Supreme Court says YES to post-sale confusion…. but Iconix still loses

What has happened?

The Supreme Court (SC) has given judgment in the Iconix v Dream Pairs case, confirming that the post-sale context is relevant when assessing the similarity of marks and a likelihood of confusion. The decision is an extremely important one, significantly bolstering enforcement options for many brand owners. For details on the background to the case, see here.

What did the SC say about similarity of marks?

The Court held that, when assessing whether marks are similar (and – if so - the degree of similarity), account can be taken of how the marks will be perceived by the average consumer in “realistic and representative” post-sale circumstances. This means that similarity is not only assessed based on a side-by-side comparison of the marks (ie on the intrinsic qualities of the marks) but also based on how the marks will be perceived post-sale.

Different viewing angles and other factors – provided they are realistic and representative – are therefore relevant. In the case of footwear, this would include how a mark is perceived when a consumer is looking down at it from above when worn. In the case of an app, it might include how a mark is perceived from the side or other viewing angles. 

What if marks aren't similar when used?

The Court was keen to point out that a lack of similarity in the post-sale context cannot negate intrinsic similarity (as a side-by-side comparison is always relevant). Therefore, if there is a finding of similarity either on a side-by-side comparison or in realistic and representative post-sale contexts this should be sufficient for the decision-maker to proceed to consider whether there is a likelihood of confusion. 

What did the SC say about post-sale confusion?

The Court also confirmed that post-sale confusion is sufficient for a finding of a likelihood of confusion (even if there is no likelihood of confusion at the point of sale). Perhaps more importantly, there is no need for such post-sale confusion to impact the average consumer's subsequent transactional decision (eg to cause the consumer to subsequently make a different purchasing choice). 

In other words, the existence of a likelihood of confusion in the post-sale context itself is the damage. It is not necessary to show that economic damage (eg in the form of lost sales) to the brand owner results.

This might open up other arguments as to what damage is required for a finding of infringement. It also means that there is a significant difference between infringement claims based on a likelihood of confusion and those based on unfair advantage/detriment. The existence of a likelihood of confusion is the damage whereas unfair advantage/detriment claims require a change in the economic behaviour of consumers (or a serious likelihood of such a change).

What did the Court not determine? 

There will no doubt be debate about what constitutes "realistic and representative circumstances" – the Supreme Court decision does not cover this although there is a body of case law on the issue. It seems unlikely that it will cover fleeting and unrealistic scenarios. The decision also does not expressly cover the level of attention that consumers would pay in the post-sale context – probably the same as that they would pay at the point of sale. 

Does the ruling apply to Registry actions as well as infringement?

While the decision comes in the context of an infringement action, it arguably also applies to Registry actions (such as opposition and invalidity actions). That might seem surprising to some since Registry actions tend to focus on a direct mark-for-sign comparison and not context of use. However, that principle has arguably been eroded in recent years and it is arguably implicit in the Supreme Court ruling that the post-sale context is relevant to Registry as well as infringement actions. 

It means that decisions such as that in the Chanel case might be decided differently if they were in the UK. In that case, the EU General Court held that the sign on the left was only slightly similar to the Chanel registration on the right and that the marks must be "compared in the form in which they are registered and applied for, irrespective of any possible rotation in their use on the market" on handbags. Such rotation might now be considered relevant in the UK. 

Huawei mark	Chanel mark

Does it apply to passing off?

It remains to be seen whether the ruling also applies to passing off claims (ie whether post-sale similarity and post-sale misrepresentation are relevant). The High Court (IPEC) in the Hugz case held that post-sale context was relevant to a passing off claim and it seems logical that it should apply.

Does this mean that initial interest confusion is also relevant?

Although the Supreme Court’s judgment focuses on post-sale confusion, it has also shone a light on how the courts might be more receptive to a real-world analysis spanning the entire consumer journey, including the pre-sale context. 

Given this decision, now would be a good time for a brand owner to "test the water" by citing initial interest confusion in an appropriate case. This is particularly so as the current Court of Appeal IP judge, Arnold LJ, held that initial interest confusion could be sufficient for a finding of a likelihood of confusion in the Och-ziff case. While the Court of Appeal subsequently rejected that proposition (in the Interflora case), the fact that Arnold LJ is a current Court of Appeal judge might be the additional incentive needed. 

What other post-sale issues are relevant?

We've already seen the Court of Appeal in the Samsung case look at the post-sale context to determine the goods/services on which the infringing mark was used (more here). At the point of sale, use was on an app, post-sale it was on a downloadable watch face. That approach has now been implicitly endorsed by the Supreme Court. In other words, it is not just the mark that might be perceived differently post-sale, the goods/services of use might also be different. This will be particularly important in cases involving apps and other technology.

Is UK law on the post-sale context the same as CJEU law? 

The UK and CJEU have long recognised the relevance of post-sale confusion. Nonetheless, it has always been a somewhat controversial principle in the UK. The endorsement by the Supreme Court keeps UK law on this issue in line with current CJEU law. However, it also potentially introduces some differences between UK and CJEU law including the potential application of the principles to Registry actions in the UK and the wider idea in the UK that marks can be deemed similar because of the way that they are perceived post-sale.

Who will this impact and how?

The decision will be particularly relevant for those in the clothing, footwear, accessories, wearables and consumer goods industries where marks often look different when in use compared to at the point of sale. It also opens up the possibility of parties relying on how the marks will be perceived on the goods/services as marketed (ie at the point of sale but with realistic and representative marketing practices in mind). 

Potentially also evidence as to the buying habits and behaviours of the relevant public will become relevant (although the courts have always resisted the introduction of such "evidence", including surveys).

What about look-alikes?

The decision should also bolster actions against look-alikes, giving brand owners greater scope to argue that consumers will be confused when they encounter the look-alike "in the wild" (even if the purchaser wasn't confused when they bought the item). 

It has traditionally been difficult to win look-alike cases based on a likelihood of confusion given that consumers know which shop they are in when they purchase the look-alike and are broadly aware of the brands on offer (and so are arguably not confused). This context should not come into play in a post-sale environment.

Brand owners will still need to show that there is a likelihood of post-sale confusion despite potentially different brand names (and other indicia) appearing on the look-alike but they will be able to take account of how the marks are perceived post-sale (potentially where packaging has been removed) and absent the shop context. 

This will be particularly relevant for shape marks (imagine a shape mark registration for eg Colin the Caterpillar and how competitor products might be perceived when stripped of their packaging and the purchasing environment). It will also benefit the owners of marks that do not have a reputation and so cannot rely on unfair advantage/detriment claims – those most likely to be successfully deployed in look-alike cases. 

The ruling follows the Thatcher's v Aldi Court of Appeal decision which has also bolstered the ability of brand owners to take action against look-alikes based on unfair advantage (more here). Since permission to appeal this decision to the Supreme Court has been finally refused, the Court of Appeal ruling stands. 

Why did Iconix still lose?

Despite these clarifications of the law, the Supreme Court ultimately reinstated the trial judge's initial finding of no likelihood of confusion in the case. The trial judge had adequately considered the post-sale context and its decision that the marks were only faintly similar (even in such context) was not rationally insupportable. It was not therefore open to the Court of Appeal to overturn that decision. 

What does this mean for appeals?

Some commentators see the reinstatement of the first instance decision as a significant rebuttal of the Court of Appeal. They also see it as inconsistent with other recent decisions (eg in Thatchers v Aldi) in which the Supreme Court refused permission to appeal even though the Court of Appeal had overturned the first instance decision on grounds similar to those in Iconix. 

However, it should be borne in mind that the Supreme Court will only accept cases of general public importance. It clearly felt that there was such a point in the Iconix case but not the Thatchers case. Once that criterion is met, there is scope for the Supreme Court to scrutinise the Court of Appeal decision and, in particular, any finding by the Court of Appeal that the first instance decision involved an error of law or principle. Seen in this way, the Iconix decision is arguably a straight-forward application of the correct legal tests for appeals.

Nonetheless, it is yet further confirmation of the need to get things right at first instance in the UK, including at the UKIPO, as the threshold for overturning decisions on appeal is very high. The position is different for EUIPO and CJEU appeals. It is also further reminder that appeals based on the fact that the first instance decision is rationally insupportable are difficult. Appealing based on an error of law will be much easier. 

What should brand owners do?

When clearing new brands for use and registration, trade mark applicants should factor in how marks will be perceived in realistic and representative post-sale circumstances and any increased potential for confusion post-sale. For a belt and braces approach, they should also consider realistic and representative point of sale circumstances that might differ from the analysis undertaken on a pure mark-for sign (intrinsic) comparison. Brand owners should also review existing and threatened infringement and Registry actions to consider whether post-sale (and other) factors might impact the arguments and merits of the case. Those involved in UK Registry and court actions should keep in mind that they need to submit their best case and evidence at first instance – it is not a dress-rehearsal!