Aiwa decision highlights pitfalls of resuscitating dormant or distressed brands

United Kingdom

On 13 December 2019 Mr Justice Mann has delivered his judgment on the appeal from a UK Trademark Registry decision revoking five of Aiwa Co Ltd's (‘Limited’) registered UK trademarks (‘the AIWA marks’) and granting a new UK trademark (the ‘new AIWA mark’) in the name of Aiwa Corporation (‘Corporation’) (Aiwa Co Ltd v Aiwa Corporation ([2019] EWHC 3468 (Ch)). The key points are as follows:

  • The High Court dismissed Limited's appeal of the registry's decision revoking its trademarks for non-use.
  • The two elements of non-use of a trademark - ie, whether there is use by the proprietor with its consent and whether that use is genuine use - should be considered separately. The absence of proprietorial consent does not necessarily mean the absence of genuine use.  
  • Sony Corporation (‘Sony’)’s initial placing of goods on the UK market did not imply consent for the second-hand sale of those goods. 
  • Second-hand dealings may, in certain circumstances, amount to genuine use.

Background

Aiwa was once a renowned global audio brand but became unprofitable in the late 1990s and was bought, together with the AIWA marks, by Sony in 2003. However, the brand continued to be unsuccessful and there have been no retail sales of new goods bearing the AIWA marks since 2008.

In 2017 Limited, a Japanese company, was set up to re-establish the Aiwa brand after having purchased the AIWA marks from Sony. In the same year, an unconnected US company, Corporation, which had purchased Aiwa's US trademarks and had marketed a speaker under the Aiwa brand, filed an application to register the new AIWA mark.  Limited opposed the registration under Section 6A of the Trademarks Act 1994 based on its AIWA marks, prompting Corporation to commence revocation proceedings under Section 46(1) of the act based on non-use of the AIWA marks for a five-year period.

Section 6A of the act prevents registration of a mark where an existing registered similar mark meets the "use conditions". Subsection 3 provides that the use conditions are met if, within the relevant five-year period, the earlier trademark "has been put to genuine use… by the proprietor or with his consent". Correspondingly, Section 46(1) provides that registration of a trademark may be revoked if, within the relevant five-year period, "it has not been put to genuine use… by the proprietor or with his consent".

Registry decision

The registry considered whether second-hand sales of Aiwa products by third parties amounted to use with the consent of the proprietor. It concluded that this was not genuine use, ordering revocation of the AIWA marks and dismissing Limited's opposition to registration of the new AIWA mark.

Judgment

On appeal, Mr Justice Mann held that the registry's approach had been erroneous as it conflated the two elements of non-use, genuine use and use by the proprietor with its consent, which should be considered separately. The registry had assumed that an absence of proprietor consent automatically resulted in an absence of genuine use.  

On the basis of the decision in Einstein Trademark ([2007] RPC 23), Limited had submitted that:

  • ‘consent’ had the same nature whether concerned with non-use, exhaustion of rights or infringement; and
  • Sony, by placing goods bearing the AIWA marks on the UK market, had both exhausted its rights and implied its consent to the use of the AIWA marks in second-hand UK sales.   

Mr Justice Mann accepted that there was no material difference between consent for exhaustion of rights and consent for use. However, he considered the argument that exhaustion implied consent to the sale of second-hand items was incorrect. He ruled that consent in placing the goods on the market results in the exhaustion of the proprietor's trademarks rights in the goods. This, in turn, bars a proprietor from preventing use of its marks in relation to those goods when resold, but this is because it no longer has exclusive trademark rights in relation those goods, not because it has consented to that use by re-sale.

Although Mr Justice Mann's findings on consent effectively disposed of the appeal, he also considered whether use of the AIWA marks in relation to second-hand sales amounted to genuine use. Referring to The London Taxi Corporation Limited v Frazer-Nash Research Limited ([2016] EWHC 52 (Ch)), he held that it would depend on two key factors, namely, whether use of the mark on the market:

  • amounted to real commercial exploitation so as to create or preserve a market for the relevant goods or services; and
  • was warranted in the economic sector concerned for that purpose.

Based on the "thin" evidence available, Mr Justice Mann was "unable" to find that the "level and nature" of second-hand sales by Limited were capable of fulfilling these criteria even if the second-hand sales could be regarded as being use of the marks in question by the proprietor or with its consent.

Comment

The judgment serves as warning to those seeking to resuscitate dormant or distressed brands. Although Mr Justice Mann does not exclude the possibility of second-hand dealings amounting to use, such use would need to comply with the London Taxi principles in order to be genuine use. In addition, his judgment also raises questions for companies that are seeking to establish markets for ‘pre-owned’ products such as watches, clothes and jewellery. If such use is by the proprietor or with its consent, does it amount to use of the trademarks and is it genuine use? These are questions which may need to be considered by higher courts.

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