Greek consumers perceive dominant word indication on garments as a source identifier, not as embellishment

Author: Manos K. Markakis (IP LAW GREECE, Athens)

Journal of Intellectual Property Law & Practice (2015), doi: 10.1093/jiplp/jpv064, first published online: April 15, 2015

Judgment No 1876/2014 of the Athens Three Member Civil Court of Appeal (Greek Community Trade Mark Court of 2nd Instance), 21 March 2014

The Athens Court of Appeal ruled that the average Greek consumer of garments perceives a word sign prominently displayed on a garment front as an origin indicator and, accordingly, rejected the relevant ‘decorative use’ defence as unsubstantiated.

Legal context

The ‘decorative use’ of someone else's trade mark is not a statutory infringement defence expressly laid down in the Trade Mark Directive, the Community Trade Mark (CTM) Regulation or the Greek Trade Mark Act. However, the Court of Justice of the European Union (CJEU) carved decorative use out of infringing subject matter in the course of examining the conditions of application of Article 5(1) and (2) of the Trade Mark Directive. In particular, the CJEU has ruled, in Case C-408/01 Adidas-Salomon AG et al v Fitnessworld Trading Ltd (paragraphs 39 and 40), that:

the fact that a sign is viewed as an embellishment by the relevant section of the public is not, in itself, an obstacle to the protection conferred by Article 5(2) of the Trade Mark Directive, where the degree of similarity is none the less such that the relevant section of the public establishes a link between the sign and the mark. By contrast, where, according to a finding of fact by the national court, the relevant section of the public views the sign purely as an embellishment, it necessarily does not establish any link with a registered mark.

In addition, according to the judgment of the CJEU in Case C-102/07 Adidas AG et al v Marca Mode CV et al (paragraph 34):

the public's perception that a sign is a decoration cannot constitute a restriction on the protection conferred by Article 5(1)(b) of the Trade Mark Directive when, despite its decorative nature, that sign is so similar to the registered trade mark that the relevant public is likely to perceive that the goods come from the same undertaking or, as the case may be, from economically-linked undertakings.

The requirement of the sign being viewed ‘purely’ as an embellishment is not further elaborated in the case law of the CJEU. In view of the absolute character of the concept of ‘purity’, it may be argued that, for the decorative use defence to operate, 100% of the relevant public must perceive the contested sign as serving 100% decorative and 0% source-identifying function. However, such a monolithic legal test is impracticable in real life, particularly when it is dependent upon the impalpable and constantly fluctuating consumer perception. Inevitably, the qualification of a disputed use as ‘decorative’ is always a case- and fact-specific exercise.

Facts

In the autumn of 2006, Jumbo (a large retailer located in Athens) offered for sale children's athletic suits bearing the ‘CHAMPION COLLEGE’ sign. Champion Products Europe Ltd (a clothing manufacturer located in Dublin) issued a warning letter to Jumbo complaining about infringement of its ‘CHAMPION’ trade marks. Following negotiations, Jumbo and Champion entered into a settlement agreement, finalizing the matter on 3 November 2006. Under the agreement, Jumbo undertook, among other things, to refrain from commercializing any garment bearing the ‘CHAMPION COLLEGE’ sign or any other indication identical with, or confusingly similar to, the ‘CHAMPION’ trade marks. In addition, Jumbo promised to pay Champion a minimum amount of 15,000 euros as a contractual penalty in the event of breach of its cease-and-desist undertaking.

In November 2007, Jumbo offered for sale toddlers' sleeveless pullovers bearing the term ‘champion’ emblazoned across the front breast section. This wording was written in lower case stylized font and painted in the same colour used for decorating the pullover's side-lines. The contested ‘champion’ sign did not appear on any other part of the pullovers. However, Jumbo's trade mark (which enjoys reputation in Greece) featured both on (a) the sewn-in care label and (b) the swing tag attached to the pullover by a plastic joiner. Apart from the ‘champion’ term and Jumbo's trade mark, no other word or figurative signs were placed upon the contested pullovers. Moreover, no further use of the ‘champion’ sign was made in the course of promoting/offering the contested pullovers. Instead, the pullovers were simply identified by reference to the generic term ‘sleeveless pullover’ in conjunction with their size, namely the corresponding toddler's age (eg 23 months). An indicative photo presenting the contested pullovers is shown on the right.

In January 2008 Champion instigated main infringement proceedings against Jumbo before the Athens Three Member First Instance Civil Court (CTM Court of 1st Instance) asserting as grounds of action, among others, trade mark infringement and breach of contract. In particular, Champion invoked (a) its earlier trade mark registrations CTM
000122630 ‘CHAMPION’, CTM 000122598 (above, right), GR 69657 (left) and GR 81821 (below, right) (all covering articles of clothing in Class 25), as well as the settlement agreement of 2006. Relying upon these rights, Champion claimed, among other things, (a) a permanent injunction against the commercialization of any garment bearing the ‘champion’ sign, (b) an award of moral damages for trade mark infringement and (c) an award of the contractually fixed penalty for breach of contract.

In defence, Jumbo argued, among other things, that the contested ‘champion’ wording was not used ‘in the trade mark sense’ but merely in a decorative manner ‘as a pure embellishment’. Expanding upon the decorative use defence, Jumbo further argued that the contested term (a) solely contributed to the overall aesthetic value created by the pullover's adornment (ie this is why it is written in stylized font and painted in the same colour as the side-lines) and (b) appears on the garment's section where the average consumer (namely, the toddler's parent, guardian or relative) normally expects to read a laudatory message concerning the garment wearer (ie not the manufacturer's mark). Given that both labels of the contested pullovers prominently bore Jumbo's famous trade mark, any risk of confusion with, or dilution of, the asserted Champion marks should be ruled out. Similarly, the settlement agreement cannot be held breached, since Jumbo's undertaking should be narrowly construed to cover origin-identifying uses only.

In September 2010 the court issued preliminary Judgment No 5610/2010, partially upholding the action. In particular, the court dismissed Jumbo's defences and ruled that (a) the asserted trade marks of Champion have acquired high reputation among the relevant Greek consumers, (b) the contested wording was perceived by the relevant public as an origin indicator and (c) a likelihood of consumer confusion/association was created as a result of the commercialization of the contested pullovers. Nevertheless, the court ascertained that it was unable to safely assess Champion's damage on the basis of the evidence included in the case file to that date. Therefore the court ordered Jumbo to disclose to Champion certain figures in connection with the sales of the contested pullovers.

In compliance with the order, Jumbo produced official documentation establishing total sales of 3,817 items throughout the material period of two months, the total retail value of which amounted to 38,132 euros. In July 2012, the court handed down definitive Judgment No 3549/2012, under which the court (a) permanently enjoined Jumbo against commercializing any garment bearing the ‘champion’ indication, (b) awarded Champion the amount of 40,000 euros (plus interest) as moral damages and (c) awarded Champion the amount of 15,000 euros (plus interest) as a contractual penalty. Jumbo appealed and Champion cross-appealed.

In March 2014 the Athens Three Member Civil Court of Appeal handed down the final judgment on this long-running dispute. Under the final judgment (a) both the appeal and the cross-appeal were dismissed and (b) both judgments under appeal were affirmed in their entirety, thereby also ratifying the first instance damage and penalty awards. Notably, the overall compensation award of 55,000 euros amounted at the time of delivery of the appeal judgment (ie calculating also legal interest) to the total of approximately 80,000 euros.

Analysis

The appellate court focused its analysis on Jumbo's decorative use defence. First, the court noted that the limitations to the trade mark right (ie descriptive use, use of customary terms, etc) must generally be applied narrowly. Secondly, the court noted that, in the context of consumer confusion, ‘use as a trade mark’ is any use that is capable of generating confusion/association, in the sense that a non-negligible portion of the relevant public may apprehend the used sign as serving a source-identifying function. Thirdly, the court observed that, as a general principle, decorative use is logically conceivable as regards figurative trade marks; however, it is hard to conceive how a word mark can be used as such, as a pure embellishment.

Following the above preliminary considerations, the court then evaluated whether the contested label actually served a purely embroidering function. Following examination of the layout/design of several (third-party) garments brought in by the parties (many of which bore the manufacturer's mark on the same section as in the contested pullovers), the court reached the conclusion, relying also upon the teachings of experience, that (a non-insignificant section of) the garment-buying public perceives the sole word sign prominently displayed on the garment front as an origin indicator, not as mere ornamentation. Therefore, considering (a) the close similarity between the contested indication and the asserted reputable trade marks and (b) the identity of the goods in question, the court concluded that a risk of consumer confusion (in the sense of association) was obviously created.

Regarding breach of contract, the court upheld Jumbo's proposed narrow interpretation of the cease-and-desist undertaking (namely, that it should be limited to ‘trade mark use’ only). Nevertheless, in the light of the analysis and conclusion regarding the trade mark infringement ground, the undertaking was, almost automatically, deemed to have been breached.

Practical significance

The decorative use will continue to ‘fly’ as valid infringement defence; though with clipped wings. Even if the defendant can establish the prima facie decorative function of the contested use, an additional evidential threshold will need to be met: the contested use must still not be perceived by a non-negligible portion of the relevant public as (also) serving an origin-identifying function. Proving the latter may be a highly burdensome task, particularly if (a) the asserted trade mark has acquired reputation or high distinctive power or (b) other players in the relevant business sector implement the same or similar branding methods (as the contested use), thereby educating and formatting consumer perception accordingly.

The annotated judgment brings good news for trade mark owners, as it effectively restrains ‘hands-off’ situations, where the trade mark owner must tolerate the decorative use of identical or similar signs by third parties.

Disclosure of interest

The author represented in court the plaintiff in the above litigation proceedings, both at first instance (two trials) and on appeal (one trial). However, the views expressed in this article are personal to the author and in no way reflect the views of the author's clients.