Oatly misses ‘oat’ on victory in UK trademark battle against PureOaty

An infringement claim brought by drinks manufacturer Oatly AB before the Intellectual Property Enterprise Court (IPEC) has been dismissed in its entirety. The case highlights the limits to how far trademark law can be used to block a rival competing in the same space, as well as highlighting the difficulties brand owners can face when trying to enforce marks containing descriptive elements (Oatly AB v Glebe Farm Foods Ltd ([2021] EWHC 2189 (IPEC)).

Background

Oatly AB ─ Swedish manufacturer of the well-known oat-based drink, Oatly ─ has been selling oat-based milk substitutes since the 1990s, which have been branded as Oatly since around 2001. The company sells its Oatly range in the United Kingdom through its subsidiary company, Oatly UK Limited (both are claimants in this case – collectively ‘Oatly’). Oatly has had great success in the UK market in recent years, particularly with its market-leading Barista Edition (which had sales of over £38m in the year to end of February 2021). The brand is well known for its distinctive and fun packaging:

The defendant is Glebe Farm Foods, a family-run farming business based in Cambridgeshire, which has been growing oats since 2008. It specialises in the production of certified, 100% gluten-free oats (currently the only UK farm to do so) and takes pride in the purity of its oats. Glebe Farm Foods launched an oat drink in January 2019. Originally called simply Oat Drink, it was rebranded as PUREOATY (a play on the word ‘purity’) a year later, with updated product packaging:

Following this rebrand in early 2020, Oatly sued Glebe Farm Foods in the IPEC, claiming infringement of five of its registered trademarks under Section10(2) (likelihood of confusion) and 10(3) (injury to distinctive character or repute, or unfair advantage) of the Trademarks Act and passing off. 

The claim relied on three word-marks: OATLY (two separate registrations) and OAT-LY! and two device marks: the blue OAT-LY! carton mark; and the grey OAT-LY carton mark:

Oatly’s claim was ultimately dismissed by the judge, Mr Nicholas Caddick QC in its entirety.

Decision

Likelihood of confusion

The judge assessed whether PUREOATY was likely to be confused with each of the marks relied on by Oatly, but since Oatly’s strongest argument was whether the PUREOATY sign (whether used as a word or as depicted on the carton) infringed the two OATLY word marks, the judge focused most of his time on this assessment. Oatly’s case faced some major hurdles but a key difficulty was that the sole similarity between the sign and the marks was the letters OAT, which are descriptive and so have no significance in relation to the trade origin of the goods in question.  This posed a problem for Oatly because the remaining elements of the respective sign and marks are very different – PURE and LY.  Further, as Mr Daniel Alexander QC usefully articulated in his judgment in Planetart LLC v Photobox ([EWHC] 713):

“consumers are less likely to think that two descriptive marks denote businesses that are connected with one another because a credible and dominant alternative explanation exists for the similarity in marks which has nothing to do with their denotation of a common trade source, namely that the similarity is attributable to their descriptiveness.[emphasis added]

There is no hard-and-fast rule in UK case law that says use of a descriptive term prevents a finding of confusion, because it also depends on the distinctiveness and visual impact of the other elements of the mark(s) in question and each case must be assessed on its own facts. However, such a case is undoubtedly more difficult to establish – the existence of the descriptive term goes against there being a likelihood of confusion. Oatly’s case was also not helped by the fact that there was no evidence of actual confusion in the marketplace to counteract this.

The fact that the PUREOATY carton prominently displays the Glebe Farm Foods distinctive house logo and hence clearly signals to origin of the goods to the consumer, also weighed against Oatly.

The judge found no likelihood of confusion between the PUREOATY sign, and its use in the context of the carton, and any of Oatly’s trademarks. The passing-off claim also failed on the same reasoning.

Injury to Oatly’s marks

Oatly claimed all three types of injury to its marks under Section 10(3), namely:

  • detriment to the distinctive character of their marks (dilution);
  • detriment to the repute of their marks (tarnishment); and
  • unfair advantage being taken of the distinctive character or repute of their marks.

There was no evidence of any tarnishment so little time was spent on this in the judgment, but the other two injury claims also failed.   

To get its injury claims off the ground, Oatly had to establish (among other requirements) that use of the sign PUREOATY would create a link in the average consumer’s mind with its marks.  A link can be established even if no likelihood of confusion is found. Oatly had helpful evidence here, in the form of product reviews of PureOaty, where consumers had mistakenly referred to Oatly (albeit they were not actually confused). In addition, product comparison reviews with consumers comparing the PureOaty product with the Oatly product showed that a link had clearly been made.

Again, the descriptiveness of the common element of the parties’ sign and marks, i.e. ‘OAT’, was a factor that harmed Oatly’s case, as under a dilution claim a brand owner has less right to complain that its brand is being diluted if it has chosen a mark that is of limited distinctiveness in the first place. Indeed, the judge stated that if Oatly loses sales, it would be as a result of there being a rival oat drink product on the market, and not because its marks had been in any way diminished by Glebe Farm Foods’ use of the PUREOATY sign.  Further, Glebe Farm Foods was not taking unfair advantage of Oatly’s marks simply by using the element of those marks that is descriptive (and which has not acquired distinctiveness).

Separately, there was also a policy consideration in play regarding the line to be drawn between legitimate competition on the one hand, and taking advantage of a rival brand’s reputation on the other. The judge made it clear that the concept of unfair advantage “does not seek to prevent a business learning from its competitors, even to the extent of adopting similarities in approach and presentation”. There is a clear distinction between a trader who deliberately seeks to trade off the back off another brand owner’s goodwill and repute, and a trader who takes a conscious decision to ‘live dangerously’ (ie, where a trader may have fully appreciated the risk of confusion and  endeavoured to adopt a sign which is a safe distance away). Further, taking note of a rival’s marketing strategy and branding, as Glebe Farm Foods did in this case when considering its product rebrand, were considered “examples of a business learning from a rival’s approach” but did not amount to an intention to take advantage of the distinctive character or repute of Oatly’s marks. Glebe Farm Foods had due cause to adopt the name and branding that it chose, and its actions fell on the right side of the line.     

Key takeaways

While the outcome of this case is not particularly surprising, it is a helpful reminder for brand owners, that although trademarks can be a powerful tool in protecting their valuable intellectual property, trademark law cannot be used to prevent legitimate, rival traders from entering the marketplace. Customer choice and open competition are cornerstones of the consumer market and trademark law cannot be used as a weapon to block a competitor where there are no legitimate grounds to do so.

Using descriptive terms within a product or service name to signal to the busy consumer what that product or service is (ie, it does what it says on the tin) is common practice amongst brands worldwide. The downside of this is that a brand owner will have to work much harder to inform the consumer of the origin of their product/service, and to enforce their rights against third parties. The best practice from a trademark law standpoint is, of course, to adopt a totally unique and distinctive brand name (eg, the oft-quoted KODAK for cameras), but this has to be balanced with the practical realities of marketing a product or service in a crowded marketplace, where use of descriptive terms is commonplace. In this scenario, it is highly recommended that a brand’s house name and logo is always used prominently in combination with, or in close proximity to any descriptive elements, to mitigate the risk of confusion and subsequent claims.


This is an insight article whose content has not been commissioned or written by the WTR editorial team, but which has been proofed and edited to run in accordance with the WTR style guide.


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