The wheels have come off for esure

Headline

The High Court has upheld the decision of the Hearing Officer to allow an opposition by Direct Line Insurance Plc to an application by esure Insurance Limited to register a representation of its computer mouse on wheels in respect of insurance and financial services in class 36. The opposition was based on Direct Line's prior UK and Community trade mark registrations for its well known telephone on wheels.

The Case

esure Insurance Limited v Direct Line Insurance PLC. [2007] EWHC 1557 (Ch). High Court (Lindsay J) – on appeal from a decision of the Hearing Officer.

Context

The "relative grounds for refusal of registration" of a UK trade mark are set out in section 5 of the Trade Marks Act 1994 (the "Act"). So far as they are relevant to this case, they are as follows:

"5(2) A trade mark shall not be registered if because-

(a) it is identical with an earlier trade mark and is to be registered for goods or services that are similar to those for which the earlier trade mark is protected, or
(b) it is similar to an earlier trade mark and is to be registered for goods or services identical with or similar to those for which the earlier trade mark is protected,

there exists a likelihood of confusion on the part of the public, which includes a likelihood of association with the earlier trade mark."

"5(3) A trade mark which-

(a) is identical with or similar to an earlier trade mark, ...
(b) ... [The omitted words were replaced by the Trade Marks (Proof of Use, etc) Regulations 2004.

shall not be registered if, or to the extent that, the earlier trade mark has a reputation in the United Kingdom (or, in the case of a Community Trade Mark or international trade mark (EC), in the European Community) and the use of the later mark without due cause would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier trade mark."

The above provisions of the Act were intended to implement the equivalent provisions of the European Directive to approximate the law of the Member States relating to trade mark (89/104/EEC) (the "Directive"), which are respectively Articles 4(1)(b) and 4(2). Since, much of the case law is European case law relating to the interpretation of the Directive, this note will refer to the provisions of the Directive as well as the Act.

Facts

Direct Line sells financial and insurance services direct to the public. In 1990 Direct Line began to use a representation of a telephone-on-wheels in its advertising and has since spent millions of pounds in developing the reputation in the telephone-on-wheels device, which is now well known to consumers of insurance services. Direct Line has long held UK and Community registered trade marks for its telephone-on-wheels device. Although the marks were always in fact used with a red telephone and black wheels, the registered marks were not limited in colour.

esure also sells financial and insurance services to the public. On 10 September 2004 it applied to register a UK trade mark for a representation of a computer mouse-on-wheels which was not limited in colour. On 18 September 2004 it began to advertise using the mouse-on-wheels device (with the device being used in orange and blue).

On 26 January 2005, Direct Line opposed esure's trade mark application under sections 5(2)(b) and 5(3) of the Act. On 9 May 2005 Direct Line began an extensive advertising campaign featuring its well known telephone-on-wheels trade mark along with its new "friend", a red and black mouse-on-wheels.

In March 2005, the Registrar gave a preliminary indication that the marks were not similar and there was no likelihood of confusion between them. Nonetheless, Direct Line pursued its opposition and, after a lengthy hearing, the Hearing Officer held that Direct Line's opposition should be upheld under sections 5(2)(b) and 5(3) of the Act. esure appealed to the High Court arguing that the Hearing Officer had made a number of errors of principle in reaching his decision.
In July 2005, Direct Line commissioned an extensive survey to establish whether there was any confusion on the part of the public between Direct Line's mark and the mark applied for by esure.

Decision

In a detailed and lengthy judgment, Lindsay J first dealt with a number of preliminary issues. First, citing Reef Trade Mark [2002] EWHC Civ 763 amongst others, he held that the proper approach on an appeal such as this was a complex issue, but ultimately he must be on his guard not to substitute his own view for that of the fact finding tribunal "unless a distinct and material error of principle on the Hearing Officer's part is demonstrated".

One argument raised by esure was that the Hearing Officer had erred in principle in that he did not take the Registrar's preliminary indication into account when coming to his decision. Lindsay J held that, far from being an error in principle not to take it into account, it would have been a "serious error of principle" to take it into account. The Registrar's preliminary indication is arrived at based on the trade mark application and notice of opposition and without any supporting evidence from either side. The function of the preliminary indication was to determine which party was to make the next step in deciding whether proceedings should continue.

In relation to the substantive grounds of the opposition, it was not contested that the services covered by esure's application were identical to those for which Direct Line's trade marks were registered. It was also not argued that the marks in question were identical, even, noted Lindsay J, "with the less stringent view of identity which some ECJ decisions now seem to espouse". It was also common ground that the relevant date for assessment was the date of esure's trade mark application.

As to the similarity of the marks, after a detailed look at the case law on the subject since Sabel and Lloyd Schufabrik, Lindsay J held that the Hearing Officer had erred in principle in deciding that there was no threshold test for assessing whether the marks were similar. Whilst the threshold was a low one, mere similarity between the marks was not enough. Lindsay J went on:

"First, overall impressions of the rival marks are formed, paying full regard to all the requirements of the autonomous concept of 4(1)(b) similarity. Next one has to have in mind the types of confusion which are then relevant, namely those identified in Sabel. Then the threshold question arises: are those overall impressions such that one can reasonably say that a likelihood of confusion could not thereby be created?"

He held that the threshold in this case had been overcome. Despite the numerous differences between the marks, the conceptual similarities and the identity of the services are such that it could not be said that a likelihood of confusion could not be created.

Lindsay J held that whether there is or was a likelihood of confusion is very much a matter for the evidence. In this regard, the Hearing Officer had held that Direct Line's survey evidence should be rejected on the grounds that it would necessarily have been coloured by the fact that it was conducted after Direct Line's extensive marketing campaign featuring its own mouse-on-wheels. Next, the Hearing Officer rejected any possibility of "direct confusion" between the telephone-on-wheels and the mouse-on-wheels. The Hearing Officer did, however, find that at the relevant date there was a likelihood of "indirect confusion" in the sense that the mouse-on-wheels was being used by an economically linked undertaking. Lindsay J held that this conclusion could only have been reached without an error in principle on the part of the Hearing Officer if it was made on the basis of evidence presented to him. Since the Hearing Officer had, rightly, rejected the survey evidence there was no evidence available to him to enable him to reach that conclusion.

Highlighting the differences between the marks, Lindsay J held that the "matter was too finely balanced to be such as could be concluded by a first impression; clear evidence or, at lowest, a plainly reliable inference as to confusion was needed." Accordingly, without evidence it was an error of principle by the Hearing Officer to conclude that there was a likelihood of confusion. In coming to his decision that there was no likelihood of confusion, Lindsay J pointed out that the onus of proof was on Direct Line to show that there was a likelihood of confusion. esure's appeal on this ground was allowed.

As to section 5(3), Lindsay J held that it was too stringent a test to require Direct Line to show that, on a balance of probabilities unfair advantage or detriment would occur. It suffices that a "non-hypothetical future risk" of detriment or unfair advantage was put before the Court. Lindsay J held that, having applied a more stringent than necessary test in this regard, the Hearing Officer had not made a material error in principle. Further, on the evidence presented, the Hearing Officer was entitled to find that esure's mark would take unfair advantage of or cause detriment to the distinctive character of Direct Line's mark. Accordingly, the Hearing Officer's decision would stand and the appeal would be rejected.

Comment

Lindsay J was constrained in this case in that it was an appeal against the decision of the Hearing Officer and, as such, he could only intervene where there was an error in principle or a manifest error in a finding of fact. He found such an error in relation to the arguments under section 5(2)(b) in that the Hearing Officer held that there was no threshold for assessing similarity and that the Hearing Officer had no evidence on which to find there was no likelihood of confusion. There being no such error in principle in relation to the arguments on section 5(3), Lindsay J was bound to follow the decision of the Hearing Officer.

In relation to section 5(2)(b), it is interesting and perhaps surprising that Lindsay J appears to require that a likelihood of confusion be proven in evidence, as opposed to being something that can be inferred by a court based on its own impression of the marks at issue . The Hearing Officer held that, in the absence of reliable evidence, he was able to assess the extent of the similarity of the marks for himself and determine that there was a likelihood of confusion. Lindsay J held that without evidence the Hearing Officer was not, as a matter of principle, able to come to this conclusion because the extent of the similarity was too finely balanced; Direct Line had not overcome the burden of proving the likelihood of confusion. From a legal point of view, this would appear to be very close to the boundary between findings of fact and findings in law, especially when it is remembered that Lindsay J held that the threshold for similarity between the marks had been overcome. Practically, Lindsay J's judgment highlights the importance of reliable evidence in relation to confusion, but provides little guidance as to how evidence of a likelihood of confusion could be produced; a burden that would be very difficult to overcome in circumstances where the later mark has not yet been used in the course of trade or has only just begun to be used. It may be that this case can be limited to its facts on this point since Lindsay J links the requirement for evidence to the finding that the question of similarity of the marks was finely balanced. It may be that, where the marks are more similar, the more able a court will be able to infer a likelihood of confusion without the need for evidence.

It is also worth noting that this is a case where, even though there was similarity of signs and identity of services, a case under section 5(2)(b) was not made out, but the case under section 5(3) was. This should be borne in mind when considering the grounds of an opposition or, for that matter, infringement proceedings under sections 10(2) and 10(3) of the Act.