning the packaging of Nomination's products at [44]:

"Each bracelet sold by Nomination goes out to a retailer with packaging which separately accompanies the bracelet. The retailer puts the bracelet into the packaging for supply to consumers. I was shown an example of a sturdy and elegantly designed cardboard box with Nomination's name and logo prominently on the front and back. Inside the box there is a foam support in which the bracelet is contained. The evidence indicated that the bracelet and support are wrapped in yellow tissue paper. The box contains a leaflet which includes a guarantee. The box is presented in a similarly elegant cardboard bag, closed by a ribbon. I agree with [counsel for Nomination] that the impression given by Nomination's packaging is that its contents are of high quality."

10. The judge made no finding that retailers were contractually obliged to use this packaging. Counsel for JSC submitted to us that there was no evidence that retailers were even instructed to use the packaging by Nomination. Be that as it may, the judge clearly accepted that the retailers did use the packaging. It is convenient to note at this point that, during the course of argument, counsel for JSC took us to a photograph showing what Floyd LJ aptly described as a "kit" of bracelets and flat-packed packaging in the form in which it was received by JSC from one of Nomination's authorised retailers. Contrary to counsel's suggestion, this photograph (and the evidence of Mr Brealey in his first witness statement at paragraphs 14 and 26) is perfectly consistent with the judge's findings, although it also shows that the bracelets were sent to JSC wrapped in plain white tissue paper rather than in the (Nomination-branded) yellow tissue paper. Moreover, there is no reason why retailers supplied with such kits should not use the packaging provided, and every reason why they would be likely to do so. I shall return to the topic of Nomination's packaging below.

The acts complained of

11. Nomination's first complaint focuses upon the packaging in which JSC sold the Bundles. The judge described this as follows at [11]:

"The bundles either consisted of two blister packs, one for each of the Nomination and JSC links, or alternatively the JSC link was supplied in a blister pack and the Nomination base link was in a small plastic bag bearing a label 'Manufactured by Nomination Italy Repackaged by JSC Jewellery UK'."

12. Nomination's second complaint concerns the manner in which JSC advertised the Bundles. Attention was focussed at trial and in this Court on a listing on ebay dated 17 March 2015 for "1 x Family Superlink Daisy Charm 1 x Genuine Nomination Italian Charms For Classic" which features images of, first, a Nomination base link with the trade mark clearly visible and, secondly, a charm link with no visible trade mark ("the Listing"). The judge quoted part of the text of the Listing at [66]. Since counsel for JSC complained that the judge's quotation omitted material parts of the Listing, I shall set it out more fully.
13. The main part of the Listing included the following information:

"Condition: New with tags

Names on Charm: – select –

Quantity [ ]

£4.99

…

Located in United Kingdom

Seller information

Jscjewellery (61720 ()

99.8% positive feedback

…

Visit shop: JSC Jewellery UK

…"

14. The description tab included the following information:

"Item specifics

Condition: New with tags a brand-new, unused, unworn and undamaged item in the original packaging (such as the original box ….

…

Brand: Daisy Charm

JSC Italian Charm – DAISY CHARM Plus Nomination Charm

Item description

18mm (superlink) Family charm of your choice by Daisy Charm®, plus you also get a single branded Nomination link for your bracelet. So you will receive one branded Daisy Charm and one plain Nomination link, both compatible and for the classic size bracelet.

…

Mix and match with the thousands of Daisy Charm UK branded Italian charms for your classic Italian charm bracelet that can be found on our eBay store, just click on the door symbol near the top of the page.

The Daisy charm is 9mm x 18mm in size, has a matt finish, and the Nomination charm is 9mm in size and has a shiny finish. All our 9mm charms come individually packaged in a small blister packet and have our brand name – Daisy Charm – stamped on the back.

…

About Us

We are a UK based company that has been selling Italian charms since 2004 and were one of the first eBay sellers of Italian charms in the UK market. We have a large range of Italian charms designed for the UK market …."

The legal framework

15. The Trade Marks are all EU trade marks (formerly known as Community trade marks). Despite this, the parties argued their cases before the judge, and the judge therefore expressed his judgment, by reference to the provisions of the Trade Marks Act 1994 and the European Directives which it implements. This does not matter, because the provisions in the relevant European Regulations correspond to those in the Directives. Nevertheless, in the interests of accuracy, I will refer to the Regulations.
16. Nomination's infringement allegations relate to periods covered by (i) Council Regulation 207/2009/EC of 26 February 2009 on the Community trade mark (codified version), (ii) Regulation 207/2009 as amended by European Parliament and Council Regulation 2015/2424/EU of 16 December 2015 and (iii) European Parliament and Council Regulation 2017/1001/EU of 14 June 2017 on the European Union trade mark. There is no material difference for present purposes between the relevant provisions of Regulation 207/2009, Regulation 207/2009 as amended and Regulation 2017/1001, although the numbering of the articles has changed.
17. The key provisions of Regulation 207/2009 for the purposes of this appeal are as follows:

"Article 9

Rights conferred by a Community trade mark

1. A Community trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:

(a) any sign which is identical with the Community trade mark in relation to goods or services which are identical with those for which the Community trade mark is registered;

…

Article 13

Exhaustion of the rights conferred by a Community trade mark

1. A Community trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community 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."

18. The case law of the Court of Justice of the European Union establishes that six conditions must be fulfilled in order for there to be prima facie infringement under Article 9(1)(a) of Regulation 207/2009:

i) There must be use of a sign by a third party within the relevant territory.

ii) The use must be in the course of trade.

iii) The use must be without the consent of the proprietor of the trade mark.

iv) The use must be of a sign which is identical to the trade mark.

v) The use must be (a) in relation to goods or services (b) which are identical to those for which the trade mark is registered.

vi) The use must affect, or be liable to affect, one of the functions of the trade mark.

19. The first five conditions are apparent on the face of the legislation. Condition (vi) has been read into the legislation by the CJEU as a matter of interpretation.
20. It is implicit in the structure of Regulation 207/2009 that all six conditions are satisfied where the third party uses a sign identical to the trade mark in relation to goods identical to those covered by the registration which are genuine goods marketed by the trade mark proprietor. Where the goods have been put on the market in the EU (or, by virtue of the EEA Agreement, the EEA) by the proprietor or with its consent, however, then the third party has a defence under Article 13(1) unless the proprietor has legitimate reasons to oppose further commercialisation of the goods within Article 13(2).
21. Passing off is, of course, a doctrine of the English common law. The principles are well established, and are not in dispute. Accordingly, it is unnecessary for me to set them out.

The first issue: did Nomination have a legitimate reason to oppose further commercialisation of the Nomination links in the Bundles?

The law

22. The judge considered the law in relation to Article 13(2) at [49]-[55]. It is evident that he directed himself that the principle to be applied was that articulated by the CJEU in Case C-59/08 Copad SA v Christian Dior Couture SA [EU:C:2009:260] at [55]:

"… 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 …"

23. Counsel for JSC did not take issue with this, and in particular did not suggest that anything turned on the possible distinction between the requirement for "damage" articulated by the CJEU in Copad and the requirement that the use in question "seriously damages the reputation of the trade mark" which it had articulated in the earlier case of Case C-337/95 Parfums Christian Dior SA v Evora BV [1997] ECR I-6013 at [48].

The judge's assessment

24. The judge's assessment of this issue was as follows:

"45. As I have said, JSC supplied Nomination base links to their customers either in a small blister pack or in a small transparent plastic bag. No one could say that JSC's packaging conveys an impression of quality.

46. A potential difficulty for Nomination was the packaging sometimes used by their retailers for the sale of individual links. I was shown a Nomination base link in a transparent plastic bag as supplied by one of Nomination's authorised retailers. However, a customer going to an authorised Nomination retailer to buy an extra base link has already bought or been given a Nomination bracelet. The image of quality has already been conveyed by the bracelet's packaging.

47. JSC's customers may never have received a Nomination bracelet. In fact JSC's advertising promotes the idea of using a Nomination base link as an additional part of JSC's 'Italian charm bracelet'. So far as packaging is concerned, these customers would associate Nomination's product only with either a small blister pack or a small plastic bag.

48. [Counsel for JSC] pointed out that non-authorised traders other than JSC have supplied Nomination's base links in simple packaging and Nomination have not sought to stop such sales. I agree that Nomination have been relaxed about policing its rights. But that does not neutralise the rights if they exist.

…

56. … I must reach a view as to whether it is likely that JSC's packaging will damage the reputation of the Trade Marks and thereby Nomination. I think it is likely. I am satisfied that the elegant packaging of Nomination's bracelets will convey an image of luxury to purchasers and that this increases the reputation of the Trade Marks. The receipt of Nomination's products in a small blister pack or polythene bag is likely to damage that reputation."

The appeal

25. Before turning to the principal criticisms which JSC makes of the judge's assessment, it is convenient first to deal with two more minor points. Counsel for JSC pointed out that the CJEU had gone on in Copad to hold at [59] 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.
27. I turn therefore to consider JSC's principal criticisms of the judge's assessment. The first of these is that the judge failed to take into account evidence showing that Nomination bracelets were not always sold in the "luxury" packaging described above. Mr Brealey gave evidence in paragraphs 30-31 of his first witness statement that on 16 November 2018 JSC's solicitor had purchased a Nomination base bracelet costing £11.90 from the online retailer Amazon SARL which had arrived wrapped in a clear plastic sleeve inside a clear grip-seal plastic bag and without any "luxury" packaging. Both the sleeve and the bag bore the Nomination brand name in black print.
28. It is correct that the judge did not refer to this evidence in his judgment. In my judgment, however, it does not undermine his assessment. In the first place, it post-dates the relevant period. Secondly, the evidence does not reveal where Amazon SARL sourced the bracelet from. Thus it does not show that the source was either Nomination or an authorised retailer. Mr Brealey assumed that it came from Nomination or an authorised retailer because the sleeve and bag were branded Nomination, but this does not necessarily follow. Thirdly, there is no evidence as to the frequency of such sales. Fourthly, as discussed above, Nomination primarily sell their products through bricks-and-mortar retailers. This evidence does not detract from the judge's finding that consumers who had bought bracelets from such retailers, or received as gifts bracelets purchased by others from such retailers, would have been exposed to the "luxury" packaging.
29. JSC's second main criticism is based on the judge's findings in [46]. The judge found that Nomination's authorised retailers "sometimes" sold individual Nomination links in transparent plastic bags. Counsel for JSC took us to the sole example of this in evidence, which is a photograph showing a single charm link purchased by JSC in 2016 from an authorised retailer called Argento that arrived in what appears to be a clear grip-seal plastic bag. Counsel for JSC submitted there was no evidential foundation for the finding that this only happened "sometimes", but that is an impossible submission to accept when counsel was unable to cite any evidence as to the frequency of such sales. The mere fact that Nomination's case was that it did not consent to the sale of individual base links is not enough to show that such links were commonly sold in plastic bags.
30. More importantly, counsel for JSC submitted that, if, as he submitted that the judge had found at [46], the reputation of the Trade Marks was not damaged when consumers who had bought Nomination bracelets in "luxury packaging" from authorised retailers then purchased individual Nomination links in plastic bags, there was no basis for concluding that the position would be any different when such consumers purchased Bundles containing Nomination links in blister packs or plastic bags from JSC.
31. As Patten LJ pointed out in the course of argument, it appears from what the judge said at [47] that the judge's answer to this point was that JSC's customers might never have purchased or received a Nomination bracelet. Counsel for JSC submitted that, if so, the judge had fallen into error because, up to that point, the judge had rightly been focussing upon the reputation of the Trade Marks amongst consumers who had purchased Nomination bracelets.
32. Counsel for Nomination disputed that the judge had found in [46] that the reputation of the Trade Marks was not damaged when consumers who had bought Nomination bracelets in "luxury packaging" from authorised retailers then purchased individual Nomination links in plastic bags. He submitted that this was damaging to the reputation of the Trade Marks, but the judge had found that it only happened "sometimes", and that this did not justify JSC inflicting further damage on the reputation of the Trade Marks by its sales of the Bundles on an apparently substantial scale over a five year period.
33. I would add that, in the case of consumers who had never purchased or received a Nomination bracelet, the point I understand the judge to have been making at [47] was that Nomination had been deprived of the opportunity of conveying its desired luxury image to them, and in that sense the reputation of the Trade Marks had been damaged. (The same would be true of the base bracelet sold by Amazon SARL, but the other caveats noted in paragraph 28 above apply to that. In any event, it could be argued that the same reasoning would apply, namely that it would not justify JSC inflicting further damage on the reputation of the Trade Marks.)
34. While I see some force in JSC's criticisms of the judge's reasoning, the question is whether this Court would be justified in substituting its own evaluation of the issue for that of the judge, particularly in the circumstances identified in paragraph 4 above. In my judgment, it would not. For the reasons given in paragraphs 32 and 33 above, I consider that it was open to the judge to conclude that sales of Nomination links by JSC in blister packs and plastic bags were likely to have damaged the reputation of the Trade Marks.

The second issue: did JSC's advertising of the Bundles infringe the Trade Marks or amount to passing off?

Trade mark infringement

35. I am bound to say that I have some difficulty with the way Nomination's second complaint of trade mark infringement was argued by the parties below, and therefore analysed by the judge. Nomination advanced its case under Article 9(1)(a), and it was agreed between the parties that Nomination's pleaded allegations of infringement under Article 9(1)(b) and (c) added nothing. The sole issue between the parties under Article 9(1)(a) was whether JSC had used the sign "in relation to" JSC's own links i.e. condition (v)(a).
36. As the judge correctly identified at [78], the test laid down by the CJEU with respect to condition (v)(a) is whether the use of the sign is "for the purpose of distinguishing the goods or services in question", that is to say, as a trade mark (see Case C-63/97 Bayerische Motorenwerke AG v Deenik [1999] ECR I-905 at [38], Case C-245/02 Anheuser-Busch Inc v Budejovicky Budvar np [2004] ECR I-10989 at [64], and Case C-17/06 Céline SARL v Céline SA [2007] ECR I-7041 at [20]). Part of the point of this test is that, if the sign is used for the purpose of distinguishing non-genuine goods, then a likelihood of confusion may safely be (rebuttably) presumed (in accordance with Article 16(1) of TRIPS). (It is not necessary for these purposes to consider the position if the goods are genuine.) Thus the logic is that use of the identical sign "in relation to" non-genuine identical goods implies a likelihood of confusion.
37. Nomination's case before the judge involved reversing this logic. Nomination argued that there was a likelihood of confusion (and indeed actual confusion), and therefore there was use of the sign "in relation to" goods. JSC did not take issue with this logic (instead they argued that there was no likelihood of confusion). But I wonder if it necessarily follows, and in particular whether a likelihood of confusion means that the sign has been used "in relation to" all the relevant goods. In any event, it seems to me that, given that Nomination were positively asserting a likelihood of confusion, their case would have been better analysed under Article 9(1)(b).
38. This problem is compounded by the fact that the parties treated the passing off claim as raising the same issue when, to my mind, it did not. Rather, the passing off claim ran parallel to the pleaded Article 9(1)(b) claim.
39. Fortunately, it is not necessary to try to untangle this knot, because the judge found that JSC was liable for passing off. Unless JSC can overturn that conclusion, it does not matter whether the judge's analysis of the trade mark claim was soundly based.

Passing off

40. There was no dispute at trial that Nomination owned considerable goodwill in the NOMINATION name. The issues were whether JSC's use of the name constituted a misrepresentation and, if so, whether it had caused damage to Nomination. The judge found that JSC's use of the name in advertisements exemplified by the Listing had led to a significant proportion of the relevant public to believe that the Daisy Charm links in the Bundles were supplied by Nomination, and thus constituted a misrepresentation. He also found that this was damaging to Nomination.
41. There is no dispute that, if the judge was entitled to find that there had been a misrepresentation, then he was also entitled to find that it was damaging to Nomination. JSC contend that it was not open to the judge to find that there had been a misrepresentation. This is a challenge to the judge's findings of fact. JSC therefore face an uphill task.
42. As counsel for JSC submitted, the judge's conclusion rested upon two foundations. The first was his interpretation of the Listing at [67]:

"A typical reader of this and other online advertisements from JSC would reasonably have priorities other than pondering in depth which link is made by whom. However, I think a reasonable reader would have received a blurred message about the manufacturing source of the two bundled links and might have formed the impression that both are made for JSC, one of them being styled 'Nomination'."

43. Counsel for JSC submitted that it was clear from the Listing that the Bundles comprised a JSC link and a Nomination link. In support of this submission, he relied in particular upon various features of the Listing which the judge had not quoted, such as the information about the seller being based in the UK. I am not persuaded by this submission. As counsel for JSC himself pointed out, the Listing is for a very inexpensive item. In those circumstances the judge was entitled to conclude that it would not be read with great care and attention. Moreover, the fact remains that what JSC were doing was selling a bundle of two links from different trade sources. They therefore took the risk that, if they did not make the different sources of the two links crystal clear, some consumers would be confused.
44. The second foundation consisted of a letter from Natalie Hall of Xen Jewellery Design Ltd, an authorised Nomination retailer, to Kenneth Brown of Nomination dated 8 March 2016 and an email from Dale Gamble of J&D Duo Jewellery, another authorised Nomination retailer, to Mr Brown dated 9 March 2016 which the judge found at [68]-[76] evidenced actual confusion amongst purchasers of the Bundles as to the source of the JSC charm links. Counsel for JSC submitted that the judge was wrong to place weight upon this evidence because (i) as Mr Brown admitted, the communications had been prompted by him, (ii) the communications were hearsay evidence unsupported by statements of truth and untested in cross-examination and (iii) in the case of Mr Gamble's email it was headed "without prejudice".
45. The judge addressed points (i) and (iii) in his judgment. He did not consider that either point undermined the truth of the contents of the communications, and in my judgment he was clearly entitled to take that view. He did not explicitly address point (ii), but plainly he was aware of it. As he would also have been aware, Nomination had notified JSC of their intention to rely upon the communications well before trial, and if JSC had had reason to believe that the communications were untrue, they could have applied for the authors of them to be cross-examined pursuant to CPR rule 33.4. JSC did not do so. In those circumstances the weight to be attached to the communications was a matter for the judge. Furthermore, I consider that he was entitled to conclude that they evidenced actual confusion on the part of purchasers of Bundles and that such confusion stemmed from the use of the NOMINATION name in advertisements such as the Listing.
46. Accordingly, in my judgment, the judge was entitled to find that JSC's use of the NOMINATION name in the Listing and similar advertisements had led to a significant proportion of the relevant public to believe that JSC's Daisy Charm links were supplied by Nomination.

Conclusion

47. For the reasons given above, I would dismiss this appeal.

Lord Justice Floyd:

48. I agree.

Lord Justice Patten:

49. I also agree.