Trade Marks and Passing Off - GNAT and Co. v West Lake East


Jane Lambert

Intellectual Property Enterprise Court (HH Judge Hacon) GNAT and Company Limited and an9other v West Lake East Ltd and another [2022] EWHC (IPEC) (16 Feb 2022)

This was an action for trade mark infringement and passing off and a counterclaim for partial revocation of the mark for non-use.   The action and counterclaim came on for trial before His Honour Judge Hacon on 2 Dec 2021.  He delivered judgment on 16 Feb 2022 ((see GNAT and Company Limited and another v West Lake East Ltd and another [2022] EWHC (IPEC) (16 Feb 2022)).   At para [101] of his judgment, His Honour dismissed the claim for passing off but held the defendants jointly liable for trade mark infringement under s.10 (2) of the Trade Marks Act 1994.

The Parties
The claimants were GNAT and Company Limited., a company incorporated in the British Virgin Islands which was the registered proprietor of the mark in suit and its licensee, China Tang London Ltd., the operator of the China Tang restaurant at the Dorchester.  The defendants were West Lake East Ltd which operates the "China Tang" takeaway in Barrow-in-Furness pictured above and Honglu Gu, that company's only shareholder and director.

The Mark in Suit
The following was the mark in suit:

It was registered for 

"Restaurant services; cocktail lounge services; bars; cafes; catering services; snack bars; self-service restaurants; mobile catering services; cafeterias; tea houses" 

in class 43 under trade mark number UK00002415093.

The Issues
The claimants complained that the defendants had infringed the mark in suit under s.10 (2) and (3) of the Trade Marks Act 1994 by running their takeaway business under the name CHINA TANG  and that they had also passed off their business as and for the second claimant's. The defendants relied on honest concurrent user and counterclaimed for the partial revocation of the mark for non-use.

The Counterclaim
Judge Hacon considered the counterclaim first because s.11A of the Trade Markis Act 1994 provides the following defence:

"(1) The proprietor of a trade mark is entitled to prohibit the use of a sign only to the extent that the registration of the trade mark is not liable to be revoked pursuant to section 46 (1) (a) or (b) (revocation on basis of non-use) at the date the action for infringement is brought.
(2) Subsection (3) applies in relation to an action for infringement of a registered trade mark where the registration procedure for the trade mark was completed before the start of the period of five years ending with the date the action is brought.
(3) If the defendant so requests, the proprietor of the trade mark must furnish proof—
(a) that during the five-year period preceding the date the action for infringement is brought, the trade mark has been put to genuine use in the United Kingdom by or with the consent of the proprietor in relation to the goods and services for which it is registered and which are cited as justification for the action, or
(b) that there are proper reasons for non-use.
(4) Nothing in subsections (2) and (3) overrides any provision of section 46, as applied by subsection (1) (including the words from “Provided that” to the end of subsection (3)).”

The claimants did not resist the deletion of “self-service restaurants” from the specification or argue that the mark had been put to genuine use in relation to cafe or cafeteria services but they contended that a fair specification in the present case would include services provided by cafes and cafeterias. The judge agreed with them.  He said in para [17]:

"It follows that deleting either term from the specification of the Trade Mark would by implication limit the scope of 'restaurant services' in the specification. That would not be apparent to the public from the proposed amended specification and would be liable to mislead. More to the point, in my view 'restaurant services' is not a broad term such that it would be fair to slice and dice it into subsets. Nor was that proposed by the defendants. 'Restaurant services' should be given its full meaning, which includes restaurant services provided by cafes and cafeterias."

He, therefore, dismissed the counterclaim for the deletion of cafes and cafeterias from the specification.

S.10 (2) Trade Marks Act 1994
A trade mark is infringed under s.10 (2) if a person uses in the course of trade a sign 

"where because –
(a) the sign is identical with the trade mark and is used in relation to goods or services similar to those for which the trade mark is registered, or 
(b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered, 
there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trade mark."

The question for the court was whether there was a likelihood of confusion between the registered mark and the sign "CHINA TANG".  The services for which the mark was registered were not identical to the defendants' but the judge found that they were very similar.  He said at [23]:

"In law the issue is whether the relevant similarities are such that there is a risk that the average consumer might believe that the WLE’s services come from the same undertaking as those of the claimants or come from an undertaking economically linked to the claimants, see Comic Enterprises Ltd v Twentieth Century Fox Film Corporation [2016] EWCA Civ 41, at [31]-[32], discussed in Urbanbubble Ltd v Urban Evolution Property Management Ltd [2022] EWHC 134 (IPEC) at [53]-[54]."

The defendants argued that the claimants’ restaurant and the defendants' takeaway had traded for over 12 years without any instance of confusion. They contended that if there was any likelihood of confusion then instances of confusion would have emerged by now.  They submitted that there were good reasons for the  lack of confusion.   First, the difference between a luxury restaurant on Park Lane and a takeaway in Barrow-in-Furness was obvious.  Secondly, the mark in suit was not inherently distinctive as "Tang" is a common surname in China.  They could have mentioned that it happens to be the family name of the Director-General of the World Intellectual Property Organization.  The word "China" merely indicates the cuisine. There was at least one other restaurant called "China Tang" in the UK that was unconnected with either party.  Thirdly, the average consumer would take care in selecting an eatery and be most unlikely to be influenced by its name.

The judge rejected those submissions.  The comparison was to be made with the registered mark and not the establishment in Park Lane.   After referring to the judgment of Mr Justice Laddie at paras [22] and [23] of Compass Publishing BV v Compass Logistics Ltd [2004] EWHC 520 (Ch), His Honour said at [30]:

"The defendants’ point that WLE’s modest takeaway has little in common with the claimants’ opulent Park Lane restaurant largely fades away if the relevant comparison includes, on the side of the Trade Mark, its use as the trading name of a low price restaurant, such as a pizza restaurant or indeed a low price Chinese restaurant, as would be the case following the principle of law explained in Compass."

He added at [36]:

"In the present case, the likelihood of confusion is to be approached by considering the perception of the average consumer who is aware of both (a) low price restaurants trading under the Trade Mark and (b) WLE’s takeaway using the “China Tang” trading name. It is to be assumed that the average consumer is also aware that low price restaurants often provide takeaway services."

He concluded at [44]:

"Because of the aural identicality of the Trade Mark and the sign, the close visual similarity between them and the close similarity between WLE’s services and the restaurant services of the Trade Mark specification, in particular the services of low-cost restaurants which typically offer takeaway services, I take the view that there is a likelihood of confusion."

That left the defence of honest concurrent user which the judge considered separately.

S.10 (3) Trade Marks Act 1994
That subsection provides that a person infringes a registered trade mark if he uses in the course of trade in relation to goods or services a sign which is identical with or similar to the trade mark, where the trade mark has a reputation in the United Kingdom and the use of the sign, being without due cause, takes unfair advantage of or is detrimental to, the distinctive character or the repute of the trade mark. 

The claimants complained that the defendants infringed that subsection by operating their takeaway under the CHINA TANG sign. The defendants denied liability on the grounds that:
  • The mark in suit enjoyed no reputation in the UK;
  • There was no link between that mark and the defendants' sign in the mind of the average consumer;
  • Use of that sign did not take unfair advantage of, and was not detrimental to, the distinctive character or repute of the mark in suit; and
  • Any such advantage or detriment would not be without due cause.
The judge rejected the second contention accepted the first and third.  In the absence of any advantage or detriment the fourth issue did not arise.

Addressing first the question of reputation, Judge Hacon directed himself as follows between paras [50] and [57]:

"[50] The principal guidance to the concept of “reputation” comes from CJEU judgments concerned with EU trade marks, dealing of course with a reputation in the EU as opposed to the UK.
[51] First, the threshold of a sufficient reputation is reached when the EU trade mark is known by a significant part of the public concerned by the products or services covered by that trade mark, see Iron & Smith KfT v Unilever NV (C-125/14) EU:C:2015:539, at [17].
[52] Secondly, an important starting point is the identification of the market for the goods or services covered by the trade mark. In Iron & Smith Advocate General Wahl said that this ought to assume “a paramount role in the analysis” (at [17]).
[53] Thus, thirdly, the relevant public may be the public at large or a more specialised public, or example traders in a specific sector, see PAGO International GmbH (C-301/07) EU:C:2009:611 at [22].
[54] Fourthly, all relevant facts must be taken into account in assessing reputation, in particular the market share held by the trade mark, the intensity, geographical extent and duration of its use, and the size of the investment made by the undertaking in promoting it, see PAGO at [25] and Iron & Smith at [18].
[55] Fifthly, reputation must accordingly be assessed according to a combination of geographical and economic criteria, see Advocate General Wahl in Iron & Smith at [17].
[56] Sixthly, from a geographical perspective, the requirement of a reputation must be considered to be fulfilled when the EU trade mark has a reputation in a substantial part of the EU and such a part may, in some circumstances, correspond to the territory of a single Member State, see PAGO at [27] and [29]; Iron & Smith at [19].
[57] Fancourt J observed in Sazerac Brands, LLC v Liverpool Gin Distillery Limited [2020] EWHC 2424 (Ch) (upheld on appeal [2021] EWCA Civ 1207; the case under s.10(3) was not considered by the Court of Appeal) that the issue of reputation is likely to arise and be important in a case where the market is very broad but the trade mark has had only local exposure."

The learned judge set out the facts that were relevant to this case at [61]:

"The Park Lane restaurant opened in September 2005 and the turnover in each of the calendar years 2006 to 2009 was between 5 and 6 million pounds. The annual number of covers, i.e. customers served, in each of those years was about 70,000. Sums spent on advertising in the years 2005 to 2009 varied, the relevant figures being £25,892, £47,224, £5,304, £43,820 and £19,604. Between 2005 and 2009 the claimants provided dining vouchers worth about £17,000 to charities. The restaurant has been given press coverage and awards. By 2009 these were (i) a 2005 review in The Caterer review, an online publication, (ii) the Tatler Restaurant Award in 2006 for best room, (iii) a review in The Scotsman in 2007, reviews in (iv) the Daily Telegraph and (v) the Evening Standard in 2009 and (vi) entries in Time Out Eating and Drinking Guide and Time Out’s Hot 100 in 2009."

He directed himself to consider that evidence from both a geographical and an economic aspect.  As to the geographical aspect, he had no means of knowing how many people had read any of the articles concerned or been made aware of the awards but it was likely that a spread of individuals across the UK would have done so through the reputation might have been patchy, depending on the economic aspect of the evidence. 

As to the economic aspect, he had to consider in particular the market share held by the business conducted under the registered trade mark, the intensity and duration of the use of the trade mark and the size of the investment made by the undertaking in promoting it. He concluded that relative to the UK restaurant business as a whole, the share conducted under the mark in suit was tiny in 2009. The business was conducted for a little over four years before the defendants started trading, but it was a single restaurant. Money had been spent on advertising but the evidence did not show how it was spent. In the context of the restaurant market of the UK as a whole, the sums would have been very small.  

The upshot was that by the end of 2009 when the defendants started trading the business conducted under the trade mark had a reputation which satisfied the geographical aspect of the requirement but not  the economic one. At that stage, the claimants' mark did not have a reputation within the meaning of s.10 (3).

The judge found no evidence of advantage being taken of the claimants' mark or of detriment to its distinctive character or repute.   

It followed that the case for infringement under s.10 (3) could not succeed.   

Honest Concurrent User
Under cross-examination, the second defendant admitted that when he chose the name for his business neither he nor anyone else did a trade mark search for “CHINA TANG” or an internet search for restaurants of that name.  The judge said that if anyone had conducted a trade mark or internet search with any degree of rigour, he or she would have found the claimants’ restaurant. Either the defendants did carry out those searches and ignored the results or no such searches were carried out.  While he had sympathy for the defendants, His Honour made clear that if a party starts to use a trading name without appropriate advice and simple searches, such use will not have been honest concurrent use without some reason why it should be taken to have been so. There was no such reason in the present case. It was not one of the rare cases of honest concurrent use contemplated by the Court of Appeal in IPC Media.  The claim under s.10 (2) therefore succeeded.

Passing off
In the claim for passing off, Judge Hacon accepted that the claimants’ business enjoyed goodwill stretching beyond London as a result of press coverage, but such goodwill was likely to be patchy goodwill and probably did not stretch into the vicinity of the defendants' takeaway business in Barrow. However, he found no evidence of deception or even doubt about a connection between the two businesses in the minds of the relevant public, notwithstanding that the businesses had traded simultaneously for some 12 years. If any members of the public had become aware of the two businesses, there was no reason to suppose that it had led to a belief that there was a connection in the course of trade between the two. In His Honour's view, it was unlikely that there had been any misrepresentation. Absent misrepresentation, there could have been no damage and hence no passing off.

Director's Liability
The second defendant admitted in his defence and counterclaim that he was the sole director and shareholder of the first.  In cross-examination, he admitted that the first defendant was his company and  project that if it were to change its name, it would be his responsibility to pick the new name.  In Grenade (UK) Limited v Grenade Energy Limited [2016] EWHC 877 (IPEC) Judge Hacon had said that where the individual alleged to be jointly liable is the sole director and sole shareholder of a one-man company, an evidential burden is imposed on that individual to show why, contrary to what one might expect, the acts of the company complained of were not initiated and controlled by that individual. Mr Gu had failed to discharge that burden. It followed that he was jointly liable with his company for trade mark infringement under s.10 (2).

I have discussed this case in IP Northwest rather than NIPC Law because the defendants carried on business in a part of Cumbria that was formerly in Lancashire and they were represented by Manchester solicitors. However, this case considers a number of important issues which I shall discuss in detail in NIPC Law over the next few weeks. These include specifying the claimant's services for the purpose of s.10 (2), what constitutes a mark's reputation for the purpose of s.10 (3) and directors' liability since  Sea Shepherd UK v Fish & Fish Ltd [2015] 1 Lloyd's Rep 593, [2015] 2 All ER (Comm) 867, [2015] AC 1229, [2015] 4 All ER 247, [2015] WLR(D) 102, [2015] UKSC 10, [2015] 2 WLR 694, [2015] 1 AC 1229.

I should like to give notice of two events at which I will speak. One is a free online talk entitled Witness Statements in Intellectual Property Proceedings which will take place between 14:00 and 15:30 on 22 June.  It will cover:
  • The background to the Part 57AC Practice Decision
  • Its main provisions
  • CPR Part 63 and the Part 63 Practice Direction
  • CPR Part 32 and the Part 32 Practice Direction
  • Greencastle v Payne and other decisions
  • The Patents Rules 2007 and Trade Marks Rules 2008 and Tribunal Practice Notes, and
  • Examples of compliant witness statements.
You will find further details in Witness Statements for Use in IP Proceedings which appeared in NIPC Law on 13 May 2022.  My other speaking engagement will be with my colleagues in our chambers IP practice group seminar Intellectual Property Event - Order and Disorder - The Entropy of Intellectual Property Remedies which will take place at the Postal Museum on 7 July 2022.

Anyone wishing to discuss this article may call me on 020 7404 5252 during normal office hours or send me a message through my contact page.