Intel on Dilution: More Questions Than Answers

Can a brand become so famous that no one else can use it in any sphere? This question was at the heart of the dispute recently in Intel Corporation Inc. v CPM United Kingdom Ltd. (C-252/07). In its long-awaited decision, however, the ECJ raised more questions than answers, leaving famous mark owners unsure of the extent of their rights and how to prove relevant damage. Nonetheless, careful reading of the judgment can pay dividends for brand owners considering action based on dilution.

Intel Inside the Courts

The dispute erupted in 2003, when Intel applied to invalidate CPM’s UK registered trade mark for INTELMARK for marketing services in Class 35.

Intel contended that INTELMARK was similar to its own INTEL trade mark for microprocessor products and related goods and services in Classes 9, 16, 38 and 42, in which it enjoyed a substantial reputation. Intel argued that the use of INTELMARK would be detrimental to the distinctive character of its mark under S. 5 (3) TMA 1994.

Intel lost before the UK-IPO and on appeal before the High Court. At both instances it failed to adduce any evidence of damage and relied instead on a bald assertion that the INTEL mark was unique and strongly distinctive. Intel argued that this was enough to allow a court to conclude that any use of the INTEL mark for any goods or services would bring INTEL to mind and undermine its distinctiveness. In the absence of evidence, though, neither the IPO nor the Court was persuaded.

Faced with the same issue, the Court of Appeal decided to refer to the ECJ the question of whether, where an earlier unique mark with a huge reputation would be brought to mind by a later mark for dissimilar goods or services, the famous mark owner could rely on those facts alone to prove the required link in the public mind and detriment to distinctive character.

Whose Opinion Counts?

The ECJ at the outset put paid to Intel’s hopes, holding that the mere existence of a link in the public mind was not enough.

The Court held, first, that whether use of a later mark was detrimental to the distinctive character of an earlier registered mark with a reputation had to be considered from the point of view of the average consumer of the earlier mark’s goods and services.

If a famous brand’s clientele was specialist, it was entirely possible that its reputation might not spill over into a different sphere occupied by the later mark, depending how similar or dissimilar the goods or services were. In that case, it was less likely that the famous mark’s clientele would think of the famous mark when coming into contact with the later mark, or that they would even come into contact with the later mark at all. The burden of proving a link would be harder.

How to Establish a Link

However, the Court recognised that a mark could be so famous that its reputation spilled over into all spheres. Even in such a case, however, it was necessary to prove that the later mark brought the earlier mark to mind, and the Court identified a number of factors relevant to this process.

In particular, the Court referred to the degree of similarity between the marks; the degree of closeness or dissimilarity between the parties’ goods and services; the strength of the earlier mark’s reputation and how far it extended beyond its own field; how distinctive it was or had become through use; and whether the later use was likely to give rise to confusion.

Where a claimant can prove a likelihood of confusion, the Court held that the required link would be established.

In all other cases, however, it would be for the national court or IPO to weigh up the various factors to assess how the average consumer of the earlier mark would react to encountering the later mark.

Is Uniqueness Enough?

The Court affirmed that strongly distinctive marks are more likely to be brought to mind by identical or similar later marks in other spheres. While there was no requirement that a mark be unique to enjoy extended protection, nonetheless uniqueness was a relevant factor to consider, since such marks were inherently strongly distinctive.
Uniqueness on its own, however, did not create a presumption of a link in the public mind. A claimant still needed to prove the required link by reference to the factors identified by the Court.

What is Dilution?

Once a link is proved, however, a claimant is not necessarily home and dry. Contrary to Intel’s arguments, the Court held that a claimant still needed to show that the link would result in one of the types of injury envisaged under the provision, or a serious likelihood of it.

In this case, the Court considered only detriment to distinctive character, which it defined as “dilution,” or the whittling away of a mark’s distinctiveness such that “the earlier mark, which used to arouse immediate association with the goods and services for which it is registered, is no longer capable of doing so.”

The Court recognised that in the case of a unique mark with a huge reputation, it was more likely that use of a later identical or similar mark would call the earlier mark to mind and undermine its distinctiveness. However, there could be no presumption of such damage, and the claimant would need to prove that the use of the later mark had led to, or was likely to lead to, a change in the economic behaviour of the average consumer of its own goods or services.

Notably, the Court regarded it as irrelevant whether or not the later mark owner drew any commercial benefit from the distinctiveness of the earlier mark (para. 78). Only a change in the economic behaviour of the famous brand owner’s goods or services mattered.

The Court did not expound on the meaning of a “change in economic behaviour,” although it did note that such a change could be possible even after the first use of a later conflicting mark, thus ensuring that brand owners do not have to await a string of potentially damaging acts before trying to convince a court that damage has occurred or is seriously likely.

Comment

Intel has aroused a storm in the British legal press, but commentators seem divided as to its real importance.

Some see the Court’s ruling as hobbling superbrand owners in their efforts to defend against encroachment. There is some truth to this, no doubt, since it is now clear that superbrand owners are subject to the same requirements of evidence as everyone else.

Nonetheless, it is hard to see how this outcome can be surprising, since it is clear from the wording of the provision that relief will only be granted where there is a registered mark with a reputation, and the use of the later mark takes unfair advantage of, or is detrimental to, the distinctive character or repute of the earlier mark. There is no suggestion that a presumption should exist for any type of mark, and it is no shock, therefore, to learn that there is none.

The real importance of Intel is not so much in the predictable answer it gave to the question, but rather in the further questions the Court’s reasoning raises. For example, it is peculiar that the Court should accord any significance to whether or not use of the later mark is likely to give rise to confusion, since confusion is clearly not required under S. 5 (3) TMA or its European equivalent.

Holding that the existence of a likelihood of confusion will prima facie prove the required link in the public mind does not, of course, mean that without such confusion, there can be no link. Nonetheless, it is strange that the Court introduced the concept of confusion into a provision that does not refer to it, and which was widely believed to be intended to provide a remedy in cases where there was no confusion. Indeed, in cases where there is a likelihood of confusion, claimants are likely to bring an action under the more straightforward S. 5 (2), rather than S. 5 (3).

Moreover, the concept of change in economic behaviour is a curious one. Erosion or whittling away of distinctiveness is inherently a gradual process, and one which is difficult to show until it has become almost irreversible. It may take years for the economic behaviour of a famous brand owner’s customers to change after identical or similar marks enter the marketplace in different spheres. Indeed, economic behaviour might not change at all, even though the damage Intel feared, namely that its mark might no longer automatically bring only its goods and services to mind, had taken place.

Experienced forensic accountants may be able to track and project likely changes in economic behaviour, but in order to put them on the case one needs to know exactly what the term means. One might have expected it to possibly mean the attraction of new customers to the later mark as a result of the reputation of the earlier mark, but the Court clearly indicated that such a benefit for the later market entrant is irrelevant, and in any event a famous brand owner might be able to challenge such use on the basis that there is unfair advantage, thus side-stepping the need to prove dilution at all. The Court gave no guidance on the meaning of economic behaviour at all and it is likely to be only a matter of time before the question of its interpretation is back before the Court.

The position for now is that the ECJ has embraced the concept of dilution, but has set a test for proving it that is nearly impossible to pass. Until it examines the issue anew, famous brand owners are more likely to find consolation in the arms of an unfair advantage claim, than in the real source of their chagrin, dilution.