High Court Endorses ‘Initial Interest Confusion’ Doctrine of Trade Mark Infringement

The Claimants, Och-Ziff Management and OZ Management (together “Och-Ziff”) are part of the Och-Ziff Group, a global asset management group founded in 1994 by Mr. Och, the Chairman and Chief Executive of the parent company. Och-Ziff Management is the registered proprietor of a Community Trade Mark (CTM) for OCH-ZIFF in classes 9, 16 and 36 filed in January 2008 and a further CTM for “OCH” in the same classes, filed in October 2009, after the Claimants became aware of the Defendant’s use and registered in June 2010.

The first Defendant, OCH Capital, was founded by Mr. Ochocki on 3 March 2009. Mr. Ochocki presented evidence that he chose the name OCH Capital to reflect his nickname. OCH Capital started trading in late September 2009, and shortly afterwards Och-Ziff objected to its use of various signs including “OCH” and “OCH CAPITAL” on the basis of their registered trade marks and the common law tort of passing off.

Was the OCH Mark Filed in Bad Faith?

Och-Ziff sought to strengthen their position in relation to the distinctive element of their brand by filing a community trade mark for “OCH” in October 2009, after they had became aware of OCH Capital’s use of these letters. OCH Capital argued that the Claimants had acted in bad faith when they had applied for the mark.

Citing Hotel SRL Cipriani v Cipriani and Lindt, Arnold J confirmed that a trade mark application does not constitute bad faith merely because the trade mark applicant knows that third parties are using the same mark in relation to identical goods or services, nor does it constitute bad faith if the applicant does not seek to register the actual trade mark used but merely the distinctive part of it. It was commonplace for applicants to apply to register the distinctive elements of their trade marks and with good reason.

In the circumstances Arnold J concluded that Och-Ziff had a legitimate right to protect the name “OCH” and to seek registration of it, and the application was not made in bad faith. The fact that Och-Ziff had filed the application in order to assist it in its planned claim against OCH Capital did not in itself constitute bad faith. Arnold J also considered it relevant that OCH Capital did not claim that at the application date it had sufficient goodwill in the name OCH Capital to prevent the registration on the basis of prior rights.

What Does Use ‘in the course of trade’ Mean?

The case also considered the meaning of ‘use in the course of trade’, a common issue in any determination of trade mark infringement. A number of different uses were alleged. In respect of the use of “OCH” on its own, and on the basis of limited evidence, Arnold J accepted that ‘OCH’ was used primarily internally within OCH Capital and that it could not be shown that it had been used externally (i.e. with clients or potential clients).

The Court of Justice has repeatedly held that “in the course of trade” means “in the context of commercial activity with a view to economic advantage and not as a private matter”. Nevertheless it was unclear how this principle was to be applied in practice and whether ‘not as a private matter’ served to clarify the meaning of the first part of the phrase or whether it was a separate stand-alone criterion.

In particular the Court considered the Court of Justice’s decision in Google France, where Google’s role in providing Adwords was characterised as creating the technical conditions necessary for the use of a sign and being paid for that service, but was not considered to constitute ‘use in the course of trade’. The Court also considered cases on genuine use required to maintain a registered trade mark and concluded that it was crucial to consider whether the acts under consideration were part of (or preparatory to) a communication with a third party. In the circumstances he concluded that use of the sign in internal emails did not constitute use in the course of trade.

Initial Interest Confusion

Under Article 9(1)(b) of the CTM Regulation of 2009, a trade mark is infringed by use, in the course of trade, of a sign which is identical with or similar to the registered mark and is used in relation to identical or similar goods where there exists a likelihood of confusion on the part of the public. The likelihood of confusion includes the likelihood of association between the sign and the trade mark.

How the Court will determine whether a likelihood of confusion exists is well established in case law, including that the likelihood of confusion must be appreciated globally, through the eyes of the average consumer of the relevant goods and services, taking account of all relevant factors. The comparison of marks in the trade mark infringement context requires consideration of the use that has actually been made of the sign.

Och-Ziff submitted that the protection conferred by Article 9(1)(b) extends to what is known as “initial interest confusion” a principle derived from US trade mark law. The International Trade Mark Association have described it as follows:

“initial interest confusion is a doctrine which has been developing in U.S. trademarks cases since the 1970s, which allows for a finding of liability where a plaintiff can demonstrate that a consumer was confused by a defendant's conduct at the time of interest in a product or service, even if that initial confusion is corrected by the time of purchase.”

Arnold J referred to several UK and ECJ cases to determine whether the doctrine of initial interest confusion applies to European trade mark law. Although none of them referred to initial interest confusion by name, he found them to be instructive. Whirlpool v Kenwood demonstrated that the process of buying goods or services should, from selection through to purchase, be free of the distorting effects of confusion. It also referred to ‘bait and switch’ marketing techniques, where a product or service is initially offered in such a way as to be confused with those of a trade mark proprietor, but by the time of purchase the product or service has been replaced with a product or service from another source. In addition case law relating to the use of trade marks in advertising such as the O2 Holdings v Hutchison 3G made it clear that confusion could occur when a consumer views an advertisement, whether or not the advertisement leads to a sale and whether or not the consumer remains confused at the time of any such sale.

Arnold J concluded that the weight of authority supported a conclusion that initial interest confusion is actionable under Article 9(1)(b). He also commented that even where there was no diversion of sales, such confusion could cause damage by affecting the reputation of the trade marked goods and services, or by eroding the distinctiveness of the trade mark, factors normally reserved for consideration under Article 9(1)(c) (infringement of marks with a reputation).

Arnold J found that several uses of OCH Capital infringed the registered trade marks under Article 9(1)(b), concluding that there was a ‘manifest likelihood of confusion’. Arnold J was particularly convinced by accounts of different individuals who had independently contacted Och-Ziff when they had seen a sign for OCH Capital in the window of OCH Capital’s offices.

Article 9(1)(c) – ‘Dilution’, ‘Tarnishment’ and ‘Free-riding’

Under Article 9(1)(c) of the CTM Regulation 2009, a CTM with a reputation will be infringed where the use of an identical or similar sign, without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or repute of the mark.

Arnold J summarized guidance given in L’Oreal v Bellure (and other cases) that Article 9(1)(c) covers three distinct kinds of injury:

(i) detriment to the distinctive character of the mark, otherwise known as ‘dilution’ or ‘blurring’;

(ii) detriment to the repute of the mark, otherwise known as ‘tarnishment’ or ‘degradation’; and

(iii) taking unfair advantage of the distinctive character or the repute of the mark, also known as ‘free-rising’ or ‘parasitism’.

As Arnold J had already found confusion under Article 9(1)(b), he considered infringement under Article 9(1)(c) only briefly. In doing so, he discounted the finding of confusion and assessed the Article 9(1)(c) claim independently. On this basis, Arnold J found no infringement under Article 9(1)(c) and that none of the alleged harm had occurred or was likely to occur.

But it’s My Nickname

OCH Capital also tried to rely on the ‘use of own name’ defence to trade mark infringement. To rely on the defence such use must in any event be ‘in accordance with honest practices in industrial and commercial matters’. While Arnold J accepted Mr. Ochocki’s evidence as to his reasons for choosing the name OCH Capital, he did not consider them compelling ones for continuing use of the name in the face of Och-Ziff’s complaint. At the time of the first complaint OCH Capital’s use of OCH had barely started and at this stage it would have been relatively easy for it to change its name. Overall Arnold J concluded that OCH Capital had not discharged its duty to act fairly in relation to the legitimate interests of Och-Ziff and that its use of the signs complained of amounted to unfair competition with Och-Ziff. As a result the ‘use of own name’ defence was unsuccessful.

Passing Off

Arnold J held that the principles of initial interest confusion can also apply in a passing off context. He held that there can be passing off merely by advertising goods for sale even if none are in fact sold, and that the success of ‘switch selling’ (where a product or services is advertised in a way that is presented as being associated with another’s goodwill) relies on a misrepresentation, even though the customer has ceased to be misled by the time the transaction is concluded. The general principle is that if the defendant successfully induces the public to do business with him by making a misrepresentation then it ought not to matter that the falsity of the representation would become apparent at some stage. This is the case even if the misrepresentation is innocent rather than deliberate. Arnold J found that there was damage to the claimant’s goodwill and that the passing off case succeeded.

Comment – Initial Interest Confusion Arrives in the UK

The case is the first to specifically endorse the doctrine of initial interest confusion and confirm that a trade mark can be infringed under Article 9(1)(b) (likelihood of confusion) even where by the time of purchase the consumer is no longer confused as to the origin of the goods and services. This case will be of comfort to trade mark proprietors who may now feel more confident of bringing an action where third parties target their consumers in an initially confusing way, even when they do so unintentionally. It may also be seen as a brave decision, as it could be seen as extending the protection conferred by a registered trade mark. Although Arnold J’s reasoning seems sound, it remains to be seen if the ECJ will take the same approach.