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Sailing Close to the Wind: Budget Brands

By Scott Gardiner
Sailing Close to the Wind: Budget Brands

What do hair serums, salmon fillets and caterpillars all have in common? The answer is of course that they have all been the subject of high-profile trade mark disputes.

The arrival of budget supermarkets in the UK has increased competition and provided consumers with greater choice. However, in seeking to compete with more familiar and established household names, these lower-cost retailers have often ‘sailed close to the wind' by bringing to market a wide range of so-termed ‘copycat' or ‘imitation' brands. Whilst some may argue that these ‘copycat' brands simply provide busy shoppers with helpful ‘visual cues' to familiar product types, it is easy to see why brand owners may take issue with the actions of their budget rivals.

Each year, brand owners invest substantially in the marketing and promotion of their products. Together with longstanding and widespread use, such investment helps brand owners secure valuable goodwill and reputation in their trade marks. After all, in the words of Lord Mcnaghten in IRC v Muller & Co's Margarine Ltd [1901] AC 217, goodwill is "the attractive force which brings custom". It is, in effect, what induces someone to buy Kellogg's corn flakes instead of the corn flakes offered by another provider.

Therefore, it is not surprising that new entrants to the market often seek to take advantage of the goodwill and reputation attached to already established third party trade marks by selling their own products under signs or in packaging which call to mind these more familiar and reputed brands. But just how close to their more premium rivals can the own-brand products offered by budget retailers be?

Moroccan Oil

Moroccanoil Israel Limited v Aldi Stores Ltd [2014] EWHC 1686 (IPEC)

This case concerned an action brought against Aldi by Moroccanoil Israel Limited (MIL). In bringing the claim, MIL argued that Aldi's sale of its own-brand hair oil under the name ‘Miracle Oil' constituted passing off. In view of the alleged similarities between the respective marks and the overall ‘get up' of the two products, MIL argued that consumers would:

  • mistake Aldi's Miracle Oil product for Moroccan Oil;
  • assume that Miracle Oil and Moroccan Oil have the same manufacturer; or
  • otherwise believe that there was an association between the two retailers/products.

MIL's claim was dismissed on the basis that no evidence had been presented which demonstrated that consumers would in fact be deceived as to the origin of the relevant goods. Fatal to MIL's case was the Court's reluctance to recognise the concept of ‘initial interest confusion' in the context of a passing off claim. In this regard, HHJ Hacon considered that any momentary confusion would be dispelled once the customer picked up the product and inspected it. Accordingly, whilst it was recognised that Aldi had been "cheeky" in the selection of its packaging, it was held that consumers would in fact recognise that Aldi's product and MIL's product were different. Whether the same conclusion would be reached today remains to be seen, not least because Aldi now stocks branded products alongside its various own-brand lines.

The Saucy Fish Co

Icelandic Seachill v Aldi Stores Ltd [2016] EWHC 1134 (Ch)

This case involved an action brought against Aldi by Icelandic Seachill (The Saucy Fish Co) for both trade mark infringement and passing off.

The act complained of was Aldi's sale of vacuum packed salmon fillets in packaging which closely resembled The Saucy Fish Co's own product packaging. Unlike in the Moroccan Oil / Miracle Oil case, The Saucy Fish Co was able to rely on registered trade mark rights, which included its registrations for (i) THE SAUCY FISH COMPANY, (ii) variations of its Fish Device and (iii) the design of its product packaging. The Saucy Fish Co also claimed that its trade marks benefited from the extended protection afforded to marks that have a reputation.

The case was ultimately settled out of court with Aldi agreeing to revise its product packaging. Given the challenges associated with relying on the law of passing off, the fact that The Saucy Fish Co was able to rely on its registered trade mark rights may well have proven instrumental in it achieving a favourable outcome.

Colin the Caterpillar

Most recently, Marks & Spencer (M&S) has taken steps to pursue Aldi for trade mark infringement. The alleged infringement concerns Aldi's sale of its Cuthbert the Caterpillar cake, which M&S considers to infringe various of its registered trade mark rights relating to its similarly named cake, Colin the Caterpillar.

The case has not yet proceeded to trial. However, should it do so, it will be interesting to see whether, in addition to trade mark infringement, M&S also seeks to rely on the law of passing off.

In relation to M&S' claim for trade mark infringement, given the number of other caterpillar cakes currently on the market (going by names including Clyde, Curly, Wiggles and Morris) it may be difficult for M&S to demonstrate that consumers are likely to be confused. For the same reason, and given the decision in the Miracle Oil case, M&S may also struggle to succeed in any claim brought under the law of passing off, where it is necessary to demonstrate that consumers are liable to be deceived as to the commercial origin of the relevant goods.

On the other hand, if M&S is able to prove that its trade marks also benefit from a reputation, its prospects of success may be somewhat improved. This is because M&S would not need to show that consumers are likely to be confused, but rather that Aldi's use is without due cause and takes unfair advantage of, or is detrimental to, the distinctive character or repute of M&S' registered trade marks. The fact that Aldi is a budget retailer may help M&S establish its case, though M&S will still need to prove that, despite the seemingly ever-growing family of caterpillar cakes offered by other supermarkets, upon seeing a Cuthbert the Caterpillar cake, a link with M&S' Colin the Caterpillar cake will be established in the minds of consumers. Whether M&S will succeed in any such claim remains to be seen and it may be that the dispute is ultimately settled out of court.

Clearly, the business model adopted by budget supermarkets such as Aldi relies, in part, on the ability of these retailers to sail as close to the wind as possible without infringing the intellectual property rights of third parties. The cases described above demonstrate some of the difficulties that brand owners face when relying on unregistered rights, which is often required when budget brands replicate certain aspects of a product's overall ‘get up' or appearance. For this reason, in addition to protecting the names of their products, brand owners ought to also take steps to secure trade mark registrations for any distinctive packaging designs and related indicia.