Swatch AG v Apple Inc

This is an Appeal from a decision of the Hearing Officer, Oliver Morris, acting on behalf of the Registrar of Trade Marks (‘the Decision’) in Oppositions brought by the Respondent (‘Apple’) under numbers 406449 and 406479. The Decision was made on 19 October 2017. The remarkable delay between the Decision and the hearing of this Appeal is partially due to a protracted application for an extension of time for permission to Appeal, initially refused in the High Court and then permitted by consent in the Court of Appeal. This process took around a year. The remainder of the delay seems to have been due to stays agreed between the parties for the purpose of settlement. A further stay for the same purpose was sought from me on the eve of the date fixed for this Appeal, at which time I was told that the matter was near to settlement. Given the history of the matter, and the previous lack of success of settlement discussions, I granted an adjournment of 48 hours (to the end of the 3-day window fixed for the Appeal) to enable the parties to finalise their settlement. No settlement was reached in time (nor has yet been reached) and the Appeal therefore went ahead.

The Trade Mark Applications in suit are International Registrations which designated the UK, made by the Appellant (‘Swatch’). They are numbered 1281231 and 1281232 and are for the following signs, respectively:

The Applications were made in classes 9 and 14 for a wide range of goods including watches and consumer electronic products.

The Oppositions were made by Apple under s5(4)(a) and s3(6) of the Trade Marks Act 1994. The s5(4)(a) objection contended that the use of the mark could be prevented by Apple under the law of passing off by reason of the goodwill which Apple had acquired in connection with the phrase ONE MORE THING. The s3(6) objection contended (at a broad level) that the application was made in bad faith having regard to Swatch’s knowledge of Apple’s reputation in the phrase, the circumstances in which the marks were applied for and Swatch’s likely intentions in relation to use of the marks.

The phrase has been used at launches of Apple products since 1998 in the following way. The well-known Chairman and founder of Apple, Steve Jobs, would reach what would seem to be the end of his keynote address at an industry event chosen for an important announcement, turn as if to leave the stage, and then turn back with the words ‘but there’s one more thing’. In 1998 the first ‘one more thing’ was the return of Apple to profitability. In later years, the ‘one more thing’ would often be a new Apple product. The tradition appears to have lapsed on Steve Jobs’ death in 2011 but was revived by his successor Tim Cook in 2015 for the launch of the Apple Watch.

The somewhat theatrical use of the phrase in this way was probably originally borrowed from, and intended as a playful reference to, the fictional TV detective Columbo, popular in the 1970s and 1980s on US and UK television. His modus operandi in each episode was to reveal the devastating piece of evidence from which he had solved the crime by walking away from the criminal he was questioning and then turning back with the words ‘there’s just one more thing…’.

The phrase ‘ONE MORE THING’ has thereby become associated with Apple in the sense that the kind of people who follow Apple launches (in particular Apple ‘fans’ who take an extreme interest in their industry announcements) have become accustomed to expect the ‘ONE MORE THING’ moment. The evidence showed for example compilations of ‘ONE MORE THING’ moments put together by Apple fans on YouTube.

Swatch is a well-known manufacturer of watches based in Switzerland. For many years it has had a reputation in the UK for bright and distinctively designed plastic watches, sold in particular through its own retail outlets on the High Street.

There appears to be a long running trade mark dispute between Swatch and Apple about the marks ‘I-WATCH’ and ‘I-SWATCH’. I know little about this dispute save that it already existed at the time of the Applications in suit.

Apple filed evidence of its use of the ONE MORE THING phrase in connection with its product launches. It also exhibited a number of online comments from third parties made in trade blogs and websites criticising Swatch’s trade mark applications for ONE MORE THING and TICK DIFFERENT. A lot of reliance was placed on these comments before the Hearing Officer and before me as representing the unsolicited opinions of industry observers.

The clearest example of these is from a website called THENEXTWEB.com dating from 2015. The headline is

Swatch’s approach in the evidence was to avoid saying anything about the purpose behind filing the Applications, nor even commenting on its state of knowledge of the signs relied on by Apple. Instead it listed certain occasions in the past in which it had used signs incorporating the word ‘More’. It also pointed out the Columbo usage of the phrase ONE MORE THING and gave evidence of product ranges it had brought out in the past based on fictional characters (eg James Bond). However, it never actually stated that it had any real intention of making a Columbo ‘tie-up’.

The Hearing Officer rejected the objection under s5(4)(a). Whilst he accepted that a non-trivial (though relatively small) number of people in the United Kingdom would have been aware of Apple’s usage of the phrase ONE MORE THING in the context I have explained above, he did not consider that this was sufficient to turn what is a common phrase in English usage into a

He also found that the public would not be deceived by the use of the phrase by Swatch in relation to the goods within the scope of the Application. At worst, he thought, some people who were aware of Apple’s usage might be caused to ‘wonder’ whether Swatch’s use of the phrase had some connection with Apple, but this was not enough for the purposes of passing off.

The Hearing Officer’s rejection of the s5(4)(a) Opposition was not appealed because there was no challenge to his finding that there was no likelihood of deception. However, Apple did appeal (by way of Respondent’s Notice) the Hearing Officer’s finding in the course of his Decision that the phrase had not been shown to be distinctive of Apple’s goods or services in the trade mark sense. This was said to be potentially relevant to the s3(6) Opposition.

It is convenient to deal with this point on the Respondent’s Notice straight away. I can find no fault with the Hearing Officer’s findings on the issue of distinctiveness. To establish trade mark distinctiveness in respect of a common English phrase of this kind would require powerful evidence that it had gained what is sometimes called a ‘secondary meaning’ to the average consumer. I agree with the Hearing Officer that the evidence in this case fell far short of that. Whilst the Hearing Officer was no doubt right to hold that a non-trivial number of people would be aware of the fact that Apple had a tradition of using the phrase in their product launches, this does not make the phrase indicative of the origin of Apple’s products or services. So far as I am aware, the phrase has never been used by Apple as an indicator of origin, but only in a way which is essentially descriptive of a particular moment at a launch event.

The Hearing Officer upheld the Oppositions under s3(6).

The Decision contains a long account of the pleaded case under s3(6), and the extent to which certain arguments were open to Apple. The reason for this can be seen in [52] and [53] of the Decision. Rather like the author of the THENEXTWEB article cited above, Apple did not know what Swatch’s intentions actually were and therefore was reduced to speculation. Its primary case at the hearing before the Hearing Officer was in fact the same as the first suggestion of the author of that article: ‘maybe it just wants to keep Apple from using the phrase’. Or, as Apple’s counsel put it at the hearing in the Registry:

Paragraph 44 of Apple’s skeleton argument before the Hearing Officer averred that this ‘blocking’ explanation was

It is not surprising that Apple pursued this line of argument as its primary case before the Hearing Officer. It is well-established that an application made with the ‘dog in the manger’ attitude that ‘I have no real use for this mark myself, but I want to stop other people from using it’ is likely to be considered to be made in bad faith. See for example Arnold J (as he then was) in Red Bull GmbH vSun Mark Limited [2012] EWHC 1929 at [138] in which he quotes from the decision of the Court of Justice of the European Union in Lindt v Hauswirth C529/07 at [41]-[45]. A finding of bad faith is particularly likely to follow where the intent to prohibit use is targeted at a particular individual or trader known to have an interest in the mark (whether or not that interest is legally protectable).

Unfortunately it turned out that the ‘blocking’ case was not actually pleaded by Apple in its Notices of Opposition. Apple’s only pleaded case on Swatch’s motivation and intention was found in paragraph 9 of their Notices, as follows:

As the Hearing Officer pointed out, the three pleaded purposes here (‘parody’, ‘diversion of trade’ and ‘making use of the reputation’) all inherently involve the actual use of the mark. A ‘dog in the manger’ or ‘blocking’ allegation is quite different – it does not complain about the intended use of the mark, but rather the intended use of the registration for negative, disruptive purposes. Indeed, as the CJEU pointed out in Lindt, the reason a ‘blocking’ intention may be objectionable is that it suggests that the proprietor has no intention to use the mark at all.

In [57] of his Decision, the Hearing Officer rejected Apple’s argument that its pleading was sufficiently broad to allow it to run its primary case that Swatch had no intention to use the marks, and that the applications were blocking applications. He also refused permission to amend to introduce the ‘blocking’ objection. Neither of these decisions are appealed by Apple.

Of the possible purposes set out in the pleading at paragraph 9, ‘diversion of trade’ suggests an intention to deceive the public and ‘making use of the reputation of the mark’ suggests an intention to call Apple’s ‘catch phrase’ to mind so as to ride on their coat-tails in some way. The Hearing Officer considered that these allegations were inconsistent with his findings in relation to the s5(4)(a) objection, so rejected them. Again, that finding was not challenged before me.

That left the allegation that the Applicant intended to use the mark ‘to parody Apple’. As Mr Riordan put it at that hearing, referring to paragraph 9 of the pleading:

‘Trolling’ in the sense of malicious advertising or malicious social media use is not specifically pleaded, but it would appear from Mr Riordan’s submissions that they considered it to be encompassed by what is pleaded. The reaction of Mr Conway, acting for Swatch at the hearing below, to this was as follows:

The Hearing Officer considered the ‘parody’ allegation from [59] of his Decision.

He first referred to Apple’s reliance on the articles such as the one on THENEXTWEB which I have quoted. He pointed out in this context that there was no great consensus as to the possible motivation of Swatch, but that ‘trolling’ Apple and running a parodic marketing campaign had been suggested. Having noted Mr Conway’s argument that these articles were not a reliable source on which to base a decision (some were said to be ‘Apple biased’ publications, and others had an IP rather than technology focus), the Hearing Officer said that he did not rely ‘too heavily’ on them but:

He went on to find that it could be no coincidence that the ONE MORE THING marks were applied for with TICK DIFFERENT at a point in time when the parties were ‘already at loggerheads’ and concluded as follows (still in [59]):

In [61] of his Decision, the Hearing Officer turned to consider Mr Conway’s submissions (i) that the evidence, eg the Columbo references, was also consistent with a good faith explanation for the application, and (ii) that parody does not necessarily equate to bad faith. On the first point, he noted that Swatch had failed to give evidence about its actual intentions and therefore done nothing to displace the prima facie case which he had held to exist. On the second point he said this:

The Grounds of Appeal are lengthy and discursive. However, as argued before me, there were essentially three points.

The first was that Apple’s case as pleaded on bad faith was predicated on the proposition that it owned enforceable rights by way of goodwill associated with the unregistered trade mark ONE MORE THING in the United Kingdom, and that the Hearing Officer, having rejected this case in the course of his determination of the s5(4)(a) Opposition, should therefore have rejected the s3(6) Opposition as well.

The second was that the Hearing Officer did not have any adequate evidential basis for his findings as to the intention of Swatch when it made the Applications in suit, in particular his finding as to the intention of parodic use. In particular, Mr Moss for Swatch relied on the principle explained by Geoffrey

The third ground of appeal was that an intention of parodic use was not in any event sufficient to amount to bad faith, particularly bearing in mind the principle of freedom of expression (Human Rights Act s12).

I do not find the first ground convincing at all. It seems to me self-evident, as Ms May QC for Apple contended, that a s3(6) Opposition is free-standing and does not require any enforceable right in the mark in the UK (by way of an actionable reputation) to be established. The fact that Apple considered that it did have an enforceable right, and that the s3(6) Opposition was drafted against that background does not mean that Apple had thereby taken on an extra and unnecessary burden.

The second and third grounds however deserve some detailed consideration. A decision under s3(6) does of course, as Ms May QC submitted, involve both determinations of fact on the evidence (eg knowledge and intention on the part of the Applicant) and the evaluation of a course of conduct against an extremely imprecise legal test. On both those questions an Appellate Court should be unwilling to depart from the decision of an experienced Hearing Officer unless that decision was based on a clear error of principle or was plainly wrong. Nonetheless, it is worth remarking at the outset that this is quite an unusual case:

For these reasons, it seems to me appropriate to consider the reasoning of the Hearing Officer with particular care.

The ‘bad faith’ objection to the registration of trade marks has defied any straightforward definition, either by the UK Courts or by the CJEU. It is clear however that it involves a consideration of the state of mind of the applicant and in particular their intentions with respect to the application. It also requires an assessment of those intentions against certain norms, in particular (i) what would be considered honest and fair behaviour by a business and (ii) the proper purpose of obtaining trade mark protection (that is to say to protect a mark used to distinguish goods and services from those of other traders).

The CJEU in Sky v SkyKick C-371/18 [74]-[75] put it this way:

These indications are generally consistent with the summary provided by Arnold J in Red Bull which I set out for convenience:

I start with the challenge to the Hearing Officer’s factual conclusion as to the intentions of Swatch, starting with his reasoning in [59] of his Decision which I have quoted in [29] above. I will repeat it here for convenience:

I have no difficulty with the Hearing Officer’s finding in the first sentence. There was enough basis in (i) the timing of the Applications (ii) the making of 2

However, I struggle to see how the second sentence starting with the words ‘I therefore accept’ can be said to follow (as the Hearing Officer seemed to think) from that finding. ‘Some form of objective of upsetting or cocking a snook at Apple’ covers a wide range of possible intentions and does not in my view lead to the particular conclusion that parodic use was intended. For example, the mere act of applying to register these marks (regardless of any intention to use them) would be likely to cause upset at Apple. Similarly the ordinary trade mark use of the marks, eg as slogans for Swatch’s own goods, would no doubt have done the same.

I therefore do not agree with the reasoning of the Hearing Officer that a prima facie case of intention to parody Apple followed from the fact that the Applications were intended to upset Apple. Nor do I consider that a prima facie case of intention to parody Apple was otherwise established by the evidence in the case. The following points are material:

In the end, all that can really be said with confidence on the evidence is that Swatch must have regarded these Applications as useful in some way in its broader dispute with Apple. They probably wanted to stimulate a response of some kind from Apple and they must have known that Apple would be annoyed. But the mere making of the Applications and their prosecution to grant would probably achieve both of these aims, as would the ordinary use of the marks in relation to the goods applied for. It may be said that the absence of any statement of intention by Swatch in the evidence makes that a more doubtful proposition, but, as Mr Moss pointed out on behalf of Swatch, they had made a formal statement of intent to use at the relevant date, namely when they made the Applications.

It would be perfectly reasonable and consistent with the evidence to suppose that Swatch had not, at the date of the Applications, given much thought to exactly what they would do with these marks. This of itself would not amount to bad faith, as pointed out by the CJEU in Sky v SkyKick C-371/18 at [76]:

Whether one applies the principle of Occam’s Razor or the Court of Justice’s requirement for proof on the basis of ‘objective, relevant and consistent indicia’ (Footnote: ¹), there is therefore in my view no support in the evidence for reaching the rather complex explanation that Swatch intended to use the trade mark to undermine Apple by parodic use.

For those reasons I consider that the Hearing Officer was wrong to hold that Swatch intended to make use of the mark to poke fun at Apple in a manner akin to parody.

I have considered whether the simple fact that Swatch were motivated by a desire to annoy Apple could be sufficient to amount to bad faith. I do not think it can. Annoyance of a business is not a concept which is capable of objective analysis. The CJEU’s reference to ‘undermining the interests of third parties’ suggests something which is economically identifiable. And in any event, Apple’s case was not pleaded on anything like this basis.

This would be sufficient for the Appeal to succeed, but I will also consider the third ground argued before me, namely that even a proven intention to ‘poke fun at Apple in a manner akin to parody’ would not be sufficient in itself to amount to bad faith under s3(6).

It will be recalled that the CJEU in SkyKick at [75] referred to bad faith as applying where the Applicant has

‘Poking fun’ and ‘parody’ cover a multitude of possibilities from gentle and affectionate teasing to full-frontal attacks. I do not consider that it is an inherently dishonest business practice to use a sign which brings another trader to the mind of some consumers in an amusing but inoffensive way. Such an activity would not necessarily undermine the interests of the third party in any material way. The point at which parodic or humorous activity of that kind would transgress the boundaries of honest business practices must depend on the nature of the humour, the intensity of its use and its consequent impact on the business interests of the recipient.

One can imagine cases in which a mark is inherently offensively parodic, so that any use of it must inevitably transgress honest business practices and unfairly undermine the interests of the subject of the parody. However, where (as here) the mark itself is not offensive, it is hard to see how the mere prospect that it might be put to some parodic use which overstepped the mark provides a ground for refusal under s3(6). This is because (i) the making of the Application is equally consistent with the proprietor acting in good faith, so a finding of bad faith would contravene the proposition of Arnold J in [133] of Red Bull (see [40] above), and (ii) the Court would be essentially engaging in speculation, contrary to Ian Adam (also [40] above).

This argument was dismissed by the Hearing Officer in the passage from [61] of his Decision which I have quoted above. I disagree with his analysis. Taking the points he makes in order:

All in all, it seems to me that the Hearing Officer had no clear idea in mind as to the kind of parody which Swatch might engage in using this mark. This is not surprising in itself, since there was no evidence on the point at all. However, without a clear idea, it was not legitimate to conclude that Swatch’s intentions had stepped over the line between the appropriate and inappropriate use of a trade mark. I should add that at the hearing before me I asked Apple to consider over the lunchtime adjournment if they could provide some examples of the kind of parody which they would be concerned Swatch might engage in using the mark ONE MORE THING. It ultimately declined to do so, saying in essence that so far as they were concerned any use of the mark by an unauthorised third party would be offensive and damaging. Whilst Apple was perfectly entitled to take this approach, it does to my mind illustrate the problems with the Hearing Officer’s Decision. The Decision is founded on an intention to use a mark in a particular way which is said to be unfair and would materially undermine Apple’s business when no example or illustration of the use in question was provided.

I therefore conclude that the Hearing Officer was wrong to uphold the Opposition under s3(6). The Appeal succeeds.