- Mr Javid Alavi is a trader. He owns a shop in the Carnaby Street area of the West End of London where he sells clothing and shoes. He also conducts an export trade. The shop is called MERC, and some of the clothing and shoes which he sells are also marked MERC. DaimlerChrysler AG, who are the owners of the very well-known Mercedes-Benz business consider that Mr Alavi infringes certain United Kingdom Registered Trade Marks and Community Trade Marks, and is passing off himself, his business and his clothes and shoes as and for the claimant 'and/or as authorised by and/or connected with' the claimant.
- It is convenient to set out the relevant details of the marks in suit here:
Mr Alavi has two pending Community Trade Mark applications. One of them (457622) is for the word mark MERC in class 25 in respect of clothing, footwear, headgear (sic). This mark has been opposed by DaimlerChrysler at OHIM (the Office for the Harmonisation of the Internal Market, the Community Trade Mark Office). The Opposition Division rejected the opposition on 14 December 2000, but the decision is to be appealed. The effect of the appeal is to suspend registration, with the result that his successful application to register does not afford Mr Alavi any defence to the present proceedings. He also has a pending application in the United Kingdom Trade Mark Registry for a mark consisting of the word 'merc' with a device to which I can refer as the swirl device. This mark is sought to be registered in class 25 in respect of clothing, footwear, headgear, but also in classes 3, 9, 14, 16, 18, 19, 28 and 42 in respect of all the goods and services comprised in those classes. Mr Alavi's other Community Trade Mark application is for the swirl device alone.
- The outline of the case is as follows. There are two UK marks whose specification of goods covers clothing: UK 280568 MERCEDES and UK 1242824 MERCEDES-BENZ. Mr Alavi is alleged to infringe these marks ('the UK Clothing Marks') by virtue of section 10(2)(b) of the Trade Marks Act 1994 ('the 1994 Act'). This is an 'identical goods, similar marks' case. The remaining UK marks ('the UK Vehicle Marks') are all broadly in relation to machinery including motor cars and are said to be infringed by virtue only by virtue of section 10(3) of the 1994 Act. I shall not bother to consider the MERCEDES BENZ + device mark separately since the case on it cannot be stronger than it is on the other UK Vehicle Marks.
- The law relating to the Community trade marks ('CTM's) is found in Council Regulation (EC) NO 40/94 of 20 December 1993 on the Community trade mark ('the Regulation'). This is not a domestic instrument, and the High Court and the Court of Appeal are designated 'Community trade mark courts' of first and second instance under Article 91 of the Regulation. The MERCEDES-BENZ CTM and the MERC CTM are alleged to be infringed by virtue of Art 9(1)(b) of the Regulation (identical goods, similar marks) and by virtue of Art 9(1)(c), which corresponds to section 10(3).
- Finally, DaimlerChrysler complains of passing-off on orthodox principles. It is said that it possesses a goodwill and reputation which is associated with the word MERC, which is a well-known and frequently used abbreviation for MERCEDES or MERCEDES-BENZ; that the goodwill and reputation extends to clothing, so that the relevant members of the public (those aware of the word MERC in its application to the products of DaimlerChrysler) would associate any clothing bearing the word as being associated with, or the product of, or approved by, DaimlerChrysler, so that its use makes a material misrepresentation at the point of sale and thereafter. Thus it is said that Mr Alavi, in marking his clothing MERC passes it off as something it is not: and so too passes off his MERC business as associated with DaimlerChrysler.
- The defence starts from the factual proposition that Mr Alavi has been trading for over thirty years under or by reference to the name MERC without a single instance of confusion. This fact is relied on generally to throw light upon the similarity of the word MERC when used on clothing to the word MERCEDES or MERCEDES-BENZ.
- Second, it is said that the UK Clothing Marks and the UK Vehicle Marks have not been used across the full width of the specification of goods and are vulnerable to an allegation of non-use.
- Third, it is said that the requirements of section 10(2)(b) of the 1994 Act and Art 9(1)(b) of the Regulation are not satisfied in respect either of the UK Clothing Marks (marks not sufficiently similar) or the MERCEDES-BENZ CTM (same reason). The correct analysis, it is suggested, is that the enquiry under section 10(2)(b) / Art 9(1)(b) is close to determining whether or not there is passing off: and it is said that there is no passing-off here. This submission requires an analysis of the decisions of the Court of Justice culminating in Case C-342/97 Lloyd Schuhfabrik Meyer GmbH v Klijsen Handel BV  ECR I-3819,  ETMR 690.
- Fourth, it is said that in relation to the UK Vehicle Marks and the MERC CTM the requirements of section 10(3)/ Art 9(1)(c) are not satisfied. This involves a consideration of the various authorities on section 10(3) and the decision of the Court of Justice in Case C-375/97 General Motors v Yplon SA  ECR I-5421,  IP&T 207 and Case C-251/95 SABEL BV v Puma AG  ECR I-6191.
- Fifth, so far as the UK Vehicle Marks are concerned, it is said that Mr Alavi is entitled to the protection of the transitional provisions of the 1994 Act. Broadly speaking, it is submitted that paragraph 4(2)(a) of the Third Schedule to the 1994 Act protects any use which 'did not amount to infringement of the existing registered mark under the old law'. Since the UK Vehicle Marks are, it is said, unarguably not infringed under the pre-existing law (section 4 of the Trade Marks Act 1938), then Mr Alavi's use, which began on clothing and on the shop before the coming into effect of the 1994 Act, is protected. Similarly, it is said that under the 1938 Act the UK Clothing Marks were not infringed: and therefore there is a complete defence to all allegations of infringement.
- There are no transitional provisions in the Regulation. The Sixth general defence is that nonetheless the registration of the CTM's should not affect an existing trade. This involves the question whether, from the point of view of the Regulation, this is a transitional problem at all, or whether it is just a question of prior vested right to which Article 107 of the Regulation relates.
- Seventh, it is said that there is an 'own name' defence both under the 1994 Act and the Regulation.
- Eighth, it is said that this is a case of acquiescence which ought to bar relief.
- Ninth, and finally, it is said that the effect of the grant of the CTM (and the effect of the 1994 Act if the transitional provisions are not available) is to deprive the defendant of his trading goodwill and thus his property, contrary to Article 1 of the First Protocol to the European Convention on Human Rights, in a case where there is no objective justification for so doing.
- This brief introduction to the issues in the case is sufficient to show that a number of difficult points under the 1994 Act and the Regulation arise. The 1994 Act, of course, was passed in consequence of the United Kingdom's obligation to transpose the provisions of the First Council Directive of 21 December 1988 to approximate the laws of the Member States relating to trade marks (89/104/EEC) ('the Directive') and the result is that any question of construction of the non-'home-grown' provisions of the 1994 Act (to use Jacob J's phrase) or of the Regulation is in principle capable of forming the subject matter of a reference to the Court of Justice under Art 234 (ex Art 177) of the EC Treaty.
- There was no dispute as to the correct principles to be applied to the allegation of passing-off. The speech of Lord Diplock in the Advocaat case (Erven Warnink BV v J Townend & Sons (Hull) Ltd  RPC 31) identifies the five elements without which a passing-off action cannot be maintained, viz., (1) a misrepresentation (2) made by a trader in the course of trade, (3) to prospective customers of his or ultimate consumers of goods or services supplied by him, (4) which is calculated to injure the business or goodwill of another trader (in the sense that this is a reasonably foreseeable consequence) and (5) which causes actual damage to a business or goodwill of the trader by whom the action is brought or (in a quia timet action) will probably do so. In this case, the misrepresentation pleaded is a misrepresentation as to trade origin of the goods in question with the claimant, or a misrepresentation as to the authorisation of, or connection with, the goods in question with the claimant, and the manner in which the misrepresentation is made is by use of a mark (MERC) which when used upon clothing is considered in the minds of the public to be the claimant's mark. This is not a quia timet action. Thus, this is a conventional passing off action, and the issues can be identified as reputation and goodwill, confusion and actual damage caused by the confusion (see County Sound v Ocean Sound  FSR 367 at 372 by Nourse LJ).
- The case on reputation is put in this way.
(1) There is no doubt that DaimlerChrysler owns a substantial and valuable goodwill and reputation associated with the words MERCEDES and MERCEDES-BENZ in relation to motor vehicles. For brevity, I shall call the people with whom DaimlerChrysler enjoy a goodwill and reputation associated with the words MERCEDES and MERCEDES-BENZ the 'relevant public'. The relevant public is very large, since these are very well known marks, and the reputation is a strong one. The foundation of this reputation is the high quality of DaimlerChrysler's products, which is generally acknowledged.
(2) There have been appreciable sales of clothing to a limited section of the relevant public under the mark MERCEDES or MERCEDES-BENZ, and the trading goodwill associated with these marks extends to clothing, but would do so anyway, regardless of actual trade in clothing, because of the overpoweringly strong reputation which attaches to the marks with the relevant public. Essentially, anything marked MERCEDES or MERCEDES-BENZ would be associated with DaimlerChrysler in the minds of the relevant public.
(3) There is another more limited class comprising persons who are aware of the use of the word MERC as a way of referring either to Mercedes-Benz motor vehicles or their manufacturer. This class of persons would recognise the word MERC used in respect of motor vehicles or of clothing as denoting that the vehicle or clothing was associated with DaimlerChrysler.
(4) So far as all the relevant public are concerned, whether or not they know of the use of the word MERC, the word MERC when used on clothing is confusingly similar to MERCEDES or MERCEDES-BENZ and if they saw it on clothing they would think that the clothing was associated with DaimlerChrysler.
Use of the DaimlerChrysler trade marks in the United Kingdom.
- The first Mercedes motor vehicles were imported into the United Kingdom before the First World War. The first of the marks in suit, 254251 would no doubt have been applied for under the provisions of the 1883 Act, and the second, 280568 under the provisions of the 1905 Act. There is, I think, no doubt that the marks MERCEDES and MERCEDES-BENZ are extremely well known as marks for motor vehicles and have been for many years, certainly since the 1930's. It may be (I do not know) that MERCEDES is now regarded as an abbreviated form of MERCEDES-BENZ but that the marks are well known there is no doubt. For a long time (I do not know when the use began) the marks were commonly associated with the three-pointed star mark, which appears on the evidence to be entirely distinctive.
- I find that the claimants have a strong goodwill associated with the marks MERCEDES and MERCEDES-BENZ used in respect of vehicles. I consider that the contention which I have labelled (1) in paragraph 17 to be justified.
- The evidence of sales of clothing under the MERCEDES-BENZ mark suggests that the sales are small. Most of the use of the mark which these sales represent is what can be called 'T-shirt use' that is, use of the logo or mark as decorative embellishment of the clothing, or use of the clothing as a bill-board to advertise the mark. An early example is an advertisement placed in the magazine called 'Motor Sport' in 1964 by Mercedes-Benz (GB) Limited (which is indistinguishable from DaimlerChrysler for this purpose) for
'A bottle stopper, a key ring an ashtray, a cigarette lighter, a scarf, a powder compact and many many more exciting gifts, in a price range that starts at 6d. and goes up to £5-and all with the world-famous Mercedes-Benz emblem. Wonderful presents for Mercedes owners and for all motorists.'
This copy is placed beneath a heading 'Mercedes Gifts for motoring enthusiasts'. There are pictures of some of the gifts. They do indeed prominently bear the three- pointed star. This advertisement ran for some time. Mr Johnson, who devised it, gave evidence. He exhibits a statutory declaration in trade mark proceedings he was involved in in 1977, in which he emphasises that since he joined the company in 1962 he had constantly endeavoured to create the situation in which the Daimler-Benz Three-Pointed Star Trade Marks and the words 'Three-pointed Star' by themselves symbolise Daimler-Benz products. His statutory declaration emphasises the significance of the three-pointed star. He describes what I call 'T-shirt use' very well:
'Both my company and Daimler-Benz [AG], in common with most large companies continually seek new ways of promoting the products of Daimler-Benz. One form of advertising which has become very popular in the last few years is in use of T-shirts to publicise (usually) well known names. T-shirts have been astonishingly successful as an article of wear by both sexes and this phenomena apparently originated in the United States of America where students are prone to display the name of their College or University on their T-shirts. The advertising industry seized on this as an ideal vehicle for publicising this or that product or service. Daimler-Benz [AG] themselves market a range of T-shirts…. It can be seen that both of these bear the Three-Pointed Star in a ring. These are not sold by my company but directly by Daimler-Benz [AG] and I have been informed that some 22000 of these T-shirts have been sold.
Of course, the goodwill accruing in respect of T-shirt use is always a matter of fact. There is no rule that T-shirt use of a mark primarily used in relation to some other kind of goods altogether, say computers, does not confer on the user a goodwill in relation to T-shirts. It is a question of fact in every case, but one should not blindly accept that this kind of advertising use necessarily gives rise to a protectable goodwill in respect of the substrate which carries the advertisement.
- In relation to clothing, there is one principal distinction which can normally be drawn. Much clothing carries a clear indication of its trade origin in internal labels commonly on the neck-band or inside the breast and on swing tickets which hang from the sleeve or hem. With trousers and skirts the label is commonly on the waistband and/or the hip pockets. Such MERCEDES or MERCEDES-BENZ clothing as I have been shown can be described as follows. There are two blue anoraks which, apart from the three-pointed star device on the breast and the words MERCEDES-BENZ on the upper arm, contain no other labels. There is a grey anorak which contains a neck label 'Designed exclusively for Mercedes Benz' and some T-shirts. The neck labels of the latter either carry the words 'Sportswear designed by IS' and below that a picture of a motor car and the word 'Mercedes' or, in one white T-shirt, the words 'the Mercedes-Benz collection'(with a three-pointed star over the breast). All these articles were sold in Mercedes car showrooms and were ordered through the Mercedes-Benz accessories list. The association of the goods with car showrooms tends, in my judgment, to reinforce the suggestion that what I have called T-shirt use is in this case use which indicates trade origin, at least when the sale is in what can be called a Mercedes-Benz context.
- An interesting example of a use which cannot found a reputation in respect of clothing is given by Mr Cartmell in his evidence. He is the Warranty Technical Manager at DaimlerChrysler UK Limited. When he joined the company
'In order to carry out my duties in this department it was necessary to wear overalls and, upon joining the company, I recall that I was given 2 packets of blue and white cloth badges to be sewn onto my overalls. These badges were embroidered with the distinctive Mercedes-Benz three-pointed star encircled by the words "Mercedes Benz".'
- The various gift items, like the clothing, were and are sold only in Mercedes-Benz showrooms. They were all associated with the three-pointed star. I have been shown no example of any garment in which use was made of the words Mercedes or Mercedes-Benz without the three-pointed star. The advertisements in 'Motor Sport' apart, the earliest examples of any use on clothing which I have been shown date from 1978. I am not satisfied that there was any use sufficient of its own to found a reputation in the words MERCEDES or MERCEDES-BENZ in respect of clothing by 1967, or by the early 1970's. By 1980, there was some relevant use on clothing and probably other gifts, but the extent to which these products were before the public as whole is uncertain. By the early 1990's it is quite plain that use on clothing was on the increase, and by 1997, annual turnover in respect of all gift-type accessories, including clothing, was £1.2m. Unfortunately, I am not told how much of this was represented by clothing. However, I was shown material which suggests that refinements in marketing techniques had led to some of the products at least being deliberately associated with particular cars in the range: thus there is an S-Class clothing and gift collection and a C-class clothing and gift collection. The close association which now seems to exist between the clothing and the cars, taken with the sales from Mercedes showrooms points to the conclusion that what is really to be considered here is not any goodwill generated in respect of clothing distinct from vehicles, which I do not regard as substantial on its own, but the very strong reputation attached to the marks generally.
- I turn to the use of the word MERC. I have no doubt that the word MERC has long been used, particularly by owners of Mercedes-Benz cars, to refer to the claimant's cars (or the cars of its various predecessors in title to the business). I have myself heard it many times, used both in respect of the speaker's own car and in respect of cars belonging to others. I am satisfied that this usage is long-standing. It is not a normal trade usage, but I have no doubt that it is a common casual usage, both among the interested public and Mercedes-Benz dealers, and second-hand dealers also. It is also used by motoring journalists to refer to Mercedes Benz cars. This usage is in the course of evolution. The word is now being used much more prominently than in the past in car and lorry magazines to refer to DaimlerChrysler's products. It is not used by DaimlerChrysler, and there was evidence from Mr Johnson that DaimlerChrysler discouraged this usage in the past. There is a brand manual for DaimlerChrysler, which I was not in the end shown, but it is clear that recently, (1997 or 1998) the attitude has changed and DaimlerChrysler wish to use the mark (as their trade mark registration testifies).
- During the course of the proceedings, a survey was conducted on behalf of DaimlerChrysler. The results of this survey were not relied on to show confusion and deception in the minds of the public caused by Mr Alavi's use of MERC, but to identify particular members of the public whose evidence would in the claimant's view be of assistance in deciding the action. This employment of the survey results accords with what Jacob J thought was the right course in the Neutrogena/Neutralia case (Neutrogena Corp. v Golden Ltd.  RPC 473 at 485-6). It is of much more value to hear the evidence of the public than to see imperfect records of unsupervised interviews. In this case there was a preliminary survey by White & Case, DaimlerChrysler's solicitors, and then a more complete survey by NOP. The White & Case survey covered about 240 members of the public, who were shown three of the defendant's T-shirts. It should be remembered that the public were shown the T-shirts not in a commercial context but in the possession of an interviewer in the street. Such an approach will of course excite trains of thought or speculation, which is why such surveys are most use in identifying potential witnesses who are prepared to be crossexamined. In response to 'What are your first thoughts on this?' and 'anything else?' if an uninteresting answer was given, about twenty or so interviewees referred to the claimant, and one referred to the defendant.
- Seventy-eight members of the public were interviewed by NOP. Their answers are divided up by T-shirt shown (26 or so of each). There are about ten or twelve recorded responses, some of which are very tentative, that refer to cars or to Mercedes. In this survey, there is no reference to the defendant.
- Of the respondents to the surveys, Ms Adams, Mr Anderson, Mrs Beaumont, Mr Humphries, Mr Keeble and Ms Oakes gave witness statements. Ms Adams and Mr Keeble did not attend for cross-examination.
- Mr Anderson, a 17-year old student, associated the word MERC on the front of the Tshirt with the claimant. He thought everybody called the cars Mercs. He thought that the T-shirt was some sort of false advertising. He agreed that the advertisement for the defendant as it appears at bundle E p 90, plainly had nothing to do with the claimant. The same went for the interior and exterior of the shop, the plastic shopping bags and the bags in which the shirts were packed which show in the photographs. Mrs Beaumont's husband had a Mercedes-Benz car which he calls the Merc. Mrs Beaumont associated the name on the T-shirt she was shown with the car. She too did not think the shop shown in the photographs was associated with the claimant. There was some, but not much, suggestion that the absence of the three-pointed star made her more uncertain than she would otherwise have been. Mr Humphries did not think the T-shirt was associated with the claimant but was not sure. He also knew of the use of MERC as a 'well-known colloquial term for the Mercedes Benz car'. That was his only reason for supposing any link with the claimant. Ms Oakes assumed that a person wearing the T-shirt she was shown was 'someone connected with Mercedes-Benz'. She thought the T-shirt was promotional, and she agreed that the shop shown in the photograph she was shown could not be associated with the claimant.
- The evidence from members of the public failed to give any convincing evidence of confusion. The association between the claimant and the T-shirts they were shown was, in their view, essentially an advertising connection: the T-shirts were being used to advertise the claimant. Their answers in respect of the shop were clear: it did not have anything to do with the claimant. Taken with the low level of recognition from the survey, I think I am justified in saying that the claimant's trading goodwill does not extend to the use of the word MERC as a mark for clothing.
- I should just mention the evidence of Mr Burgess-Wise. He was a motoring journalist and an enthusiast. I did not regard him as representative of the general public, but he was extremely well-informed about cars. He accepted that the use of the word MERC received much greater exposure among the general public recently than previously. He was hard-pushed to see that the shop was associated with the claimant, although in the end he maintained it. While I accept that he truthfully expressed his own view, I do not regard it as sufficiently characteristic of that of the relevant public. There is nothing about the shop whatever to connect it with the claimant. Everything about the shop negates any slight pointer in the claimant's direction which the word Merc in isolation may provide.
- There is no convincing evidence of the word MERC possessing a reputation extending to clothing, or of any confusion, today, and the position must have been the same both when the 1994 Act came into force in 1980, in 1970 and in 1967.
Mr Alavi's course of trading
- There is little or no agreement between the parties as to the nature, scope and duration of Mr Alavi's use of the mark MERC. Mr Alavi's case is that he started trading as MERC in 1967. Then, as now, it is said that he traded in clothing in the Carnaby Street area. He says that his trading activities started in 1967. Certainly he was trading under the name MERC by 1978, since he produces a certificate under the Registration of Business Names Act 1916 recording a statement of change in registered particulars in respect of MERC. Most unfortunately, the details of business names registered under this act have now been destroyed or are no longer available. Mr Alavi himself lost the greater part of his business records in 1997 before the present proceedings started. But it seems clear that trading was being carried out under the name MERC by 1978. Mr Alavi says that he wanted a short catchy name which would be registrable as a business name, and MERC was made up of the initial names of four countries, Mexico, England, Russia and Canada supplied by members of his staff.
- Since 1967, Mr Alavi says that MERC have developed the MERC style of fitted, club, street and casual wear. By 1997, he says that the MERC range consisted of suits, jackets, trousers, skirts, harringtons (a type of jacket), james and donkey jackets, crombie overcoats, tipped and contrast polos, tank tops, rollnecks and button down shirts. There is no doubt (and this was confirmed by some of MERC's customers who gave evidence before me) the clothing was worn by professional musicians. At the same time, there was a substantial trade in non-MERC branded goods, in particular Fred Perry, Ben Sherman, Lonsdale and Farah Original clothing. By 1997, he says that there was a substantial export trade and a mail-order business.
- The present position is that Mr Alavi conducts his retail business from a shop at 17-21 Ganton Street W1. This shop has the name MERC prominently over the door.
- Mr Carr QC for DaimlerChrysler challenged the extent of the use of the word MERC as a mark. He suggested that the use before complaint was made (the letter before action was dated 22 September 1997) was not substantial, but that the letter before action stimulated Mr Alavi into a greatly increased use of the word, with a view to increasing his nuisance value to DaimlerChrysler. I therefore need to consider the evidence of pre-1997 use with some care. In doing this, I shall rely principally upon the documents, the inferences that I believe can be drawn from the documents, and upon certain of the witnesses. Mr Alavi was not reliable as a witness, and was too prone to make sweeping assertions which would not stand analysis. He was also combative. However, not all his evidence can be rejected out of hand. He gave quite specific evidence about the addresses of shops and other places from which he had traded, in the period from 1967, and these were not substantially challenged in cross-examination, and I accept them. In the end, Mr Carr QC submitted that there is no satisfactory evidence of use of MERC before 1980. This I reject, for reasons which I shall give below. In the account which follows, I do not distinguish between Mr Alavi and his companies. I shall deal with this issue separately.
- The shop. I have no doubt that trading started under the name MERC in or about 1967 in the Carnaby Street area. The first shop was in the nature of a stall, in Carnaby Market. In 1969, Mr Alavi says that Merc moved to 15 Carnaby Court, and occupied what was on the evidence open-fronted stall-like premises on the ground floor. Mr Paterson Riley, who had started trading in Carnaby Street in 1971 or 1972, said that Mr Alavi had always been known to him as MERC, although he accepted that a photograph of the front (or possibly part of the front) of the shop in Ganton Street appearing in a brochure JA19 did not have the word Merc on it, but merely two stylised M's. That it is the MERC shop is plain enough (a customer is carrying a plastic bag bearing the word in large letters and it also appears on a manuscript notice in the window by the customer's head) but it seems that it did not always appear on the fascia. It is submitted that Mr Riley was very vague and was not reliable as to dates. I do not think that is correct: he knew that Mr Alavi had been in Carnaby street for as long as he had.
- Mr Delroy Williams is the manager of the Jamaican musician Desmond Dekker. He related his first visit to Merc (which he emphasised has and had links with the reggae world) to the success of a song 'Israelites' in 1967. He is criticised as being uncertain as to date, but his evidence establishes a lengthy course of trading. In the mid-1980's he had purchased a rather dramatic lurex jacket which had a tailor's label bearing the word MERC with the device of a mounted horseman.
- A rather similar, violet, jacket was purchased by Mr Alavi's accountant, Mr Barlow, in the mid-1980's, apparently for a fancy dress party. Mr Barlow was a very satisfactory witness, and although I shall deal with his evidence in more detail when I consider the manner in which Mr Alavi traded, for present purposes it is only necessary to note that he says that the retail shop Merc was certainly a 'substantial and active business' when he encountered it. He says that it sold a range of goods including Fred Perry and Ben Sherman shirts, which were sold along with goods bearing the Merc mark.
- The unchallenged evidence of Mr Hellier (the editor of 'Darlings of Wapping Wharf Laundrette') who had been briefly a member of the band called the Small Faces in 1971 and 1972 was that he had first visited Merc in the early 1970's. The Small Faces were a Mod band, in the sense that it was a band admired by the section of street fashion who call themselves Mods.
- Mr Clarke (again unchallenged) says that the family knitwear company, Cugar Knitwear Limited started supplying MERC in Carnaby Street in the late 1970's, although he does not state how the knitwear was labelled. From 1994, his successor company, M. G. N. Knitwear Limited, has supplied knitwear to Mr Alavi with a MERC label inside the neck.
- Mr Gur gave evidence that he was a manufacturer of jackets who had received his first order from Mr Alavi in about 1977 for 150 or 200 jackets. He believes that his business (which he conducted with his brother Nihal) was the sole manufacturer of Merc jackets from 1981 or 1982 until 1986 or 1987. He says that the jackets usually had a MERC label and a MERC swing ticket. Mr Gur carried on business at 38/40 Somerford Grove N16, which he let to Mr Alavi from 'the end of the 1970's' until 1983. Mr Alavi says it was from 1980. His evidence was that he had produced between 100,000 and 120,000 jackets for Merc over their relationship. For reasons which I shall give, I am satisfied that the great majority of this clothing went for export.
- Mr Alavi says that in 1975, the business moved to 8/9 Carnaby Court. Up to this time it did not have its own telephone but used the public telephones, or shared a telephone with another trader. Mr Alavi says he took the shared telephone number with him to the new premises. Further units were taken at 10-12 Carnaby Court in 1980, and in 1982 a second shop was taken at 30-31 Great Marlborough Street. This shop lasted until 1987. This is confirmed by Mr Conway, who purchased the shop from Mr Alavi in 1988 and says that it was called Merc, and had several large illuminated signs. Mr Conway had known Mr Alavi since 1974. The Post Office London Street Directory and Kelly's both show the presence of Merc at 10/12 Carnaby Court from 1981 to 1988. The Post Office telephone directory shows Merc at Great Marlborough Street in 1988 and 1986. In 1985 the address is given as 21 Ganton Street. In 1983 it is given as 15 Ganton Street. Until 1980 Mr Alavi's personal address is given in the telephone directory as 9 Carnaby Court. A company under the control of Mr Alavi, Merc Leisure Limited (I shall return to the topic of Mr Alavi's companies below in paragraph 57) took a lease on the basement of 15-21 Ganton Street, which until 1998 seems to have been the centre of operations in the Carnaby Street area.
- From 1984, Mr Alavi says that 15-21 Ganton Street was known as Merc House and produces a photograph of the fascia over the entrance: this appears to be unchallenged. The business has now moved from Ganton Street to 10 Carnaby Street. There is unchallenged evidence that from 1993 there has been a MERC shop at 1 Chalk Farm Road.
- The clothing sold by Merc reflects Mod fashion: indeed, the Managing Director of Fred Perry, Mr Flynn, who seemed to me to be a knowledgeable and helpful witness, gave direct evidence of trading with Merc since early 1990, and said that Merc had been part of the folklore when he had been with Levi Strauss, the jeans manufacturer, since 1979. He said that in its own market, the shop enjoyed what he called 'icon status'.
- Mr Alavi produced two brochures. The first, JA 19, was put by him as being in 1984. It is in fact a poster, intended to be folded out, and contains photographs in common with his other brochure at Bundle E tab 3. The latter can be dated positively as having been produced after January 1994. The former, which obviously preceded it, uses different product codes, but I do not feel confident in dating it substantially before 1994. Both brochures are principally concerned with branded goods, mainly Ben Sherman and Fred Perry. As regards both, Mr Alavi refused in cross-examination to accept the obvious, that the codes BS meant Ben Sherman and FP meant Fred Perry, thereby immensely damaging his case that there were other goods, particularly suits and jackets, 'Sta-Prest' trousers, harringtons, donkey jackets and crombies which were marked MERC. But I consider that MS stands for Merc suit just as SP stands for Sta-Prest. In any event, the suits are plainly put forward in the catalogue as having been manufactured by Merc. I accept that these are Merc's own lines, principally on the evidence of brochures themselves and on the evidence from other witnesses as to Merc-branded suits being supplied from as early as 1982 and as to the supply of labels.
The wholesale and export business
- The wholesale and export business has been conducted from various warehouses. Mr Alavi identifies warehouse facilities at 14-21 Ganton Street distinct from the retail premises from 1970 to 1984; the warehouse at Somerford Grove previously occupied by Mr Gur from 1980 to 1983 and at 300 Acton Lane from 1982 to 1998. The business conducted at these premises appears to have been fairly substantial. He says that he has been exporting since 1976.
- Señor Fernándes Perdices, from Madrid, says that he has been dealing with Mr Alavi for at least ten years. He describes MERC as a brand. Señor Gelabert, from Barcelona, who says that Merc enjoys a reputation in Spain as a manufacturer of clothing. He says that he has been buying from Mr Alavi in Ganton Street for over ten years.
- Herr Missfeld from Lübeck has been buying from Mr Alavi at the Merc shop for more than ten years. He carefully distinguishes the Merc shop, with which he has been dealing for over ten years and is synonymous with Fred Perry and Ben Sherman clothing, from the Merc brand on clothes which he says has only been well-known in Lübeck and North Germany for two years. Herr Meyer, from South Germany (Nürnberg) has been buying clothes bearing the MERC label for nine years.
- From this evidence it appears that the export trade has been substantial, and has included MERC branded garments for at least ten years. This use does not, of course, generate a protectable goodwill to trade within relation to retail sale in the United Kingdom, but it may do so in respect of other traders in the United Kingdom seeking to export to the same markets.
- Mr Alavi gives evidence of having displayed under the Merc name at a number of exhibitions. There is no doubt that at the Man and Boy Exhibition at Earl's Court in 1985, Mr Alavi exhibited under the Merc name and won the prize for best stand. The word MERC is used prominently on the stand. The photographs of the stand show the Lurex jackets, and a range of trousers, jackets, shoes and (possibly) shirts. It is clear that other shows have been attended before 1990 (but none before 1984 has been photographed) and at these shows it seems from the photographs exhibited that the garments had swing tickets with the 'mountain' device on them. Whether the word Merc also appeared on the swing tickets is not clear. None of the photographs give any clue as to the labels used in the clothing. The same swing tickets appear more clearly in the photographs exhibited by Mr Andreasian.
- Mr Andreasian gave evidence as to the conduct of the business at Acton Lane. He had started working with Mr Alavi in 1982, becoming a full-time employee in 1983. He gives evidence of a substantial export trade at this time in goods marked MERC. He said that some of the clothing went to the Merc shops in Carnaby Street. He also mentions the use of other brands ('Avanti' for C&A, for example) and the purchase of branded goods from Fred Perry and Ben Sherman. His evidence strongly suggests that by 1984-85 Merc was a more substantial operation than it subsequently became. His colleague, Mr Artoonian, was a less satisfactory witness -I did not believe him when he said that he had seen MERC T-shirts at the warehouse in Acton Lane -but he supports the impression that I have of a comparatively substantial export trade with some goods only being sold in the Carnaby Street shop, and perhaps sold to some other retailers such as Burtons, with whom Mr Alavi says that he had a brief concession. Doubt was thrown on this by Mr Alderson, but his evidence was far from conclusive, but in any event the volume of business appears to have been comparatively small.
- In 1985, Mr Alavi purchased a Mercedes van from Mercedes-Benz at Colindale. This was a white van, and the word MERC was painted prominently on the sides and on the wind-deflector above the cab roof. The painting was also done by Mercedes-Benz at Colindale. A photograph exists of the van: it is C-registered (1985) and the relevant page from the record of registrations records maintained at Colindale records that it was ordered on 3 July 1985 by 'Merc Leisure'. This is a reference to one of Mr Alavi's companies, Merc Leisure Limited, to which I shall return. Plainly by 1985 trade under the name MERC is sufficiently important for it to be painted on the side of the van.
- Finally, I should mention the evidence about the supply of labels used by Merc. This evidence, obviously important, came from Mr Trevor Jones. Mr Jones was a satisfactory witness, and I should be inclined to accept his evidence, which was that the supply of labels by the companies with which he was associated started in the mid -1970's. He had no axe to grind, having stopped supplying Mr Alavi with labels in 1997. He recognised the label which was in Mr Delroy Williams's lurex jacket as having been in fashion ten or fifteen years ago, which is consistent with the purchase date given by Mr Williams. The labels which he supplied were in different sizes and types, appropriate to jackets, trousers and shirts. His first labels (the old labels) were green and white, and had the 'mountain' device or stylised 'M' together with the word MERC: all the labels which he supplied had the word MERC on them.
- The evidence of Mr Rehman was that T-shirts have been sold over-printed with the word MERC on the chest since the mid-1980's. A photograph of one appears on one of the two pre-action brochures in the case. I accept this evidence.
Mr Lord's interview
- In the spring/summer 1999 edition of a publication called 'FHM Collections', a fashion magazine associated with the magazine FHM, there is an interview with Mr Alex Lord, described as the assistant manager at the Merc shop at 10 Carnaby Street. In answer to the question 'How do you deal with local competition?' Mr Lord is quoted as saying
'Merc, our own brand of clothing, started last year and we hope eventually to be able to compete with Fred Perry and the other big names. We make button-down slim-fit shirts, which are based on the original Sixties shirt and actually fit better than a Ben Sherman. Our main tactic, though, is to keep the prices as low as possible. Even our most expensive item, the "Tonic" suit, is only £105.'
Unsurprisingly the claimants made this statement the subject of a Civil Evidence Act notice. The inference which is sought to be drawn from it is that no sales of clothing marked MERC took place at the shop until 1998, after the proceedings began. Mr Lord gave oral evidence. His evidence was heavily criticised by the claimants. He was not a satisfactory witness. He was out to assist Mr Alavi. But there is unimpeachable evidence that Merc clothing was sold prior to 1998 in the shop. Mr Barlow and Mr Delroy Williams at least make this clear. I conclude that Mr Lord was ignorant as to the whole course of trading of Merc (he is a fairly recent employee) and that he believed what he said to the journalist. While I accept that journalists are capable of making almost any error of detail, it was not possible to be satisfied that an error had been made in this case. This suggests that there has been discontinuity in the supply of Merc-branded goods to the shop.
The trade mark
- Mr Alavi applied personally to register the word mark MERC on 24 January 1997 in class 25 in respect of 'clothing, footwear, headgear'. This obviously suggests an intention to trade in relation to these goods under the mark. I attach some significance to this. The application was made before any complaint had been made by the claimants. The mark was advertised in the usual way in the Community Trade Marks bulletin on 5 January 1998, and opposed by the claimants on 3 April 1998. The claimants had applied for and registered the word MERC in respect of 'vehicles and parts therefor' on 20 August 1997. It was not suggested to Mr Alavi that he did not intend to use the mark which he had applied to be registered.
How Mr Alavi traded
- There is evidence that from time to time, Mr Alavi traded through the medium of certain companies. The companies identified are Merc Leisure Limited and Merc Properties Limited. Mr Barlow gave evidence that Merc Clothing Company Limited had traded in the supply of suits, but ceased to trade after it had incurred a substantial bad debt rendering it barely profitable. There was also Merc Properties Limited, which Mr Barlow said owned the warehouse in Acton, and Merc Leisure Limited, which entered a members' voluntary liquidation in 1988. The only member of the company was Mr Alavi. Merc Clothing Company Limited was eventually struck off and dissolved as a defunct company in 1992.
- Finally Mr Barlow made it clear that the great majority of the MERC-branded goods went for export, and he dealt with the general nature of the trading as follows:
Q. Had Mr Alavi ever given you what his annual turnover was in relation to e.g. Ben Sherman goods, or did he not break it down like that?
A. He never broke it down. We knew what we were buying in and basically the shop was run by Javid Alavi and a chap called Jimmy Tan, who was his manager, and they kept their eye on the stock, so if one line was selling well then they would buy more in, there would be a constant turnover of stock, and bad lines we just were trying to get rid of them and do not repeat them, and it just depends on what was selling at the time.
Q. Did Mr Alavi ever tell you that he had given the limited companies a informal licence to use the Merc name?
A. There was no such thing as an informal licence. He had Merc as a sole trader. He then formed companies with specific tasks, Merc this, Merc that Merc the other, so he kept the name "Merc" running through all his enterprises.
He was quite clear, however, that MERC-branded goods were sold alongside the others in the shops.
- There is no suggestion that Merc Property Limited ever traded.
- To the extent to which there is a goodwill attaching to the word MERC arising out of its use on clothing by Mr Alavi or by the two companies to which I have referred, it seems to me that Mr Alavi is now entitled to that goodwill, and was so entitled in 1997 when these proceedings began. It is not realistic to attempt to divide up the trading goodwill in the manner which was suggested by the claimants and to say that Mr Alavi was not entitled to the goodwill associated with the trading activities of either of these companies. These companies were the property of Mr Alavi and wholly under his control, and in this context control is central. They traded side-by-side with the stalls or shops, which have always been Mr Alavi's business. There is no suggestion of any attempt to realise goodwill for the benefit of the creditors of any of the companies, who were all paid in full. All the companies traded from time to time under the direct control of their only active member, Mr Alavi, and I conclude that he is now solely entitled to the benefit of the goodwill generated by their trading.
Conclusions on Mr Alavi's trading down to 1997
- I find that Mr Alavi started trading in 1967 from modest premises in and around Carnaby Street. He started the use of the name MERC at this time or soon afterwards, but the word MERC was established by 1975 as a trade mark used on goods as well as the trading style of the shop or shops from which Mr Alavi traded.
- Mr Alavi had by the early 1980's two distinct trades. The first was the trade carried out by the shops. This was a trade in garments of interest to particular fashion-conscious groups, and consisted of the sale of branded goods (Ben Sherman, Fred Perry) and some goods marked Merc. The other trade was principally a wholesale trade in Merc clothing of the type exhibited at the Earl's Court Man and Boy show in 1985 and the other exhibitions to which I have referred. This trade, which was carried at least until the late 1980's by companies under Mr Alavi's direct control, was substantial but resulted in retail sales mainly abroad.
- I accept that Mr Alavi's trading has varied in its size from time to time. The shops have always carried on business as Merc. It is far from clear that the word has ever been absent from all the fascias at any time since about 1975. All the other premises showed the name, and it was painted on the side of Mr Alavi's Mercedes van.
- Having regard to the evidence of use and to the evidence of Mr Flynn, in particular, I conclude that Mr Alavi was, in 1997, entitled to the benefit of a trading goodwill associated with the name MERC in respect of clothing. I do not consider that it is possible further to divide the reputation up. It is not sensible to say that the reputation was limited to Carnaby Street, or to Mods, Skinheads and Casuals, the three classes of purchaser who frequent the shop, as DaimlerChrysler wish me to say. First, the evidence of Delroy Williams and the others from the wider world of pop music suggest that the shop is more widely known: and I cannot ignore the wholesale trade and the goodwill generated (at the time) by the exhibitions and so on. Nor can I ignore the mail-order business. Accordingly I reject DaimlerChrysler's contention that before 1997 the trading under MERC was 'discontinuous, sporadic and uncertain'. To accept this contention would involve the rejection of evidence from a number of witnesses who were entirely satisfactory.
- I find that Mr Alavi's business was well-established by 1985, and that both the shop and the manufacturing business traded under the name Merc. I am satisfied (on the basis of the certificate from the Registry of Business Names) that he was trading under that name by 1978. In coming to this conclusion, I do not need to rely upon a purely export trade in goods marked MERC, and I do not do so. English trading was sufficient.
Mr Alavi's trading since 1997
- Since 1997, it is plain that Mr Alavi's trading has placed far more emphasis on MERC and has become considerably more sophisticated, so far as the shop and the mail-order business are concerned, than it was previously. It is clear also that although the shop has for many years used MERC carrier bags, there is more emphasis on the use of MERC on shirt bags, for example, and considerable emphasis on the own-brand products. The advertising material concentrates far more on the MERC brand. I must make it clear that I do not accept that this trading is representative of the trading which went on before 1997, and I accept that it has been in part stimulated by these proceedings. I do not however accept the claimant's contention that Mr Alavi's trading since 1997 has been with a view to establish a trading reputation in MERC for the first time, which I consider to be an unsupportable contention if one considers the name of the shop, the word on the side of the van and the exhibitions, the evidence of the labels and the evidence of the customers. But I accept that the use of the word MERC as a trade mark applied to goods was not very substantial but not negligible so far as sale through the shop was concerned. Making for export, however, is a different matter. This was obviously a substantial trade.
Conclusions on passing-off
- Against these findings of fact, it is possible to deal with the complaint of passing-off shortly. It must fail. Mr Alavi has been trading under the style complained of since at least 1985. He had entered the market by 1978. He did not make any relevant misrepresentation then and he had not, down to 1997 essentially changed the manner of his trading. As Oliver LJ (as he then was) said in Budweiser (Anheuser-Busch v Budejovicky Budvar  RPC 413 at 462),
'The plaintiffs' primary submission is that the learned judge was wrong in regarding the material point of time at which he should consider the matter as the date of the Writ. Obviously the plaintiffs must, to succeed, have a cause of action at that date, but Mr Kentridge submits, and Mr Jeffs does not contest, that it cannot be right to look simply at that date to see whether a passing off is established. In particular to test by reference to that date whether plaintiff and defendant have concurrent reputations would simply mean that no remedy lay against a defendant who had successfully passed off his goods as the plaintiffs', so as to establish a reputation for himself.'
This is consistent with what was said by Lord Scarman giving the opinion of the Board in Cadbury Schweppes Pty Ltd v The Pub Squash Co Ltd  RPC 429 at 494: the relevant date in law is the date of the commencement of the conduct complained of. I should just add that there must come a time after which the court would not interfere with a continued course of trading which might have involved passing off at its inception but no longer did so: logically, this point would come six years after it could safely be said that there was no deception and independent goodwill had been established in the market by the protagonists. There must also be doubt as to the availability of injunctive relief if there is no passing-off at the date the action is commenced.
Non-use of the UK marks.
- This question needs to be considered before the issue of infringement. Section 46 provides for revocation of a registration. The remedy of revocation is flexible as to the date from which it is effective-subsection 46(6)-while a registration which is invalid under section 47 is deemed never to have been made (sub-section 47(6)).
46.-(1) The registration of a trade mark may be revoked on any of the following grounds-
(a) that within the period of five years following the date of completion of the registration procedure it has not been put to genuine use in the United Kingdom, by the proprietor or with his consent, in relation to the goods or services for which it is registered, and there are no proper reasons for non-use...
(5) where grounds for revocation exist in respect of only some of the goods or services for which the trade mark is registered, revocation shall relate to those goods or services only.
This section has given rise to considerable difficulty and judicial disagreement, to which I have already referred in a judgment in Decon v Fred Baker (unreported, 13 November 2000). Where there is a large class of goods, and some use only within that class, there is a serious difficulty as to how the class is to be limited. My conclusion was as follows:
'24. I think that the correct starting point as a matter of principle consists of the list of articles for which the proprietor has in fact used the mark. In arriving at a fair specification having regard to the proprietor's use, it is also necessary to remember that the effect of section 10(2) (and of 10(3), in limited circumstances) is to give the proprietor protection outside his specification of goods but in areas where he can demonstrate a likelihood of deception in the wide sense, that is, deception as to trade origin leading to association among the relevant public. There is no pressing need, therefore, to confer on the proprietor a wider protection than his use warrants by unduly broadening the specification of goods. There is a balance to be held between the proprietor, other traders and the public having regard to the use which has in fact taken place.'
I shall assume this is correct, although it is a question on the proper approach to Article 13 of the Directive, and is not the subject of any decision of the Court of Justice to which my attention has been drawn.
- DaimlerChrysler have shown use in respect of sweaters, anoraks, polo-shirts, scarves, T-shirts and baseball caps. There is no use, as Mr Wilson observes, in jackets, trousers, suits, underwear, socks, and pretty well all articles of women's wear. There is some overlap with the defendant's range, but not much. With some doubt I have come to the conclusion that a narrower specification of goods, based mainly on this list, is appropriate. In this connection, there is in the cases a difference of approach between the judges. I have already considered this question in the Decon case, and I repeat them here.
- These provisions have been the subject of observations by Neuberger J., Laddie J. and Jacob J. in, respectively, Premier Brands UK Limited v. Typhoon Europe Ltd  FSR 767, Mercury v. Mercury  FSR 850 and Minerva TM  FSR 734. In the Mercury case, Laddie J. was concerned with the mark Mercury registered in respect of (inter alia) 'computers, electronic instruments for processing data and computer programs in class 9'. This enormously wide specification of goods covered not only computer software of use in the claimant's business of telecommunications, but, as Laddie J. put it, games software, accounting software, software for designing genealogical tables, software used in the medical diagnostic field, software used for controlling computers in satellites and software used in computers used in running the London Underground system. Laddie J. took the view that what defined software was the function it performed, and that the functions performed by computer software in general were so multifarious that the registration was in danger of attack on the ground of non-use. The case being an application for summary judgment, it was not necessary for Laddie J. to decide the question and he did not do so. In the Premier Brands ("Typhoon") case, Neuberger J, said in relation to a specification of goods that when applying section 46(5) one
"simply looks at the list of items on the register, and asks oneself in relation to each such item, whether or not the mark has been used "in relation to" or "in connection with" that item during the past five years. If the answer is in the affirmative then the mark can remain registered in respect of that item; if the answer is in the negative then, subject to any question of discretion, the registration is revoked in respect of that item. One does not dig deeper and, as it were, narrow a particular category of items to reflect the goods to which the mark has been used".
- In the Minerva case, Jacob J did not accept this view of the section. With respect, I think that the difficulty with Neuberger J's. formulation is that while apt to deal with the case before him, it did not deal in terms with huge classes of goods described by single phrases like "computer software" or "cleaning substances and preparations". I must therefore differ with respect from Neuberger J. and agree with what Jacob J. said in Minerva TM. At times, it is inevitable that one is obliged to dig deeper.
- Here, the use has been on a limited range of goods. But one must remember it is because marks are to remain on the register only in respect of the goods in respect of which they are used that we have Art 4(1)(b). Jacobs AG set out the competing considerations very clearly in his opinion in the Canon case, Case C-39/1997 Canon v MGM  ECRI-5507,  RPC 117 at paragraph 51:
'By way of a final observation, I would add that I do not consider it unjust for a trade-mark owner to benefit from protection in relation to a wider range of goods than those in relation to which the mark is registered. It is not reasonable to require a trade-mark owner to register his mark in relation to all types of goods in relation to which use of his mark may give rise to a risk of confusion, because he may not be using his mark in relation to such goods; indeed marks which are registered in respect of goods or services in relation to which they are not used are liable to be struck off the register after five years on the grounds of non-use. Moreover, the criterion of confusion ensures that when registering a mark in relation to a certain class of goods or services, the trade-mark owner is not thereby protected in relation to too broad a range of goods or services. The concept of confusion should not be extended too far, since, as I observed in my Opinion in SABEL, a broad interpretation would be contrary to the Directive's aim of assisting the free movement of goods. However, where there is a genuine and properly substantiated likelihood of confusion, it is in my view not only justifiable but necessary to protect both the consumer and trade-mark owner by disallowing the registration of a later mark even in relation to similar goods and services in respect of which the earlier mark is not registered.'
- In my judgment, DaimlerChrysler will be adequately protected in their sales of promotional garments if the mark is revoked in respect of all clothing except sweaters, anoraks, polo-shirts, scarves, T-shirts and baseball caps, and I would order accordingly. However, I consider that this raises a point of construction of and approach to Article 10 of the Directive, which is transposed into English law in section 46. It seems to me to be essential to know whether a registration is to be restricted to precisely the goods in respect of which use is shown or some other, wider class, and, if so, what are the criteria by which that class is established. Before the mark is revoked, I consider that a reference may be necessary, and I will hear submissions.
- I decline to change the 'metal goods' mark at all. It is not sensible to reduce the vehicle marks in scope, and I do not regard the metal goods mark as in any way vulnerable to an allegation of non-use.
Infringement of the UK Clothing Marks
- Section 10 of the Trade Marks Act provides as follows:-
10.-( 1) A person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical for those for which it is registered.
(2) A person infringes a registered trade mark if he uses in the course of trade a sign where because -
(a) the sign is identical with the trade mark and is used in relation to goods or services similar to those for which the trade mark is registered or
(b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered,
there exists a likelihood of confusion on the part of the public which includes the likelihood of association with the trade mark.
(3) A person infringes a registered trade mark if he uses in the course of trade a sign which-
(a) is identical with or similar to the trade mark, and
(b) is used in relation to goods or services which are not similar to those for which the trade mark is registered,
where the trade mark has a reputation in the United Kingdom and the use of the sign, without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
- I shall consider infringement on the basis of the broad specification of goods. It seems to me that the goods sold by Mr Alavi are obviously similar to those comprised within the limited specification of goods which I consider appropriate. The real question concerns the marks.
- This provision has been the subject of a number of decisions, notably British Sugar v. James Robertson ('Treat')  RPC 281 and Pfizer Limited v Eurofood Link (United Kingdom) Ltd (Viagra/Viagrene) S Thorley QC  ETMR 896. As is well known, the domestic provisions are not 'home grown' and there is a growing body of authority from the European Court of Justice on the corresponding provisions of the Directive, that is, Art 5(1) and 5(2): Case C—251/95 Sabel v Puma  ECR I-6191, the Canon case and case C—342/97 Lloyd Schuhfabrik Meyer & Co GmbH v. Klijsen Handel BV  ECR 1-3819,  ETMR 690. Corresponding provisions are found in Art 9(1) of the directive, and apply to the infringement of the CTM's.
- The main departure from the previous law is obviously represented by section 10(2)(b), since the traditional English approach has been a mark-for-mark, or mark-for-sign, comparison. Speaking of s 10(2), Jacob J carefully distinguished the concept of similarity from the concept of confusion in Treat, and pointed out that if the concepts are elided 'a "strong" mark would get protection for a greater range of goods than a "weak" mark.' This is precisely the effect of the interpretation of Arts 4 and 5 of the Directive which has commended itself to the Court of Justice. In Lloyd, the Court of Justice put it this way:
'It is possible that mere aural similarity between trade marks may create a likelihood of confusion within the meaning of Article 5(l)(b) of [the Directive]. The more similar the goods or services covered and the more distinctive the earlier mark, the greater will be the likelihood of confusion. In determining the distinctive character of a mark and, accordingly, in assessing whether it is highly distinctive, it is necessary to make a global assessment of the greater or lesser capacity of the mark to identify the goods or services for which it has been registered as coming from a particular undertaking, and thus to distinguish those goods or services from those of other undertakings. In making that assessment, account should be taken of all relevant factors, and, in particular, of the inherent characteristics of the mark, including the fact that it does or does not contain an element descriptive of the goods or services for which it has been registered. It is not possible to state in general terms, for example by referring to given percentages relating to the degree of recognition attained by the mark within the relevant section of the public, when a mark has a strong distinctive character.'
English trade mark lawyers have long been accustomed to distinguish inherent ability to distinguish from distinctiveness in fact. Both are part of this assessment. As the Court put it in paragraph 24 of the judgment,
'In making that assessment [sc assessing whether the mark is highly distinctive] account should be taken, in particular, of the inherent characteristics of the mark, including the fact that it does or does not contain an element descriptive of the goods or services for which it has been registered; the market share held by the mark; how intensive, geographically widespread and long-standing use of the mark has been; the amount invested by the undertaking in promoting the mark; the proportion of the relevant section of the public, which, because of the mark, identifies the goods or services as originating from a particular undertaking; and statements from chambers of commerce and industry or other trade or professional associations.'
- This interpretation of Art 5(l)(b) seems to leave Art 5(2) (and s 10(3)) for the cases where either (a)there is deception but the goods are dissimilar or (b) there is no likelihood of deception (in the sense that nobody will be confused as to the origin of the goods in question) but the defendant is taking a free ride on the claimant's reputation. It entails a wide-ranging enquiry. But it places emphasis on the factors which go to deciding the extent and strength of a reputation capable of supporting a passing-off action. Thus, if the defendant is guilty of passing-off, I suspect that there must be a strong case for infringement under Art 5(1)(b). That is not to say that there will be no infringement under 5(1)(b) if there is no passing-off, since the comparison is still mark for sign in this sense, that additional matter which prevents confusion in fact (such as a statement 'These are not the claimant's goods' can in certain circumstances prevent passing-off, but will not, as I understand it, prevent infringement). Nonetheless, as I have said elsewhere, this is not an investigation into passing off, but an investigation of the similarity between mark and sign on the one hand and specification of goods and defendant's goods on the other.
- I think that the following can be gained from the cases:
(1) Under Art 5(1)(a) the test is a straightforward mark for sign test. Extraneous considerations have no effect, and in particular additional matter will not suffice to avoid infringement (British Sugar).
(2) However, under Art 5(1)(b) the comparison is not a straightforward mark for sign comparison. On the contrary, it involves a global assessment of the likelihood of confusion as to origin of the goods or services concerned. This involves an assessment of the distinctiveness of the mark, and involves the assessment of many factors familiar in passing-off cases (Sabel, Lloyd).
(3) The person to be considered in considering the likelihood of confusion is the ordinary consumer, neither too careful nor too careless, but reasonably circumspect well-informed and observant. There must be allowance for defective recollection, which will of course vary with the goods in question (is it a fifty pence purchase in the station kiosk or a once-in-a-lifetime expenditure of £50000).
(4) The phrase 'likelihood of association' is an explanation of the kind of confusion as to origin with which the provision is concerned. It is not a different type of infringement from confusion as to origin. (Sabel, Canon).
(5) There is a greater likelihood of confusion with very distinctive marks (Sabel, Canon, Lloyd). This is a very surprising proposition (and perhaps only a presumption of fact, since this cannot be a legal issue), since normally it is easier to distinguish a well-known word mark from others close to it. But it seems to me to make more sense when one comes to consider device marks. I have difficulty understanding how it can affect the similarity of goods, but that is the law.
- It would be idle to pretend that I do not approach the considerations outlined in (2) above with trepidation. A finding of confusion in fact, or passing-off, may not be sufficient to establish that the mark and the sign, or the goods, are sufficiently similar. Or it may tip the scales. As Jacob J pointed out in Treat, there is nothing new in trying to identify goods that are similar to the goods comprised within the specification on an objective basis. There is, as he said, much in common with the concept of 'goods of the same description' in the law before the 1994 Act (see subsection 12(1) (prior registration) and section 26 (prior use) in the 1938 Act). A number of objective criteria were established, starting with the well-known exposition in Jellinek's Appln (1946) 63 RPC 59 at 70 (Romer J). The case is to do with shoe polish and boots and shoes:
'Now taking firstly into consideration the nature of the goods which are now in question, it seems to me that boots and shoes on the one hand differ in their nature at least as widely as the nature of semolina differs from that of mustard; the compositions of the two commodities are wholly different and distinct from one another; secondly, it seems to me that the respective uses of the articles have to be taken into account in considering whether they should be regarded as goods of the same description. The mere fact that polish is applied to boots and shoes for the purpose of cleaning them and giving them a smart appearance seems to me to be quite irrelevant in this connection.
In my judgment boots and shoes cannot be regarded as used for any purpose analogous to that for which shoe polish is sold; the former are used to wear and the latter is used for cleaning, and there is, from this point of view, nothing in common between the two.
Thirdly, I have, I think, to take into consideration the question of the trade channels through which the commodities respectively are bought and sold. Upon this question evidence was given...
Can, then, such similarity of description be said to arise by reason of the channels of trade though which the respective commodities are sold?
In my judgment, the answer to this question is clearly in the negative.'
Expanded and updated, the list of relevant considerations is that identified by Jacob J in Treat and is set out in Jacobs AG's recital of the United Kingdom's submissions in Canon (paragraph 45 of his Opinion):
(a) The uses of the respective goods or services;
(b) The users of the respective goods and services
(c) The physical nature of the goods or acts of service;
(d) The trade channels through which the goods or services reach the market;
(e) In the case of self-serve consumer items, where in practice they are respectively found or likely to be found in supermarkets, and in particular whether they are, or are likely to be, found on the same or different shelves;
(f) The extent to which the respective goods or services are in competition with each other: that enquiry may take into account how those in trade classify goods, for instance whether market research companies, who of course act for industry, put the goods or services in the same or different sectors.
- The French government took a very similar view (paragraph 47 of the Opinion), considering that, in assessing the similarity of goods and services, the factors to be taken into account should include the nature of the goods or services, their intended destination and clientele, their normal use and the usual manner of their distribution. Jacobs AG considered that in assessing the similarity of the goods or services 'it will AG considered that in assessing the similarity of the goods or services 'it will be helpful to have regard to the factors suggested by the United Kingdom and French Governments'. Jacobs AG clearly considered, however, that the test was not wholly objective, and this was, of course, the view which the Court of Justice took. It is however necessary to bear in mind what the Court of Justice said about the application of Art 4(1)(b) (and thus section 10(2) and Art 9(l)(c)):
'22. It is, however, important to stress that, for the purposes of applying Article 4(1)(b), even where a mark is identical to another with a highly distinctive character, it is still necessary to adduce evidence of similarity between the goods and services covered. In contrast to Article 4(4)(a) [s 10(3) and Art 9(l)(c)], which expressly refers to the situation where the goods or services are not similar, Article 4(1)(b) provides that the likelihood of confusion presupposes that the goods or services covered are identical or similar.
23. In assessing the similarity of the goods or services concerned, as the French and United Kingdom Governments and the Commission have pointed out, all the relevant factors relating to those goods or services themselves should be taken into account. Those factors include, inter alia, their nature, their end users and their method of use and whether they are in competition with each other or are complementary.'
- Absent the evidence to which I have referred which has satisfied me that some people use the word Merc as an abbreviation or nick-name for Mercedes Benz, I should have regarded the allegation of infringement of the UK Clothing Marks under sub-section 10(2) as hopeless. What I have to consider is whether there is any likelihood of what I can call 'spillover' of this use of MERC in respect of the clothing marks, having regard to the way in which the clothing marks are otherwise used. So far as Mr Alavi's shop is concerned, there obviously is no spillage. So that use is unaffected. This leaves the use on the clothing itself. In my judgment, Mr Anderson's thought processes, and those of Mrs Beaumont, were not those which are relevant to a customer for the claimant's goods. They are not shown to be in any way characteristic of the public, and are plainly, it seems to me, deductive. In my view, the possibilities of such spill-over are very slight. I do not think the evidence can justify a finding that there is a likelihood of confusion between the defendant's mark and the UK Clothing Marks.
The UK vehicle marks
- The position in respect of the UK Vehicle Marks is obviously impossible under section 10(2) and the only complaint of infringement is under section 10(3). The goods are plainly not similar. In my judgment the marks are not similar, but if I am wrong in this, I do not consider that there is any complaint under section 10(3) and my reasons are the following.
- Section 10(3) transposes Art 5(2) of the Directive into English law. This provision has been considered directly by the ECJ in only one case, Case C—375/97: General Motors v Yplon SA  ECR 1-5421,  IP&T 207. The case was concerned with the use of the mark CHEVY for cleaning products. It has also been considered by Mr Thorley QC in the Viagra case (above) and Neuberger J in the Typhoon case (below). Before the Sabel decision of the ECJ, there had been a view that s 10(3) and Art 5(2) required proof of confusion (see Baywatch Production v The Home Video Channel  FSR 22, although the point was left open by Aldous LJ in BT plc v One In A Million  FSR 1. Aldous LJ did not, I think, consider that the s 10(3) required proof of confusion, and in this he was correct, as Sabel shows.
- Basing himself on paragraph 15 of the judgment of the Court of Justice in Sabel, Mr Thorley QC was inclined in the Viagra case to assimilate this head of infringement to the 'association without confusion' which the Benelux countries sought to argue formed part of Article 5(1)(b) ('includes the likelihood of association...'). I am not sure this is right, although I freely accept it may be. It would seem odd to drive that head of infringement so enthusiastically out by the door, if it were only to re-enter by a window obviously present in the same Article, albeit for marks with a reputation. As Jacobs AG pointed out (paragraph 48 of his opinion) Art 4(4)(a) (and hence also Art 5(2)) does not require confusion because it is providing a different test of infringement, available only in respect of marks which have a reputation. In Chevy, the court of Justice avoided interpreting the whole provision (the question referred related only to the necessary geographical extent of the reputation of the mark) but it was considered in some detail by Jacobs AG. He identifies the key features of Art 5(2) as (1) protection is provided only for marks with a reputation (2) protection is provided only in respect of goods and services which are not similar to those in respect of which the mark is registered and (3) the type of harm to the trade mark is specified. This area of the law is bedevilled by the nuances of different national approaches to trade marks and the associated difficulties in translation, but Jacobs AG emphasises that the provision is not to be used to give marks 'an unduly extensive protection', emphasising that there is no question of a risk of unfair advantage or detriment: there must be actual unfair advantage or detriment. But, for this to happen, there must be some sort of connection formed (I avoid the word association) between the sign used by the defendant and the mark and its associated reputation.
- In the TYPHOON case (Premier Brands United Kingdom Limited v Typhoon Europe Limited  FSR 767) Neuberger J had to consider s 10(3). He held that it is not aimed at every sign whose use may stimulate the relevant public to recall a trade mark which enjoys a reputation with them. This is so because the element of unfair advantage or detriment is not present in such cases. So far as unfair advantage and detriment are concerned, Neuberger J accepted, I think, that common to these is the idea of exploitation of the mark, either negatively or positively by the user of the sign. A good example is the decision of Mr Geoffrey Hobbs QC sitting as the Appointed Person in C. A. Sheimer (M.) Sdn Bhd's TM  RPC 484 (VISA for condoms and contraceptive devices) (referred to by Neuberger J as the Visa case). This was a case of identity of marks, and Mr Hobbs QC was not prepared to find unfair advantage was being taken of the reputation associated with the VISA mark. He was prepared to find detriment. The case could be viewed as one involving ridicule. But the adverse effect must be over and above that caused by the presence in the market place of different marks which call each other to mind. As Mr Hobbs QC said,
'The provisions of section 5(3) [and s 10(3), Art 5(2)] are clearly not intended to have the sweeping effect of preventing the registration of any mark which is the same as or similar to a trade mark with a reputation, nor are they intended to make it automatically objectionable for the use of one trade mark to remind people of another, so the importance of this question should not be underestimated.'
I think that it is very tempting to substitute one set of tests for another under the guise of statutory interpretation. It is obvious that what may amount to taking unfair advantage of, or causing detriment to, one trade mark, may be very different from what may amount to taking advantage of, or causing detriment to, another. It may, in particular, depend crucially on the goods in respect of which the allegedly infringing sign is used, as it did in the Visa case. Neuberger J discusses this and other cases, at length, and they were not cited again to me.
- In my view, the best approach is just to follow the section, remembering Jacobs AG's warning that it is concerned with actual effects, not risks or likelihoods. The enquiry is as follows. (1) Does the proprietor's mark have a reputation? If so (2) is the defendant's sign sufficiently similar to it that the public are either deceived into the belief that the goods are associated with the proprietor so that the use of the sign takes unfair advantage of the mark, or alternatively cause detriment in their minds to either (a) the repute or (b) the distinctive character of the mark, or (3) even if they are not confused, does the use of the sign nonetheless have this effect and (4) is the use complained of nonetheless with due cause. Detriment can take the form either of making the mark less attractive (tarnishing, to use Neuberger J's word) or less distinctive (blurring). On this analysis, Visa is of course a case of tarnishing.
- My finding that there is no passing off by the use of MERC and no infringement of the clothing marks because the marks are not similar for the purposes of section 10(2) excludes, I think, the second possibility that I have identified in the foregoing paragraph. So far as the third possibility (no confusion) is concerned, I accept that the word MERC on its own divorced from any commercial context might be recognised by some people who simply see it as the abbreviation of the DaimlerChrysler marks with which they are familiar. There is no evidence whatever of any advantage derived from this recognition by the defendants use of their sign MERC on clothing. The defendant does nothing to trade on the MERCEDES marks. Mr Wilson QC accepts that where the word MERC appears in a conventionally promotional place (such as on the shoulder or across the front or back of a T-shirt) then it might be said that some advantage is taken of the claimant's reputation. But he says that on any view conventional swing tickets and inside labels are unaffected, as is the use on the shop. In making this concession, Mr Wilson accepts that the assessment of unfair advantage must be an objective one: the defendant's intention is not relevant. In my view, the advantage is so minor as to be negligible. If the public say, 'That is the word which means Mercedes to me, but it is not a Mercedes product', and they do not perceive it as possessing high quality, or as making such a claim, then there is no case on infringement.
- In this case, however, the main attack was made on the basis of detriment allegedly caused to the marks in suit. It was said that Mr Alavi's business is heavily concerned with Mods, Skinheads and Casuals. These are not people with whom Mercedes wish to see a MERC mark being used. Furthermore, it is said that the defendant's website contains links to skinhead sites which are distasteful, and which contain links to sites which are more distasteful still. DaimlerChrysler justifiably set great store by their image of high quality engineering, and this use is not one with which they should have to deal.
- So far as detriment to the repute of the DaimlerChrysler marks is concerned, there was no evidence that any member of the public would associate the use of the mark MERC on the website with DaimlerChrysler's marks. The kind of detriment with which one is concerned here is perhaps the detriment one can identify in painting the well-known eau-de-cologne mark '4711' on the side of a liquid manure tanker (see KUR 'Well-Known Marks, Highly Renowned Marks and Marks Having a (High) Reputation-What's it all about?' 23 IIC 218 (1992) at 227 n.26 and also referred to in Mostert, Famous and Well-Known Marks at page 59 n.29). Here, to those of sensitive disposition the juxtaposition of the mark and the tanker can be said to be detrimental to the repute of the mark. The decision of the Benelux Court of Justice in CLAERYN/KLAREIN for Bols/all purpose cleanser is a well-known further example. There are a number of condom cases: apart from Visa itself. Mr Hobbs QC refers to one in the Bundesgerichtshof 26 IIC 282 (1995), case number I ZR 79/92, which was concerned with little folding boxes, like matchbooks, made to look like a Mars bar and bearing the registered trade mark MARS, which held a condom. These were joke products. Here the lower court had considered that an appreciable number of the public would consider that the little boxes were advertisements for MARS products, that they would consider them in poor taste or at least an overdone advertising gimmick. This is a finding of infringement of the advertising right in German trade mark law.
But the court went on to consider an allegation of unfair competition, and in so doing discussed the concept of detriment to a trade mark, albeit in terms which seems to assume confusion as to the source of the goods in question:
'If marks, whose reputation was established by the plaintiff only in connection with confectionery, in particular a candy-bar, and which marks have great advertising value for these goods are used-as on the part of the defendant-for labelling of contraceptive wrappers, then this circumstance alone suffices to impair the advertising power in regard to the original goods and, moreover, to ruin their positive image at least as far as part of the public is concerned ... for , by their very purpose, contraceptives evoke certain associations (sexual relations, AIDS prevention, etc.), which significant portions of the addressed public would certainly rather do without when it comes to buying candy, and with which reputable candy manufacturers, in particular, rightfully do not wish to be identified because, as a rule, contraceptives do not appear to promote the sale or image of their products.
Impairment of the marks' owner [sc in using the mark as it seems fit], and the disparagement of its good name, cannot be ruled out on the basis that the gag item lacks any reference to the marks' owner, so that there is no way it could be associated with the latter. For, in the case at issue, the plaintiff's marks, nearly identical in word and appearance are used directly on the defendant's product in the manner of a trademark, i.e. as an identifier. As the court of appeals rightfully established, they consequently also fulfil the mark's function as an indicator of product origin, i.e. they point to the plaintiff unless and until the consumer notices the inconspicuous, second reference to the origin of the defendant's company on the back of the package. Accordingly, association with the product 'contraceptives as promotional gifts' with the plaintiffs company appears quite conceivable in this case...'
This passage is not particularly helpful on what is meant by disparagement when there is no confusion, if it is not something along the lines of the 4711 case, or just use of the mark in a non-confusing way in association with what it considered to be a product not consonant with the general reputation of the mark, such as in Visa itself. It should be noted that the word 'repute' as used in the sub-section is apt to include a reference to the proprietor of the mark and his products.
- The words 'detriment to the distinctive character' also give difficulty. Mr Hobbs QC and Neuberger J discuss them. I find the concept to which they refer somewhat fugitive. The presence of two similar marks where there was only one before seems to me to be detrimental to the distinctive character of the first. I am satisfied that this is not that the words are talking about. Mr Hobbs QC deals with the matter as arising out of deception and confusion, which is logical. But Jacobs AG says that Art 5(2) covers cases where there is no deception: what are they? I think, with respect, that the interpretation placed on these words inferentially by Neuberger J when he refers to blurring and quotes the following passage from Mostert, Famous and Well-Known Marks (1997) at 58-9 is no more satisfactory:
'Obviously, the more a trademark is used on a wide variety of goods becoming saturated in the process, the less the particular mark will call to mind and focus the public's attention on the plaintiff's particular product. If, for example, the TIFFANY mark has become well-known in connection with jewellery, and it is used on a multiplicity of other goods such as chocolates, clothing, a motion picture house, and a restaurant, the likelihood that the TIFFANY mark will still exclusively call to mind the owner's jewellery products becomes increasingly diminished.'
- Read literally, this is simply a suggestion that once a mark acquires a reputation one can throw the specification of goods away. Any use of another mark will potentially have this effect if any member of the relevant public becomes aware of the second mark. Here, the point was not pressed, emphasis being placed on the element of detriment to the repute of the mark, and I prefer to come to no conclusion on it. It raises difficult conceptual problems.
- In my judgment, no objection to the defendant's use of the sign MERC can be made out on this ground. I consider that in order to succeed under Art 5(2) and s 10(3) it must be shown that there is established in the mind of the relevant public a connection between the mark with which they are familiar and the disparaging use. Thus, it is not sufficient to see the word MERC, note that this is the word which one uses to refer to Mercedes cars, see the disagreeable web-site and register it as disagreeable, if nothing actually rubs off on the sign MERC itself or on MERCEDES, or on DaimlerChrysler. I was not satisfied that this was the case here, and so this allegation of infringement fails.
- I should add that I was also addressed on the meaning of the words 'without due cause'. I have not referred to this part of the argument since in my view the point does not arise having regard to the guidance which I have taken from Jacobs AG's observations in Sabel and the evident approval of the Court of his general approach. Nonetheless, it may be that the point is capable of reference, although I have not felt it necessary to refer the question at this stage.
The transitional provisions of the 1994 Act.
- If I am wrong in the conclusion to which I have come, then I have to consider the transitional provisions of the 1994 Act. Paragraph 4(2) provides as follows:
'It is not an infringement of-
(a) an existing registered trade mark, or
(b) a registered trade mark of which the distinctive elements are the same or substantially the same as those of an existing registered mark and which is registered for the same goods or services,
to continue after commencement any use which did not amount to infringement of the existing registered trade mark under the old law.'
Here, the UK vehicle marks were not arguably infringed under the 1938 Act. The goods are different. So these marks are not infringed, providing the uses complained of began before the coming into effect of the 1994 Act. In this connection, I should observe that the provision requires the use to continue: and thus there must have been a period of continuous use up to that date. It would be most unjust if a small hiatus in a long use removed the protection. I should prefer to construe the provision to relate to a commercially relevant use capable of being continued. Thus an interrupted use in respect of which a substantial goodwill existed should, in my judgment, suffice. Only if a pre-existing use could be taken to be abandoned should the protection not be available. Equally, the section cannot be merely referring (for example) to the particular use which existed before the date: otherwise use on short socks would infringe if there had only been use on long socks before the date. There is obviously a question of degree here, but Mr Carr QC, who appeared for DaimlerChrysler, did not address any argument on this point.
- In the foregoing discussion I really only consider the earliest of the clothing marks MERCEDES, which was registered in 1906. It seems to me that the 1985 mark adds nothing to the case, and, if I am right on the lack of any deceptive resemblance, its validity is unaffected by Mr Alavi's activities. The reasons which I have given for saying the marks are not similar are in essence the reasons I would have given for saying there was no deceptive resemblance under section 4(1)(a) of the 1938 Act and the defence is available in respect of these marks also.
- The allegations under sub-section 10(3) of the 1994 Act relating to the website necessarily fail if the website had been continuously used from a date anterior to the coming into effect of the 1994 Act. I do not believe that Mr Alavi challenged DaimlerChrysler's assertion that his website started after 1997. The website is different in kind from any form of advertising which Mr Alavi appears, on the evidence, to have carried out in the past, and so the defence under the transitional provisions cannot be made out in respect of this use.
Other defences: use of own name
- Both the 1994 Act and the Regulation provide for an 'own name' defence.
'A registered trade mark is not infringed by-
(a) the use by a person of his own name or address,
provided the use is in accordance with honest practices in industrial or commercial matters.'
- Mr Wilson QC submits that MERC is Mr Alavi's trading name. Why, he asked rhetorically, should he not be entitled to use it? This question involves a point which was left open in the Court of Appeal in Scandecor Development AB v Scandecor Marketing AB  FSR 26 on appeal from Lloyd J  FSR 500, the relevant part of Lloyd J's judgment being at 521-2. In summary, Lloyd J held in the case of a limited company that the defence was available, and that it did not matter if the word Limited, or Ltd, (or I would add plc or any other abbreviation indicative of legal nature) were not used. With this, with respect, I completely agree. I also consider that it is barely logical to make an exception to this principle in respect of trading names. I strongly suspect that the correct approach under this section is similar to that taken under section 8 of the 1938 Act. A mere trading name which does not give rise to passing-off may be protected, but if the use is unnecessary or creates any misrepresentation in the public mind then it will not be permitted: see Ballantine v Ballantyne Stewart  RPC 47 (Lloyd-Jacob J), 273 (CA). Since, however, this point does not arise, I prefer to express no concluded view, the more so since the proper approach to this provision has not been considered by the Court of Justice-see the judgment of Jacob J in Euromarket Designs v Peters ...unreported, 25 July 2000).
- In the present case, it seems to me that the question of use in accordance with honest practices in industrial and commercial matters would arise if there were any question of passing off, or if Mr Alavi had either adopted his mark with a view to taking a free ride on the claimant's goodwill (in which case he would also infringe by virtue of sub-section 10(3)). But this is not the case. Essentially, had either the passing-off claim or the claim for infringement under 10(3) succeeded, I can see a strong reason for saying that the use would not be in accordance with honest commercial practices, but the question does not arise.
- Accordingly, in the absence of passing-off or any other unfair practice (which might well include infringement under section 10(3)), Mr Alavi can use his trading name.
The Community Trade Marks and the Regulation
- In general, all I have said in respect of the UK clothing marks, and its consequences in respect of the UK vehicle marks, apply to the 'all goods' CTM. The position of the MERC mark needs to be considered separately.
- The position of the MERC mark is that it is a case where the mark is identical, but the goods fall outside the specification of goods of the registered mark. The questions again arise under the equivalents of sections 10(2) and 10(3) of the 1994 Act, Articles 9(l)(b) and 9(1)(c) of the Regulation. All the remarks which I have made above apply equally to these provisions. I have felt more doubt in respect of the MERC mark registered in respect of vehicles, because of the identity of the marks. The question is not merely the obverse of the issues which arise in relation to MERCEDES or MERCEDES-BENZ registered in respect of clothing. If one considers the position of this mark (in contradistinction to the MERCEDES marks) the essential difference lies in its non-use by DaimlerChrysler. No instances of use by DaimlerChrysler were relied on. It was said to have a reputation which has accrued to it by reason of its use as an abbreviation for Mercedes. I have held that at the commencement of these proceedings, that reputation would not support an allegation of passing off in respect of clothing by use of MERC in the way Mr Alavi uses that sign. So that is the first of the global considerations which I bear in mind. It must be remembered that the claim is that clothing is 'similar' to motor vehicles. Again, all the indicia save, in a limited sense, the channels of trade tell against similarity (see paragraph 84 above). In my judgment, viewed against the reputation enjoyed by this mark, and its informal use which is unsupported on the evidence by its proprietor the allegation of infringement must fail.
Prior rights defence
- If I am wrong in this, there remains the question whether there is a defence, given that Mr Alavi had been trading for a substantial time before August 1977 in the manner I have indicated. This defence does not arise in relation to the earliest of the UK Clothing Marks and is thus irrelevant to the case on the UK Marks generally, and need only be considered here. This is not the same problem as is met by the transitional provisions in our national legislation, because the effect of the 1994 Act was to change the protection conferred by existing marks. Where a new mark is concerned, these problems do not arise, and the only question is whether the defendant is able to take advantage of the protection conferred by the Regulation on existing users. These are to be found in Article 8, in respect of non-registered trade marks or signs of more than mere local significance. Art 8 provides a ground of invalidity. Where the prior right is restricted to a particular locality, Art 52(l)(c) and Art 107 provide a defence to infringement.
- By Art 8(4),
'Upon opposition by the proprietor of a non-registered trade mark or of another sign used in the course of trade or more than mere local significance, the trade mark applied for shall not be registered where and to the extent that, pursuant to the law of the Member State governing that sign
(a) rights to that sign were acquired prior to the date of application for registration of the Community trade mark, or the date of the priority claimed for the application for registration of the Community trade mark;
(b) that sign confers on its proprietor the right to prohibit the use of a subsequent trade mark.'
Art 107 is as follows:
'Prior rights applicable to particular localities
1. The proprietor of an earlier right which only applies to a particular locality may oppose the use of the Community trade mark in the territory where his right is protected in so far as the law of the Member State concerned so permits.
2. Paragraph I shall cease to apply if the proprietor of the earlier right has acquiesced in the use of the Community trade mark in the territory where his right is protected for a period of five successive years, being aware of such use, unless the community trade mark was applied for in bad faith.
3. The proprietor of the Community trade mark shall not be entitled to oppose use of the right referred to in paragraph 1 even though that right may no longer be invoked against the Community trade mark.'
- The recitals to the Regulation give no guidance as to the distinction between marks of merely local significance and non-local marks. I have some difficulty in identifying the difference. Certainly Article 8 seems to be talking (in English terms) about marks which would support a passing-off action. So however is Article 107, which seems on the face of it to be concerned with marks which enjoy a local reputation and would support a passing-off action (Faulder v Rushton (1903) 20 RPC 477). It seems to be plain that non-local marks referred to in Article 8 include marks restricted in their effect to one Member State. I consider that in principle Mr Alavi's protectable goodwill (see paragraph 64 above) would protect him against use by another clothing trader who sought to use the mark MERC on clothing. It would not, obviously, protect him against the use of MERC on motor vehicles. If Article 8(4) is restricted in its effect to a right to prevent use of the subsequent mark in respect of the goods for which it is registered, this defence is of no use to Mr Alavi. The result would be that he would be the proprietor of a protectable goodwill, trading honestly, who was divested of his goodwill and right to trade by a subsequent registration. This would be possible because of the extended protection of Art 9(l)(b) and 9(1)(c). I cannot believe that this is right. It is no answer to say, as DaimlerChrysler say, that it is all because their marks are very famous and have become household names.
- I suspect that the Treaty provisions cannot affect the existence of a goodwill as a property right, (although they may affect their exercise)-see Art 295 (ex Art 222) of the Treaty of Rome. Goodwill is a property right in United Kingdom law. I do not see how a grant of a community trade mark can destroy an existing goodwill and a course of trading which is not dishonest and does not mislead the public.
- Fortunately, the question does not arise, if I am right in my view as to the infringement of the MERC mark. The question must, it seems to me, be referred to the Court of Justice if I am wrong. In this connection, I raised at trial the question whether there was a potential inconsistency with Article 1 of the first Protocol to the European Convention on Human Rights in this regard. In this case the discussion takes place in an exclusively Community law context. There is, so far as I can see, no relevant authority so far as the grant of a monopoly affecting existing trading goodwill is concerned. There are certain analogies with the introduction of the hire right in the context of copyright, which was discussed in Case C -200/96: Metronome Musik GmbH v Music Point Hokamp GmbH  ECR 1-1953. This was a case not concerned with a property right but with the freedom to carry on a business. The complaint was that the harmonisation of the copyright rental right by Council Directive 92/100/EEC, which had the effect of introducing the rental right into German copyright law, was incompatible with fundamental Community rights. The point taken was based squarely on the effect of the right on an established lawful business. The Court of Justice considered the nature of the rental right, its position in the international legal order, and balanced the interest in promoting such a right against the freedom to carry on a trade, which was, as it said, not an absolute right but a freedom which must be viewed 'in relation to [its] social function'. Having regard to the function of the rental right, the balance came down in favour of the rental right, and so there was no incompatibility with fundamental principles. Indeed, it would have been surprising if any other conclusion had been reached.
- No doubt the introduction of monopolies in respect of manufactures other than patentable inventions (playing cards, to take the famous example) could be struck down on this ground. But the case is not concerned with the grant of an individual right (a Community trade mark) which has effect on a particular individual's business in the way I have indicated. This point is plainly referable to the Court of Justice, if the factual basis for it existed.
- The final defence with which I must deal is a defence of acquiescence. Ultimately this resolved itself into a complaint about delay, and a case of knowledge based on two particular events. The first, which I have described above, is the painting of the word MERC on Mr Alavi's van by the then proprietors subsidiary at Colindale. The other, which I have not described above, concerns a visit to Mr Alavi's MERC stand at one of the Man and Boy exhibitions to which I have referred. In brief, Mr Alavi says that he was visited by some representatives of the Mercedes-Benz who did not object to his use of Merc.
- Delay does not form a ground of defence unless either it gives rise to a defence under the Trade Marks legislation (and the directive) or DaimlerChrysler has acquiesced in Mr Alavi's activities, and Mr Alavi has been induced by DaimlerChrysler's standing by to commit himself to a course of action which otherwise he might not have undertaken: see Farmer's Build Ltd v Carrier Bulk Materials Handling Ltd  RPC 461. In Electolux Ltd v Electrix Ltd (1954) 71 RPC 23, which was a trade mark case, the position of the infringer who is building up his own goodwill was described in this way by Sir Raymond Evershed MR:
'Mr. Shelley says that the case really is properly analogous to the case supposed by Lord Cranworth in Ramsden v. Dyson (1866) LR 1 HL 129. That is the case of a man building upon another's land, upon the false hypothesis that the land is his (the builder's) own. He says that the analogy is there and is true, because what the Defendants have done and are doing, in trading under their mark "Electrix", is to build, not (it is true) a house, but an edifice of another kind, namely, a business goodwill. I myself do not accept that that is a true analogy. In the Ramsden v. Dyson type of case, if the true owner of the land is entitled to assert his rights, then not only does he strip the builder of the fruits of his toil, but he also assumes to himself, and makes his own property, those fruits. In a case such as the present, there is no doubt that the Defendant is damaged, he suffers loss, if, after building up this goodwill, he is then restrained from continuing to operate under the name. But it is surely quite wrong to say that the Plaintiff in this case, the owner of the mark, assumes to himself some proprietary right or some benefit which otherwise would be the property of the Defendants. After all, if the Plaintiffs are entitled to succeed, they are only taking and retaining what would be theirs by virtue of their own registered mark-unless, of course, they are prevented by this acquiescence from claiming to assert those rights.
I think, upon analysis, that Mr. Shelley's argument must, in the end of all, come to this, that the owner of a registered trade mark who for a substantial period of time has lain by and not asserted his rights has lost those rights, notwithstanding that they are rights conferred upon him by statute. I think so to hold, at any rate in a case where the length of time involved is no greater than in this case [10 years], would be to introduce a wholly novel-nay, revolutionary-doctrine, and I think also that it would be contrary to the principles laid down by the decided cases. Indeed, Mr. Shelley himself admitted that mere delay, without more, can be no bar to the exercise by the owner of a registered trade mark of his statutory right. The cases, I think, are clear to that effect; for example, to quote but two, Fullwood v. Fuliwood (1878) 9 Ch.D., p.176, another decision of Fry, J. in a passing-off case, and Vidal Dyes V. Levinstein (1912) 29 R.P.C. 245, at p.259, a patent case, where the proprietor had lain by for as long a period there as ten years.'
- It is an essential component in a defence of aquiescence that the failure of the plaintiff to act should have induced the defendant to believe that the wrong was being assented to. But in this case there was no such reliance by Mr Alavi: indeed, he only remembered the visit to the stand on being asked by his solicitors, and had attached no importance to it at the time. In any event, DaimlerChrysler (or their predecessors) were not aware of his trading activities until 1997. These facts cannot support a plea of acquiescence. But the period of trading is very long. Had I found that Mr Alavi had infringed one or more of the Mercedes marks, but that there was no passing off, and that there had been no damage, perhaps the question of delay should have to be considered in the context of relief. But the question does not arise. This defence fails.
- The action fails and must be dismissed. My preliminary view (which does not affect the outcome of the infringement proceedings) is that the United Kingdom clothing marks should be revoked in part, but that the principles applicable require a reference to the ECJ. I will hear submissions on the correct way forward in the light of this judgment.