Budejovicky Budvar Narodni Podnik v Anheuser -Busch Inc

By our judgment of 20^th October 2009, [2009] EWCA Civ 1022, we decided to refer to the Court of Justice of the European Union (“the Court”) some questions of trade mark law: the answers would be necessary to resolve this appeal. It is from the decision of Norris J of 19^th February 2008 dismissing BB’s (as I shall call the appellants) appeal from the decision of 2^nd August 2007 of the Hearing Officer, Mr Foley, in the Trade Mark Registry.

The general facts and background to the appeal are already set out in our first judgment which must be read with this judgment. In the first judgment we resolved certain English law defences (abuse of process, estoppel) against BB. No more need be said about them.

BB also raised a defence of acquiescence under Art. 9(1) of the Directive. This raised two questions of law for the CJEU. BB accepts that the response from the CJEU rules out any defence of acquiescence. So no more need be said about that.

But we had a third question. It was this:

In Council Directive 89/104/EEC:

3.

Does Art 4(1)(a) apply so as to enable the proprietor of an earlier mark to prevail even where there has been a long period of honest concurrent use of two identical trade marks for identical goods so that the guarantee of origin of the earlier mark does not mean the mark signifies the goods of the proprietor of the earlier and none other but instead signifies his goods or the goods of the other user?

The Court ruled as follows:

3.

Article 4(1)(a) of Directive 89/104 must be interpreted as meaning that the proprietor of an earlier trade mark cannot obtain the cancellation of an identical later trade mark designating identical goods where there has been a long period of honest concurrent use of those two trade marks where, in circumstances such as those in the main proceedings, that use neither has nor is liable to have an adverse effect on the essential function of the trade mark which is to guarantee to consumers the origin of the goods or services.

Mr Mellor QC submits that answer to the case is now clear. It is that where a long-standing situation of honest concurrent user of the same mark for the same goods has come about, each user can register its mark, each can stop third parties from using it, but that neither can stop the other. The state of honest concurrent use means that the essential function of the parties’ trade marks is not regarded as having adverse effect. True it is that there will always be some confusion, but that does not matter. It is also true that cases of honest concurrent use are rare, but this is such a case.

Mr Bloch QC for AB submits:

Is it open for BB to take the point on appeal?

I see nothing unfair about allowing the point to be taken on appeal to this court. It is simply a point of law which is taken on the basis of the evidence before the Hearing Officer. There is generally no unfairness in the Court of Appeal considering whether on the facts a case has been made out as a matter of law, even if the point is raised for the first time in that court. Things are of course different if the point also involves questions of fact which require further evidence. It is perhaps worth observing that the great “honest concurrent use” case, GE itself, involved two fresh points of law on appeal. The first instance case was concerned with issues about alleged improper licensing and “muddying the mark”, the Court of Appeal was concerned with whether the GE and GEC marks were confusingly similar and whether s.11 of the 1938 therefore invalidated GE’s mark and the House of Lords was concerned with the meaning of “disentitled to protection in a court of justice” within s.11. Lord Diplock was moved to describe the case as having a “chameleon like history” [1973] RPC 297 at p.318

In considering whether it is unfair it is also pertinent to note that BB raised the point fairly and squarely in its Notice of Appeal. There is no question of AB being taken by surprise. Moreover the fact that we referred a question about the point over AB’s objection shows that we have already allowed the point to be taken.

Accordingly I think there is nothing unfair about allowing BB to run the point now. It is merely saying that in law, on the existing evidence, AB has failed to make out its case. The fact that AB did not put in evidence on essential function is due solely to its mistaken view of the law. I deal with the possibility of further fact finding later.

Mr Bloch submitted that the earlier cases between the parties established a non de minimis level of confusion. He then submitted that the old English rule permitting honest concurrent use was wider than the EU rule. The latter only permitted it where the level of confusion was de minimis. If there was a level of confusion above that, then the essential function of the mark relied on would be impaired and a case of permissible honest concurrent use would not be made out. So here BB was outside the scope of the Court’s ruling.

It is therefore necessary to consider what the findings of confusion in the earlier cases were and whether the Court’s answer was confined to de minimis levels of confusion only.

In my judgment giving rise to the reference (with which the other members of the court agreed) I said:

[3] But although the names are the same, the beers are not. Their tastes, prices and get-ups have always been different. In markets where they have co-existed, consumers have by and large become aware of the difference, though of course there will always be some small level of confusion.

And the question asked (I repeat the key bit) was on the basis that there had been:

a long period of honest concurrent use of two identical trade marks for identical goods so that the guarantee of origin of the earlier mark does not mean the mark signifies the goods of the proprietor of the earlier and none other but instead signifies his goods or the goods of the other user

Mr Bloch submitted that it was wrong for us to hold that “consumers have by and large become aware of the difference, though of course there will always be some small level of confusion”. On the contrary, he said, the earlier cases show significant levels of confusion

To substantiate this he took us to the following passages in the earlier judgments. Firstly Oliver LJ (in the passing off case reversing Whitford J on the facts) said at [1984] FSR p. 461 :

In fact there was ample and unchallenged evidence of confusion. It should be mentioned that apart from the name, there is no similarity of get-up, so that no one would pick up the Czech beer mistaking it for the American by reason of its appearance. But there was ample evidence of cases in which orders had been placed for Budweiser by people expecting the plaintiffs’ beer and in which they had been served instead with the defendants’. And there was ample evidence that in the minds of several people the impression was created that the two were in some way connected.

Next Dillon LJ said at p.477:

The learned judges’ conclusion that at the date of issue of the writ there was a dual reputation in the name Budweiser which neither party could claim had been improperly achieved is correct.

It is the inevitable consequence of this that there will be some degree of confusion among some members of the public and some traders, as there has in fact been.

Similarly in the second Court of Appeal case Peter Gibson LJ said at [2000] RPC p.916

AB’s action [i.e. the earlier passing off action] failed because at the date of inception of the conduct complained of, in 1973/4, AB, whilst possessing the reputation in the name Budweiser and whilst proving confusion and the risk of deception could not establish that it possessed goodwill in this country.

Judge LJ (as he then was) said, in a typically common sense way, at p. 920:

Further it seems to me likely that there is some continuing confusion between the two products, at any rate in the cases of those individuals who do not appreciate that there are differences between American Budweiser and Czech Budweiser.

I do not accept that these findings are inconsistent with what I said in my first judgment. I did not hold that the level of confusion was de minimis. I said it was small, not that it was negligible. The level of confusion in the earlier cases was clearly not negligible: otherwise the claims in passing off would have failed for that reason alone, not because there was defence of honest concurrent use or failure to prove goodwill. What I said is entirely consistent with the findings relied upon by Mr Bloch. Common sense prevails here. These two brands have lived side by side for many many years in different get-ups, prices and taste and with large sales: the sales of AB’s beer are much greater than BB’s but the latter are substantial. You do not have to be a genius to infer from those very facts alone that the public by and large will have got used to that. Or that there will always be some who are confused, albeit that many are not.

Mr Bloch took us to some passages in the Judgment:

75      In the present case, it is to be noted that the use by Budvar of the Budweiser trade mark in the United Kingdom neither has nor is liable to have an adverse effect on the essential function of the Budweiser trade mark owned by Anheuser-Busch.

76      In that regard, it should be stressed that the circumstances which gave rise to the dispute in the main proceedings are exceptional.

77      First, the referring court states that Anheuser-Busch and Budvar have each been marketing their beers in the United Kingdom under the word sign ‘Budweiser’ or under a trade mark including that sign for almost 30 years prior to the registration of the marks concerned.

78      Second, Anheuser-Busch and Budvar were authorised to register jointly and concurrently their Budweiser trade marks following a judgment delivered by the Court of Appeal (England & Wales) (Civil Division) in February 2000.

79      Third, the order for reference also states that, while Anheuser-Busch submitted an application for registration of the word ‘Budweiser’ as a trade mark in the United Kingdom earlier than Budvar, both of those companies have from the beginning used their Budweiser trade marks in good faith.

80      Fourth, as was stated in paragraph 10 of this judgment, the referring court found that, although the names are identical, United Kingdom consumers are well aware of the difference between the beers of Budvar and those of Anheuser-Busch, since their tastes, prices and get-ups have always been different.

81      Fifth, it follows from the coexistence of those two trade marks on the United Kingdom market that, even though the trade marks were identical, the beers of Anheuser-Busch and Budvar were clearly identifiable as being produced by different companies.

He submitted (correctly) that the circumstances of the dispute are exceptional. But then he suggested that the five factors referred to by the Court, and in particular that “consumers are well aware of the difference between the beers” and that “the beers [of the parties] were clearly identifiable as being produced by different companies” circumscribed the ruling so much that it was limited to cases of de minimis confusion.

I do not accept that. The Court could have said just that but did not. The rather self-evident point as to the effect of a long period of honest concurrent use was clearly laid before the Court when I summarised Mr Mellor’s submission:

Mr Mellor suggests that the Court might recognise a further exception in the case of long established honest concurrent use. For in such a case the guarantee of origin of the mark is not impaired by the use of the mark by each party. Once such concurrent use is established the mark does not solely indicate the goods of just one of the users. It means one or the other. Hence there is no impairment of the guarantee and, if impairment is the touchstone of Art 4(1), no infraction of it.

The Court did not rule that only de minimis levels of confusion are acceptable when there is honest concurrent use. Nor did the Court rule that the inevitable confusion in a same mark/same goods case is enough to take a case out of acceptable concurrent use. Yet that is what Mr Bloch’s submissions involve.

More fundamentally, Mr Bloch’s submissions involve the unstated premise that even where there is long established honest concurrent use the mark of one party must provide a guarantee of origin in that party and not the other. That is quite unrealistic. Here for instance, Budweiser has never denoted AB’s beer alone.

So I do not think that there is any impairment of the guarantee of origin – of either side’s mark. The guarantee is different given a situation of long established honest concurrent use.

It is here necessary to chart the course of proceedings below. I concentrate only on the essential elements. AB’s Statement of Grounds in the Registry claimed that its registration of Budweiser under No. 1,125,449 was of an “earlier trade mark”. It then referred to BB’s impugned registration of Budweiser and alleged it post-dated its own registration. All that was correct.

It then went on to allege that this was a “same mark, same goods” case and so BB’s registration was invalid under s.5(1) of the Trade Marks Act 1994 (corresponding to Art. 4(1)(a)).

The pleading did not stop there. It went on to allege that AB had used Budweiser since 1974 and relied on the “previous findings in respect of such use” referring expressly to the decision of Whitford J in the passing off case [1984] FSR 413. It claimed “continued use and substantial accrued reputation” in Budweiser “from 1974 on a continuous basis to date.”

The pleading did not allege any “adverse effect” on the essential function of the trade mark. It is unclear why, given that it was a “same mark, same goods” case any use was relied upon, but it was.

BB responded by raising acquiescence and other points which no longer matter. It expressly referred to the earlier passing off and trade mark registration Court of Appeal decisions, [1984] FSR 413 and [2000] RPC 906. Both of these decisions confirm the state of honest concurrent use between the parties.

AB filed evidence. It was simply of its extensive use of Budweiser since 1974, giving the sales figures. AB did not allege any adverse effect on its trade mark or of confusion.

BB responded with evidence of its sales figures, claiming use from 1973 though the detail of the earlier years is not specified (most of the figures are there in the reports of the earlier cases). There was a hearing, at which BB did not expressly say: “but it has not been proved or pleaded that there was an adverse effect on AB’s mark”. And AB did not expressly contend the opposite.

The hearing officer in his decision reluctantly decided in AB’s favour. He held that this was a case of same mark same goods and that alone was enough to satisfy Art. 4(1) (s.5(1) of the UK Act). But he said this:

[61] …… Such as it is, the evidence indicates (although it does not substantiate) that the two marks have co-existed for some considerable time with no apparent confusion, a fact that on its face could have provide[d] a compelling reason to allow what exists in the market to remain undisturbed. It may well be that having traded side by side for so long the consumer is now fully aware of the two competing brands, but equally could mean that confusion is there but this had not surfaced; there is no evidence one way or another.

[62] The question of confusion or no confusion is, however, academic, for under Section 5(1) there is no requirement for there to be a finding of confusion. If the marks and goods are found to be identical, the potential for confusion is simply assumed. No amount of evidence of non-confusion, if there is such a thing, nor the absence of any confusion, can change the conclusion. The position is that even though the parties appear to have traded alongside one another without there being any harm, because the marks and goods are identical, concurrent use is not a factor that I can properly take into account; refusal is mandatory.

I have certain unease at the position in which I find myself. The court of appeal issued a decision that on the facts, allowed the status quo in the reality of the market. In concentrating on the legal issues the parties have left me in the position of having to determine these proceedings on the thinnest of evidence.

We know now from the Court’s answer that the hearing officer was wrong to conclude that “concurrent use is not a factor I can properly take into account”. If the concurrent use is honest (as is accepted to be the case here) and there is no adverse affect on the essential function of the trade mark, the case is not within Art.4(1).

It is just worth stepping back and examining what has happened in the jurisprudence of the Court. Those who framed the same mark/same goods rule were rather naïve. To say that confusion is necessarily so in such a case, is wrong. The apparently black and white rigid application of the rule which the hearing officer thought was compelled, has been tempered to produce rational answers. The Court has steadily been recognising this in a series of cases, O₂ v Hutchison Case C-533/06, [2008] ECR I-4231 (comparative advertising conforming with the Comparative Advertising Directive), Hölterhoff [2002] ECR I-4187 (purely descriptive use), BMW v Deenik [1999] ECR I-905 (honestly stating that a garage repaired BMWs), Adam Opel v Autec Case C-48/05 [2007] ETMR 5 (use of mark on a toy car not infringing if no effect on essential function even though mark was registered for toys), Celine v Celine Case C-17-06 [2007] ECR I-7041 (use as a business name for a clothes shop not affecting essential function of mark registered for clothing). The ruling here is another example of tempering the apparently inflexible same mark/same goods rule to produce a rational answer.

Turning back to the present case, it is now apparent that AB approached it on a wrong legal basis. It was quite clear, following BB’s explicit reference to the Court of Appeal cases in its pleading, that honest concurrent use was somehow in play though it is fair to say that exactly how was obscure at best. AB could have put in a reply pleading saying “ah but the use affects the essential function of our mark” and so is no defence, or it could have left it at that. It did the latter. Perhaps it had in mind to advance something more, something in the nature of an adverse affect, for it is difficult to see why it put its extensive sales in evidence. Mr Bloch said he personally had no idea why the figures were put in – but there must have been some reason. But what is clear is that no case of affecting the essential function of the mark was pleaded or proved.

Mr Bloch submits that my approach is not fair. He asserted (but provided no material to support his assertion) that at the time the pleading was filed (2005) the practice for a case under s.5(1) was merely to assert same mark/same goods. By implication he was suggesting that it was for BB to raise a defence of honest concurrent use which did not affect the essential function of the mark. I do not agree. The alleged practice was not established. The fact of honest concurrent use under the old law was clearly raised on the pleadings by BB’s references to the two Court of Appeal cases. The legal consequence was not spelt out. It was quite open to AB to reply by alleging that the essential function of its mark was adversely affected. It did not do so. Probably it was acting under a mistake of law (the same mistake as was made by the hearing officer, namely that proof of same mark/same goods was enough). I am not entirely convinced of that, however, because there must have been some purpose in putting the sales figures in – I can only surmise that it was a desultory attempt at something intended to show harm. It does not matter, however. The fact was that the onus lay on AB to plead and prove what was necessary to make out a case under s.5(1) and it failed to do so.

One can find confirmation of this if one considers what would be necessary if the case were, as Mr Bloch suggested, remitted to the Registry. AB would have to amend its pleadings to allege for the first time (and particularise) damage to the essential function of its trade mark. It would then have to adduce evidence in support of its case. It would be a new trial, caused by the fact that AB failed to put its case at the first trial. Justice does not require this – indeed it would be unjust to allow AB to assail BB yet again.

I therefore reject all Mr Bloch’s points and conclude that the appeal should be allowed.

I agree with the conclusion of Jacob LJ. However, I see rather more force in Mr Bloch’s complaints about unfairness than he does. I would therefore like to say a little more about it.

I agree with Jacob LJ that the onus was on AB to plead and prove what was necessary but when it was necessary to do so is a matter to which I will come. I also agree that honest concurrent use was in the frame from the beginning but exactly how was, as he says, obscure at best. Had BB made its point clearly, AB would have realised that it might need to amend its pleadings and to adduce further evidence. But the point was not clearly raised at the beginning. Further, even as the case proceeded, there was still no explicit reference to the point by BB. It did not surface before Norris J. It only surfaced in the Grounds of Appeal to this court.

BB needs our permission to raise the point before us. If there were evidence which enabled AB to establish adverse effect, I do not think that it would be right to allow BB to take the point without affording AB the opportunity to establish adverse effect on the facts. Jacob LJ take a different view which he tests by considering what would happen if we remitted the matter to the Registry.

He says that AB would have to amend its pleadings and to allege for the first time damage to the essential functions of its trade mark. That is true. But in purely pleading terms, one might have expected BB’s response in the Registry to have asserted that it had a defence based on honest concurrent use to which AB would have responded by way, in effect, of reply, that there was adverse effect. After all, the literal meaning of the words of section 5(1) are absolute. It is only judicial interpretation, both in the Court and in our domestic courts, which has put a gloss on the words of the EU and domestic legislation in order to make the provisions workable in a sensible commercial way. Even if Jacob LJ is right to say that the new trial would be caused by the fact that AB failed to put its case at the first trial, I do not, for my part, consider that the circumstances are such that it would be unjust to allow AB to amend and to adduce further evidence.

But before that can happen, I would need to be persuaded that at least, in theory, there could be evidence of some sort to support a claim of adverse effect. In that context, evidence of confusion would, in my judgment, be insufficient. However much evidence of confusion is adduced, I do not see how that could, in the light of the earlier cases, be sufficient to establish any impairment of the guarantee of origin given the unstated premise in Mr Bloch’s submissions identified by Jacob LJ in paragraph 22 of his judgment.

In any case, AB has known since the service of the Grounds of Appeal that honest concurrent use was being relied on by BB in the context of section 5(1); it has known since the decision of the Court on 22 September 2011 that it might need to show adverse effect affirmatively. And yet it has not, notwithstanding this passage of time, given this court any hint about how such adverse effect might be established or the nature of the evidence which might be adduced to establish such adverse effect. I do not consider that we should remit the matter to the Registry without at least knowing in outline the nature of the evidence which AB would want to adduce. It is now too late for us to be told.

I agree the appeal should be allowed.