Court of Appeal issues landmark decision on likelihood of confusion assessment


The Court of Appeal has released its highly-anticipated ruling in Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts ([2013] SGCA 65), which probably ranks as the most important decision of the Singapore courts in 2013 in relation to intellectual property. This case arose out of an appeal by the parties against the decision of Judith Prakash J in the High Court.

The facts are as follows. Australian hotel chain Staywell Hospitality Group Pty Ltd filed an application to register the following mark in Classes 35 and 43 of the Nice Classification for marketing and hotel/hospitality services:

The application was opposed by US hotel chain Starwood Hotels & Resorts, which owns registrations for ST REGIS in Classes 36, 37 and 43 (hotel and hospitality services).

Before the registrar, Starwood successfully opposed Staywell’s application under Sections 8(2)(b) and 8(4)(b)(i) of the Trademarks Act (Cap 332). The registrar found that the competing marks and services were similar, and that such similarity resulted in a likelihood of confusion in that the public would think that the Park Regis Singapore Hotel was economically linked to the St Regis Singapore Hotel.

Staywell appealed. The High Court confirmed that the marks were aurally and conceptually similar, but overturned the registrar’s decision. It held that there was no likelihood of confusion resulting from the similarity of the marks and the services based on many factors, including the steps taken by Staywell to differentiate its services from those of Starwood.

Both parties appealed to the Court of Appeal - Staywell appealed the finding that the marks were aurally and conceptually similar, while Starwood appealed the finding that there was no likelihood of confusion and that there was no goodwill in 'St Regis' as at the date of the application.

The Court of Appeal first examined whether the marks were aurally and conceptually similar, and once again endorsed the 'step-by-step' approach as being "conceptually neater and more systematic".

The preliminary point raised by Starwood - that the similarity of marks is subject to a “low threshold test” - was rejected by the Court of Appeal. In contrast, the court held that, when assessing similarity, the marks must be observed in their entirety (without considering any external factors), and that such assessment is “ultimately and inevitably a matter of impression rather than one that can be resolved as a quantitative or mechanistic exercise”. Further, the court noted that the three aspects of similarity (visual, aural and conceptual) must guide the court’s inquiry and be used as signposts, rather than as a "checkbox exercise".

The Court of Appeal further held that the assessment of the importance of each aspect of similarity should be reserved to the 'likelihood of confusion' inquiry, as the focus of such assessment is the effect of such similarity on consumers, which impinges on the issue of confusion. This represents a departure from the approach of the High Court in Festina v Romanson ([2010] 4 SLR 552) and the Court of Appeal in Sarika v Ferrero ([2013] 1 SLR 531).

On the facts, Staywell submitted that the High Court had wrongly focused on the 'Regis' element of both marks (as it was never used on its own) when it should have considered the similarity of the marks as a whole. The Court of Appeal reiterated the legal position that the assessment of the visual, aural or conceptual similarity of marks must be “based on the overall impression given by the marks, bearing in mind, in particular, their distinctive and dominant components”, and the fact that the lower court had considered the dominant and distinctive components of the marks did not mean that it had failed to consider the marks as a whole. Where a common denominator is present, the question is whether that common element is so dominant as to render the differing elements “ineffective to obscure the similarity between the marks”.

With regard to aural similarity, the Court of Appeal held that the High Court was perfectly entitled to conclude that 'Regis' was the dominant and distinctive component of both marks when pronounced. Staywell’s submission that the High Court had erred in considering the dominance of 'Regis' because Starwood had never used or registered 'Regis' alone was misconceived, because a component can clearly be dominant even though it is part of a mark and never used on its own. The Court of Appeal thus agreed with the High Court and even found a high degree of aural similarity between the marks.

With regard to conceptual similarity, the Court of Appeal disagreed with the High Court, which had held that the marks shared the underlying connotation of 'royalty' by virtue of the use of the word 'Regis'. Instead, it held that greater care is needed when considering the conceptually dominant component of a composite mark, because the idea conveyed by each component might be different from that conveyed by the sum of its parts. Here, the connotation of 'royalty' in 'Regis' became secondary once the prefixes 'Park' and 'St' were introduced: 'Park Regis' connoted a geographical location, while 'St Regis' connoted a saintly character. However, the Court of Appeal did find some conceptual similarity in that both marks evoked the idea of a place or location, since both 'St' and 'Park' are commonly used in place names in Singapore.

In conclusion, the Court of Appeal held that the marks had a substantial degree of aural similarity and an average degree of conceptual similarity. Overall, the marks were thus similar.

While the parties did not appeal the High Court’s finding that the services were similar, the Court of Appeal addressed the issue to clarify certain aspects of the lower court’s reasoning, holding that registration in the same specification within a class establishes a prima facie case of identity of goods and services, and that, where a good or service for which registration is sought falls within the ambit of the specification for which the earlier mark is registered, the competing goods/services would be regarded as identical. In this case, there was such an overlap between the parties’ Class 43 services. In relation to Staywell’s Class 35 application, the Court of Appeal held that the services were similar to Starwood’s services in Class 43.

In relation to the assessment of the likelihood of confusion, two key issues were considered, namely:

  • whether there is a difference in approach between opposition proceedings and infringement proceedings; and
  • whether factors extraneous to the marks and the products/services are relevant (and if so, to what extent).

It has previously been held in Singapore that the approaches to determining the likelihood of confusion in opposition proceedings and infringement proceedings are identical. The Court of Appeal took the opportunity to examine the question in greater detail.

The court considered the legal position in Europe and the United Kingdom, where a distinction is drawn between the approach of the likelihood of confusion inquiry in opposition proceedings and that in infringement proceedings. Specifically, in infringement proceedings, the likelihood of confusion is assessed by examining the defendant’s alleged infringing use of its sign, while in opposition proceedings, the notional fair use of the mark applied for across the range of goods and services in respect of which registration is sought is examined - the latter test being more stringent and offering more protection to the earlier mark.

The Court of Appeal held that, in Singapore, there is a difference between the likelihood of confusion inquiry in opposition proceedings and that in infringement proceedings (although there are overlaps). The reason is that, in opposition proceedings, the opponent enjoys monopoly rights over its mark, while the applicant wishes to obtain associated monopoly rights, including the right to use its mark for the whole spectrum of goods or services for which the mark is applied for, immunity from infringement liability for such goods or services, and the right to enforce its registration against third parties, even if it does not actually offer that particular good or service at the time. Therefore, an applicant seeks to establish a monopoly over the right to use a mark for its intended purpose, as well as for a number of notional fair uses.

In contrast, in infringement proceedings, the question is whether the infringer’s actual use of its mark encroaches on the registered proprietor’s monopoly rights.

The Court of Appeal concluded that the likelihood of confusion inquiry in opposition proceedings must take into account the full range of rights enjoyed by the proprietor of the earlier mark (ie, both the actual and notional fair uses) and compare this to the full range of rights sought by the applicant (ie, both the actual use by the applicant - if any - and the notional fair uses that would be possible should registration be granted).

The second issue was whether "extraneous factors" should be considered. This issue arose because the High Court had taken such factors into account (eg, the distinct branding of the hotels and how the perception of customers could be affected by the trade channels used by the parties to market their hotel services).

The Court of Appeal opined that the wording of the Trademarks Act did not preclude the court's discretion to consider extraneous factors, but also admitted that there were significant limits in this respect. The court noted that recent UK decisions have considered the likelihood of confusion from the perspective of the average consumer of the goods or services in question, taking into account the "context and circumstances of use" of the sign.

The Court of Appeal held that the inclusion of extraneous factors must strike a balance between the competing goals of the trademark regime - that is, to prevent confusion and to promote business certainty. The court thus set out the following principles:

  1. When assessing similarity, the marks must be considered without any added or extraneous factor.

  2. When considering the similarity of goods or services, extraneous factors are relevant to establish the degree of similarity of goods and services that are not identical in infringement cases, and in opposition proceedings where the classes or specifications differ. However, extraneous factors must not be considered if the goods/services are identical or are to be registered in the same class or specification.

  3. When considering the effect of (1) and (2) on the relevant segment of the public, extraneous factors may be considered to the extent that they inform the court as to how the similarity of the marks and goods is likely to affect the consumer’s perception as to the source of the goods, subject to the following qualifications:
    • In opposition proceedings, factors relating to the actual and particular circumstances and manner of use of the marks are irrelevant; rather, the question is whether there is an overlap between the notional fair uses of the marks.
    • In both opposition and infringement proceedings, once a likelihood of confusion has been found, factors that might have the effect of diminishing such likelihood of confusion should not be considered. The principle that marks must be considered without recourse to external factors would be weakened if such factors were later considered at the likelihood of confusion inquiry. Similarly, once the goods or services have been deemed to be similar, then it would be wrong in principle to examine whether, through its trading choices, the defendant has differentiated its goods in some way. The Court of Appeal endorsed Professor Ng-Loy Wee Loon’s view that taking extraneous factors into consideration renders protection "illusory", as it would permit traders to avoid a finding of confusion by pricing or packaging their products or services differently, or even by using disclaimer notices (see "Developments in Singapore Law between 2005 and 2011: Trends and Perspectives" (Academy Publishing)).
  4. The Court of Appeal also endorsed an academic article - “Trademarks, Consumer Psychology and the Sophisticated Customer” (Thomas R Lee, Eric DeRosia and Glenn L Christensen (57 Emory LJ 575)) - which had proposed a framework for understanding how consumers are likely to behave when making a purchase, and suggested that the key considerations are:
    • the factors that motivate consumers to exercise care when making the purchase in question; and
    • the factors that enable the consumers to exercise such care.
  5. These factors include the price of the item, whether such item is usually purchased on impulse or with a greater degree of attention, the nature of the typical purchasing process and whether such transactions are frequent or not.

  6. Therefore, the factors that may be taken into account are those that are intrinsic to the very nature of the goods or services and/or those that affect the perception of consumers.

  7. In contrast, the factors that may not be taken into account are the actions taken by traders to differentiate its goods/services, which can change from time to time - in particular, the court held that factors such as pricing differentials, packaging and marketing choices should not be examined.

In view of the foregoing principles, the Court of Appeal provided a non-exhaustive list of factors that are admissible in the likelihood of confusion inquiry:

  • Factors relating to the impact of the similarity of the marks on consumer perception - namely:
  1. the degree of similarity;
  2. the reputation of the marks;
  3. the impression given by the marks; and
  4. the possibility of imperfect recollection.
  • Factors relating to the impact of the similarity of the goods/services on consumer perception:
  1. the normal way in which consumers purchase goods/services of that type;
  2. whether the products are expensive or not, as this influences the degree of care of consumers when making a purchase (in contrast, price disparity is not relevant);
  3. the nature of the goods/services and whether they tend to command a greater degree of attention; and
  4. the likely characteristics of the relevant consumers and whether they would tend to apply care or have a specialist knowledge when making the purchase.

On the facts, the Court of Appeal noted that the High Court’s analysis depended to a great extent on the differentiation between Staywell’s establishment as a four-star hotel and Starwood’s as a six-star hotel. As these were opposition - rather than infringement - proceedings, the Court of Appeal held that the lower court's focus on the way in which the mark was used was misplaced. Even if Staywell’s actual use resulted in a lack of confusion, the range of notional fair uses of each of the marks should have been considered.

Further, the Court of Appeal held that confusion extends to a risk of association between the parties. Even if only the actual use of the marks was considered, it was not unlikely that the public would be misled into believing that there was an economic link between the two hotels - especially in light of the fact that large hotel chains tend to operate differently branded hotels under different logos, but with a common denominator in their names (eg, Hyatt Regency, Grand Hyatt and Park Hyatt).

The Court of Appeal thus found that, in light of this industry practice, the use of the common denominator 'Regis' in both marks took on a particular significance and, accordingly, there was ample ground for finding that consumers would be likely to believe that there was an economic link between the two hotels.

Starwood also alleged that initial interest confusion (ie, temporary confusion that is dispelled by the time of the purchase) can constitute confusion under Section 8(2) of the act. The Court of Appeal disagreed, holding that the doctrine of initial interest confusion does not have the same purpose as Sections 8(2) and 27(2). The rationale underlying the doctrine is the protection of the reputation of a well-known mark from dilution or the prevention of the misappropriation of the owner’s goodwill, which the court had previously held to fall within Section 8(4)(b)(ii) (see Novelty Pte Ltd v Amanresorts Ltd ([2009] 3 SLR(R) 216) at 229).

Moreover, the Court of Appeal held that a finding of liability when consumers are properly informed as to what they are purchasing contradicts the goal of trademark law, which is to protect the source-identifying function of a trademark. Therefore, the court held that initial interest confusion was not part of Singapore law.

With regard to Section 8(4)(b)(i), the Court of Appeal held that use of the mark applied for would give rise to a "confusing connection" between Staywell’s services and Starwood’s, following from its conclusion under Section 8(2). The real issue was whether use of the mark applied for was likely to damage the interests of Starwood – the fourth element of Section 8(4)(b)(i).

Starwood submitted that there were two heads of damage, namely:

  1. damage by dilution and tarnishment, as the public would believe that Starwood does not supply only top-of-the-range hotels, but also hotels of varying quality (relying on CDL Hotels International Ltd v Pontiac Marina Pte Ltd ([1998] 1 SLR (R) 975)); and
  2. restriction on its ability to exploit its mark in a lower segment of the market.

As regards (1), the Court of Appeal noted that the type of damage referred to in CDL Hotels (dilution of goodwill and the undermining of the plaintiff’s prestigious image) was really a "species of traditional origin-based confusion". There must be something other than the perception of a confusing connection to satisfy the fourth element of Section 8(4)(b)(i).

However, as regards (2), the Court of Appeal noted that this was a recognised head of damage: where the field in which the applicant operates is in close proximity to, or is a natural extension of, the business of the owner of the earlier mark, damage in the form of a restriction of expansion opportunities will more readily be inferred. Conversely, where there is no such proximity, the owner of the earlier mark must show a genuine intention to expand into the prospective market.

On the facts of the case, as the two markets were in close proximity, the Court of Appeal held that there was a likelihood that Starwood’s business expansion opportunities would be prejudiced. Therefore this head of damage was established.

The last issue concerned Section 8(7) of the act, which relates to passing off. The High Court had found that no goodwill existed in ST REGIS as at the relevant date, while Starwood had submitted that goodwill subsisted in the mark as a result of:

  • extensive pre-trading activities; and
  • the presence of Singapore customers of overseas St Regis hotels, coupled with the reputation of the St Regis brand in Singapore at the relevant date.

The court noted that the latter point invited it to depart from the traditional ‘hard-line’ approach. This traditional position is that a foreign trader which does not conduct any business in Singapore cannot be successful in an action for passing off in the country. This requirement was relaxed in CDL Hotels, where the Court of Appeal recognised that pre-trading activities are capable of generating goodwill, even if they do not generate income; however, mere preparations for trading were not capable of generating goodwill.

In the present case, Starwood argued that the activities carried out prior to the official opening of its St Regis hotel constituted pre-trading activities, while Staywell contended that they were mere preparations for trading. The Court of Appeal opined that such a dichotomy was not helpful and should not be preserved, since it cannot always be said that 'non-publicity' activities have no relevance to the establishment of goodwill; rather, the sufficiency of pre-trading activities depend on their nature and intensity.

In this respect, the Court of Appeal provided the following principles:

  1. Pre-trading activities need not be revenue-generating – the focus is on the response of the consumer; and
  2. The relevant pre-trading activities must unequivocally demonstrate the intention of the trader to enter the Singapore market.

The principle set forth in (2) reflects a key rationale of the 'hard-line' approach, which is to prevent the unwarranted stifling of local companies, since the courts must strike a balance between the interests of foreign entrants and existing local companies. When a foreign trader has no interest in the local market, the interest of local companies prevails; however, when the foreign trader has evinced its intention to enter the local market, then the interest in preventing local traders from free-riding on the efforts and expenditure of the foreign trader prevails. However, although the intention to enter the Singapore market is necessary, it is not sufficient; the foreign trader's activities must generate an active force that will bring in customers when the business eventually starts operations.

On the facts of the case, the Court of Appeal examined the nature and intensity of Starwood's pre-trading activities:

  • The securing of restaurant tenants was irrelevant, since the goodwill relied upon was not that of an employer or landlord.
  • The advertisements promoting the St Regis brand spanned only one calendar month and only three of these advertisements were published in a Singapore publication. The Court of Appeal had difficulties concluding that Starwood’s advertising was extensive and widespread, was targeted at creating demand within Singapore or had actually succeeded in creating demand among the public. Further, there was no mention of physical promotional events or any use of digital or terrestrial media. The Court of Appeal held that the 200 pages of print advertisements in a number of foreign magazines presented by Starwood were insufficient to warrant a finding of goodwill.

Starwood alternatively submitted that it had goodwill in the ST REGIS mark in Singapore prior to its launch by virtue of the international reputation of ST REGIS, coupled with the presence of Singapore customers who had purchased hotel services in St Regis hotels abroad.

The Court of Appeal examined the current UK position according to which, for a foreign trader to have goodwill in the United Kingdom, the trader must have customers in the country and bookings for its services must have been made from within the country. This was the case in Amanresorts, where goodwill was found.

In relation to Prof Ng-Loy’s suggestion that the test of Prof Wadlow in "The Law of Passing-off" be adopted (ie, "a service business operating from abroad has customers and therefore goodwill in the jurisdiction to the extent that persons from that jurisdiction consciously seek out and make use of its services in preference to those available from competitors in the jurisdiction or elsewhere so the foreign business has goodwill in the jurisdiction if residents in the same are prepared to go to it to avail themselves of its services, or if the availability of those services abroad is a material factor in their travelling to wherever the services can be acquired or experienced"), the Court of Appeal opined that such an approach should be commended, given the widespread practice of international travel, as well as the prevalence of accessing services through the Internet by means of online bookings. However, it held that such matter was better left to a subsequent occasion where it would be necessary for the determination of the issues presented; this case was not that occasion, since there was no evidence that Singapore residents travelled abroad for the purpose of seeking out, and staying at, St Regis hotels there.

In conclusion, the Court of Appeal allowed Starwood’s appeal under Sections 8(2)(b) and 8(4)(b)(i) of the act and dismissed its appeal under Section 8(7)(a). Staywell’s appeal was dismissed.

Regina Quek, One Legal LLC, Singapore

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