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UNITARY PATENT

In 2012 Member States and the European Parliament agreed on the "patent package" - a legislative initiative consisting of two...

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OHIM Softens on Deadlines, But Not Dilution in WATERFORD

The latest round of the WATERFORD crystal appeals hints that OHIM's bureaucratic inflexibility on deadlines may, at long last, be softening. Not, indeed, before time: the case had been pending for 10 years before OHIM accepted evidence formerly disallowed as out of time, which ultimately changed the outcome of the case (Second Board of Appeal, R-240/2004-2). However, the sunny outlook ends there, for the same case tows a strict line on dilution that continues to cast doubt on its real usefulness as a practical ground for challenging a CTM.

The contrast between OHIM's approach in WATERFORD, and the General Court rulings in the recent BOTOX cases (see this issue), is stark. Arguably, though, WATERFORD offers the better guidance to those gambling to win on dilution. 

Glass Half Empty 

The long round of WATERFORD appeals began in 2000, when Waterford Wedgwood plc opposed a CTM application for a stylised logo incorporating a fountain device, the word WATERFORD in large letters, and the word STELLENBOSCH in a much smaller font below, in the name of Assembled Investments (Proprietary) Ltd. The application covered wines in Class 33. Opposition was based on a likelihood of confusion with and unfair advantage of or detriment to the distinctiveness or repute of Waterford's earlier CTM for WATERFORD covering glassware. At first instance, Waterford lost the confusion claim on the ground that wine glasses and wine were not similar goods. OHIM also ruled that Waterford had not proved the reputation needed to succeed based on unfair advantage or detriment. Waterford appealed and won its confusion claim, but on further appeal the General Court ruled for the applicant, returning to OHIM's original finding of no similarity between wine glasses and wine. The ECJ upheld.

What had never been decided on appeal, though, was whether the Opposition Division had been right to reject the opposition based on unfair advantage and dilution through detriment, ie, blurring and tarnishing. The ECJ therefore ordered the case back to the Board of Appeal to consider this alternative ground.
 
Glass Half Full

Waterford's original case under unfair advantage and detriment had been rejected on the basis that it had failed to prove that its CTM for WATERFORD enjoyed a reputation in a substantial part of the Community.

However, that finding had been based on only some of the evidence filed. In particular, the Opposition Division had ignored copies of a brochure from 1995, an analysis of the value of annual sales orders between 1996 and 2001 and a market survey report dated July 2000 showing the level of brand awareness enjoyed by WATERFORD in the UK. Waterford had filed all these at the evidence in reply stage to augment its existing evidence of reputation and to answer criticisms raised by the applicant. The Opposition Division had excluded the further evidence of reputation, however, holding that it was not purely evidence in reply and that the original deadline for substantiating the opposition by proving the existence, scope and validity of earlier marks (including claims to reputation) had already passed. The admissibility and impact of this evidence was the primary issue on this latest appeal.When the ECJ batted the case on this issue back, the Second Board of Appeal saw matters rather differently. The Board accepted that under Article 76 (2) CTMR, the Office may disregard facts or evidence not submitted or produced in due time by the parties. However, the operative word here was "may"; although a party enjoyed no right to have late-filed evidence considered, the Office had a discretion to admit it where there was no provision to the contrary, and where the circumstances suggested that the evidence should be admitted.

In particular, the Board considered that the late-filed material was admissible on the basis that new factors had emerged that made its filing appropriate, referring to the General Court's 2007 decision in T-86/05 K & L Ruppert Stiftung & Co. Handels-KG v OHIM. Although that case had related to proof of genuine use, the Board considered that the same approach should apply to evidence of the existence, validity and scope of pleaded prior rights, including claims to reputation, that would normally fall due within the initial term for substantiating the opposition. In Waterford, the new factor that emerged was the applicant's challenge to evidence of reputation that had already been timely filed, which made further evidence to complement and support the original evidence appropriate.

The Board considered that the further evidence of reputation should have been admitted, and overturned the Opposition Division's finding on that point.

Water into Wine

Opening the door to this new evidence ultimately changed the course of the case.

The late-filed materials had included a catalogue pre-dating the filing of the opposed application and showing WATERFORD-branded glassware for sale through Harrods, "one of the favourite and more prestigious shopping places in London." The new sales figures relied upon in Ireland and the UK spanned the years 1996 to 2001 and showed inter alia around 8.2 million Euros worth of sales in the UK alone in 1999, the year the opposed application was filed. Finally, and most persuasively, the Board was swayed by the results of a professionally conducted market survey showing total brand awareness of 85% for WATERFORD for glassware in the UK (combining both prompted and unprompted figures). The 33.6% unprompted awareness was twice the spontaneous awareness of any other glassware brand in the UK.

Although the survey had been conducted in July 2000, and therefore after the opposed application was filed in 1999, this did not deprive the survey of evidentiary value as of the filing date since reputation and awareness took time to build. The survey results were therefore regarded as a good indication of the likely position in 1999.Taking these materials into account, the Board found that Waterford had proved a reputation in the UK, which was the second largest member state of the EU in terms of population and was therefore a substantial part of the Community, following the reasoning in the ECJ's earlier decision in Pago International GmbH v Tirolmilch registrierte Genossenschaft mbH (C-301/07). Given the very substantial reputation proved and the fact that wine glasses and wine were used together, it was likely that there would be a link in the public mind between the marks, particularly as Waterford had shown that its WATERFORD mark was actually engraved in its wine glasses. Where marks were likely to be encountered in the same sphere, the required mental link was that much more likely.

Good Vintage for Dilution, Too

The Board then went on to consider unfair advantage and detriment to distinctiveness and repute.

On the latter points first, the Board found that Waterford had submitted no evidence or arguments as to how the ability of the WATERFORD mark to function as an indicator of origin would be undermined or "blurred" by the use of the later WATERFORD STELLENBOSCH Logo. Nor had it filed any evidence or submissions as to how the use of that mark would tarnish the reputation or image of the WATERFORD mark. The Opponent had, really, done no more than to paraphrase the wording of Article 8 (5) and to make bald assertions.

Given the ECJ's finding in Intel Corporation, Inc. v CPM United Kingdom Ltd. (C-252/07) that proof of detriment to distinctiveness required proof that the use of the later mark would result in a change, or a serious likelihood of a change, in the economic behaviour of consumers, there could be no finding for the Opponent in the absence of persuasive evidence or submissions on that point.

Waterford's submissions on unfair advantage were no more detailed, but, critically, the Board was not hobbled by Intel on this point. It observed that in the case of marks with very substantial reputations, a future, non-hypothetical risk of unfair advantage "is so obvious that the opposing party does not need to put forward and prove any other fact to that end." The substantial reputation enjoyed by the WATERFORD mark, the close similarity of the marks at issue, the complementarity of the goods and the fact that the consumer was likely to encounter them both at the same time all combined to make it likely, in the Board's view, that the use of the later mark would benefit unfairly from the reputation and investment in promotion of the WATERFORD mark for wine glasses. The Board of Appeal therefore found for Waterford, and rejected the application.

Comment

This case is a cornucopia of issues, but for many the richest harvest is the affirmation that OHIM can and indeed should accept further submissions and evidence on reputation at the evidence in reply stage, especially when the original evidence has been criticised by the other party to the case.

This ruling is important. Serious adversaries typically do challenge the other side's evidence in CTM proceedings, and parties therefore commonly rely on the evidence in reply stage to bolster facets of a case that have been attacked or undermined. If the Board of Appeal had decided the other way, the evidence in reply stage would have emerged as of very limited use, and hardly a true opportunity to reply to all points made. The lack of a consistent approach to evidence in reply meant that it was becoming difficult to predict whether it would be accepted in whole, in part or even at all. This decision in WATERFORD will hopefully go some way toward redressing that.

Following this decision, the admissibility of further evidence of reputation at the evidence in reply stage should be assessed by asking first whether it is truly evidence in reply, and, if not, whether it should nonetheless still be admitted because new factors have emerged, such as unexpected criticisms advanced by an adversary, that make its filing appropriate. Parties seeking the exercise of this discretion may also wish to draw out how the new evidence is relevant, supportive and not prejudicial to the conduct of the case (eg, its admission will not unduly delay a decision). Parties seeking to rely on such new evidence should make these principles the lynchpin of their submissions in favour of admissibility. Moreover, submissions on admissibility should accompany the evidence; there is no guarantee that OHIM will ask for them, nor are the arguments in favour necessarily as obvious as parties might think. 
As for the other issues arising from this case, the confirmation that the UK is a substantial part of the EU for the purposes of proving the reputation of a CTM is no surprise given that Austria, which is economically less significant, has already been recognised as a "substantial part" of the EU in Pago. 

More notable, though, was the Board's approach to the question of dilution. The recent BOTOX cases before the General Court, covered elsewhere in this issue, show that the approach taken in WATERFORD is by no means assured, since in the BOTOX cases the Court upheld pleas of blurring despite the dearth of evidence of any likely change in consumer economic behaviour. The Board of Appeal's more rigid insistence on such evidence in WATERFORD may be unattractive to those pressing CTM dilution claims, but it seems more in line with Intel and therefore less vulnerable to being overturned on appeal. Ultimately, proving unfair advantage is more straightforward than proving blurring of distinctiveness, and WATERFORD shows that a case based on unfair advantage can be achieved based on evidence of reputation and submissions alone.  

Even though blurring is a tough case to win, though, WATERFORD does offer some salient advice to would-be dilution claimants: keep the registers clean. In WATERFORD the Board was influenced by the existence of numerous conflicting marks on the UK Register, which the Opponent had not challenged. The Board concluded that the Opponent had not actively defended its rights against encroachment and dilution. The Board was consequently sceptical as to how the opposed mark could cause the type of damage alleged. 

Owners of marks with a reputation, therefore, cannot afford to sleep on their rights. Failing to fend off marks that come too close, both in the marketplace and on registers, can eventually strip a well-known brand owner of its ability to do so in future. Watch services and marketplace vigilance help immensely, but it is ultimately the action taken that counts. Timely action against a few scattered instances is often cheaper and easier than dealing with many infringers at once. Essentially, with great power comes great responsibility-a principle to which Waterford itself might now raise a glass.