UK COURT DIARY

Genuine Use After La Mer

In July, the Court of Appeal ended a well-known legal battle on the meaning of genuine use with its judgment in Laboratoires Goëmar SA v La Mer Technology Inc. ([2005] EWCA Civ 978). In it, the Court examined the ECJ’s guidance on what constitutes genuine use of a trade mark, and, reversing the High Court’s finding, gleaned the principles to be applied when analyzing proof of use in English proceedings.

The Court’s guidance is widely perceived as giving new hope to those relying on de minimis use. Is such optimism, however, justified?

 

Reference to the ECJ

The case centred on an attempt by La Mer to revoke a U.K. trade mark registration for LABORATOIRE DE LA MER in the name of Goëmar, on the ground that there had been no genuine use of the mark in the U.K. for the registered goods within the past 5 years. The registration covered “perfumes and cosmetics containing marine products” in Class 3.

The evidence showed that Goëmar, a French company, had appointed an unrelated distributor in Scotland who placed 5 orders for perfumes and cosmetics containing marine products bearing the mark between 14 November 1996 and 16 May 1997. The orders were valued at around £800 in all, with most being delivered in April 1997. The recommended retail price was between £5 and £30 per item.

There was, however, no evidence that any of the goods had been sold to end-users, and in October 1997 the distributor ceased trading.

The Patent Office had held Goëmar’s use to be genuine, and La Mer appealed to the High Court. The judge referred questions to the ECJ on the correct interpretation of “genuine use,” but the ECJ declined to answer, holding that its earlier judgment in Ansul BV v Ajax Brandbeveiliging BV ([2005] Dh 97) had provided adequate guidance.

In Ansul, the ECJ had ruled that genuine use was use that did not serve solely to preserve rights. More positively, it expounded genuine use as consistent with the origin-indicating essential function of a mark. It must therefore amount to real commercial exploitation, “warranted in the economic sector concerned to maintain or create a share in the market for the goods or services protected by the mark.”

 

The High Court Judgment

On the basis of Ansul, the High Court granted the appeal, finding that there had in fact been no genuine use.

Pivotal to the judgment was the absence of any evidence that the products were ever offered or sold to end-users, and of any advertising or other measures to bring the mark to the attention of end-users with a view to creating market share for the brand. The judge regarded the sales to the Scottish distributor as akin to mere internal use, which was clearly not genuine use under the Ansul criteria.

 

Court of Appeal

In a practical and reasoned judgment, the Court of Appeal examined the Ansul criteria and their application to this case.

In particular, the Court disagreed with the High Court’s finding that sales to an unrelated distributor could be regarded as “internal use.” These were, quite simply, external sales made at arm’s length. They were, moreover, exports to another country. As the result was the transfer of ownership in the goods to an unrelated company, in another country, it was unarguable that the use was “external” rather than “internal.”

Whether the judgment could stand, therefore, depended on whether the importation of very modest quantities of goods into the United Kingdom was sufficient to create market share in the field of perfumes and cosmetics. La Mer argued that it did not, because “market share” related to end-users, to whom the goods had simply never been sold or promoted. For its part, Goëmar asserted that sales to an importer did amount to genuine use, because their purpose was to create a route to the U.K. market. It was purpose, rather than effect, which counted.

The Court was not swayed by Goëmar’s arguments that subjective intention is relevant to whether use is genuine. In its view, the objective circumstances of sales, rather than the purpose or intent of a mark owner, are determinative.

Nonetheless, the Court was persuaded to overturn the judgment of the High Court and to find that genuine use had been shown.

The Court of Appeal found that the High Court had erred in placing too much emphasis on the role of end-users. The ECJ had not specified end-users as the sole market in which relevant market share may be created or maintained. There was also a market in wholesale distribution, involving the sales of foreign products to local distributors in the U.K. There was nothing to suggest that the use was either internal or token, and the sales, albeit modest, to a single importer in the United Kingdom amounted to real commercial exploitation of the mark within that specialist wholesale market.

 

Comment

Goëmar enjoyed good fortune, but at great expense of time and money. It took 5 years to establish that its minimal use was sufficient to sustain its registration. The tiny volume of its sales and the existence of a sole importer who never channeled the goods onto the consumer market made pursuing the challenge worth La Mer’s while. The High Court’s judgment, albeit overturned, illustrates how de minimis use opens up numerous fronts for challengers, which might ultimately win them the case.

The Court of Appeal did not regard “de minimis” use as a helpful or relevant concept for the assessment of genuine use. It considered that any attempt to determine the significance of a given amount of use within a particular market would be difficult, time-consuming and expensive. In its view, Ansul did not require this; all that was needed was an assessment of whether the use was real commercial exploitation sufficient to establish or maintain share in some market, whether wholesale, retail or end-users.

Those who seek to defend registrations based on very minimal use, however, may not derive much comfort from this ruling. The mere fact that small use cannot be discounted is not the end of the case. Minimal use opens up many questions: was the use token? Was it really enough to create or maintain market share, in any kind of market? How much use actually confers a market share? Those challenging de minimis use will find many weaknesses to exploit, and the smaller the proprietor’s use, the more expensive, and the riskier, a case is likely to be.

It is also doubtful that the Court of Appeal has dispensed so easily with the notion that the significance of use within a particular market sector is relevant to determining whether use is genuine. The language of Ansul strongly suggests that market factors such as the nature of the goods are relevant. The ECJ indicated that the assessment of whether use is sufficient to create or maintain market share must be made against the backdrop of the goods or services for which a mark is protected. Although the Court of Appeal expressed displeasure at the prospect of evidence going to the nature of goods and the market in them, nonetheless it is likely to come, with all its attendant costs and complexity.

Those who find themselves defending a non-use claim with very little use may strengthen their hand by showing the tribunal, up-front, how their use suffices to establish a share in the context of the relevant market. They are likely to have scope to do so; cases of de minimis use look set to challenge parties and the courts for some time to come.