Initial interest confusion recognized by the English courts

Authors: Peter O'Byrne and Ben Allgrove (Baker & McKenzie LLP)

Och-Ziff Management Europe Ltd and Anor v Och Capital LLP & Ors [2010] EWHC 2599 (Ch), 20 October 2010

Journal of Intellectual Property Law & Practice (2011) doi: 10.1093/jiplp/jpq202, first published online 27 January 2011

Confusion prior to sale of services or goods has been recently accepted by the High Court of England and Wales as actionable in passing off and trade mark infringement, materially expanding the scope of these causes of action in English law.

Legal context

Under Article 9(1)(b) of the Community Trade Mark Regulation (207/2009/EC) (CTMR), holders of a Community trade mark (CTM) can prevent others from using a similar sign for similar goods or services to those for which the CTM is registered and which causes a likelihood of confusion among the relevant public. The CTMR also provides for infringement to be established under Article 9(1)(a) where a sign identical to a CTM is used for identical goods, and under Article 9(1)(c) which provides for owners of CTMs with a reputation to prevent use of a similar sign for any goods or services where such use without due cause among other things is detrimental to the distinctive character or the repute of the CTM. There are various defences to infringement, including under Article 12(a) where a defendant uses its own name or address in accordance with honest commercial practices.

Further, under the English law tort of passing off, goodwill can be protected where the following three elements are established (Reckitt & Colman v Borden [1990] 1 WLR 491, 499):

• Goodwill: the claimant must establish that he has goodwill in the market in respect of his goods and services and that he has established that goodwill through the use of distinguishing feature(s).
  
• Misrepresentation: the defendant must have made, or engaged in conduct which amounts to, a misrepresentation that leads (or is likely to lead) relevant members of the public to be confused about the trade origins of the goods or services in respect of which the misrepresentation is made.
  
• Damage: the claimant must have suffered, or be likely to suffer loss or damage as a result of that confusion

Before the present case, the position in English law was that the confusion required by the second limb was confusion at the point of sale.

Facts

The present dispute arose in the financial services industry. Och-Ziff Management Europe Ltd was a global asset management group founded in 1994 and had relevant CTM registrations for OCH-ZIFF and OCH. Och Capital LLP was subsequently established by a Mr Ochoki and was in the very early stages of commencing business as an investment house when Och-Ziff commenced proceedings for trade mark infringement and passing off. Arnold J concluded that Och Capital had infringed both the OCH-ZIFF and OCH CTMs under Article 9(1)(b) CTMR and by passing off, but dismissed infringement claims under Article 9(1)(a) and (c). In so ruling the Court dismissed Och Capital's arguments that it had an own-name defence under Article 12(a).

Analysis

Initial interest confusion in trade mark infringement

The High Court reviewed comprehensively the law in relation to initial interest confusion, which the International Trade mark Association defined as:

a doctrine which has been developing in U.S. trademarks cases since the 1970s, which allows for a finding of liability where a plaintiff can demonstrate that a consumer was confused by a defendant's conduct at the time of interest in a product or service, even if that initial confusion is corrected by the time of purchase.

Reviewing the US case law, including the central cases of Brookfield Communications, Inc v West Coast Entertainment Corp 174F. 3rd 1036 (9th Cir., 1999) and Grotrian, Helfferich, Schultz., Th. Steinweg Nachf. v Steinway & Sons 523 F2d 1331 (2nd Cir., 1975), the Court concluded that the doctrine is ‘increasingly accepted’ in US law but controversial in application and scope. Classically the cases are successful in so-called ‘bait and switch’ scenarios where a competitor's trade mark is used to attract a consumer whom the trader can then try and switch to the trader's own product. The High Court had recently indicated the potential for the doctrine to cross the pond into English law in Whirlpool Corp v Kenwood Ltd [2008] EWHC 1930 (Ch), where it accepted that this classic bait and switch activity can be prevented under Article 9(1)(b).

Och-Ziff was, however, arguing more broadly that, for trade mark infringement requiring a likelihood of confusion, initial interest confusion should be actionable under Article 9(1)(b). Given that the potential infringing acts in the CTMR included use in advertising it was clear that the relevant likelihood of confusion could occur pre-sale. Further, recent Court of Justice of the EU case law supported its case. The Court agreed with this view: an advertisement causing confusion is clearly capable of causing damage to the trade mark owner even if there is no confusion at the point of a later sale. Even without diversion of sales, a confusing advertisement may tarnish the reputation of the trade mark owner's goods, and may dilute the distinctiveness of its brand.

Initial interest confusion in passing off

Having concluded there was likelihood of confusion for CTM infringement purposes, the High Court ruled that initial interest confusion was also actionable in passing off. The Court adopted with approval an analysis from Professor Wadlow, emphasising that the principles underpinning passing off held good whether or not the misrepresentation was made deliberately or innocently:

• There can be passing off with liability for substantial damages merely by advertising goods for sale, even if none are in fact sold.
  
• There are few a priori limits on what the misrepresentation causing damage to the claimant's goodwill may be or how the damage may arise. The case in which the defendant's goods are sold as and for the goods of the claimant is only a ‘special instance of a more general rule’.
  
• Bait & switch selling involves a process in which the making of the misrepresentation is an essential step and can arise from a misrepresentation even if the deception has been dispelled by the conclusion of the transaction.
  
• The general principle is that, if the defendant successfully induces the public to do business with him by making a misrepresentation, it ought not to matter that the falsity of the representation becomes apparent at some stage and there is no confusion at the point of sale.

The result is that, according to Arnold J at least, initial interest confusion can constitute an actionable misrepresentation in passing off, but Och-Ziff still needed to establish that damage resulted to its goodwill. The Court concluded that damage to Och-Ziff's goodwill was likely through consumers believing that the Och Capital's business was connected with it. Damage was also likely through erosion of the distinctiveness of Och-Ziff's brand, this conclusion being reached even without an equivalent finding of dilution in relation to Och-Ziff's Article 9(1)(c) infringement claim.

Practical significance

This case materially expands the scope of situations in which businesses in the UK can successfully prevent competitors from trading in a manner which damages their trade marks and/or goodwill. Such actions are not restricted to situations of confusion at point of sale, but now clearly encompass pre-sale confusion, at least where classic bait and switch conduct is involved. This result will please brand owners and reflects a growing acceptance of trade marks and brands having functions and protectable value beyond the core indication of origin function (see, Allgrove & O'Byrne, ‘Pre-sale misrepresentations in passing off: an idea whose time has come or unfair competition by the back door?’ (2006) 1(6) JIPLP 413 where the application of initial interest confusion in English law was canvassed).

This decision confirms judicial indications in recent years that passing off is not a static doctrine and that misrepresentations which create confusion pre-sale should, in appropriate situations, be actionable. It also brings the UK more into line with US case law and its doctrine of initial interest confusion. The flow of the Court's reasoning shows an acceptance that the common law tort of passing off has to take into account the nature of European trade mark law and evolve with it where the same mischief is being addressed and legislative policy has clearly been expressed.

An outstanding question is whether misrepresentations leading to damage in the absence of actual confusion (whether at the point of sale or otherwise) should be actionable in passing off. However, the argument that where trade mark protection had expanded to encompass a form of statutory unfair competition (ie taking unfair advantage without due cause under Article 9(1)(c) CTMR), the law of passing off may legitimately follow to encompass damaging misrepresentations in the absence of confusion was expressly rejected by the Court of Appeal in L'Oreal & Ors v Bellure & Ors [2007] EWCA Civ 936. Och-Ziff indicates that this is a door that is still worth pushing at on the right facts.