Contending with a curve ball

8th Nov 2021

Steven Jennings suggests considering a caveat.

[2021] EWCA Civ 1207, Liverpool Gin Distillery Ltd & Others v Sazerac Brands, LLC & Others, 
Court of Appeal, 5th August 2021.

This is an appeal (with Lord Justice Arnold giving the judgment on behalf of the Court of Appeal) from a decision handed down on 10th September 2020, in which it was held that the marks AMERICAN EAGLE (the Sign) and EAGLE RARE (the Trade Marks) were similar on the basis of a likelihood of indirect confusion

Here, the Appellants sought to overturn the finding of indirect confusion on appeal but failed.

The decision has a number of potential implications for those involved in searching for, filing and prosecuting trade marks because of what it tells us about how to assess indirect confusion as a likely risk factor when conducting an availability search or filing an opposition. 

Initial case

Eagle Rare and American Eagle packaging

The initial case had established that the relevant consumer would be the ordinary bourbon consumer and that (at paragraph 47) “there is a greater than usual degree of brand loyalty within the bourbon market and so, on average, the consumer has a somewhat higher degree of attentiveness than a consumer of certain other spirits”.

Bear in mind also that the expert witnesses helped to establish that annual sales of bourbon in the UK amounted to 16.8 million bottles.

It might therefore come as a surprise that a market share (at its most generous) of 0.1% of the total bourbon market or 1.1% of the premium market met the test in paragraph 34, that “it suffices that a significant part of the public concerned has knowledge”.

Further, the Claimants’ expert provided examples of brands that a consumer could find confusingly similar but which have different owners and coexist on the US Register; for example, Heaven Hill and Heaven’s Door.

As an expert, he must be aware these all coexist in use, even if he did not know that the USPTO maintains prior rights as an absolute bar to registration, so that if the marks really were confusingly similar, one would not expect such coexistence. 

The appeal

The Court referred to the Appointed Person (AP) decision in LA Sugar Ltd v Back Beat Inc. In that case, the owner of 26 RED SUGAR had opposed the Applicant for the device mark LA SUGAR. He outlined three scenarios in which indirect confusion could occur:

  •  Where the common element is so strikingly distinctive (either inherently or through use) that the average consumer would assume that only the brand owner would use it in a trade mark.
  • Where the later mark simply adds a non-distinctive element to the earlier mark, of the kind that one would expect to find in a sub-brand or brand extension (terms such as “lite”, “express”, “worldwide”, “mini”, etc.).
  •  Where the earlier mark comprises a number of elements, and a change of one element appears entirely logical and consistent with a brand extension (FAT FACE to BRAT FACE, for example).

The Court then gave a further example of indirect confusion that leads consumers to believe that it is a co-branded product, referring to Cheeky Italian Ltd v Sutaria, which determined that “a finding of a likelihood of indirect confusion is not a consolation prize for those who fail to establish a likelihood of direct confusion” and that “if there is no likelihood of direct confusion, ‘one needs a reasonably special set of circumstances for a finding of a likelihood of indirect confusion’.”

The Court reprised the judge’s findings that there was some visual and aural similarity between the Sign and Trade Marks, bearing in mind evidence that the Trade Marks were occasionally abbreviated to EAGLE (although given their minimal sales, this must have been negligible), which led to his conclusion that there was “a significant degree of similarity, but not overwhelming similarity” between the Sign and the Trade Marks.

Key factors? 

In paragraph 24 of the Appeal, the judge found that, given the inherently distinctive character of the Trade Marks – in that no other bourbon whiskey in the UK had a name that included the word “eagle” – the average consumer that saw or heard the Sign would be likely to call the Trade Marks to mind.

He went on to say that there would be “a natural association in the mind of the consumer between a new brand using the word ‘eagle’ and Eagle Rare, given the coincidence of the product and the name, even if the average consumer would not instinctively consider them to be one and the same product”.

What’s more, he added: “In particular, once American Eagle 4 Year Old is established and becomes more widely known than Eagle Rare, having been positioned by the Defendants to compete with Jack Daniels and the like in the mass market, it will be natural for a consumer to assume that Eagle Rare is a special version of American Eagle.”

The role of possible brand extensions appears to have played a factor in the judge’s mind, even though the Appellants claimed that the Respondents, in their 20-year history, appear to have only produced the Eagle Rare 10 Year and Eagle Rare 17 Year, which come in the same traditional shape of bottle and with an additional label of authenticity.

Prior conduct

Finally, two instances of the prior conduct of the owner of the Appellants’ business, Mr Hainsworth, may have had some effect on the original judge, although this was not discussed in the Court of Appeal.

The first involves an application to register VERA LYNN for spirits without permission, which was refused by the UK IPO.

The second was that he could not deny knowledge of the Claimants given that he had a substantial minority shareholding in West Cork Distillers, with whom the Claimants had reached a settlement that “Skibbereen Eagle” would only be used in relation to Irish whiskey.

Just as practitioners were beginning to get comfortable with the concept of unfair advantage, this appears to throw a curve ball, indicating that potential assessments of similarity in prior rights searches may have become unfeasible.

However, I do not believe that this case shows a general trend, but rather “a reasonably special set of circumstances”.

Practitioners may want to consider adding a caveat to their search reports, noting that if the client has had any significant prior contact with any of the parties included in the search report, then this should be advised to them in case it affects the likelihood of the proposed use being deemed an infringement.  

Key points

  • A special set of circumstances is needed for indirect confusion
  • Clients’ prior conduct may affect the outcome of a case
  • Ask whether your clients have had dealings with any parties revealed in a search report, as this may lead to you revising your assessment
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