Diageo victorious in extended passing-off case

United Kingdom

In Diageo North America Inc v Intercontinental Brands (ICB) Ltd ([2010] EWHC 17 (ch), January 19 2010), the Chancery Division of the High Court of England and Wales has held that the sale of a non-vodka product under the name Vodkat constituted extended passing off.

The claimants were members of the Diageo Group, one of the world's leading producers of alcoholic drinks, and the owners of Smirnoff vodka. The defendant, Intercontinental Brands (ICB) Ltd, also produced alcoholic drinks, including a clear, virtually tasteless alcoholic drink marketed under the brand name Vodkat. A mixture of vodka and neutral fermented alcohol, Vodkat had an overall alcohol by volume (ABV) of 22%. It was not classified as a 'vodka' under the EU regulations on spirit drinks (initially Council Regulation 1576/89, now Regulation 110/2008), as these required that vodka be a minimum of 37.5% ABV and produced from distilled alcohol. The duty payable on a litre of 22% ABV Vodkat was significantly less than that paid on a litre of 37.5% vodka due to a favourable customs classification, resulting in a cheaper retail price. Initially, Vodkat was marketed in a get-up strongly reminiscent of vodka. However, in August 2009 the get-up of Vodkat was entirely replaced with a new one.

Diageo commenced proceedings against ICB for passing off. The court pointed out that this case is the latest in a long line of cases where "suppliers of products of a particular description have sought to restrain rival traders from using that description or a confusingly similar term in relation to goods which do not correspond to that description". The characteristics of such an action for so-called 'extended passing off' were established in Erven Warnink BV v J Townend and Sons Ltd ([1979] AC 731).

ICB accepted that the name Vodkat was chosen to associate the product with vodka, and that Vodkat was targeted at females aged 18 to 25, who comprise the core vodka market.

The court reviewed the development of the law on the extended form of passing off, and agreed with Diageo that the term 'vodka' denoted a clearly defined class of goods, the definition of which is clearly set out in the EU regulations on spirit drinks. It referred to the fact that the overwhelming proportion of vodka products sold in the United Kingdom from 1990 onwards complied with that definition, and concluded that the mere fact that a class is broad does not prevent it from being clearly defined. The court also considered that 'vodka' denoted a particular class of alcoholic beverage to the UK vodka-consuming public, and was generally perceived to be a clear, tasteless, distilled, high-strength spirit. ICB submitted that a claim for passing off is available only where the class of goods is perceived by the public as being of superior quality or having a cachet, but the court rejected that claim. 

The court concluded that passing off had occurred and that Vodkat had been marketed in a manner designed to mislead members of the public into believing that the product was vodka or a weaker version of vodka. It referred to the fact that the old get-up of Vodkat was reminiscent of vodka and that the product was not described in a clear and comprehensible way. Furthermore, ICB had not instructed retailers to display the product among the speciality drinks and liqueurs, rather than with vodkas. The court also considered that the evidence established not only that there was a likelihood of confusion, but also that members of the public had actually been confused. 

The judgment also contains a number of interesting observations on trap purchases and survey evidence.

In particular, the court reviewed the law surrounding trap purchases, reiterating the requirement for defendants to be promptly informed as to what is alleged, and given a proper chance to investigate a claimant's evidence while the events are still fresh in the mind of the relevant witnesses.

In relation to the specific trap purchases carried out by Diageo, the court confirmed that it was not vital that precise questions be asked. For instance, the question "can I have a bottle of your cheapest vodka?" was imprecise, but this imprecision was not material.

Overall, the court concluded that the probative value of this type of evidence would depend on all the circumstances of the case.
 
Moreover, ICB conducted a survey designed to obtain evidence as to consumers' perceptions of vodka. Diageo did not agree that such a survey would serve a useful purpose and advanced a number of criticisms at trial.

The court confirmed that the sample of respondents surveyed should be representative of the relevant consumers of the product. ICB's survey was not limited to those persons who had drunk vodka, let alone regular vodka drinkers. The court also stated that it would be helpful if the data could be recorded and analyzed in a way which allowed consideration of sub-samples of the overall respondents - in this instance, females aged 18 to 25. Furthermore, the court criticized the fact that obvious questions such as "what is vodka?" had not been asked in ICB's survey. The court emphasized the need for careful drafting of the questions which are asked in surveys.
 
Anna Reid and Tamsin Holman, Ashurst LLP, London

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