UK COURT DIARY

Honestly Not Infringing: The Parameters of the “Own-Name” Defence

Although the use of one’s own name is not necessarily a defence to passing off, it may avoid a finding of trade mark infringement. The parameters of the defence under S. 11 (2) (a) of the Trade Marks Act 1994 are still developing, however, particularly on the question of who may invoke the defence and in what circumstances. Some clearer principles are, however, beginning to emerge.

 

Whose name?

According to Article 6 (1) (a) of the E.U. Trade Marks Directive, on which S. 11 (2) (a) is based, “The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade…his own name or address…provided he uses them in accordance with honest practices in industrial or commercial matters.”

It is unclear from that provision, however, whether companies as well as private individuals can invoke the defence.

The preferred view of the English courts, as expounded by Lord Nicholls in Scandecor Developments v. Scandecor Marketing ([2001] 2 CMLR 30) is that companies are entitled to this shield. Although the U.K. courts have followed this approach, the issue is not regarded as acte clair, and the House of Lords referred a question on this point to the ECJ in Scandecor. The case was settled, however, and the question never answered.

Nevertheless, recognition of the ability of companies to invoke the protection of this provision seems right. Trade mark law is designed for commerce, and the vehicle for most commerce is the company or partnership, entities going beyond the sole trader. In the recent case of Reed Executive plc & Another v. Reed Business Information Ltd. & Others (3 March 2004), the Court of Appeal agreed, noting that it would be outrageous if a private individual were able to take advantage of the defence, but would lose it upon incorporation.

Unless and until the ECJ rules differently, therefore, the English courts are likely to grant the own-name defence to companies as well as to private individuals.

 

What is honest use?

“Any fear that dishonest people might form companies with misleading names so as to take advantage of the defence is easily removed by the use of the proviso,” ruled the Court of Appeal recently in Reed. “Such a deliberate attempt to avail oneself of another’s mark would not be honest practice.”

The certainty of this statement is apt for the case of deliberate commercial disguise, but it belies the difficulty in assessing what honest practices are in other, less clearcut circumstances. The issue has long been debated by the courts. Thorny questions include whether the use of one’s own name can be regarded as honest if it is presented or perceived as a trade mark; whether the use can be regarded as honest if it gives rise to confusion; and, if so, whether the defence still applies where the defendant has become aware of significant confusion, but continues with the use.

In Reed, the Court of Appeal considered these issues in detail. It observed that even trade mark use, or use intended to indicate origin, had been regarded as being within the scope of the own-name defence in Premier Luggage v. Premier Company ([2003] FSR 5). The ECJ confirmed this view in Gerolsteiner Brunnen v. Putsch (Case C-100/02, reported in Make Your Mark, Spring 2004), where the question of whether use was “as a trade mark” or not was regarded as irrelevant to whether the Article 6 (1) defences could apply.

Also in Gerolsteiner, the ECJ laid down guidance for interpreting “honest practices.” It held that the defendant’s duty was “to act fairly in relation to legitimate interests of the trade mark owner” and to avoid the perception that it was “unfairly competing.” In that case, mere aural confusion was unlikely on its own to rebut a claim to honest practices, particularly given the practical risk of phonetic similarities in a common market of 25 member states. Therefore, the mere fact that some confusion is arising will not of itself mean that a defendant is not acting honestly.

How much confusion is needed, then, to take a defendant’s use of its own name outside the scope of honest practices? The Court of Appeal regarded this as a question of degree, and of whether the confusion actually amounts to unfair competition. To do this, significant actual deception is needed; mere possibilities of deception are unlikely to be enough, as the Court considered that these can be lessened or even avoided altogether by the use, for example, of different trade dress.

What, however, of the case where a defendant is aware that he is causing confusion, or even commences use in the knowledge that confusion is likely? There has as yet been no ECJ guidance on these points. Previously the English courts had considered that honest practices had to be assessed objectively, asking “would a reasonable defendant, knowing all the facts, expect confusion?” The reasonable defendant was likely to have armed himself with the relevant information first, by searching the registers and making reasonable investigations into earlier marks to determine whether they had acquired reputation or goodwill (Cable & Wireless v. BT [1998] FSR 383 at 391).

In Reed, however, the Court of Appeal preferred a more straightforward test of simple causation. Under it, even an honest defendant will be outside the scope of the defence if he in fact causes significant deception, even if he did not know about the confusion or the risk. Legal honesty and actual honesty are not the same thing.

 

 

Comment

 

It is clear from these cases that the requirement to assess “honest practices in industrial or commercial matters” goes beyond a mere assessment of “honest use.”

Nevertheless, the principles in this area are still developing. In the recent High Court decision in International Business Machines Corp. v. Web-Sphere Ltd. (17 March 2004), the defendant changed its company name to one incorporating a mark identical to the claimant’s registered mark, after the claimant had begun its well-publicised activities. There was nothing to rebut the strong inference that the defendant had chosen its new name in order to take advantage of the reputation accruing in the claimant’s mark.

In this case, curiously, the High Court was also influenced by the absence of any evidence that the defendant had searched trade mark registers or made other enquiries prior to changing its company name, that would have armed it with the information needed to make a reasonable decision as to whether confusion would be likely. The court also observed that there was identity of goods, and no evidence that the defendant had taken any steps to minimise the risk of confusion. Both these points are outside the scope of the pure causation approach laid down by the Court of Appeal, and suggest that the temptation to view honest practices in accordance with the actual honesty of the defendant remains.

No doubt the subjective intent of the defendant is an essential consideration. A defendant may adopt a company name in the desire to take advantage of the reputation of another, but may for reasons beyond his control fail in his objective. Nevertheless, if the mark holder were to sue for infringement, it is difficult to imagine a court upholding a defence based on honest use of a company name, because the defendant’s personal intentions in adopting the name were not honest. Therefore, simple as the causation test may be, other subjective factors are likely to continue to be relevant.

The finding that trade mark use, or use intended to indicate origin, is within the scope of the own-name defence is right, given that the primary purpose of the use of a company name in the course of trade is to identify the origin of goods or services. If the defence did not apply in such circumstances, then it is unlikely that many own-name uses would be spared a finding of infringement where they clash with a registered trade mark.