22 January 2016

High Court rejects trade mark infringement and passing off case relating to taxi shape

The High Court has rejected a claim of trade mark infringement and passing off brought by the London Taxi Company (LTC) in relation to a new model of London taxi currently undergoing trials, the Metrocab. The case is unusual as LTC owns a UK registered design but based its case on its UK and CTMs for the shapes of its Fairway and TX1 and TXII taxis (its UK registered design is for the same shape as that protected by the UK trade mark), and goodwill in those three models, together with the TX4 model.  Alongside Arnold J’s decision on the same day relating to the KIT KAT shape, it is also a reminder of the significant difficulties in obtaining, and enforcing trade marks for shapes and passing off actions based on those shapes.

Key points of interest in the decision

The decision is another lengthy judgment from Arnold J with a number of interesting discussion points. 

Distinctive character

Arnold J concluded that both the UK and CTM lacked inherent distinctive character, as they would be perceived by the average consumer of taxis as merely a variation of the typical shape of a taxi. The average consumer in this case was taxi drivers, and not also members of the public who hire taxis, although he did accept that, when purchasing a taxi, one factor that taxi drivers would take into account was the (perceived) reactions of members of the public to the design.

CJEU case law has confirmed that only a mark which departs significantly from the norm or customs of the sector "and thereby fulfils its essential function of indicating origin" will not be devoid of distinctive character. Jacob LJ (in the Court of Appeal in Bongrain) had interpreted this as meaning that the fact that the shape of a product is unusual is a necessary, but not a sufficient, condition for it to have inherent distinctive character. Arnold J suggested that, at some point, this issue should be referred to the CJEU but it was unnecessary for him to do so in this case.

Neither of the marks had acquired distinctiveness either, a conclusion he reached by applying his judgment in relation to the shape of a KIT KIT (discussed in our bulletin). In KIT KAT, Arnold J said that, to demonstrate acquired distinctiveness, it is necessary to prove that, at the relevant date, a significant proportion of the relevant public perceives the goods or services as originating from a particular undertaking because of the sign in question (as opposed to any other trade mark which may also be present).  

The evidence failed to demonstrate that taxi drivers perceived taxis embodying the shape in the CTM and UK TM as emanating from LTC because of their shapes, as opposed to the conventional trade marks for the products (it is noteworthy that LTC did not rely on any survey evidence – a survey was relied on in KIT KAT, but was not sufficient). As for consumers of taxi services, even if they did fall into the average consumer category, there was no reason why they should care about the origin of the taxis. 

Shape marks: substantial value

The trade marks were also invalid on the ground that they consist exclusively of the shape which gives substantial value to the goods (an objection that cannot be overcome by acquired distinctiveness). Arnold J reviewed the recent decisions of the CJEU in Hauck (re the shape of the Tripp Trapp chair) and the General Court in Simba Toys (re the shape of the Rubik’s Cube), and of the High Court in Sӓmann v Tetrosyl. He concluded that it was the shape itself that must add substantial value to the goods, and that goodwill derived from sales and advertising was not relevant. In upholding the objection, Arnold J noted the policy behind the provision, as identified in Hauck, namely to prevent LTC obtaining a trade mark monopoly in the shape, compared to the 25 year monopoly provided by a registered design.

Revocation of the CTM on the grounds of lack of genuine use

LTC relied on, as genuine use of the CTM, sales and other disposals of used Fairway taxis (having stopped producing the Fairway long before the start of the relevant period). Alternatively, it relied upon substantial sales it had made during the relevant period of its other taxis as being use in a form differing in elements which did not alter the distinctive character of the mark. 

Arnold J noted that whether sales of used vehicles bearing the mark constitutes genuine use of the trade mark is a difficult question of law and will ultimately have to be resolved by the CJEU but, again, he concluded it was not necessary to refer it in this case.  He also noted that there is, as yet, no clear picture on how to interpret the principles in the CJEU's decision in Onel on assessing genuine use in the Community.  In particular, he referred to the recent IPEC decision in Sofa Workshop v Sofaworks where HHJ Hacon said that there must be use in more than one Member State (with a possible exception where the market for the goods or services is restricted to the territory of a single Member State). As discussed in our bulletin on Sofa Workshop, HHJ Hacon’s decision has prompted significant concern amongst owners of CTMs. It is interesting to note that Arnold J refers to the decision being under appeal (and that therefore he would not comment on the merits of the decision).  Also, whilst he said that he found the thrust of the IPEC’s reasoning persuasive, he thought it better not to express the applicable principles in terms of a general rule but rather that the assessment is a “multi-factorial one which includes the geographical extent of the use”.

The conclusion was the sale of used Fairway taxis did not constitute genuine use in the Community: in particular, this activity, even if it was use of the CTM, was merely recirculation of the goods which had already been put on the market under the CTM long beforehand, at a fraction of the price of a new taxi. It therefore did not help to create or maintain a share of the market for vehicles bearing the CTM. As for the substantial sales of the other taxis, the differences in appearance altered any distinctive character the CTM may have had.

Infringement

Assuming the marks were valid, Arnold J would have rejected the trade mark infringement claim based on likelihood of confusion on the assumption the marks had a low distinctive character and there was a low degree of similarity between the marks and the Metrocab (factors which outweighed the fact that the goods were identical, and consumers of taxi services at least would pay a relatively low degree of attention). Whilst there was no evidence of actual confusion, this was not a weighty factor as the Metrocab trial had been on a small scale. He would also have rejected the claim of detriment to distinctive character and unfair advantage.

Honest practices defence

Even if there was infringement, the Defendants could have relied upon the defence that the shape of the new Metrocab was an indication concerning the kind, intended purpose and geographical use of the vehicle, i.e., that it was suitable for use as a licensed London taxi, and that that use was in accordance with honest practices. We discussed honest practices (in the context of the own name defence) in the Maier v ASOS decision in our bulletin; Arnold J noted that the Court of Appeal had not considered his earlier decision in Samuel Smith where he had set out a number of useful factors. In particular, given the nature of the marks, he thought it reasonable that the Defendants had not done a trade mark search.

Passing off

Finally, Arnold J rejected the passing off claim as failing at the first hurdle of not demonstrating that consumers of taxi services relied upon the features of the taxi models as denoting the sources of LTC’s taxis.

He also rejected an allegation of fraud, i.e. that the Defendants intended to deceive the public (i.e taxi passengers as opposed to taxi drivers) as to the origin of the Metrocab by adopting a shape closely resembling the shape of LTC's taxis. The evidence demonstrated that, whilst the Defendants had instructed their design consultants to design a taxi which conformed to the perceptions of the trade and public, and was recognisable as a London taxi, they had not instructed them to update or face-lift the TX4.  

Comment

This case gave Arnold J an early opportunity to apply his ruling in the KIT KAT shape mark decision, but also to consider some other important aspects of trade mark law, namely the substantial value shape objection, genuine use in the Community and the honest practices defence.  Given the significance of these issues,  and also the two areas where he suggested a reference to the CJEU would be necessary in the future (namely, whether it is enough for inherent distinctiveness that a shape is unusual, and whether sales of used products can amount to genuine use), it appears likely that permission will be sought to appeal to the Court of Appeal.

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