Under Articles 9(1)(b) & (c) of the CTM Regulation and Sections 10(2) & 10(3) of the UK Trade Marks Act, a trade mark owner has a right to prevent all third parties, not having his consent, from using a sign which is identical with or similar to his mark in relation to goods and/or services covered by his registration, where there exists a likelihood of confusion, including the likelihood of association between the signs, or where his ark has a reputation in the Community and where use of the later sign would, without due cause, take unfair advantage of, or be detrimental to, the distinctive character or repute of the earlier mark. In the case of Okotoks Ltd v Fine & Country Ltd ( EWCA Civ 672), the Court was asked to consider how close is too close to a competitor's brand.
Since 2001, Fine & Country Ltd (F&C) provided licences to independent estate agencies to use the name FINE & COUNTRY, alongside their own business names, to market upper end real estate properties. F&C had seventy nine licensees using its FINE & COUNTRY brand in forty one stand-alone F&C offices, as well as fifty six dual branded offices, in the UK. In addition, it also had fifty seven offices overseas. The company had won numerous professional awards and had ranked consistently at the top of the list of UK real estate agents, with the largest number of sales of upper end properties, and the largest number of these types of listings on its books.
By contrast, Okotoks (who were better known under the name haart) historically targeted lower end real estate properties. However, in 2009, Okotoks decided it wanted to break into the upper end real estate market and launched a brand called finehaart. This was ultimately abandoned, since the new name still had an association with haart and the sale of low end properties. Having been aware of the success of the FINE & COUNTRY brand, and working with a former employee of F&C, Okotoks decided instead to adopt the name FINE, together with the strap line Selling fine homes throughout the country. At the time of adopting the FINE brand, Okotoks were well aware of the reputation of the FINE & COUNTRY brand, as well as the risk associated with "living dangerously" close to F&C's brand.
When you live dangerously, you can get burnt, so it was no surprise that F&C sued Okotoks, claiming that their use of the word FINE, in relation to estate agency services, constituted passing off and/or trade mark infringement of F&C's CTM and UK trade mark registrations for FINE & COUNTRY.
On passing off, Okotoks argued in its defence that the claimant did not meet the first requirement of a passing off action, namely, that F&C did not own the goodwill in the FINE & COUNTRY mark, as it was a dormant, non-trading company. However, on the basis that the parent company of F&C, GPEA Ltd, was, in substance, the entity granting the licences to use the FINE & COUNTRY brand, the High Court held that the goodwill in the mark had attached to the business (rather than to the individual licensees). By being a franchisee, F&C was not entitled to a share in the goodwill which attached to the FINE & COUNTRY name. So long as the relationship existed between F&C and GPEA Ltd, and GPEA Ltd had not abandoned control of the business, the goodwill attached to GPEA Ltd. The Court further found that the FINE marks were likely to confuse and deceive the public and that there was a realistic risk of damage in the future to the FINE & COUNTRY marks.
It was further argued by Okotoks that the word "fine" was commonly used in the real estate field and that the word should be free for all traders to use. The Court did recognise here that, if a common word in the trade were adopted, there would need to be a tolerated level of deception. However, in the present case, passing off was established, based on the fact that the Judge found that Okotoks' use of FINE contained similar font, capitalisation and underlining. The additional use of the strapline ensured that Okotoks' use gave a similar overall impression to that of F&C's FINE & COUNTRY mark.
In relation to trade mark infringement, Okotoks raised a defence under Article 12(b) of the CTM Regulation (the equivalent of Section 11(2)(b) of the UK Trade Marks Act), claiming that F&C was trying to monopolise a descriptive word (‘fine'), and counterclaimed for the invalidity of the registered mark. They considered that the FINE & COUNTRY mark was primarily descriptive of the kind of properties on offer or was laudatory of the quality of those properties, or both. Again, the Court found in favour of F&C and held that the registered mark was distinctive, both inherently and on the basis of acquired distinctiveness. It followed, in the Court's view, that the mark was "sufficiently distinctive to have warranted and continue to warrant registration". In addition, the Court held that the registered mark had a "recognised separate existence apart from the descriptive and laudatory nature of the words themselves".
In the end, the Court was not swayed by Okotoks' arguments and held that their use of the word FINE amounted to passing off and trade mark infringement. Okotoks appealed to the Court of Appeal.
After an assessment of whether or not the High Court had erred in interpreting the law, the Court of Appeal dismissed all of Okotoks' grounds of appeal and upheld the decision that Okotoks' use of FINE for estate agency services was indeed both passing off and trade mark infringement of Fine & Country's rights in the FINE & COUNTRY mark. The main issues dealt with in the Court of Appeal's decision merely served to confirm the judgment of the High Court.
This decision reminds us that a licensor (or even a franchisor) can bring a passing off claim, despite the fact that they are providing related services to those of their licensee (franchisee). Ultimately, if there is damage or potential damage to the image of a brand, it follows that the ability to attract licensing fees will also be damaged. Instead of letting a Court decide, it is clearly far better to state explicitly in a license agreement which entity shall own the goodwill. This point may also be relevant when conducting trade mark availability searches and considering the ongoing validity of the registrations identified. It seems, from this case, that it will not be as easy to discount a licensor's and/or franchisor's rights in a registration and, as such, great care should be taken before giving the "all clear" signal.
It is also noteworthy to mention that, although the word "fine" could be seen as descriptive and laudatory, since the FINE & COUNTRY mark had acquired distinctiveness through use, the scope of protection was wider than it would normally be for descriptive terms.
The lesson here is not to live dangerously close to a competitor's brand. Find your own distinctive name and build your own reputation. By doing so, you won't face the damaging and expensive consequences faced by Okotoks in this case.