Case No. EWHC-2564-(IPEC)

used in relation to their goods, in respect of which the trade mark rights had been exhausted, but to attract custom for the Defendants’ own goods. They posited a variety of situations in which use of a registered mark might be an infringement, such as when the defendant holds no stock of the claimant’s goods, as was the case in Cosmetic Warriors, or has no available stock of them, both being cases in which it seems to me no exhaustion defence would apply (unless perhaps the lack of stock was temporary). 100.The Claimants submitted that the defence would not apply in two other situations. First, where a defendant holds stock of the marked goods, but in quantities such that an average order, or some normal orders, cannot be fulfilled. Secondly, where stock was held but kept “only for the purpose of using the trade mark to create or preserve an attraction for customers of its retail business.” No authority was cited for these two propositions. Limited stock 101.I am not convinced by the Claimants’ argument that the exhaustion defences cannot apply where a defendant has limited stock of the marked goods. This, it seems to me, adds a significant limitation to the defences which cannot be imported into the wording of the provisions. The sole question is whether the use of the mark relates to goods which have already been placed on the market by the proprietor or with his consent and would be seen by the average consumer as relating to the claimant’s goods. Otherwise, all resellers of marked goods would run the risk that at some indeterminate point the defence would become unavailable to them, simply because they had sold some but not all of their stock of the products. In my view, the rights in all of the Claimants’ goods held by iKoustic had been exhausted, and the defences apply in principle to the alleged infringements.102. It is necessary to consider separately whether the use of GENIECLIP on the webpage shown in Annex C falls within the defence. In my view, use of the Mark to announce that a product is out of stock and to advertise the availability of an alternative product does not objectively amount to use in relation to goods in relation to which the Claimants’ rights have been exhausted. This did not amount to use of the Mark by the Defendants in order to recommercialise the Claimants’ goods. Hence, I conclude that the exhaustion defence does not apply to that webpage. 103.Furthermore, in my judgment the Claimants have not made good the allegation that the Defendants in this case were holding stock in quantities such that an average order, or some normal orders, could not be fulfilled. The Claimants submitted that an advert directed to an average consumer who wishes to purchase more goods than available would not be use in relation to the Claimants’ goods which have been put on the market, so the defence would not arise. However, the Claimants did not provide any evidence as to when the use of the Marks by iKoustic ceased to be legitimate and, because an average order could not be met, became an illegitimate and infringing use, the real purpose of which was to attract custom for the Defendants' products. There was no evidence as to when the stock of any one of their range of products reached the level which the Claimants said was too low to justify use of the Marks. Yet the size of an average or normal order would presumably have varied depending upon whether the customer was the kind of commercial customer upon which the Claimants concentrated, or the domestic customers also serviced by iKoustic. 104. Mr Silverleaf QC sought to rely upon Mr Parsons’ acceptance in cross-examination that clips have to be used with furring channels, so that once the channels have gone it is harder to sell the clips. However, Mr Parsons also explained that in such circumstances the clips might be sold to a customer who had a stock of channels, as was eventually done. It does not seem to me that the concession went anywhere near satisfying the problem of not knowing what an “ordinary” order was. 105. The Schedule, which I understand is accurate as to stock levels, shows that the amount of stock of some of the Claimants' products held by iKoustic reduced significantly between about March and July 2019, and all tailed off to nil by the end of the year. Stock levels for some products reduced earlier than for others, yet there was no evidence as to the point at which, according to the Claimants, stock levels for any one product line fell below the minimum numbers which the Claimants accept represented a commercially realistic stock holding. For example, on 10 December 2018 iKoustic held 34 rolls of the RST10 GenieMat. By 6 February 2019 that had dropped to 10 rolls. There was no evidence before me to suggest that 10 rolls was insufficient to supply the average customer; on the contrary, the Schedule mentions a request for 8 rolls of RST05 on 11 March 2019 (presumably they were not sold) and shows the remaining 10 rolls being sold to an existing customer on 8 October 2019. 106.The Claimants relied heavily upon the fact that from January 2019 iKoustic held a single roll of the FF10 GenieMat. It seems that it remained on the iKoustic website, though marked as not available to buy online, for most of 2019, a point complained about in the Amended Particulars of Claim, which also complained about the webpage later being changed to show the product available for online purchase. Mr Silverleaf QC said in opening that it was clear that the first time iKoustic had an inquiry for such a small quantity, it sold that roll. He submitted that the product was kept up on the website for months when inquiries were generated by that webpage, enabling iKoustic to sell its own products as a substitute. Mr Parsons accepts that there were difficulties selling just one roll, but it was sold on 5 November 2019. The Claimants did not adduce any evidence that a single roll would not satisfy a normal or average order. In the circumstances, I am not satisfied that the fact that the Defendants held only a single roll of FF10 meant that use of the Mark was illegitimate, even applying the Claimants’ test for disapplying the exhaustion defence. 107.The Claimants argued that as a matter of construction the defence could not apply if the Marks were used in part in relation to their goods and in part so as to sell the Defendants’ goods. This does not seem to me to be a natural construction of the provisions nor did the Claimant explain how one would distinguish between such uses. I reject this submission. 108. The Claimants also put forward various alternative scenarios, when goods were not completely out of stock, which they said would lead to infringement, but those points seem to me to collapse in the light of the issue I have identified at paragraph 103 above. In the circumstances, I do not consider that the Claimants have proved any infringement in this way. 109.The Claimants submitted that, objectively considered, once iKoustic had determined that it would offer its products in place of the advertised Genie products “where it was unable to supply any responding customer’s requirements” it was using the Marks in relation to its own goods, whatever the advertisements said. That submission goes further than the case based upon iKoustic’s inability to satisfy an average or normal order, and for all the reasons given above, I reject it. 110.I conclude that the exhaustion defences of section 12/Article 15 apply in principle to any infringing uses of the Marks, save the webpage use at Annex C, unless the Claimants have legitimate reasons to oppose the use of their Marks.Legitimate reasons to oppose use of the Marks 111.The Claimants say that they had legitimate reasons to oppose the use of their Marks, for when the Defendants continued to advertise/list their products on iKoustic’s website this was not done legitimately to attract custom for those products, at least when customers could not "in reality" be supplied with the Claimants' products but only with the Defendants' products. This was said to affect both the advertising and investment functions of the Marks by drawing away custom and impairing the ability of Marks to maintain customer loyalty. This amounted to a legitimate reason to object to the recommercialisation of the remaining Genie products in this way. 112.The Claimants referred me to several decisions of the CJEU on recommercialisation. In Case C-337/95 Parfums Christian Dior v Evora EU:C:1997:517, [1997] E.C.R. I6013, [1998] RPC 166, the objection was to the use of the mark in advertising the resale of genuine Dior products by a chemist chain not part of the Dior selective distribution network. The CJEU held:“43. The damage done to the reputation of a trade mark may, in principle, be a legitimate reason, within the meaning of Article 7(2) of the Directive, allowing the proprietor to oppose further commercialisation of goods which have been put on the market in the Community by him or with his consent. According to the case-law of the Court concerning the repackaging of trade-marked goods, the owner of a trade mark has a legitimate interest, related to the specific subjectmatter of the trade mark right, in being able to oppose the commercialisation of those goods if the presentation of the repackaged goods is liable to damage the reputation of the trade mark (Bristol-Myers Squibb, cited above, paragraph 75). … 45. As regards the instant case, which concerns prestigious, luxury goods, the reseller must not act unfairly in relation to the legitimate interests of the trade mark owner. He must therefore endeavour to prevent his advertising from affecting the value of the trade mark by detracting from the allure and prestigious image of the goods in question and from their aura of luxury. … 48. In view of the foregoing, the answer to be given to the third, fourth and fifth questions must be that the proprietor of a trade mark may not rely on Article 7(2) of the Directive to oppose the use of the trade mark, by a reseller who habitually markets articles of the same kind, but not necessarily of the same quality, as the trade-marked goods, in ways customary in the reseller's sector of trade, for the purpose of bringing to the public's attention the further commercialisation of those goods, unless it is established that, given the specific circumstances of the case, the use of the trade mark for this purpose seriously damages the reputation of the trade mark.”113.In Case C-59/08 Copad v Dior EU:C:2009: [2009] F.S.R. 22 genuine Dior lingerie was sold in breach of contract by an approved distributor to a discount retailer. The CJEU was asked whether, where a licensee who puts luxury goods on the market in breach of the licence agreement is deemed to have done so with the consent of the proprietor, that proprietor can nevertheless rely on that clause to oppose further commercialisation of the goods. It held:“54. In this respect, it must first be recalled that, according to the settled case law of the court referred to in [19] of the present judgment, use of the adverb “especially” in para.2 of art.7 of the Directive indicates that alteration or impairment of the condition of marked goods is given only as an example of what may constitute legitimate reasons (Bristol Myers Squibb at [26] and [39], and Parfums Christian Dior at [42]). 55.Accordingly, the court has already held that damage done to the reputation of a trade mark may, in principle, be a legitimate reason, within the meaning of art.7(2) of the Directive, allowing the proprietor of the mark to oppose further commercialisation of luxury goods which have been put on the market in the EEA by him or with his consent (see Parfums Christian Dior at [43], and Bayerische Motorenwerke AG v Deenik ( C-63/97) [1999] E.C.R. I-905; [1999] E.T.M.R. 339 at [49]). 56.It follows that where a licensee sells goods to a discount store in contravention of a provision in the licence agreement, such as the one at issue in the main proceedings, a balance must be struck between, on the one hand, the legitimate interest of the proprietor of the trade mark covered by the licence agreement in being protected against a discount store which does not form part of the selective distribution network using that trade mark for commercial purposes in a manner which could damage the reputation of that trade mark and, on the other hand, the discount store's legitimate interest in being able to resell the goods in question by using methods which are customary in its sector of trade (see, by analogy, Parfums Christian Dior at [44]).” 114.In Brealey v Nomination di Antonio e Paolo Gensini SNC [2020] EWCA Civ 103, [2020] FSR 28 (and the IPEC decision below reported at [2019] FSR 23) the claimants sold charm bracelets comprising individual links which could be detached and re-linked in any order. They alleged trade mark infringement by the defendant’s sale of genuine but disassembled links which were sold alongside the defendant’s own goods, and it was held that consumers would be confused as to whether the latter were also Nomination’s goods. That use of the mark was not made in relation to the genuine goods and so was an infringement. As for use in relation to the genuine goods, the Defendants relied upon the Article 15 defence and appealed against the judge’s finding that the Claimants had legitimate reasons to object to the recommercialisation of the genuine goods. It was held that Article 15(2) applied, due to the inferior way in which the defendants supplied the goods. HHJ Hacon at first instance was satisfied that the elegant packaging of the claimant’s bracelets conveyed an image of luxury to purchasers which increased the marks’ reputation. The receipt of the defendant’s products in a small blister pack or polythene bag was likely to damage that reputation. His finding that the Article 15 defence did not apply to the defendant’s sales was upheld by the Court of Appeal, which also accepted that there is no real distinction to be made between “damage” and “serious damage” in Evora and Copad (see CA at [23]).115.The Claimants submitted that legitimate reasons do not only arise through damage (serious or otherwise) to the reputation of trade marks that have an aura of luxury, or a prestigious reputation. They referred me to Case C 558/08 Portakabin Ltd v Primakabin BV EU:C:2010:416, [2010] E.T.M.R. 52 “78 It follows from the foregoing that a trade mark proprietor is not entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with, or similar to, that trade mark, which the advertiser has chosen for an internet referencing service without the consent of the proprietor, the resale of secondhand goods originally placed on the market in the EEA under that trade mark by the proprietor or with his consent, unless there are legitimate reasons, within the meaning of art.7(2) of Directive 89/104, which would justify that proprietor’s opposition to such advertising. 79Such a legitimate reason exists, inter alia, when the advertiser’s use of a sign identical with, or similar to, a trade mark seriously damages the reputation of that mark (Parfums Christian Dior [1998] E.T.M.R. 26 at [46], and BMW [1999] E.T.M.R. 339 at [49]). 80The fact that the reseller, through its advertising based on a sign identical with, or similar to, the trade mark, gives the impression that there is a commercial connection between the reseller and the trade mark proprietor, and in particular that the reseller’s business is affiliated to the proprietor’s distribution network or that there is a special relationship between the two undertakings, also constitutes a legitimate reason within the meaning of art.7(2) of Directive 89/104 . Advertising which is liable to give such an impression is not essential to the further commercialisation of goods placed on the market under the trade mark by its proprietor or with his consent or, therefore, to the purpose of the exhaustion rule laid down in art.7 of Directive 89/104 (see, to that effect, BMW [1999] E.T.M.R. 339 at [51] and [52], and Boehringer Ingelheim KG v Swingward Ltd (C-348/04) [2007] E.C.R. I-3391; [2007] E.T.M.R. 71 at [46]).” 116.That passage identifies another specific way in which damage may be suffered, that is, by a false implication of a trade connection with the trade mark. The Claimants submitted that the categories of legitimate reasons are not closed. They suggested in particular that there is no reason why unfair advantage of reputation should not also amount to a legitimate reason, in light of Evora at [45] and Portakabin at [80], and indeed in light of Article 9(2)(c). 117.The Claimants also drew my attention to the question of where the burden of proof lies in relation to the defence by reference to Boehringer Ingelheim. However, the most helpful authority in my view is Brearley, where Arnold LJ held: “25 … Counsel for JSC pointed out that the CJEU had gone on in Copad to hold at [59] that the trade mark proprietor could oppose the resale of goods “only if it can be established that, taking into the particular circumstances of the case, such resale damages the reputation of the trade mark [emphasis added]”. He submitted that, first, the burden of proof lay on the trade mark proprietor in this respect, and secondly, damage to reputation must be established. I am content to assume that both submissions are correct, but this does not assist JSC. 26. So far as the first point is concerned, there was debate before the judge as to whether there was an initial burden on JSC to show that the packaging was not liable to damage the reputation of the Trade Marks (as suggested by Case C-348/04 Boehringer Ingelheim KG v Swingward Ltd [EU:C:2007:249]), but as can be seen the judge simply asked himself whether it was likely that the packaging would damage their reputation. Turning to the second point, as counsel accepted, English procedural law takes facts as established if they are more likely than not, and the judge concluded that damage to the reputation of the Trade Marks was likely.” Similarly, I do not think anything turns on the question of the burden of proof here. 118.The Defendants countered the allegation that the Claimants had legitimate reasons to oppose the recommercialisation of the goods by saying that the Marks were used in relation to goods which had already been put on the market so that they had due cause to use the Marks. I have discussed the evidence to that effect above. I do not consider that there is any evidence before me to show that the Marks or their reputation have been damaged by the further commercialisation of the Claimants’ goods by the Defendants. I accept that the categories of legitimate reasons to oppose the resale of the Claimants' products may not be closed, however the kinds of reasons identified in the case law mentioned above seem to me to be far from the facts of this case. The goods were not being sold through an inappropriate outlet or marketed in an inappropriate or damaging manner, liable to damage the reputation of the Marks, but by a distributor previously approved by the Claimants. There is no likelihood of damage to the Marks’ reputation. Nor was there any false implication of a trade connection with the trade mark or any evidence of confusion of as to origin. 119.The Claimants submitted that the Defendants had nevertheless been taking unfair advantage of the use of the Marks, which meant that Article 15(2) would apply. The Claimants submitted that [80] of Portakabin (above) meant that advertising that takes unfair advantage of reputation is not “essential” to the further commercialisation of the goods. The basis of that argument was, it seems to me, that no recommercialisation should have been allowed where iKoustic was selling goods under other marks in parallel to and in competition with the Claimants’ goods. That argument might have had some force had the Claimants proved that during the term of the distributorship iKoustic had been required to sell exclusively the Claimants’ goods. However, as I have said above, that was not the case. Moreover, Mr Parsons claimed to have been selling third party goods throughout (although the Claimants suggested that they were not directly competitive goods, despite the inquiry discussed at paragraph 78 above). 120. In my view, the fact that Mr Parsons raised the question of co-marketing the Claimants’ goods and his MuteMat/MuteClip goods only in February 2019, and did not tell anyone at Pliteq about this earlier, apart from Mr Jones, was not because he considered that he was not entitled to sell them in parallel, but because he anticipated that Mr Downey’s response to his new products would be to refuse to continue supplying goods to iKoustic. Both Mr Jones and Mr Johnson of Pliteq were prepared to agree to Mr Parsons’ indication that he would like to sell the goods in parallel, and this in my judgment supports my view that merely selling competing goods does not amount to taking an unfair advantage in this case. I conclude that the Defendants were not taking unfair advantage of the Marks by offering competing goods to customers inquiring about the Claimant’s goods. If they were selling genuine goods it seems to me the Defendants had due cause to use the Marks so there would be no infringement under Article 9(1)(c). I therefore reject this alternative basis for seeking to apply Article 15(2). 121. I have considered whether the Defendants’ motivation for using the Marks might be relevant to the consideration of whether the Claimants have legitimate reasons to oppose the resale of the goods bearing the Marks. It does not seem to me that it is, but this argument raises the same points discussed above as to whether iKoustic was only holding token stock for the purpose of taking advantage of the Marks to switch selling Mute goods. In all the circumstances, the Defendants’ motivation appears to me to be irrelevant. 122. Lastly, there is the specific allegation in relation to the sale to Mr Trobridge, in which the supply of the Claimants’ products was changed to the Defendants.’ The documents shown to me do not seem to me to show how or why it was that Mr Trobridge first chose or agreed to buy the GENECLIPs, so it is not possible to assess whether any unfair advantage was taken by use of the Marks. 123. In the circumstances, therefore, in my judgment there are no legitimate reasons here to oppose the further commercialisation of the Claimants’ goods by the Defendants, so as to disapply the section 12(2) and Article 15(1) defences. 124. The claim of trade mark infringement accordingly fails, save in respect of the single webpage use shown at Annex C. Passing off 125.There were two pleaded aspects to the claim for passing off. First, the Claimants alleged that by using the names GENIEMAT and GENIECLIP the Defendants had misrepresented that their Mute products were those of or associated or connected with the Claimants. The Claimants accepted that it was unlikely that this element of the passing off case added anything to the registered trade mark infringement case. I agree. In my view there was no operative misrepresentation when the Defendants’ goods were offered for sale or supplied. In the light of my finding above that the Defendants were transparently offering alternative products to the Claimants’ goods, I am satisfied that this part of the passing off claim must fail. 126.Secondly, the Claimants complained of the use by the Defendants of a single photograph on the iKoustic website of the GenieMat FF25 product, when offering for sale the MuteMat USP 600-17 and MuteMat USP 750-08 products. The use was admitted, but ascribed to error. Passing off was denied. 127.The Claimants claimed to own a separate and distinct goodwill and reputation in and relating to the products shown in photographs of their products, as “the goodwill and reputation that properly belongs to the party which designed, manufactured, and constructed the products shown in such photographs.” They relied upon use of their photographs on their website in brochures and advertising materials. However, there was no evidence that customers or potential customers identified the Claimants’ products by reference to their appearance or in reliance upon the photographs, and this would seem improbable where customers are professionals seeking a particular technical product. Neither Mr Downey nor Mr Windle dealt with the alleged goodwill in the photographs in their witness statements, so there was no more than the Amended Particulars of Claim to support this claim. Furthermore, there was no evidence of use of the particular photograph copied by the Defendants; the types of images used were shown in a brochure annexed to the Amended Particulars of Claim, but I could not see that the particular photograph in issue appeared anywhere in it. 128.In the circumstances, the Claimants had to fall back upon the claim that the necessary goodwill was both generated and misappropriated by showing the wrong photograph to the potential customer. They invited me to apply Bristol Conservatories v Conservatories Custom Built [1989] RPC 455 in which the defendant had shown customers photographs of the claimant’s conservatories as if they were their own goods. Ralph Gibson LJ held at page 465, that “the judge was wrong, I think, to proceed on the basis that the plaintiffs were not alleging that they have a goodwill which was affected by the use of the photographs. In truth, … the goodwill was asserted and demonstrated as the photographs were shown and was at the same moment misappropriated by Custom Built.” 129.Bristol Conservatories would suggest that goodwill could have been generated in the photograph copied by the Defendants when it was put up on the website. However, it seems to me extremely doubtful that goodwill was generated in that way here. A purchaser of a conservatory would be bound to be influenced by the images shown to him, given the nature of the product, but it does not seem likely to me, nor was there any evidence to suggest, that a banal photograph of the purely functional GENIEMAT would generate goodwill, as opposed to the name and/or the technical description of the product. On balance, I consider that the Claimants have not proved that this was a misrepresentation. If I am wrong on that, I am comforted by the view that any such misrepresentation would not, realistically, have led to any damage to the Claimant’s goodwill. 130.In my view, this aspect of the passing off claim also fails.131. I think it is unnecessary for me to deal with the Issue relating to section 25 of the Act, which in any event might be better left for arguments as to relief, as Mr Aikens suggested.