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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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Fighting unfair competition in the UK and Germany: an Anglo-German perspective

Are you a brand owner with registered trademark rights? Or do you have a registered design or patent right for your top-selling product? So far so good, that registration certificate is likely to be enough on its own to clear the first hurdle against infringers, that is, proving the existence and ownership of rights. But what if a claimant relies on rights of the unregistered kind? For example, business goodwill, a corporate name, or a reputation in a mark extensively used but never protected through registration?

This arises more often than one might think; certain elements of branding, such as shapes or sounds, are not necessarily easily protected through registration, and sometimes a brand owner only realises that registered protection should be sought after a third party has launched a copycat. In these cases, proving that an enforceable right exists at all, and that the claimant is entitled to assert it, suddenly emerges as a threshold Fighting Unfair Competition in the UK and Germany: An Anglo-German Perspective By Angela Fox requirement for the ability to bring an action. A would-be claimant who fails to clear this obstacle will not leave the starting gate.

Actions under the law of passing off in the UK and unfair competition in Germany therefore involve more complex evidential questions from the start than ordinary trademark, design and patent infringement matters. Nonetheless, the courts in both countries have provided useful guidance on how the owners of unregistered rights can prove them in enforcement proceedings, and thereby act effectively and decisively against third parties who trade unfairly on the back of a brand owner’s investment or an owner of a product with an unusual construction or shape. An understanding of how to bring such actions successfully is essential to a strong IP protection strategy in Germany and the UK, two of the most commercially important jurisdictions in Europe.

United Kingdom

In the United Kingdom in particular, a successful action in passing off requires a basic grasp of two important concepts. First, an action under the law of passing off does not protect a right per se, or even a reputation, but rather business goodwill situated in the UK. Second, mere association between two brands is not necessarily determinative of the claim; rather, a defendant’s actions must amount to a misrepresentation, amounting to deception, that the defendant’s goods and services are those of or are somehow related to or authorised by the claimant.

Under passing off, what the law is protecting is a business owner’s property right in goodwill in the UK, which is defined in case law as “the attractive force that brings in custom”. It is not enough, though, for a brand name, get-up or other brand insignia to be known to consumers in the UK. There must be customers in the UK who are capable of availing themselves of the claimant’s goods and services in the UK. In Hotel Cipriani SRL v Cipriani (Grosvenor Street) Ltd. [2010] EWCA Civ 110, the claimant’s hotel was in fact in Italy, but customers were able to make bookings by telephone from the UK and through UK travel agents. A mere reputation among English consumers, who are only able to avail themselves of the goods or services abroad, might not be sufficient to give rise to actionable goodwill in the UK. The Court of Appeal in Cipriani regarded the question as arguable, but did not need to decide it in order to find that the claimant in that case had goodwill.

How does a business demonstrate that it owns actionable goodwill in the UK? Clearly evidence that it has customers in the UK and has been trading there for a particular length of time under or by reference to the relevant brand insignia is relevant. But a claimant must show something more, namely that its insignia - name, get-up, product or pack shape or other feature - functions as something that attracts customers and tells them that those products and services emanate from or are associated with a particular trade source. Evidence of extensive trading, methods of and investment in advertising and promotion, and size and scale of the business under the relevant brand insignia are all relevant to the assessment.

It is also important, however, to establish goodwill in the relevant business sector. While it is not unknown for passing off cases to succeed where a defendant trades in a different business field entirely, it can be far more difficult to prove the required misrepresentation in such circumstances. In Robyn Rihanna Fenty v Arcadia Group Brands Ltd. (t/a Topshop) [2013] EWHC 2310 (Ch), the claimant Rihanna enjoyed substantial goodwill in respect of entertainment services - but the evidence showed that she was also a “style leader” in the world of fashion, who had used her name and logo in respect of authorised articles of clothing and whose name when seen in relation to clothing would be understood as denoting a Rihanna-endorsed product or authorised Rihanna merchandise. The High Court found that Topshop’s sale of t-shirts bearing an unauthorised image of Rihanna amounted to passing off.

Survey evidence can also significantly strengthen a case in passing off where it demonstrates that a statistically significant segment of the relevant consumer universe associates a brand name, get-up or the like with a particular trade source. In Enterprise Holdings Inc. v Europcar Group UK. [2015] EWHC 17 (Ch), survey evidence showed that the Enterprise “e” logo had an enhanced distinctive character and was associated with the claimant by significant proportions of respondents. The court went on to find that Europcar, in adopting a similar logo, had committed acts of passing off. Germany Alongside registered and unregistered IP rights, Germany has a long tradition of protection against imitations or plagiarism through her Unfair Competition Law (“UWG”). The basic provision for the protection against unfair imitations is now in § 4 No. 3 UWG (the former identical provision was in § 4 No. 9 UWG). This provision grants protection if the provider of imitations:

(a) causes avoidable deception of the purchaser regarding their commercial origin, or

(b) unreasonably exploits or impairs the assessment of the imitated goods or services, or

(c) has dishonestly obtained the knowledge or documents needed for the imitations.

This protection under German law has not such a strong focus on brand names as in the UK. One reason for this difference might be the broad protection German Trademark Law gives to unregistered trade names like company names or work titles, in addition to registered trademarks. But if the focus of an imitation primarily refers to the layout of a product packaging, in most cases it is only possible to claim protection against this imitation by Unfair Competition Law. And even if the infringer uses a different trademark branding on the imitated packaging, this must not necessarily eliminate the deception regarding the origin of the products (BGH, decision of 2/4/2009 – I ZR 144/06 – Knoblauchwürste). However, there are a number of facets of this protection which are not expressly set out in the legal code but have been developed by the German jurisdiction over decades and adjusted from time to time.

With regard to confusion, the mere fact that some consumers, or even a significant number of consumers, are caused to wonder whether there might be a connection between a defendant and a claimant for the required misrepresentation to be shown. There has to be more than that—there must be actual deception, or a likelihood of it, for a case in passing off to be made out. Moreover, the question is whether ordinary consumers, purchasing with ordinary caution, are likely to be misled—not whether only a so-called “moron in a hurry” would be confused. So, it is necessary to consider who the average purchaser is, and the ordinary circumstances in which he or she makes a purchase.

Survey evidence on whether consumers are likely to be confused has fallen out of favour before the English courts, who typically regard confusion as a factual question which judges are normally well-equipped to decide for themselves. The best evidence of misrepresentation is in the form of witnesses who have in fact been confused, and witness gathering exercises carried out on the basis of customer service records, which may uncover real instances of confusion, can provide extremely powerful evidence of passing off. Where there has been a substantial period of coexistence without any known instances of confusion, a claimant may have a steeper hill to climb. However, in general the mere fact that there is no evidence of actual confusion does not mean that a court will decline to find passing off, since there are many reasons why instances of confusion may not have come to light.

Germany

Alongside registered and unregistered IP rights, Germany has a long tradition of
protection against imitations or plagiarism through her Unfair Competition Law
(“UWG”). The basic provision for the protection against unfair imitations is now
in § 4 No. 3 UWG (the former identical provision was in § 4 No. 9 UWG). This
provision grants protection if the provider of imitations:

(a) causes avoidable deception of the purchaser regarding their commercial
origin, or

(b) unreasonably exploits or impairs the assessment of the imitated goods or
services, or

(c) has dishonestly obtained the knowledge or documents needed for the
imitations.

This protection under German law has not such a strong focus on brand names as in the UK. One reason for this difference might be the broad protection German Trademark Law gives to unregistered trade names like company names or work titles, in addition to registered trademarks. But if the focus of an imitation primarily refers to the layout of a product packaging, in most cases it is only possible to claim protection against this imitation by Unfair Competition Law. And even if the infringer uses a different trademark branding on the imitated packaging, this must not necessarily eliminate the deception regarding the origin of the products (BGH, decision of 2/4/2009 – I ZR 144/06 – Knoblauchwürste).

However, there are a number of facets of this protection which are not expressly set out in the legal code but have been developed by the German jurisdiction over decades and adjusted from time to time.

The manufacturer of the original product must show the individual and distinctive character of the original (so called “wettbewerbliche Eigenart”). This is an unwritten precondition developed by the judiciary. In most cases it is sufficient that the product layout or shape differs from other comparable products on the German market. As the original manufacturer must provide this information in court proceedings, it is recommended to gather details concerning the shape, design or technical features of other competitor’s products from time to time.

The protection under Unfair Competition Law furthermore requires a certain minimum awareness or recognition of the product on the German market. The awareness of the product on foreign markets is not sufficient to claim protection against the imitation on the German market (BGH, decision of 9/ 10/2008 – I ZR 126/06 – Gebäckpresse). Protection against imitation by Unfair Competition Law exists alongside the protection of IP rights (OLG Düsseldorf, decision of 31/01/2012 - I-20 U 175/11 – Apple v Samsung – Galaxy Tab) and can even be claimed if a corresponding IP right has expired (BGH, decision of 22/1/2015 – I ZR 107/13 – Exzenterzähne). In particular, if a patent or design right will expire in the foreseeable future and the corresponding product is still a top-seller, the owner should prepare for the protection of this product by Unfair Competition Law in due time by gathering all information about the recognition of its own product and its specific characteristics compared to the rest of the market.

But even if you think you have strong legal protection for your product against the infringement of IP rights or the imitation of your product, you must act carefully by means of warning letters. For example, there has been a recent trend for IP right owners to try to stop the distribution of the infringing products on internet market places like Amazon by informing the provider about the infringement, rather than attacking the alleged infringer or imitator directly. This is typically done without warning to the primary originator of the product. In this case the owner of the IP right must give all necessary information concerning the IP rights and the alleged infringement of these rights to the provider of the market place (LG Düsseldorf, decision of 11/2/2014 - 4a O 88/12). Otherwise the supposed infringer is allowed to claim for protection against the unfair obstruction by the IP right owner.

At Maucher Jenkins, we have, for example, successfully defended our client, Pearl GmbH, by obtaining an injunction from the Düsseldorf district court against a US company, who had German utility models for certain 3D printing devices and who engaged in the practice of making overstated complaints of IP infringement to Amazon to block Pearl’s products from being sold through that company. We brought forward evidence before the Court that that the US company’s utility models were limited in ways that did not read onto Pearl’s products and that the US company concealed essential facts regarding the scope and validity of their rights when filing their complaint with Amazon. The District Court of Düsseldorf, the leading court for patent infringement proceedings in Europe, issued an injunction against the US company, which has now been recognized by the latter as final settlement.

Written by Angela Fox and Michael Nielen, Partners

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Monday, September 5, 2016