David Gibbins, explains why two new rulings (if followed) will rather raise the bar for brand owners and reinforce the value of national trade marks and, in the UK, the law of passing off.
The recent decisions of the Intellectual Property Enterprise Court in Sofa Workshop v Sofa Works  EWHC 1773 (IPEC) (29 June 2015) and Ukulele Orchestra of Great Britain v Erwin Clausen and another  EWHC 1772 (2 July 2015) have raised two interesting questions about the territorial requirements for use of Community Trade Marks (CTM) by the proprietor.
The first question relates to non-use by the proprietor. Articles 15 and 51 of Council Regulation (EC) 207/2009 (the CTM Regulation) provide for the revocation of CTMs for non-use where the proprietor has not made genuine use of the mark in connection with the goods or services for which it is registered for a period of five years.
In Sofa Workshop the evidence showed that the CTM SOFA WORKSHOP had been used extensively in the United Kingdom, but not elsewhere in the Community. The Defendant, Sofaworks, asserted that the use of a CTM in a single member of the Community was insufficient to prevent the mark from being revoked for non-use.
The second question relates to what use by the proprietor is needed for a CTM, which lacks inherent distinctiveness, to acquire distinctiveness by use. Article 7 of the CTM Regulation sets out the absolute grounds for refusal of a CTM application. It provides that the following shall not be registered:
- Article 7(1)(b): trade marks which are devoid of any distinctive character
- Article 7(1)(c): trade marks which consist exclusively of signs or indications which may serve, in trade, to designate the kind, quality, quantity, intended purpose, value, geographical origin or the time of production of the goods or of rendering of the service, or other characteristics of the goods or service
- Article 7(1)(d): trade marks which consist exclusively of signs or indications which have become customary in the current language or in the bona fide and established practices of the trade.
However, Article 7(3) provides that these grounds shall not apply if the trade mark has become distinctive in relation to the goods or services in consequence of use.
Article 52 makes similar provision in relation to the invalidity of marks already on the register.
In both cases, the judge (His Honour Judge Hacon) considered that the marks, SOFA WORKSHOP in one case and THE UKULELE ORCHESTRA OF GREAT BRITAIN in the other, lacked inherent distinctiveness. He therefore had to consider whether they had acquired distinctiveness. This meant that he had to consider where within the Community the proprietor had to establish acquired distinctiveness as a consequence of use.
Non-use of Community Trade Marks
In considering the non-use issue in the Sofa Workshop case, the starting point for the judge was the decision of the Court of Justice of the European Union (CJEU) in Leno Merken BV v Hagelkruis Beheer BV (C-149/11)  E.T.M.R. 16.
This was a reference from a court in the Netherlands. Leno opposed the registration of Hagelkruis's mark OMEL, relying on Leno's earlier registered mark ONEL. Hagelkruis responded that the ONEL mark was invalid for non-use. The evidence showed that the mark ONEL had been used only in the Netherlands. The referring court asked, quite specifically, whether "use of a Community trade mark within the borders of a single Member State is sufficient to constitute genuine use of that trade mark".
There was no precedent in the CJEU in relation to this specific question. The court's judgment relied largely on an analogy with cases in which the CJEU has had to decide on the extent of use of national marks to prevent revocation for non-use, in particular Ansul  ECR I-2439 and Sunrider v OHIM  ECR I-4237.
The court did not give a specific answer to the question posed. It ruled that, in considering whether a CTM has been used, the territorial borders of the Member States should be disregarded, although it did not spell out the consequences. It also ruled that the test was whether the mark had been "used in accordance with its essential function and for the purpose of maintaining or creating market share within the European Community for the goods or services covered by it."
The CJEU made clear that this is a multifactorial test to be carried out by the national court "taking account of all the relevant facts and circumstances, including the characteristics of the market concerned, the nature of the goods or services protected by the trade mark and the territorial extent and the scale of the use as well as its frequency and regularity".
However, HHJ Hacon picked up references in the reasoning which he considered cast a light on this specific question. In paragraph 50 of the judgment, the CJEU stated that there was justification for the view that use of a CTM should be in a larger territory than a single Member State unless the market for the goods or services in question is restricted to a single Member State.
In the light of this somewhat unclear guidance from the CJEU, the judge's conclusion on this question was that, in considering the territorial use aspect of the non-use, the court should generally expect use in more than one Member State, but that there was an exception where the market in question is restricted to a single Member State.
HHJ Hacon did not consider this was a case where the market was restricted to a single Member State. Accordingly he decided the marks should be revoked for non-use.
Acquisition of Distinctiveness by use
In both cases, the proprietor needed to establish that the marks relied on had become distinctive as a consequence of use. HHJ Hacon had to consider the question of where in the Community the mark needed to have acquired distinctiveness.
As the judge pointed out in both cases, Article 7(2) provides that a mark should be refused where the reasons for refusal of a CTM provided for in Article 7(1) applies only in a "part of the Community". Although "part of the Community" can mean a particular Member State, the real question is where in the Community would the descriptive significance of the mark have been appreciated as it is in these places that the proprietor must overcome the inherent lack of distinctiveness. In relation to word marks, this becomes a question of where in the Community do people speak or understand the language in which the mark is descriptive.
The General Court had to consider this question in Liz Earle Beauty Co Ltd v OHIM  E.T.M.R. 16. This was an application to register the mark NATURALLY ACTIVE for cosmetics and related products. The examiner, the Board of Appeals and the General Court all took the view that the mark was inherently descriptive in the English language so the question was whether it had become distinctive by use.
The General Court stated that it was settled law that a mark in the English language can have a meaning not only to native English speakers, but also to others with sufficient knowledge of the English language. It was well known that in Scandinavia and the Netherlands the general public has a basic knowledge of English and in Malta and Cyprus English is one of the official languages. In none of these countries had the proprietor established that the mark NATURALLY ACTIVE had acquired distinctiveness by use.
The judge pointed out that the question of how many Member States the proprietor must cover in his proof of acquired distinctiveness depends on how widely the language of the mark is spoken and on the mark itself. The question is how the mark is interpreted in each Member State. The proprietor needs, accordingly, to draw up a list of the Member States in which he must establish that the mark has acquired distinctiveness by use. So for a word mark in English, the list needs to include :
- Member States in which English is either spoken as a mother tongue or is an official language, namely the UK (English is not an official language of the UK), the Republic of Ireland and Malta.
- Members States in which English is sufficiently well spoken by the average consumer for the descriptive character of the word mark to be perceived. This is likely to mean the Netherlands, Sweden, Denmark, Finland and Cyprus.
- Further Member States in which another relevant language is spoken. Another relevant language in this context means one in which the English word or words of the CTM are sufficiently similar to their equivalents in that language for the average consumer who speaks that language to perceive the descriptive character of the word mark.
There is a temptation to conclude that, in the Sofa Workshop case, HHJ Hacon was seeking to lay down a rule that, except where the nature of the goods and services are such that they only find a market in a single Member State, use of a CTM in a single Member State can never be enough to prevent revocation for non-use.
Such a view would be supported by reasoning set out in paragraph 28 of his judgment where he said:
"in order to maintain a Community mark, some evidence should be required that the mark has been used to create or maintain a share in the market for the relevant goods or services across a section of the EU extending beyond one Member State. Looked at another way, an applicant for a Community mark must be taken to intend to use it outside one Member State and has five years in which to justify his presumed intention."
However, that may not be a correct characterisation of his decision. The CJEU has made it clear that this is a multifactorial decision to be made by the national court, albeit one in which the territorial extent of the use of the mark is an important consideration. Whether it is decisive, or as the judge put it "crucial", will no doubt be debated in cases to come.
Turning to the question of acquired distinctiveness by use, as the judge himself said, the decision looks severe on proprietors. Say, for example in the case of an English word mark, the proprietor failed to establish that the mark had acquired distinctiveness just in Malta, should his mark be held to be unregistrable or invalid? The national equivalent might be a UK application where the proprietor could not establish acquired distinctiveness just in Orkney and the Shetlands.
But as the judge points out, his decision is supported by logic and authority. If his view was not correct, a situation could arise where an application for a national mark in a particular Member State would be refused on the ground that the mark was descriptive, but a CTM covering the same Member State would be allowed.