Burges Salmon LLP - UK
Pliteq Inc and its UK licensee make and sell a range of acoustic damping and sound control products. Pliteq owns UK and EU trademark registrations for GENIECLIP and GENIEMAT in Class 17, among others. GENIECLIP is used in relation to clip and bracket products and GENIEMAT is used in relation to acoustic rubber mat products, all of which dampen or prevent sound travelling through buildings. Pliteq started to market and sell GENIECLIP and GENIEMAT products in the United Kingdom in around 2010. According to Pliteq, the products have been extremely successful over the past decade and a significant amount of money has been spent advertising and promoting them, such that they have become well known in the relevant field.
Defendants iKoustic Ltd and its sole director were a key (but not exclusive) distributor for Pliteq in the United Kingdom between 2012 and 2018. The relationship between the parties then broke down.
In 2018 iKoustic began making and selling its own alternative products under the names MuteClip and MuteMat. In the meantime, iKoustic continued to place orders with Pliteq. From around late 2018 to late 2019 iKoustic was selling both parties' products and from February 2019 onwards these sales were made without Pliteq's consent.
Pliteq alleged numerous instances of trademark infringement of its GENIECLIP and GENIEMAT marks through iKoustic’s use of Google's dynamic ads service and various uses on iKoustic’s website. The overarching theme was that iKoustic was using Pliteq’s marks to attract custom and lure internet users into purchasing its own MuteClip and MuteMat products instead – so-called ‘bait-and-switch’ selling.
Pliteq and iKoustic agreed (with the exception of the Google dynamic ads service, which iKoustic said did not constitute use of the marks) that the first five essential elements of trademark infringement under Section 10(1) of the Trademarks Act were met (ie, use of an identical sign by a third party, in relation to identical goods or services to those registered, within the relevant territory, in the course of trade and without the consent of the trademark owner). Pliteq claimed that the final condition of use affecting or liable to affect one of the functions of the mark – here, the origin, advertising and investment functions – was also met. iKoustic denied this.
With regard to use of the mark via Google's dynamic ads service, iKoustic submitted that because it had removed the relevant product pages from its website when it ran out of particular goods, the use of the mark in an ad generated by the dynamic ads service from a deleted page due to a time lag could not be said to result from iKoustic’s use of the mark. However, despite taking down the particular webpage, iKoustic had done nothing to actively block use of the mark through the dynamic ads service and the Intellectual Property Enterprise Court (IPEC) found that use of the marks in these ads (even without positive choice of the terms) constituted use by iKoustic.
With regard to the website uses, Pliteq conceded that there was no consumer confusion as to the origin of iKoustic’s goods. Where customers had contacted iKoustic thinking that it was a distributor of Pliteq products, iKoustic had made it clear that it had ceased to be a distributor of Pliteq goods or offered them an alternative product. However, Pliteq maintained that there had been bait-and-switch infringement. The court disagreed. iKoustic had used the marks in relation to genuine GENIECLIP and GENIEMAT goods that it had purchased and stocked and Pliteq’s rights in these goods were therefore exhausted. There was also no damage to the origin, advertising or investment functions of the earlier marks (except for a single use exception), with the court confirming that the “fact that some consumers might switch to the defendants’ goods would not, in circumstances of fair competition, infringe the investment function”.
Ultimately, the fact that iKoustic was using the marks in relation to genuine Pliteq goods and not its own, along with the parties’ agreement that there was no consumer confusion, led the IPEC to find no infringement by way of bait-and-switch selling or otherwise for almost all claimed uses.
There was a single exception relating to a confusing use of the GENIECLIP mark on iKoustic’s website, which incorrectly made out that no GENIECLIP products were in stock on that date and invited customers to buy a MuteClip product instead. This was found to effectively advertise MuteClip products through use of the GENIECLIP mark and therefore interfere with the investment function of the earlier mark. However, it did not constitute use in relation to the genuine goods and therefore there was no exhaustion defence.
Pliteq’s passing-off claims also failed, with the court finding no operative misrepresentation. iKoustic was transparently offering alternative products, not misrepresenting that its MuteClip and MuteMat products were those of, or associated with, Pliteq.
The decision provides useful guidance on the circumstances in which it is acceptable for distributors to carry on using a competitor’s mark when marketing competing products. Pliteq described this as a case of “classic bait-and-switch selling”. However, as the court commented in handing down the judgment, the case raised some unusual issues.
The decision provides further valuable guidance in relation to the use of third-party trademarks in keyword advertising. It is well rehearsed that keyword advertising using identical trademarks is not inherently objectionable, provided that consumers can tell without difficulty that the goods in the ad are not the goods of, or connected with, the third-party rights holder. However, it is interesting that, in this case, the failure to negatively match terms in the dynamic ads service, even without positively choosing the terms, was nonetheless found to constitute use of the mark by iKoustic.
The issues addressed in this case are only likely to become more common with the ever-increasing use of e-commerce and online advertising. Overall, the decision confirms that the courts are reluctant to intervene in, or prevent, fair competition practices.