What an awful racket… Acoustic product trade mark case provides opportunity for brands being piggy-backed to drive search traffic

An interesting recent decision by the Intellectual Property Enterprise Court (IPEC) on an unusual set of facts may provide an opportunity for brand owners to prevent unauthorised third parties from piggy-backing off a trade mark to drive traffic to their competing sites or product offerings. Uniquely, this has been found in circumstances which do not amount to traditional “bait and switch” or passing off and where consumers are not confused about the origin of the goods.

Background
Pliteq is a Canadian company that designs, manufactures and sells a range of acoustic damping and sound control products for buildings. These include clips and brackets under its “GENIECLIP” mark and rubber mat products with different acoustic characteristics under its “GENIEMAT” mark. The defendant, iKoustic, acted as a distributor and reseller for Pliteq from 2012 until 2018.

However, trouble began to brew in April 2018 when iKoustic began selling its own alternative products to the GENIEMAT and GENIECLIP, and adopted the names MuteMat and MuteClip for its competing products, having already sold a number of different acoustic products under the MuteMat name for some years.

In February 2019, Pliteq terminated iKoustic’s authorisation to sell the GENIEMAT and GENIECLIP. However, iKoustic continued to sell both of these products as well as its own competing brands for some time, until late 2019.

Pliteq alleged that iKoustic had used the GENIECLIP and GENIEMAT marks in various ways on pages on its website and also in keyword/sponsored adverts on Google, in order to attract customers who were then diverted to iKoustic’s own products. The use of Pliteq’s marks was alleged to be a cover for sales of iKoustic’s competing goods and therefore an infringement of Pliteq’s trade mark rights on passing off and/or bait and switch grounds.

Court’s decision
IPEC observed that when customers contacted iKoustic to purchase Pliteq products, iKoustic made it clear it had ceased to be a reseller and/or offered them its products as an alternative. Additionally, barring one exception, the evidence suggested that iKoustic’s use of the GENIECLIP and GENIEMAT marks related only to the GENIECLIP and GENIEMAT products it had stocked.

The Court therefore rejected the passing off claim, finding that there was no confusion as to origin of the iKoustic goods because there was no evidence of consumers being misled about the brand being sold (i.e. no misrepresentation of iKoustic’s goods being sold as Pliteq’s goods). The Court also rejected the traditional “bait and switch” claim made by Pliteq, as iKoustic was not promising to sell Pliteq’s products only then to make a last-minute switch to its own products when sending orders to consumers.

However, the Court found there was still a “bait and switch” infringement in relation to one aspect of iKoustic’s use of the claimant’s marks. On one of its webpages, iKoustic used the GENIECLIP mark to announce that Pliteq’s product was out of stock, which the court concluded was partly designed to drive customers to look at iKoustic’s alternative MuteClip product.

The Court determined that this form of “bait and switch” tactic used by iKoustic could have interfered with the investment function of the GENIECLIP mark. Specifically, iKoustic’s use of the GENIECLIP mark in relation to the promotion of its own goods was determined to substantially interfere with Pliteq’s use of the mark and the latter’s ability to preserve a reputation attracting consumers and retaining their loyalty. It was also found to damage the origin function of the marks by encouraging purchasers to use them to identify competing products and by genericising them.

Further, the Court concluded this did not objectively amount to use in relation to which the claimant’s rights were exhausted, since the defendant was not using the mark to recommercialise the claimant’s goods. It was therefore determined that there was an infringement of the mark.

Implications for brand owners
The decision by the IPEC presents an additional potential tool for brand owners to enforce their distribution terms against unauthorised or infringing resellers. The enforcement of selective distribution systems in particular is increasingly converging with IP enforcement principles.

Our team at K&L Gates recently obtained an EU-wide injunction in the Court of the Hague against an unauthorised reseller of a client’s products, relying on intellectual property law principles.

This decision by the IPEC will be an additional welcome one for brands. This is particularly the case today since we are seeing unauthorised resellers increasingly using brands’ marks as search engine keywords or for sponsored adverts on Google to drive traffic to their websites, or on their sites themselves, in order to create false consumer ‘trust’ in their sites and to promote competing goods (often accompanied by a statement that the branded good is out of stock).

This decision also highlights the need for brand owners to consider the options presented by sponsored links so that customer traffic is being driven to actual products of the brand rather than to counterfeit or competing products.

If you are interested in understanding how you can enforce your marks or product distribution using a combination of intellectual property and competition law principles, please do get in touch.

By Niall Lavery, Gabriela Da Costa and Simon Casinader

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