Neutral Citation Number: [2017] EWHC 1400 (IPEC)
Claim No: IP-2015-000152

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
INTELLECTUAL PROPERTY ENTERPRISE COURT

Rolls Building
New Fetter Lane
London
13 June 2017

B e f o r e :

HER HONOUR JUDGE MELISSA CLARKE
Sitting as a deputy Judge of the High Court

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JADEBAY LIMITED

NOA AND NANI LIMITED TRADING AS THE DISCOUNT OUTLET

Claimants
– and –


CLARKE-COLES LIMITED TRADING AS FEEL GOOD UK

Defendant

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Mr Jamie Muir Wood (instructed by Singletons Solicitors) for the Claimants
Mr John Small (instructed by Josiah Hincks Solicitors) for the Defendant
Hearing date: 2 May 2017

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HTML VERSION OF JUDGMENT

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Crown Copyright ©

    Her Honour Judge Melissa Clarke:

    INTRODUCTION

  1. This is a trade mark infringement and passing off claim arising out of the sale of aluminium flagpoles on Amazon.co.uk.
  2. The Claimants are related companies with common shareholders. The First Claimant is the registered proprietor of United Kingdom trade mark number 2653159 for the device mark:
  3. Picture 1

    which was filed on 18 February 2013 and registered with effect from 30 August 2013 in class 20 for ‘flagpoles plastic storage box garden furniture’ (the “Trade Mark“). Before the device mark was registered, the First Claimant used the words DESIGN ELEMENTS as an unregistered trade mark (the “Sign“).

  4. The First Claimant has licensed the Second Claimant, and only the Second Claimant, to sell goods including flagpoles under the Sign and the Trade Mark pursuant to an oral licence agreement. It has granted no other licences of the Sign or Trade Mark.
  5. Since March 2011 the Claimants have purchased flagpoles made by a manufacturer in China, packaged them in their own packaging branded with the Sign and/or Trade Mark, imported them into the UK and sold them through two internet-based sales channels. The First Claimant sells the flagpoles on ebay.co.uk, and the Second Claimant, trading as ‘The discount outlet’, sells them on Amazon.co.uk. The Second Claimant sells the flagpoles in three different packages with varying numbers and types of flags (for example flagpole with Union Jack, flagpole with Union Jack and St George’s Cross, etc.) and each variant is sold via a different Amazon listing, which are otherwise identical save as to total price (“Listings”). The Second Claimant created each of those Listings itself.
  6. Each of those Listings upon creation generated a unique Amazon Identification Number (or ASIN) and a unique European barcode (EAN) for the product so listed.
  7. Below is an image of the top-presented listings following a search on Amazon.co.uk for ’20 ft aluminium flagpole’ on 4 June 2017:
  8. Picture 2

    Figure 1.

  9. The first-presented product is not connected with the Claimants. However the second and third are. It can be seen that the title for these Listings is ‘Aluminium Flagpole 20ft with 2 Flags Union Jack and England Flag’ and ‘Aluminium Flagpole 20ft with Union Jack Flag’ respectively, and both are then described underneath the listing title as being ‘by DesignElements’.
  10. If an interested Amazon customer wished to learn more, or to buy, the flagpole with a single Union Jack, for example, he would click the third listing which then presents itself as follows:
  11. Picture 3

    Figure 2.

  12. It can be seen that more information is now available, including that the item is in stock and it is ‘Dispatched from and sold by The discount outlet’. That is the trading name of the Second Claimant. To purchase, the customer would click the ‘Add to basket’ button in the box on the right, which also says that the item is ‘In stock- Sold by The discount outlet’. He would then check out his purchase. That box on the right is known as the Buy Box. If 1-click ordering was enabled by the customer, it would also contain a second button saying “Buy now with 1-Click”.
  13. If the customer was unsure about whether he was ready to purchase, he might notice that there were currently 161 customer reviews of the product. He could click through and read those (or scroll down the screen where they are also displayed) to help inform his decision. He could also learn more about ‘The discount outlet’ by clicking on that hypertext name, where he would learn that it was a trading name of Noa and Nani Limited (the Second Claimant) of Tenderden, Kent, and that it had been left 95% positive reviews by Amazon customers in the previous 12 months. From that page he could click through and see what other products they sold.
  14. It is also not disputed that an Amazon listing, although set up by one seller, can be used by multiple sellers to sell the same product. Another seller can do so by locating the specific item he wishes to sell in the Amazon catalogue through its EAN or ASIN number; reviewing the description of the item which includes a description of its brand and manufacturer; confirming that the item it wishes to list is the same as that in the listing it wishes to join; pricing the item including delivery charges; and submitting the listing.
  15. When there are multiple sellers on a listing, one is selected by Amazon as the default seller and is promoted in the listing and in the Buy Box in the same manner that ‘The discount outlet’ now appears in Figure 2. If the buyer simply clicks on the ‘Add to basket’ or ‘1-Click’ buttons, it will purchase from that Buy Box seller. If it wants to consider the prices, delivery charges and delivery times of any of the other sellers using that listing, it will have to click a separate link to inspect them. The Buy Box seller is usually, but not always, the one that charges the lowest total price for the product plus delivery charges.
  16. The dispute arises because at some point after July 2012 and before 18 February 2013 the Defendant decided to use the Listings to sell its own flagpole product, which it sourced and purchased from a different manufacturer in China to that used by the Claimants. It did so after it had purchased one of the Claimants’ flagpoles from Amazon. The Defendant’s flagpoles are different in design (most notably they split into a different number of sections to the Claimants’ flagpole), but it is not now disputed that they are also 20ft tall aluminium flagpoles of a comparable quality to those of the Claimants (“Product”).
  17. When the Defendant listed its Product on the Listings, the total price it charged for the Product plus delivery undercut the total charged by the Second Claimant. It ‘won the Buy Box’ and became the default seller replacing ‘The discount outlet’ in the listing and the Buy Box, appearing as ‘Feel Good UK – UK SELLER’. Accordingly, it captured the majority of sales from the Listings during the period it sold from them.
  18. The Claimants contend that by listing its Product for sale against the Listings, which all refer to the flagpoles for sale on those listings as being ‘by DesignElements’, the Defendant has: (i) infringed the Trade Mark pursuant to sections 10(2) and 10(3) of the Trade Marks Act 1994 (“TMA”) for sales on or after 18 February 2013; and (ii) passed off its Product as goods of the Claimants in relation to sales before 18 February 2013.
  19. The Claimants’ case is that: their Listings should only have been used to sell identical product, in other words the Claimants’ flagpoles branded with the Sign or the Trade Mark; this is the product which the relevant ASIN and EAN numbers uniquely identify; if the Defendant wished to sell its own flagpoles, it should have created a new listing for Feel Good UK branded flagpoles with its own unique ASIN and EAN numbers; it has not done so, choosing instead to sell its Product as being ‘by DesignElements’ in order to ride on the coat-tails of the Claimants’ existing reputation for high-quality flagpoles and capture sales to the detriment of the Second Claimant. It claims damages for such infringement and passing off and an injunction to prevent future infringement and passing off.
  20. The Defendant’s case is that: the Listings are ‘generic’ because the title of the listing (such as “Aluminium Flagpole 20ft with 2 Flags Union Jack and England Flag”) does not refer to any brand, let alone the Sign or the Trade Mark; accordingly it is entitled to use the Listings to sell any flagpole that meets that generic description; further it is required by Amazon’s listing policy not to create additional listings when there is an existing listing which matches the product it wishes to sell; it has not used the Claimants’ Sign or Trade Mark at all, because the Trade Mark does not appear anywhere on the Listings, and the phrase ‘by DesignElements’ is not a use of the Sign (which in any event is two words not one), or any sign, but the use by Amazon of the name of the seller who created the Listing. It asks for the claim to be dismissed.
  21. For the avoidance of doubt, it is accepted by the Claimants that the Defendant has not attached the Sign or the Trade Mark or any sign complained of to the Product itself, or any part of the packaging of the Product. The only use complained of is in the Defendant’s use of the Listings to sell the Product, as I have described.
  22. CHRONOLOGY

  23. The following chronology is of assistance:
  24. i) The Second Claimant created the Listings and started selling flagpoles on Amazon on 7 March 2011.

    ii) The Defendant incorporated on 24 April 2012.

    iii) The Defendant purchased a flagpole from Claimants, via one of the Listings, on 6 March 2012.

    iv) The Defendant sourced 1176 units of the Product from a Chinese manufacturer and began selling them in the UK from its Feelgooduk.com website in July 2012.

    v) The Second Claimant sold 1504 units of its flagpoles from the Listings in 2012.

    vi) The First Claimant filed the Trade Mark application on 18 February 2013 and it was registered from 30 August 2013.

    vii) The Defendant began using the Listings or any of them to sell Product on a date unknown, which it says was before 18 February 2013.

    viii) The Claimants became aware of such sales by the Defendant on 12 September 2013 and wrote a cease and desist letter to the Defendant on the same date. The Defendant ceased selling the Product on the Listings around 5 weeks later.

    ix) The Second Claimant sold 1258 units of its flagpoles from the Listings in 2013, 16.5% fewer than in 2012.

    x) The Claimants became aware that the Defendant had started selling Product from the Listings again and instructed solicitors to write to the Defendant on 2 December 2014 asking it, again, to cease and desist. No reply was received.

    xi) The Second Claimant sold 1329 units of its flagpoles from the Listings in 2014, 11.5% fewer than in 2012 but 5.64% more than in 2013.

    xii) The Claimants’ solicitors wrote a chasing letter seeking a response to their letter of 2 December 2014, on 29 January 2015. The Defendant did not respond.

    xiii) The Claimants ordered a trap purchase of the Defendant’s Product from one of the Listings on 24 March 2015. They received a flagpole which was not the Claimants’ flagpole, but a different product, of a different design and branded ‘Feel Good UK’ on the packaging and instruction leaflet.

    xiv) The Claimants issued these proceedings on 16 September 2015.

    xv) The Second Claimant sold 412 units of flagpoles from the Listings in 2015, 72% fewer than in 2012 and 68% fewer than in 2014.

    xvi) The Defendants ceased selling the Product from the Listings in or around April 2016. The Second Claimant sold 438 units of flagpoles from the Listings in the first five months of 2016, 167 units in May 2016 alone.

    ISSUES

  25. The following issues for trial were identified by HHJ Hacon in an order dated 5 April 2016 following a case management conference on 1 February 2016:
  26. i) Whether the Defendant has used in the course of trade a sign which is identical to the Trade Mark in relation to goods similar to those for which the Trade Mark is registered;

    ii) Whether the Defendant has used in the course of trade a sign which is similar to the Trade Mark in relation to goods which are identical or similar to those for which the Trade Mark is registered;

    iii) Whether the Trade Mark has a reputation in the United Kingdom;

    iv) Whether the Defendant has used in the course of trade a sign in relation to the goods which is identical or similar to the Trade Mark and the use of the sign, being without due cause, takes advantage of, or is detrimental to, the distinctive character or the repute of the Trade Mark;

    v) Whether the Claimants’ business has goodwill in England and Wales associated with the Sign;

    vi) Whether the Defendant has used the Sign in a manner which constitutes a misrepresentation; and

    vii) Whether the Claimants have suffered damages as a consequence of any misrepresentation by the Defendants.

  27. The parties agree that consideration of the section 10(2) TMA infringement claim should properly also include consideration of the likelihood of confusion, so I will redraw issues (i) and (ii) slightly differently, as follows:
  28. (i)(a) Is there use by the Defendant of a sign identical with, or similar to the Trade Mark?

    (i)(b) Is that use in the course of trade?

    (i)(c) Is that use in relation to goods and services which are identical or similar to those for which the Trade Mark is registered?

    (ii) If so, does there exist a likelihood of confusion on the part of the public?

  29. It does not appear to be disputed that any use by the Defendant of the sign complained of was: (i) use in the United Kingdom; and (ii) without the consent of the Claimants. Certainly the Defendant has not argued otherwise.
  30. Finally, no order has been made for a split trial. The parties asked me to hear submissions about quantum, and I agreed to do so. Accordingly I am prepared to deal with both liability and quantum, if necessary, in this judgment.
  31. Mr Muir Wood appears for the Claimants and Mr Small for the Defendant. I thank them for their helpful skeleton arguments and skilful submissions.
  32. WITNESSES

  33. I heard only two witnesses at trial: Mr Alex Tolofson for the Claimants and Mr Melvyn Coles for the Defendant.
  34. Mr Tolofson is a shareholder and director of the First Claimant and a shareholder and employee of the Second Claimant. He filed two witness statements dated 27 February 2016 and 7 June 2016 and was cross-examined.
  35. Mr Tolofson presented, generally speaking, as a good witness. I am satisfied that the oral evidence he provided was credible and reliable and he answered questions honestly and carefully. As I will set out, there are significant inadequacies in the financial evidence Mr Tolofson provided, both in the scope of the evidence and in its accuracy, and for that reason I consider that his written evidence was less reliable. However where he could deal with those inadequacies in his oral evidence he did so, in my judgment, to the best of his abilities and without evasion or exaggeration.
  36. Mr Tolofson’s evidence was that the Second Claimant didn’t manufacture the flagpoles themselves but had them manufactured to its design in China. He confirmed that neither the Trade Mark nor the Sign had ever been used by the Second Claimant on the flagpoles themselves, but only on their cardboard packaging and also on the instruction leaflet that came with each flagpole.
  37. Mr Tolofson stated that the Listings were created in 2011 by an employee of the Second Claimant. As part of the process of creation of a listing, Amazon required the listing creator to specify both the brand and the manufacturer of the product to be listed, and that person had specified “DesignElements” as both the brand and the manufacturer. That was why the words “by DesignElements” appeared after the listing title on each of the Listings.
  38. Mr Tolofson’s evidence was that on the creation of a new listing, Amazon issues an ASIN number, which is a unique product identifier, and also an EAN barcode. He said that all sellers were free to sell genuine product on Amazon listings on which the brand was stated, but the Claimants’ complaint was that the Product was not genuine product as it did not match the specification of the listing. It was a different flagpole produced to a different specification by a different manufacturer and branded Feel Good UK. Mr Tolofson’s evidence was that even putting to one side considerations of trade mark infringement and passing off, under Amazon’s own listing policy, any product which does not match the specification should not be sold under that unique ASIN number and EAN barcode and should not be sold using the Listings. He acknowledged that if the Defendant had been selling the Claimants’ branded product, perhaps because it had bought their flagpoles wholesale from the Claimants, then they would be entitled to re-sell them using the Listings pursuant to Amazon’s listing policy. In fact, he said, the Claimants did not sell to wholesalers but only to retail customers, who were both personal and commercial buyers.
  39. Mr Tolofson was asked by Mr Small in cross-examination about the Claimants’ use of the Sign. He confirmed that they used it only on a number of different products which they sold via Amazon, including flagpoles, garden storage boxes, garden furniture. He confirmed flagpoles were the biggest seller of such goods sold under the Sign or the Trade Mark, making a profit of about £20,000 per annum.
  40. Mr Tolofson confirmed that the Claimants experienced a very significant increase in sales of flagpoles in May 2012, which he attributed partly to the desire of the public to fly flags during the Olympics and partly to the usual seasonal, summertime spike in sales.
  41. I accept all of this evidence.
  42. Mr Tolofson made a number of admissions in cross-examination:
  43. i) An internet search on “DESIGN ELEMENTS” shows up no results connected with the Claimants, and as a Sign or Trade Mark it appears to have no online presence outside of Amazon;

    ii) As far as he was aware, the Claimants had received no complaint from purchasers of the Defendant’s Product via the Listings that they received an inferior product, or a product which was not the Claimant’s branded product;

    iii) As far as he was aware, there was no evidence that multiple buyers who had made an initial, test purchase from the Listings of the Defendant’s Product had decided not to go ahead and buy further flagpoles.

    iv) The Claimants have provided no evidence of sales for other DESIGN ELEMENTS branded products;

    v) The Claimants have provided stock figures only back to 2012, not to 2011. Mr Tolofson explained that this was because they did not have their own stock management system until 2014, relying entirely on Amazon for their pre-2014 stock management, and the Amazon system doesn’t enable them to retrieve figures as far back as 2011. I accept this explanation.

    vi) The Claimants have provided: inadequate evidence about the Second Claimant company, in particular failing to provide any accounts; no sales figures for sales of flagpoles by the First Claimant on Ebay, in order that sales on that channel could be compared to sales on Amazon at the relevant times; inadequate and inaccurate evidence about various costs to market of the flagpoles in order that the gross profit margin can accurately be assessed.

  44. Mr Coles is the managing director of the Defendant. He filed a witness statement dated 7 June 2016 and was cross-examined.
  45. I found Mr Coles to be a less satisfactory witness. His evidence about the listing process on Amazon was confused and, in my judgment, to some extent inaccurate. For example, he said that if he wanted to create a listing for a 20ft aluminium flagpole on Amazon, Amazon would “give us [the Claimants’] ASIN number” and require the Defendant to use it”. I am satisfied on the evidence before me that Amazon might suggest an ASIN and the related listing, but it would be up to the Defendant to assess the specification, determine whether the product it wished to sell was the same as that listed (including the brand) and if not, create its own listing. Amazon would not require the Defendant to use it to sell goods which were not identical.
  46. Mr Coles also made an assertion for the first time in oral evidence that the Claimants took their flagpole off a Listing “and left it for us”. This does not appear in the pleadings or witness statements, was not put to Mr Tolofson in cross-examination and it does not accord with the evidence before me. I am satisfied on the balance of probabilities that it is not correct.
  47. When Mr Muir Wood tried to ask Mr Coles further questions about listing products on Amazon, he said “I don’t understand the process. Questions are a waste of time“. I do not consider that Mr Coles was a dishonest witness, rather I accept his own honest assessment that he did simply not understand the listing process, as the Defendant had other employees who were responsible for listing. Nevertheless his lack of understanding did not prevent him from making statements with a certain degree of confidence and certainty which, in my judgment, was misplaced. Accordingly I consider his evidence to be unreliable and I treat it with caution. Where his evidence contradicts that of Mr Tolofson and where there is no support from other evidence, or the inherent probabilities, I prefer the evidence of Mr Tolofson.
  48. Mr Coles’ evidence was that the Defendant traded as Feel Good UK from a website at feelgood.net and also on Amazon. It sold a wide variety of products and as a company it was familiar with Amazon’s listing processes. The Defendant included the Feel Good UK brand in its Amazon listing titles wherever it was appropriate, in particular on items he had designed himself such as rabbit hutches. I accept this evidence.
  49. Mr Coles admitted in his written and/or oral evidence that:
  50. i) the Claimants were selling flagpoles before the Defendants;

    ii) a customer who ordered a flagpole from the Second Claimant would see the Sign or the Trade Mark applied to the packaging only when they received the flagpole, but would be likely to have seen that trade mark by the time he wrote a customer review on Amazon;

    iii) the Claimants’ flagpole was well received and had received positive reviews on Amazon since launch;

    iv) the Defendant used the Listings created by the Second Claimant to list its Product;

    v) the product details that needed to be entered to create the Listings included the EAN and ASIN number, but also the brand name and manufacturer name, which were expressed to be ‘DesignElements’;

    vi) the Defendant had disclosed sales of 1215 units of Product from the Listings from 2014 to mid-March 2016 which was not the full time period during which it sold the Product from the Listings;

    vii) if a customer ordered from the Listings and received a flagpole supplied by the Second Claimant, the packaging and insert would have been branded with the Sign or the Trade Mark whereas if they received Product supplied by the Defendant, those would have that been branded ‘Feel Good UK’.

  51. Mr Coles confirmed that if the title of the listing had included the name Design Elements, the Defendant “…would not and could not have used it. If clearly branded we wouldn’t go near it”. However he described the words ‘by DesignElements’ as a shop name, not a trade mark or logo, saying “Its Amazon’s property, every letter of the listing belongs to Amazon”. For the reasons I give later, I do not accept this evidence.
  52. Finally, Mr Coles would not accept that the use of the sign complained of had any real function. He said “If the customer gets what the advert shows and it is good quality, they are happy. Most people think they are buying from Amazon. They will go for the cheapest seller. They have no interest in the shop name”. I will also deal with this in due course.
  53. THE LAW

    Trade Mark Infringement – Section 10(2) TMA

  54. Section 10(2) of the 1994 Act provides:
  55. “A person infringes a registered trade mark if he 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 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.”

    Use of a sign in the course of trade

  56. Use of a sign is defined in section 10(4) TMA and includes offering or exposing goods for sale, putting them on the market or stocking them for those purposes under the sign (10(4)(b) TMA).
  57. Any use of a sign in the context of commercial activity with a view to economic advantage and not as a private matter, no matter how modest, will be sufficient to satisfy the requirement for ‘use in the course of trade’ (per C-206/01 Arsenal Football Club plc v Matthew Reed EC:C:2002:651 at paragraph 40).
  58. Likelihood of confusion

  59. The relevant principles are not in dispute, and are those set out at paragraph 52 of the judgment of Kitchen LJ in Specsavers International Healthcare Ltd v Asda Stores Ltd [2012] EWCA Civ 24, [2012] FSR 19. They appear in the skeleton arguments of both counsel and are sufficiently well-known that I will not repeat them here, although I do, of course, bear them carefully in mind. The Court of Appeal also considered likelihood of confusion in Comic Enterprises Ltd v Twentieth Century Fox Film Corp [2016] EWCA Civ 41. It endorsed the Specsavers approach to the assessment of the likelihood of confusion in paragraph 31, but provided further guidance in paragraphs 32, 33 and 34:
  60. [32] In Maier we explained (at [76]) that to this summary should be added the further guidance provided by the Court of Justice in Canon (at [29]) that the risk that the public might believe that the goods or services in question come from the same undertaking or, as the case may be, from economically-linked undertakings, constitutes a likelihood of confusion for the purposes of the provision.

    [33] The decision in Specsavers clarified one further important point concerning the context of the accused use. As this court said at [87]: “… In assessing the likelihood of confusion arising from the use of a sign the court must consider the matter from the perspective of the average consumer of the goods or services in question and must take into account all the circumstances of that use that are likely to operate in that average consumer’s mind in considering the sign and the impression it is likely to make on him. The sign is not to be considered stripped of its context.”

    [34] All of this guidance makes clear that the matter must be assessed from the perspective of the average consumer. This court considered the characteristics of the average consumer at some length in [Interflora v Marks & Spencer]. The following general points emerge further to those set out above:

    (i) the average consumer is a hypothetical person or, as he has been called, a legal construct; he is a person who has been created to strike the right balance between the various competing interests including, on the one hand, the need to protect consumers and, on the other hand, the promotion of free trade in an openly competitive market, and also to provide a standard, defined in EU law, which national courts may then apply;

    (ii) the average consumer is not a statistical test; the national court must exercise its own judgment in accordance with the principle of proportionality and the principles explained by the Court of Justice to determine the perceptions of the average consumer in any given case in the light of all the circumstances; the test provides the court with a perspective from which to assess the particular question it has to decide;

    (iii) in a case involving ordinary goods and services, the court may be able to put itself in the position of the average consumer without requiring evidence from consumers, still less expert evidence or a consumer survey. In such a case, the judge can make up his or her own mind about the particular issue he or she has to decide in the absence of evidence and using his or her own common sense and experience of the world. A judge may nevertheless decide that it is necessary to have recourse to an expert’s opinion or a survey for the purpose of assisting the court to come to a conclusion as to whether there is a likelihood of deception;

    (iv) the issue of a trade mark’s distinctiveness is intimately tied to the scope of the protection to which it is entitled. So, in assessing an allegation of infringement under Article 5(1)(b) of the Directive arising from the use of a similar sign, the court must take into account the distinctiveness of the trade mark, and there will be a greater likelihood of confusion where the trade mark has a highly distinctive character either per se or as a result of the use which has been made of it. It follows that the court must necessarily have regard to the impact of the accused sign on the proportion of consumers to whom the trade mark is particularly distinctive;

    (v) if, having regard to the perceptions and expectations of the average consumer, the court concludes that a significant proportion of the relevant public is likely to be confused such as to warrant the intervention of the court, then it may properly find infringement.”

  61. These, and the Specsaver principles, are those that I will apply to assess the average consumer and the likelihood of confusion.
  62. Trade Mark Infringement – Section 10(3) TMA

  63. Section 10(3) TMA provides:
  64. “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.”

  65. In order for use of the sign to infringe a trade mark pursuant to Section 10(3) TMA, each of those elements must be made out.
  66. Reputation

  67. The Trade Mark must have a reputation in the UK. Both parties rely on the CJEU case of C-375/97 General Motors v Yplon [2000] RPC 572 which held that “in order to enjoy protection … a registered trade mark must be known by a significant part of the public concerned by the products or services for which it covers…” (My emphasis). Yplon tells us that what constitutes the relevant public may be dependent on the product or services being marketed, and it may be the public at large, or a more specialised public. It is not necessary for the reputation to be known by to a specific percentage of the public so defined. In examining whether this condition is fulfilled the court must consider all of the relevant facts of the case, “in particular the market share held by the trade mark, the intensity, geographic extent and duration of its use and the size of the investment made by the undertaking in promoting it.”
  68. The average consumer

  69. Unlike in a claim for infringement under section 10(2) TMA, for infringement to be made out under section 10(3) TMA, there is no requirement for confusion in the mind of the average consumer. Instead, the use of the sign complained of must give rise to a link between the sign and the trade mark in the mind of the average consumer of the goods or services in question. It is for the court to determine whether there is such a link between a trade mark and a sign by carrying out a global assessment taking into account all the relevant circumstances of the case.
  70. Risk of harm to the distinctive character or repute of the mark

  71. The claimant must satisfy the court of the existence of one of three types of injury. Only two are relied upon in this case: detriment to the distinctive character of the mark (“dilution”) and unfair advantage. There need not be actual injury or damage. Serious risk of damage occurring in the future is sufficient (per Decision C0252/07 Intel Corporation Inc v CPM United Kingdom Ltd at paragraph 72). The Claimants in this case do not press a case of detriment to the repute of the mark, or tarnishment, at trial, as they no longer take issue with the quality of the Product.
  72. Both parties rely on Arnold J’s reliance at paragraph 92 of Red Bull GmbH v Sun Mark Limited and Sea Air & Land Forwarding Limited [2012] EWHC 1929 (Ch) on the description of dilution and unfair advantage, and general guidance on how to assess such injuries, provided by the CJEU in Case C-487/07 L’Oréal v Bellure NV [2009] ETMR 55, [2009] ECR I-5185 at paragraphs 39, 41 and 44:
  73. “39. As regards detriment to the distinctive character of the mark, also referred to as ‘dilution’ ‘whittling away’ or ‘blurring’, such detriment is caused when that mark’s ability to identify the goods or services for which it is registered is weakened, since use of an identical or similar sign by a third party leads to dispersion of the identity and hold upon the public mind of the earlier mark. That is particularly the case when the mark, which at one time aroused immediate association with the goods or services for which it is registered, is no longer capable of doing so (see, to that effect, Intel Corporation, paragraph 29).

    …

    41. As regards the concept of ‘taking unfair advantage of the distinctive character or the repute of the trade mark’, also referred to as ‘parasitism’ or ‘free-riding’, that concept relates not to the detriment caused to the mark but to the advantage taken by the third party as a result of the use of the identical or similar sign. It covers, in particular, cases where, by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation.

    …

    44. In order to determine whether the use of a sign takes unfair advantage of the distinctive character or the repute of the mark, it is necessary to undertake a global assessment, taking into account all factors relevant to the circumstances of the case, which include the strength of the mark’s reputation and the degree of distinctive character of the mark, the degree of similarity between the marks in issue and the nature and degree of proximity of the goods or services concerned… the stronger the mark’s distinctive character and reputation are, the easier it will be to accept that detriment has been caused to it.”

    That the use of the sign complained of is without ‘due cause’

  74. The burden is on the defendant to show that there is due cause, so although it is an element of infringement under section 10(3) TMA, it operates like a defence. The Defendant in this case does not seek argue that it has ‘due cause’ to use the sign complained of.
  75. Passing Off

  76. The elements necessary to reach a finding of passing off are the ‘classical trinity’ of that tort as described by Lord Oliver in the Jif Lemon case (Reckitt & Colman Product v Borden [1990] 1 WLR 491 HL, [1990] RPC 341, HL, namely goodwill or reputation; misrepresentation leading to deception or a likelihood of deception; and damage resulting from the misrepresentation. The burden is on the Claimants to satisfy me of all three limbs.
  77. In relation to deception, the court must assess whether “a substantial number” of the Claimants’ customers or potential customers are deceived, but it is not necessary to show that all or even most of them are deceived (per Interflora Inc v Marks and Spencer Plc [2012] EWCA Civ 1501, [2013] FSR 21).
  78. The Defendant relies on The National Guild of Removers and Storers Limited v Bee Moved Limited, Nicholas Anthony Burns and Oliver Christopher Robert Sampson [2016] EWHC 3192 (IPEC) in which Douglas Campbell QC sitting as a deputy Judge of the High Court considered “…the difficulties of distinguishing between mere confusion, which is not enough to establish misrepresentation, and deception, which is” with reference to BSkyB v Sky Home Services [2007] FSR 14, Phones4U v Phone4u.co.uk Internet Ltd [2007] RPC 5 and Ewing v Buttercup Margarine Co [1917] 2 Ch 1, CA. He concluded that: “The real distinction between the two lies in their causative effect, but is not a complete statement of the position… The more complete statement focuses on whether the conduct complained of is “really likely” to be damaging to the Claimant’s goodwill or divert trade from him. This emphasis on “really likely” echoes Lord Fraser in Advocaat [1980] RPC 31 at p 106 line 3. It is implicit in this test that if the conduct complained of is not “really likely” to be damaging then it will be mere confusion.”
  79. ANALYSIS OF ISSUES

    Issue (i)(a) – Is there use by the Defendant in the United Kingdom of a sign identical with, or similar to the Trade Mark?

    Average Consumer

  80. The first step is to identify the characteristics of the average consumer in the circumstances of this case. Mr Muir Wood submits for the Claimants that the average consumer in this case is likely to be the average flagpole-buying consumer, rather than a more general purchaser of garden goods or home wares, because a flagpole, he submits, is a fairly niche product and its purchase is likely to be a considered one. It is not an everyday purchase. Mr Small makes no submissions about the characteristics of the average consumer for the Defendants.
  81. I am satisfied that the average consumer is, as Mr Muir Wood suggests, an average flagpole-buying consumer who may be buying a flagpole for his home or for a commercial setting. He is a construct made up of many different purchasers, some of whom may purchase a single flagpole, some of whom may purchase multiple flagpoles, and if the latter, he may make a test purchase first and, once happy with the quality of the product, return to make a multi-unit order. I am satisfied that the average consumer is likely to be driven by considerations of utility, quality and price rather than aesthetics or design, and that his purchase will be a considered one, rather than a whimsical or impulsive one. For that reason I consider that he is likely to pay close attention to all of the information on the listing, including reading the ‘Further details’ and at least some of the customer reviews. I am satisfied that this average consumer is one who has sufficient facility and experience with online purchasing to be confident enough to purchase such a large, utilitarian product online without the need to visually inspect it or discuss the purchase with a salesperson.
  82. Use of the sign complained of

  83. Mr Small’s primary case advanced for the Defendant is that it has not used the sign complained of at all. It has merely listed a generic 20ft Aluminium flagpole on Amazon and no more. It did so using the individual ASIN and EAN for each Listing, in accordance with the honest practices of Amazon, which the Defendant had no control over. However, if the Listing had instead been for a ‘DesignElements 20ft Aluminium Flagpole’, Mr Small accepts (as did Mr Coles in evidence) that the Defendant would have ‘used’ the sign complained of.
  84. I do not find Mr Small’s argument to be a logical one. I disagree that there is a material difference in the use of the sign complained of in the two scenarios presented by Mr Small for the Defendant. How can it be that offering for sale and selling the Product on a Listing entitled ’20ft Aluminium Flagpole’ ‘by DesignElements’ is not a use of the sign complained of, whereas offering for sale and selling the Product on a Listing entitled ‘DesignElements 20ft Aluminium Flagpole’ is? It is not the case that the title of the listing is ever presented to the consumer or potential consumer without the additional words ‘by DesignElements’ also being visible. Even if the consumer might search against for the title without the sign, the words ‘by DesignElements’ appear after the title of the listing, whether in a search results list or in the listing itself, as can be seen from figures 1 and 2. Whether the sign complained of appears in the listing title itself, or in the descriptor ‘by DesignElements’, it still acts to indicate the origin of the goods for sale on the listing, in my judgment.
  85. In making this finding, I do not accept Mr Coles’ attempts to define the words ‘by DesignElements’ as merely a ‘shop name’, by which I understand him to mean the name of the seller who originally created the listing. It is clear from the procedure for creating a new Amazon listing, which I have been taken through, that these words have been taken from the specified manufacturer of the product, and not the creator of the listing, which also explains why the product is described as being ‘by’ the brand. If the average consumer were to click through to the “Features and details” section of the Listing, he would discover that the manufacturer is also named as DesignElements. I am satisfied that the average consumer would be likely to do so, as he is likely to be considering all of the information in order to assess the utility and quality of the offered product, which are two of the qualities most important to his decision to purchase.
  86. For those reasons I do not accept the Defendant’s submission that it was merely using a ‘generic’ listing for a 20ft Aluminium Flagpole. The Listings are not generic. Whenever the item is presented to a consumer or potential consumer it is expressed to be ‘by DesignElements’ which that consumer can easily discover is the manufacturer’s brand.
  87. I accept that some people who create listings for branded products which are not their own mis-describe the brand so that their own shop name or trading name appears here, as Mr Coles suggests: for example, on a search for Nike trainers, the vast majority of the entries which are returned contain a description of a type of Nike trainer in the title and then say ‘by Nike’, but a few say, for example, ‘by La Redoute’ (a large and well-known French department store and online retailer). However, for the reasons I have given I am satisfied from the listing process that it is the manufacturer, not the original seller, that is required to be displayed here, and which the average consumer expects to find here. The seller name (whether that is the seller who originally set up the listing or one of multiple sellers who sell on the listing thereafter) has its own place in the listing, where it is made clear that they are the supplier of the product.
  88. For those reasons I am satisfied that the Defendant has used the sign complained of, namely ‘DesignElements’, to offer or expose the Products for sale in the United Kingdom, and put them on the market in the United Kingdom, pursuant to section 10(4)(b) TMA.
  89. Sign identical or similar to the Trade Mark

  90. Next I must consider whether the sign complained of is identical, or similar, to the Trade Mark. In order to assess similarity and identity of marks I must undertake an objective comparison of the sign and the Trade Mark in relation to three aspects: visual, aural and conceptual. For there to be identity, I must find an objective coincidence in all three elements.
  91. The Claimants’ primary case is that sign complained of is identical to the Trade Mark. Its secondary position, if I am not satisfied of identity, is that the sign complained of and Trade Mark are similar.
  92. The Claimant relies on the case of LTJ Diffusion SA v Sadas Vertbaudet SA (C-291/00) [2003] ETMR 83 in which the Court of Justice of the European Union gave the following guidance at page 1015:
  93. “…a sign is identical with the trade mark where it reproduces, without any modification or addition, all the elements constituting the trade mark or where, viewed as a whole, it contains differences so insignificant that they may go unnoticed by an average consumer.”

  94. Mr Muir Wood for the Claimants submits that aurally they are identical and conceptually there is no difference between them, being the same two English words in both the sign complained of and the Trade Mark. The Defendant does not appear to dispute this, and so I accept that they are.
  95. In relation to a visual comparison, Mr Muir Wood submits that they are visually identical as the average consumer will not recall the precise font in which the Trade Mark is registered, nor will he notice or remember the blue flag device which is part of the Trade Mark. The average consumer will merely recall the words “DESIGN ELEMENTS” which are identical words in both Trade Mark and sign complained of, albeit the sign removes the space between the words. Accordingly, he submits that the only differences are insignificant per LTJ Diffusion. Finally, Mr Muir Wood submits that the use of both the sign complained of and Trade Mark for the sale of identical goods, namely flagpoles strengthens the overall identity of the marks.
  96. Mr Small submits that they are not visually identical, because the sign complained of is a plain text word sign, presented with no spaces between the two words, and the Trade Mark is a stylised word mark in an unusual font presented as two separate words, plus a blue-coloured flag device.
  97. I am not satisfied that the sign complained of and the Trade Mark are identical because: (i) the words ‘Design Elements’ within Trade Mark, which are in my judgment the dominant elements of the mark, are graphically represented in a stylised font which is not an everyday, normal typeface; (ii) the Trade Mark also has a blue flag device above the letter ‘g’ in design which is a distinctive albeit not dominant feature; (iii) the Trade Mark separates the words ‘Design’ and ‘Elements’ with a space, whereas the sign complained of removes the space between them and so reduces the identity between the Trade Mark and the sign. The distinctive font and the blue flag device are elements which are not represented at all in the sign complained of. In particular, the absence in the sign of the jaunty blue flag device of the Trade Mark is, in my judgment, not a difference which is likely to go unnoticed by the average consumer.
  98. However I am satisfied of their visual similarity because: (i) the Trade Mark and the sign complained of are composed of the same two words using the same letters in the same order; (ii) although the sign removes the space between the two words of ‘Design’ and ‘Elements’, unlike in the Trade Mark, the fact that they are two separate words is visually maintained by the capitalisation of the first letter of each word; and (iii) there is no great degree of variation in the stylised version of the words used in the Trade Mark, which are easily recognisable in a highly legible, albeit unusual, font.
  99. Because I find the sign and the Trade Mark to be aurally and conceptually identical and visually similar, I accept Mr Muir Wood’s secondary submissions that the sign complained of and the Trade Mark have a high degree of similarity.
  100. Issue (i)(b) – Is that use in the course of trade?

  101. There can be no real dispute that the use of the sign complained of by the Defendant is use in the course of trade, as the Defendant has sold a significant number of Product units in so doing.
  102. Issue (i)(c) – Is the sign complained of used in relation to similar goods and services to those for which the Trade Mark is registered?

  103. I am satisfied that the use of the sign complained of by the Defendant is use in in relation to the sale of flagpoles, which is an identical use to that for which the Trade Mark is registered.
  104. Issue (ii) – If so, does there exist a likelihood of confusion on the part of the public?

  105. I have found that the sign complained of is highly similar to the Trade Mark and it is being used for the Product, which is identical use to that for which the Trade Mark is registered. Mr Muir Wood submits that in those circumstances there is a very high likelihood of confusion on the part of the average consumer described, although he acknowledges that there is no evidence of actual confusion before me.
  106. Mr Muir Wood further submits that the Trade Mark is highly distinctive as the words which make up the Trade Mark – ‘DESIGN ELEMENTS’ – have no particular meaning in relation to flagpoles and are not descriptive of the goods to which they are attached. Accordingly, he submits, there will be a greater likelihood of confusion on the part of the average consumer who is already aware of the particularly distinctive nature of the Trade Mark, such as repeat customers who may have bought one flagpole from the Second Claimant and seen the Trade Mark on the packaging, and then returned to Amazon for one or more further purchases from the Listings.
  107. Mr Muir Wood submits that if that average consumer returned to purchase additional flagpoles at a time when the Defendant had won the buy box, there would be a high likelihood of confusion in that the words ‘by DesignElements’ on the listing would confuse him into believing he was buying an identical flagpole of the Claimants, when in fact he would be buying the Product which is a different flagpole of different design and from a different source of goods.
  108. Mr Muir Wood relies in particular on the guidance at paragraph 52(k) of Specsavers, namely that where the association between the marks causes the public wrongly to believe that the respective goods come from the same or economically-linked undertakings, there is a likelihood of confusion. He submits that the average consumer in this case will believe, on purchasing from a Listing, that the Product supplied by the Defendant is that manufactured by or economically linked to the Second Claimant, and accordingly I can be satisfied that there is a likelihood of confusion on the part of the public.
  109. Mr Small for the Defendant accepts that the absence of actual confusion is not fatal to the Claimant’s claim under Section 10(2)(b), but relies on the statement of Arnold J at paragraph 99 of Jack Wills Ltd v House of Fraser (Stores) Ltd [2014] EWHC 110, [2014] E.T.M.R. 28 that: “The longer the use complained of has gone on in parallel with use of the trade mark without such evidence emerging, however, the more significant it is. Other relevant factors are the scale of the use complained of and the likelihood of actual confusion being detected.”
  110. Mr Small submits that:
  111. i) despite the Defendant selling the Product from the Listings for a significant part of the 4-year period from mid-2012 to March 2016, there is no evidence of actual confusion of consumers at all;

    ii) there are no complaints on Amazon reviews that the customers received a Feel Good UK flagpole rather than a Design Elements flagpole, nor that they even noticed they had received a different flagpole to that ordered;

    iii) Mr Coles’ evidence was that the Defendant received no direct customer complaints about the quality or brand of the Product supplied from sales from the Listings;

    iv) Mr Tolofson admits that the Claimants have received no such complaints.

  112. Mr Small further submits that the Trade Mark has no distinctiveness at all to any of those consumers who make up the average consumer, except those who have previously bought one of the Claimants’ flagpoles and return to the Listings to buy or consider buying another, because the Trade Mark itself cannot be found online, whether on Amazon or elsewhere, it doesn’t appear on the Amazon listing and can only be found on the packaging and instruction sheet of the Claimant’s flagpole after it has been purchased and delivered to the consumer.
  113. Mr Small asks the court to accept that the lack of actual evidence of confusion is significant, per Jack Wills, and submits that this coupled with the lack of distinctiveness of the Trade Mark to all but repeat customers means that the court can be satisfied that there is no likelihood of confusion on the part of the public.
  114. I have considered the matter carefully and carried out a contextual assessment of the use of the sign, as required by Specsavers, as at the date that use commenced. In the context of the Trade Mark, that is 18 February 2013. The Defendant sold the Product from the Listings for a significant part of a 4 year period. It has disclosed sales of 1215 for part of that time but I am satisfied that the overall sales must have been significantly higher. That is a significant number of sales in the context of what is a niche product and in the context of the overall sales achieved by the Second Claimant in the same period, but it is a relatively low number in total.
  115. Mr Muir Wood submits that if a consumer was minded to complain about the Product it received from the Defendant not being a product of the Second Claimant, it would be more likely than not that they would complain to the Defendant. I accept that submission, but they would also have the opportunity to complain on the Amazon reviews, and they have not done so.
  116. Of course the Claimants now make no case that the Product was of inferior quality or utility to the Claimants’ flagpole. It may be that customers noticed that they had not received what they had expected to receive, being a ‘DesignElements’ branded flagpole, but were happy to accept what they had as it fulfilled the requirements for utility, quality and price which had driven them to purchase from the Listing in the first place. In that case there would be confusion, but it would be unreported and accordingly unmeasurable. In fact that is the tenor of Mr Coles’ evidence when he said “If the customer gets what the advert shows and it is good quality, they are happy”.
  117. Taking all of the circumstances into account, I am satisfied on the balance of probabilities that there is a likelihood of confusion on the part of the average consumer. I am driven to this conclusion because of the weight of factors in favour of it, which include the high degree of similarity of the sign complained of to the Trade Mark, the identity of the goods, the distinctiveness of the Trade Mark to repeat customers, the careful consideration that the average consumer will have given to the information on the Listings before making his purchase, the real possibility of there being unreported actual confusion, and the likelihood that the average consumer will consider that the Product emanates from the stated manufacturer, DesignElements, or is economically linked to that source. Set against this is the lack of actual evidence of confusion over a four year period (not all of which involved sales of the Product on the Listings) and the lack of familiarity with the Trade Mark for that part of the average consumer construct which is not a repeat customer. Although I take those into account as significant, I do not consider that they outweigh the other factors. In particular I consider that those who are likely to be confused, or who may have been actually confused but not reported it, consititute a significant proportion of the relevant public which is sufficient to warrant intervention by the court.
  118. For those reasons I am satisfied that the use of the sign complained of in relation to the Product amounts to infringement of the Trade Mark pursuant to section 10(2) TMA.
  119. Issues (iii) – Reputation of the Trade Mark.

  120. I turn now to whether there is infringement pursuant to section 10(3) TMA, the first limb of which is to consider whether the Trade Mark has a reputation in the United Kingdom amongst a significant part of the relevant public.
  121. On the Claimants’ own case the Trade Mark is used only by the Second Claimant and only for goods sold by it on Amazon.co.uk. The Claimants do not use it even on the same goods sold on other channels, such as Ebay. Mr Tolofson confirmed that it had no other online presence. There is no evidence of advertising or marketing of the Trade Mark put before me, except to the extent that it is used on the goods sold via the Listings and other listings of the Second Claimant on Amazon. Even on these listings, the Trade Mark itself does not appear. Mr Tolofson says that all text on Amazon listings must be plain text and I accept that. However, it would have been possible to include on the Listings a photograph of the packaged goods showing the use of the Trade Mark. That has not been done.
  122. I am satisfied that the only section of the public who has seen and is aware of the Trade Mark, and so the only section of the public with whom the Trade Mark can have a reputation, is that section which has actually bought goods upon which the Trade Mark has been applied, from the Second Claimant, from Amazon. I accept that every such sale will cause a reputation to some extent. The issue is whether there is a reputation in the Trade Mark with a significant proportion of the relevant public.
  123. What is the relevant public in this case? Mr Muir Wood reminds me that the goods sold under the Trade Mark are not just flagpoles, but others including garden furniture. Flagpoles are a small, niche market and on the Claimants’ evidence, they form their highest sellers. Accordingly I can be satisfied that if the Trade Mark does not have a reputation amongst a significant part of the public concerned with flagpoles, any reputation in the very much larger garden furniture market will not assist it. However, I have no evidence how much of the public who are concerned with flagpoles may use Amazon, even if they go to look and do not buy. I cannot speculate. I do not know what other suppliers of flagpoles, or marketplaces of flagpoles, there are in the United Kingdom.
  124. What about the positive reviews on the Listings? The difficulty with considering them is that those which I can be certain relate to the Claimants’ products because they predate the sale by the Defendant of the Products on the Listing, all predate the Trade Mark. They can only be posted by those who know of the Sign as placed on the purchased flagpoles, not the Trade Mark. Those which postdate the Trade Mark (after 13 February 2013) are a mixture of reviews by those who bought flagpoles from the Second Claimant (and who know of the Trade Mark) and those who bought the Product (who do not) and I cannot distinguish between them. It is self-evident that positive reviews by those who bought the Product cannot enhance the Trade Mark as those sales are the acts which the Claimants say have been detrimental to the reputation of the mark.
  125. Taking all these circumstances into account, I cannot be satisfied that the Trade Mark has a reputation amongst a significant part of the relevant public and the claim for infringement under section 10(3) TMA must fail. I move onto passing off.
  126. Issue (v) – Does the Claimants’ business have goodwill or reputation in England and Wales associated with the Sign?

  127. Mr Muir Wood for the Claimants submits that the burden for establishing goodwill is not high. He relies on the case of Stannard v Reay [1967] F.S.R. 140 (Ch) where the Court found at page 144 that goodwill may be established after trading for a very short time. I accept that submission, and also that of Mr Small that the Claimants must show goodwill that is more than trivial (per Sutherland v V2 Music Ltd [2002] EMLR 568).
  128. Mr Muir Wood submits that even if the court considers that the Defendant was trading its Product from the Listings as early as July 2012, the evidence shows that:
  129. i) the Second Claimant was selling from one or more Listings using the Sign for over a year by then; it had sold over 700 flagpoles by July 2012;

    ii) as Mr Coles accepted in evidence, by July 2012 the Second Claimant had garnered a significant number of positive customer reviews on the Listings, which were written after the flagpoles had been received with the Sign upon the packaging and instruction leaflets;

    iii) by July 2012 the Second Claimant had also achieved repeat sales from customers who had seen the Sign upon the packaging and instruction leaflets of their previous flagpole purchases;

    iv) Mr Coles accepted that at the time the Defendants began selling Product using the Listings, those Listings were the top listings for flagpoles on Amazon.

  130. I accept all of those submissions and reject Mr Small’s submission that no goodwill attached to the Sign ‘Design Elements’ as it was not used by the Claimants in the Listings, which instead used the sign ‘DesignElements’. I consider the difference between them to be insignificant. I asked Mr Small where the goodwill from all of these sales and positive reviews had accrued if not to the Claimants associated with the Sign, and he was unable to suggest an alternative. I am satisfied that the goodwill did accrue to the Claimants for the reasons Mr Muir Wood gives.
  131. Issue (vi) – Has the Defendant used the Sign in a manner which constitutes a misrepresentation?

  132. The test is that in the Jif Lemon case, per Lord Oliver at paragraph 407: “… is it on the balance of probabilities likely that, if the appellants were not restrained as they have been, a substantial number of members of the public will be misled into purchasing the defendants’ product in the belief that it is the respondents’ product?”
  133. I have no doubt that they were. The Listings state that the 20ft Aluminium Flagpoles the consumers are considering purchasing are ‘by DesignElements’. If they click into the further information section, they will be told they are considering purchasing a flagpole manufactured by DesignElements. The photograph on the listing is of a DesignElements flagpole, which I remind myself is materially different in design to that of the Product, although it is not clear if those differences are visible from the photograph. Those potential consumers, when they clicked to buy the Product and became actual consumers, must have assumed that they were buying, and would receive, a DesignElements flagpole. They did not. I am satisfied that use of the Listing to sell the Product is a misrepresentation by the Defendant amounting to a deception.
  134. Issue (vii) – Have the Claimants suffered damage as a consequence of any misrepresentation by the Defendants?

  135. Unusually, in this case I can be satisfied on the balance of probabilities that almost every sale of the Defendant’s Product from a Listing was a sale which would otherwise have gone to the Second Claimant. Of course I cannot be certain of every sale, as the Defendant had undercut the Second Claimant somewhat in price and so it is possible that some of those customers would have decided not to purchase at the higher price, albeit I have no evidence of that. However it is sufficient for me to be satisfied that the Claimants have suffered damage. Accordingly I am satisfied that in selling Product from the Listings before 18 February 2013, the Defendant has passed off its goods, not being goods of the Claimants, as goods of the Claimants.
  136. QUANTUM OF DAMAGES

  137. The Claimants seek compensation for lost profit on each sale of Product made by the Defendant using the Listings. The Defendant admits 1215 such sales. It has not produced any sales figures for the period from July 2012 to the end of 2013, nor from mid-March 2016 to date. The Claimant has estimated these by averaging the sales data across the 26.5 months reported, to come to an average sales figure of 45 flagpoles per month. Accordingly it seeks compensation for a further estimated 810 flagpole sales in 2012 and 2013 and a further 608 flagpoles from mid-March 2016 being 2633 units in total. I am unable to make a finding of the specific date on which the Defendant began to sell Product on the Listing. Mr Coles’ oral evidence was that it was before 18 February 2013. In the absence of any more specific evidence, I will assess the sales from that date, and allow a further 12 months of sales at an estimate of 45 flagpoles per month being an additional 540 units. In respect of sales after mid-March 2016, I have no evidence that the Defendant sold any of the Product from the Listings after this time. The Defendant’s case is that it ceased in mid-March 2016 and Mr Tolofson’s evidence is that at the time he drafted his witness statement of June 2016, sales had ceased. There is no suggestion that they ever started again. On the balance of probabilities I am satisfied that there were no sales after mid-March 2016. Accordingly I find the total number of lost sales is 1215 +540 = 1755 units.
  138. The profit figure per sale sought by the Claimants has reduced incrementally as the scrutiny upon it has increased by the Defendant. Mr Small describes the evidence upon which the Claimants rely to reach this figure as woeful. Certainly it is true that the profit figure has decreased from £26.55 per unit originally claimed to £20 per unit, then following cross-examination of Mr Tolofson by Mr Small to £15.45 per unit. After close of evidence a concession was made by the Claimants in respect of VAT which brought the figure down further to £14.45 per unit, where it now remains. The Defendant’s evidence is that it has only made a gross profit of £3.29 per item. It has also provided limited financial disclosure to enable this figure to be analysed. Mr Small put this figure to Mr Tolofson who was incredulous and he said that it was “inconceivable that they made that little”.
  139. The £14.45 profit figure now sought by the Claimants is based on a sale price to consumers of £39.99 plus £4.99 shipping, less a number of specified deductions. Those which the Defendant specifically disputes are: 50p cost of shipping from China (the Defendant says that it pays £1.25); £2.50 actual cost of shipping to consumer from the UK warehouse (the Defendant says that it pays £7.70); and the £5.25 Amazon charge which Mr Coles for the Defendant says he disputes, but did not explain how it was wrong. At no point in Mr Small’s cross-examination or closing submissions, did he submit that the starting point for calculating the profit, i.e. the sale price of £39.99 plus £4.99 shipping was wrong.
  140. I accept Mr Small’s submission that the constant changes to the figures show that there has been inadequate consideration given to them by the Claimants. I am surprised that they do not know the profit margin they are making on their goods with any degree of accuracy. Mr Small submits that I cannot rely on the Claimants’ figures at all, and I should use the Defendant’s gross profit figure of £3.29 to calculate damages, but that is almost as poorly evidenced, save that I have seen evidence of the Defendant’s shipping costs to customers in the UK in the form of a DHL invoice, which I accept. I also do not know what sales price that gross profit figure of £3.29 is based upon. If it is based on the Defendant’s selling price of £29.99 then it is not very far from the Claimants’ figure of £14.45 based on a selling price of £39.99, for example.
  141. I am willing to accept Mr Tolofson’s evidence that the Claimants can ship from China for 50p per unit as I have no counter-evidence, and I am willing to accept the Amazon charges because the Defendant is in the position to be able to challenge those in detail and has not done so. The greatest discrepancy is in the figure that Mr Tolofson puts forward for UK shipping compared to the figure that the Defendant has evidenced for its costs. That gives me pause for thought, but on the balance of probabilities I accept Mr Tolofson’s figure. That is because:
  142. i) I appreciate that different businesses will achieve different prices for shipping the same thing as it is a competitive market, and much depends on volumes offered and delivery times required;

    ii) I would expect Mr Tolofson to know if he was making a significant loss on the shipping charged to customers rather than the respectable profit his figure suggests; and

    iii) If the gross profit figure on a £39.99 selling price was only £9.25, as a £7.50 UK shipping cost would make it, then the Second Claimant would have made a loss on every sale that it made at the reduced price of £29.99. That was not suggested by Mr Tolofson and I consider it inherently unlikely, particularly as he confirmed that the First Claimant is still selling flagpoles at £29.99 plus delivery on Ebay.

  143. Accordingly accept the UK shipping cost put forward by the Claimants. For the reasons given below, the Claimants’ pricing during the period was variable and no detailed analysis of what prices were charged when was put before me. Nor was it suggested in the Defendant’s closing submissions that I attempt to establish different loss of profit figures for periods of different pricing. Accordingly I will wield a broad axe and assess the loss of profits at £14.45 per unit x 1755 units being £25,359.75. I award that figure to the Claimants in damages.
  144. The Claimants also seek damages for the loss of profits the Second Claimant has suffered from having to reduce its price to compete with the Defendant selling product on its Listings. Mr Muir Wood accepts that the evidence on this point is unclear, but reminds me that Mr Coles accepted in cross-examination that the Defendant set its price to undercut the Second Claimant. He submits that £5 per unit sold by the Second Claimant from 2013 to 2015 (being 2998 units) namely a further £14,990, is an appropriate measure.
  145. Mr Tolofson’s evidence was that the Second Claimant reduced its price down to £29.99 plus delivery from £39.99 plus delivery. Since the Defendant had stopped selling on its Listings, it had increased it again. However, as mentioned, Mr Tolofson’s oral evidence was that the First Claimant had also reduced its selling price for flagpoles on Ebay to £29.99 plus delivery, despite having no similar competition on its listing, and that the price on Ebay remained at £29.99 even at the date of trial. He gave no explanation for this.
  146. I have also seen in the trial bundle some analytics produced by Amazon for each Listing showing the different prices at which the flagpoles were listed over various months or years. This shows a significant degree of variation and a picture which is more complex than suggested by the Claimants. It certainly does not show that the price went to £29.99 and stayed there from 2013 to 2015.
  147. This evidence, together with the evidence of the First Claimant’s reduced prices on Ebay, mean that I cannot be satisfied: (i) that a reduction in price was entirely attributable to the presence of the Defendant on the Listings; and (ii) that £5 loss of profit figure over all sales from 2013 – 2015 is an accurate measure of that element of the Second Claimant’s price reduction which was attributable to the presence of the Defendant on the Listings. It is for the Claimants to satisfy me of this measure of loss and they have failed to do so. Accordingly I make no award on this head.
  148. SUMMARY

  149. To summarise:
  150. i) I am satisfied that the use by the Defendant of the Listings to sell the Product after 18 February 2013 infringed the Trade Mark pursuant to section 10(2) TMA;

    ii) I cannot be satisfied that the Trade Mark has a reputation amongst a significant part of the relevant public and so the claim for infringement under section 10(3) TMA fails;

    iii) I am satisfied that the use by the Defendant of the Listings to sell the Product before 18 February 2013 was passing off;

    iv) The Claimants are entitled to an injunction restraining the Defendant from further infringement and passing off;

    v) The Defendant shall pay the Claimants the sum of £25,359.75 in damages for such infringement and passing off.

  151. I will hear submissions on interest, costs, and consequential orders at the handing down of this judgment.



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URL: http://www.bailii.org/ew/cases/EWHC/IPEC/2017/1400.html

http://www.bailii.org/ew/cases/EWHC/IPEC/2017/1400.html
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