The case of Aiwa Co. Ltd v Aiwa Corporation is a useful reminder to brand owners, particularly those who are looking to revive a brand, of what amounts to “genuine use” of a registered trade mark. The case particularly considers whether the sale of second-hand goods by third parties in the UK can constitute genuine use of a UK registered trade mark.
A registered trade mark owner can rely on its registered trade marks to stop third parties from registering the same or similar marks, but only if the mark has been put to genuine use in the UK. In many cases, the third party will retaliate by challenging the validity of the trade mark (on the basis the mark has not been put to genuine use). If the challenge is successful, the Courts may order the trade mark to be revoked. This amounts to a ‘use it or lose it’ policy, which can cause difficulties for many brand owners.
Ensuring a trade mark is put to genuine use is therefore important to ensure it offers the protection required by brand owners.
Aiwa was once a well-known brand of audio products and was bought by Sony in 2003. However, the brand continued to be unsuccessful, and since 2008 the mark has only been used in relation to spare parts and second-hand sales. In July 2017, Aiwa Corporation (“Corporation”) filed an application to register its own Aiwa mark in the UK. In the meantime, Aiwa Co Ltd (“Limited”) was set up in 2017 to re-establish the brand and it acquired the Aiwa trade mark portfolio from Sony. Armed with this portfolio, Limited opposed Corporation’s application based on its registered Aiwa marks. Corporation then commenced revocation proceedings at the UK Trade Mark Registry based on the non-use of Limited’s registered marks for a five year period (between 2012 and 2017).
The Registry hearing officer concluded that second-hand sales by third parties did not constitute genuine use of the Aiwa marks with the consent of the owner, and the other alleged uses (the after sales services of Sony, and Limited’s own activities) were not genuine uses of the Aiwa marks either. He therefore ordered the revocation of Limited’s marks and dismissed the opposition to Corporation’s trade mark application. Limited appealed this decision to the UK High Court (the “Court”), arguing there was consent to genuine use when looking at the facts and law properly.
The Court agreed the approach of the hearing officer was wrong; he should have considered the two elements to non-use (first, genuine use, and second, use by the proprietor or with his consent) separately.
Consent and second-hand sales
The case hinged on the second-hand sales of Aiwa-branded products by third parties. The issue was whether the proprietors had consented to the use of the Aiwa brand in the context of these second-hand sales by simply marketing the goods in the UK under the Aiwa brand (which would later be sold second-hand). The parties agreed there was no express consent, but Limited argued its consent to marketing products under the Aiwa brand in the UK should be taken as implied consent to the subsequent use of the brand in relation to second-hand sales of these goods by third parties. The Court disagreed. The judge held that when Sony marketed its goods under the Aiwa brand in the UK, it exhausted its rights, and this concept of exhaustion involved implied consent to onward sales in the UK. However, this implied consent to putting goods on the market did not amount to consent for the purposes of considering subsequent use within the UK.
Even though the judge’s finding on consent made the question of genuine use in relation to the second-hand sales irrelevant, he did helpfully go on to consider it. He emphasised it was not possible to come to a general conclusion as to whether all second-hand sales of branded goods amount to genuine use of a mark for the purposes of revocation or opposition proceedings; “each case will depend on its own facts (though many sets of facts will be similar, and it seems to me to be likely that the facts of the present case will be typical of most others).” He therefore confined his findings to this particular case, “while acknowledging that they may have parallel applications in other situations”.
After outlining the eight principles for genuine use (established in Arnold J’s judgment in The London Taxi Corporation), the judge focused on the two most significant principles in this case: (i) whether there is real commercial exploitation of the mark on the market for the relevant goods or services (i.e. use which created or preserves an outlet for the goods or services that bear the mark); and (ii) was the use of the mark deemed to be justified in the economic sector concerned for the purpose of creating or preserving market share for the relevant goods or services.
The judge stated that, while the appearance of the Aiwa marks on second-hand goods was capable of distinguishing goods originating from Sony from other goods, this was not enough (as this would mean virtually any second-hand sale, without more, is a genuine use of the mark). Further, the Court found the evidence of second-hand sales was “rather thin” and centred on advertisements for second-hand sales in 2018 (which it agreed could be used to infer some level of sales in the previous five year period). Therefore the Court was unable to find that the level and nature of activity generated in relation to second-hand sales was capable of maintaining a market share for goods bearing the mark, or was such that it preserves an outlet for the goods or services that bear the mark. Nor did the Court consider the after sales activities of Sony (which the judge described as “the most basic…service”), and Limited’s own activities (which the judge described as “no more than exploring options and not preparations for re-launch”), amounted to genuine use within the relevant five year period.
This case does not exclude the possibility of second-hand sales constituting genuine use. However, the Court’s decision is a warning to brand owners looking to relaunch or revive a brand that relying on second-hand sales as the main evidence of genuine use may be risky. In this case, the “rather thin” evidence of second -hand sales, and the lack of involvement of the proprietors in these sales, meant the Court could not find genuine use of the Aiwa marks. Brand owners looking to rely on second-hand sales to show genuine use should ensure they think carefully about their involvement in, and the evidence of, such sales within the UK in the relevant period.