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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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Keeping Competitors at bay

The UK Intellectual Property Office recently found that in spite of a low level of similarity between EBAY and BEAUTYBAY, and the absence of a likelihood of confusion, there was a link between the marks and that the BEAUTYBAY mark took unfair advantage of the reputation in the EBAY mark.
This case (UK trade mark opposition decision no. O-347-14) concerned applications by eBay Inc to invalidate UK trade mark registrations of Dotcom Retail Limited for BEAUTYBAY/BEAUTY BAY (a series of two marks) and BEAUTYBAY.COM in Class 3 for various hair and body care products and in Class 35 for retail services related to the Class 3 products.

On 22 August 2012, two days short of five years after Dotcom’s marks proceeded to registration, eBay applied to invalidate the registrations. eBay argued that Dotcom’s marks had been registered contrary to Sections 5(2)(b), 5(3) and 5(4)(a) of the 1994 Trade Marks Act.

Dotcom defended the invalidation applications and put eBay to proof of use of the earlier marks on which they were relying, namely UK trade mark and CTM registrations for the plain word mark EBAY and ebay (stylised) in Class 35. The Hearing Officer had no difficulty in finding that the EBAY mark had been used for a website which, in his view, was the same as an “online, interactive bulletin board” (as described in their (eBay’s) UK registrations) “for the posting, promotion, sale and resale of items via a global computer network”.

Dotcom claimed that eBay were not entitled to apply to invalidate their marks because they had been aware of the use of the (Dotcom) marks for a continuous period of five years and had acquiesced in their use. There followed a debate over when the relevant five year period of acquiescence commenced. Dotcom argued that it ran from the date of application of their trade marks namely, 8 December 2006. eBay claimed that the period commenced after the registration of the marks. The Hearing Officer agreed with eBay and, as Dotcom’s marks were registered for just under five years before the date of the invalidation applications, it was found that eBay had not acquiesced.

Key points that came across in eBay’s evidence in support of their invalidation applications were:

-    their ebay auction website had been operating since 1996, ten years before Dotcom filed their trade mark applications;
-    the number of registered users of the ebay site rose from 12000 in 1996 to 133 million worldwide by 2006 when the BEAUTYBAY applications were filed;
-    one of the 9 categories of goods sold through eBay’s website was ‘Jewellery& Beauty’;
-    eBay’s advertising and promotional expenditure was substantial;
-    eBay had acquired independent recognition of their brand – the EBAY brand was ranked highly in reports from brand evaluation organizations including Interbrand and BRANDZ and well-known retailers had established ‘storefronts’ on the ebay website.

Dotcom’s evidence comprised a witness statement from its founder, MrGabbie who claimed that the ‘BAY’ element of his company’s mark was a reference to the place where goods are stored or sold, e.g. shelving bays in warehouses and gondola bays which are found in retail stores. The Hearing Officer was not convinced by this argument because most of the uses of ‘bay’ had nothing to do with on-line stores and the term ‘gondola-end bay’ was unlikely to be familiar to the general public.

When Dotcom first started trading as Beautybay in 2005, the ‘bay’ element of the name was highlighted as shown below: 
By the time of the hearing of the invalidation applications in 2014, Dotcom had altered its trading style as follows: 

By now, Dotcom’s business was well-established.

The Hearing Officer accepted Dotcom’s claim that eBay’s business was still regarded primarily as an auction website in 2006 when Dotcom applied to register the BEAUTYBAY marks, whereas Dotcom was an authorised distributor of fixed price products. Dotcom acquired their own goodwill and recognition over the years, but was this recognition due to a link in the minds of the relevant consumers with eBay?

MrGabbie claimed that beautybay.com had 310K followers on Facebook and 15K followers on Twitter. Dotcom’s suppliers included leading beauty product manufacturers, L’Oreal, LVMH & Elemis who, according to MrGabbie, would cease supplying Dotcom with their products if they were sold via ebay. He supplied extracts from agreements with some suppliers in which it was stated that selling via ebay or Amazon is prohibited or discouraged. It appeared Dotcom had acquired their own industry recognition. However, the Hearing Officer considered that the reference to eBay by Dotcom’s suppliers was a point in favour of eBay, not Dotcom, because it supported eBay’s concerns about a connection in the mind of the relevant consumers between the Beautybay site and eBay’s business.

Dotcom was not a competitor of eBay because they sold goods (albeit generally not own branded goods) for which they were responsible, whereas eBay provided a channel through which a variety of manufacturers’ goods could be auctioned (and in later years, sold for fixed prices) without endorsement. The Hearing Officer accepted this distinction between the services covered by eBay’s registrations (“providing an online, interactive, bulletin board for the posting, promotion, sale and resale of items via a global computer network”) in Class 35 and the beauty goods in Class 3 and related retail services in Class 35 of Dotcom’s registrations. However, the method of use of the services was the same in so far as both parties’ services involved buying goods online.

Furthermore, the services were held to be complementary to the extent that an online retailer like Dotcom could use the services of eBay to bring their goods to a wider audience. The Hearing Officer concluded that there was “an average degree of similarity between the respective services in Class 35”. In his comparison of eBay’s Class 35 services with Dotcom’s Class 3 goods, the Hearing Officer referred to Oakley Inc. v Venticinque (O Store; T-16/06) in which the General Court held that retail services for particular goods might be complementary to those goods. However, in the Hearing Officer’s view, the provision of an online, interactive bulletin board was not the same as providing retail services and the service of providing an online bulletin board through which goods could be bought and sold was not complementary to the goods themselves. The Section 5(2)(b) ground for invalidation of Dotcom’s registrations therefore failed insofar as the Class 3 goods were concerned.

The Hearing Officer then turned to the marks and found that there was a low degree of visual and aural similarity between them.
 However, he held that there was “an immediately noticeable level of conceptual similarity between the respective marks when compared as wholes”. Furthermore, the EBAY mark possessed an enhanced distinctiveness as a result of the extensive use made of it. Even so, in the assessment of likelihood of confusion, these factors were not enough to outweigh the low degree of visual and aural similarity between EBAY and BEAUTYBAY and the only average level of similarity between the Class 35 services of the respective marks.

eBay’s counsel argued that, in accordance with the judgement of the CJEU in Specsavers International Healthcare v Asda Stores, account should be taken of the reputation of eBay’s marks in a particular colour scheme and the possibility that Dotcom’s marks could be used in a similar colour scheme.

However, in the Specsavers case, there was evidence that the defendant used its signs in colours that had become associated with the claimant’s marks whereas there was no such evidence in the present case. The Hearing Officer stressed that care must be taken when considering hypothetical uses of the later mark in determining what constitutes normal and fair use of that mark (for the purposes of assessing the likelihood of confusion) and “artificially contrived” use should not be taken into account.

There was no likelihood of direct confusion (where one mark is mistaken for another) between EBAY and BEAUTYBAY. Furthermore, there was no likelihood of indirect confusion, as described in L.A. Sugar v By Back Beat, because “BAY” – the common element of the marks –  was not so distinctive that it was unlikely to be associated with anyone else and the BEAUTY element of the BEAUTYBAY marks did not imply that BEAUTYBAY was a sub-brand or a brand extension of EBAY. Consequently, the Section 5(2)(b) ground for invalidation of the Dotcom registration in Class 35 was also rejected.

Moving on to the Section 5(3) ground, the Hearing Officer had no hesitation in confirming that, when Dotcom filed their applications in 2006, eBay enjoyed a substantial reputation among the general public in the UK in relation to the services covered by their UK registrations. Taking this and the following other factors into account,

-    the immediately noticeable conceptual similarity between the marks EBAY and BEAUTYBAY;
-    the non-distinctiveness of ‘E’ and ‘BEAUTY’;
-    the highlighting of the ‘BAY’ element in Dotcom’s mark; and
-    the substantial level of business by eBay in the beauty field by 2006,

the Hearing Officer concluded that consumers would have called eBay to mind upon seeing the BEAUTYBAY marks.

Having established a link, it was necessary to consider whether this link would give rise to unfair advantage or detriment. The Hearing Officer referred to Jack Wills v House of Fraser (Stores) which confirmed a previous finding that evidence of a change in the economic behaviour of the consumers of the defendant’s goods or services was necessary to establish detriment to the distinctive character or repute of the earlier mark under Section 5(3). It was necessary to assess whether the link would lead to “a transfer of the image of the EBAY marks or of the characteristics which they project onto the goods and services identified by Dotcom’s marks” and, if so, whether this was likely to lead to an increase in eBay’s sales. The Hearing Officer concluded that there would be no transfer of image but crucially, that the link arising from the query as to whether there was a connection between the parties was likely to increase the number of visitors to the BEAUTYBAY website which would lead to an increase in Dotcom’s sales.

The Hearing Officer found that MrGabbie was influenced by the success of theebay online auction website when he adopted his marks and there was “an element of copying the idea or concept of the EBAY mark”. He found that the BEAUTYBAY website benefited from “the power of attraction of the EBAY mark” and took unfair advantage.

Dotcom did not have due cause to use the BEAUTYBAY sign because they had not been using BEAUTYBAY, or another mark FRAGRANCEBAY, from a date prior to the date of application for registration of the reputed EBAY mark. Consequently, the ground of invalidation based on Section 5(3) succeeded.

Whilst it was clear that eBay had built up a substantial goodwill in their business under the mark, the relevant public had not been deceived by Dotcom’s use of the BEAUTYBAY signs, therefore there was no misrepresentation and so the Section 5(4) ground for invalidation was rejected.

Comment

The low level of similarity between the marks and the goods and services in this case was not enough to give rise to a likelihood of confusion in spite of the enhanced distinctiveness of the earlier mark as a result of the extensive use made of it. However, the EBAY mark benefited from a broader scope of protection as a result of its enhanced distinctiveness and reputation. 
Whilst the compared marks must be “similar” for a Section 5(3) claim to succeed, this case suggests that the similarity threshold may be lower under Section 5(3) than Section 5(2)(b). This case serves as a warning to owners of marks of repute not to assume that the enhanced distinctiveness of a mark will be sufficient to succeed in an opposition/cancellation action based on Section 5(2)(b) against a not very similar mark. Whilst proving reputation and unfair advantage/detriment to the distinctive character/repute of a mark is more onerous than demonstrating a likelihood of confusion, it paid off in eBay’s case.