BEAUTYBAY held to take unfair advantage of EBAY's reputation

United Kingdom

In eBay Inc v Dotcom Retail Limited, the UK Intellectual Property Office has declared the trademarks BEAUTY BAY, BEAUTYBAY and BEAUTYBAY.COM invalid on the basis that they took unfair advantage of eBay's earlier registrations for EBAY under Section 5(3) of the Trademarks Act 1994. Among other factors, it was held that the BEAUTYBAY marks involved "an element of copying the idea or concept behind the EBAY mark", such that BEAUTYBAY benefited from the power of attraction of the earlier mark and exploited the marketing efforts of eBay.

This case concerned an application by eBay to invalidate two registrations owned by Dotcom Retail Limited, the UK's largest independent online beauty retailer. The marks at issue were: (i) a series mark, consisting of BEAUTY BAY and BEAUTYBAY; and (ii) BEAUTYBAY.COM. The BEAUTYBAY marks were all filed on December 28 006 and registered on August 24 2007.

eBay relied on its earlier UK and Community trademark registrations for the EBAY word mark, as well as this stylised version:

http://www.ipo.gov.uk/trademark/image/EU001028398.jpg

The invalidity claim was based on two main grounds under the act:

  1. the BEAUTYBAY marks were confusingly similar to EBAY (Section 5(2)(b)); and

  2. the BEAUTYBAY marks were liable, without due cause, to take unfair advantage of the reputation of EBAY (Section 5(3)).

In response to eBay's claims, Dotcom alleged that eBay was prevented from applying to invalidate the BEAUTYBAY marks as it had been aware of, and had acquiesced in, the use of the registered marks for a continuous period of five years, under Section 48(1) of the act (which implements Article 9(1) of the Trademarks Directive (2008/95/EC) in the United Kingdom). Dotcom argued that this five-year period began on the date of the application for registration (December 8 2006), as this was deemed to be "the date of registration" of a trademark under Section 40(3) of the act. The hearing officer (Allan James) referred to Budejovicky Budvar NP v Anheuser-Busch Inc (Case C-482/09) (Budweiser) in which the Court of Justice of the European Union held that one of the conditions that must be satisfied before the five-year period under Article 9(1) of the Trademarks Directive begins to run is that the owner of the earlier mark must have knowledge that the later mark has been registered. Bearing in mind his obligation to interpret Section 48(1) consistently with the directive, the hearing officer found that the five-year period started on the date on which the registration of the BEAUTYBAY marks was completed (and not on the date of application for registration), as it is only from this date that the owner of an earlier mark could be aware that a later mark is registered. The hearing officer explained that to find otherwise would mean that, in cases where marks take more than five years to be registered following filing, the five-year period would expire before registration of the mark even occurs, and this would be contrary to the condition in Budweiser. He also noted that Section 48(1) refers to the use of "a registered trademark" and does not include the words "the date of registration" as defined in Section 40(3). The registration of the BEAUTYBAY marks was completed on August 24 2007 and this date was less than five years before the date of the application for invalidity (albeit by only two days). Dotcom's claim of statutory acquiescence failed.

Dotcom also requested eBay to furnish proof of use of its earlier marks, given that all were registered more than five years before its application for invalidity. Focusing on the relevant Class 35 services covered by eBay's UK registrations, the hearing officer held that eBay had demonstrated use of EBAY in relation to "providing an online, interactive bulletin board for the posting, promotion, sale and resale of items via a global computer network", as it was clear that the mark was used in connection with eBay's well-known auction website through which third parties buy and sell a range of goods.

As regards eBay's first claim of confusing similarity, the hearing officer found there to be an average degree of similarity between eBay's Class 35 services noted above and the services covered by the BEAUTYBAY marks, namely "retail services connected with the sale of fragrances, perfume, toiletries, cosmetics" and other specified beauty products. The respective services were complementary as it was conceivable that the use of an identical or similar mark by (i) an online retail services provider (ie, Dotcom); and (ii) an online intermediary (ie, eBay) could lead to confusion. The BEAUTYBAY marks were also registered in respect of the fragrances and other beauty products themselves in Class 3. However, just because these goods could possibly be sold by way of the services covered by eBay's marks did not mean that the respective goods and services were similar. eBay's claim based on Section 5(2)(b) fell away as far as the goods in Class 3 were concerned.

The hearing officer held that there was only a low degree of visual and aural similarity between EBAY and the BEAUTYBAY marks (and in fact the only visual similarity was that the marks all ended in the word 'bay', other than BEAUTYBAY.COM). Conceptually, there was an "immediately noticeable" level of similarity, given that the average consumer would likely attribute the same meaning to the shared 'bay' element when appearing in the respective marks. The hearing officer also found that EBAY is inherently distinctive, as well as very highly distinctive due to extensive use, for the Class 35 services.

Nevertheless, he held that the conceptual similarity between the marks and the highly distinctive character of EBAY were outweighed by the low level of visual and aural similarity, the only average degree of similarity between the respective services, and the fact that there was no history of use of a 'family' of BAY marks. Consequently, there was no likelihood of direct or indirect confusion. With respect to indirect confusion, it had not been demonstrated that BEAUTYBAY indicated a brand extension of EBAY or that the average consumer would believe that the users of the marks were likely to be economically linked (as opposed to just wondering whether they might be connected in some way). eBay's claim under Section 5(2)(b) was therefore rejected.

In relation to eBay's claim of unfair advantage, the hearing officer held that EBAY undoubtedly enjoyed a substantial reputation amongst the UK public at the time of filing of the BEAUTYBAY marks, in relation to the relevant Class 35 services. The existence of reputation, coupled with other factors (including the "immediately noticeable" conceptual similarity between the marks, the presence of the non-distinctive elements 'E' and 'beauty', and the fact that eBay's services were used by 2006 to buy and sell cosmetics and fragrances), led to the finding that the average consumer would "call to mind" the EBAY mark if they were to come across the BEAUTYBAY marks, either in the context of retail services for fragrances or cosmetics, or in relation to such goods online.

This link between EBAY and the BEAUTYBAY marks was, in the hearing officer's view, sufficient to lead a section of average consumers to visit the BEAUTYBAY website to find out whether BEAUTYBAY was perhaps also an online auction website with a focus on fragrances and cosmetics, or if it otherwise had something to do with EBAY. Consequently, there was the potential for an increase in the number of online visitors to the BEAUTYBAY website, which in turn was likely to increase the sales of goods under the BEAUTYBAY marks. Although not determinative of whether BEAUTYBAY took unfair advantage of the reputation of EBAY, it was noted that during the relevant period, Dotcom's UK business had grown significantly (sales increasing from £750k in 2006 to $4.3m in 2012), as had the number of visitors to the BEAUTYBAY website (increasing from 64,000 in 2006 to 273,000 in 2012).

The hearing officer observed that the use of the BEAUTYBAY marks involved "an element of copying the idea or concept of the EBAY mark". He found that Dotcom had used the 'bay' element within its BEAUTYBAY marks because it associated the word with "a place from where goods were sold", but that this association resulted from eBay's extensive use of EBAY in connection with its highly successful online auction business, rather than Dotcom's understanding of any natural meaning of the word. Whilst this did not necessarily amount to stating that Dotcom sought to benefit from EBAY's reputation, the hearing officer considered that the similarities between the respective marks were "more than a mere coincidence".

Taking all of these factors into account, the use of BEAUTYBAY was held to take unfair advantage of EBAY and the invalidity application succeeded on the basis of Section 5(3).

The hearing officer's analysis in this case is particularly thorough and provides a useful refresher of the differences between the assessment of invalidity claims under Sections 5(2)(b) and 5(3). Ultimately, the respective marks were held not to be confusingly similar. However, the hearing officer was of the view that the BEAUTYBAY marks took unfair advantage of the reputation of EBAY by bringing to mind the earlier well-known mark, which in turn would lead a section of consumers to explore the possible connection between the marks.

Lucy Calvert, Clifford Chance LLP, London

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