carrie bradley - zombie brands final
TRANSCRIPT
Zombie brands
Zombie brandsWhat are “zombie” brands?
Zombie brands
Is this practice legally safe? Can the original brand owner prevent a newcomer
from bringing the dead mark back to life?
Trade Mark Troll? Brand recycler?
Zombie brands
Revived by original brand owner (intervening rights) – consider newcomer only
Heritage brandsNature of zombie brands
Commercial arguments For and against brand revival Legal implications
Passing-off - residual goodwill Case Study
SIMMONS
Practical steps Due diligence
Zombie brands
Heritage “Heritage brands” = Connection to past
Old, iconic brands Widespread notoriety
Goodwill & reputation survivesBrand resonates with consumers
- recognition from bygone era
Zombie brands
Commercial arguments for brand revival
“PRO-ZOMBIE”Evokes nostalgia = emotional connection Recognition translates into consumer trust
and loyaltyFakes and counterfeits today v. heritage brand =
quality and authenticity = trustTrust = edge =triggers immediate demand
Demand = brand equity and value Capitalise on brand heritage by revival!
Zombie brands
Commercial arguments for brand revival
“PRO-ZOMBIE” Abandoned brands = wasted commercial
opportunity Increases consumer choice & generates
economic activity Policy: unused marks should not block active
trader once abandoned – become available
mirrors underlying policy of revocation (non-use) provisions
Rights abandoned - to allow block - unduly extending life of rights
Offer significant time & cost savings – marketingalready enjoy goodwill = automatic catapult forward
= lower business risk, premium charging prices
Zombie brands
Commercial arguments against brand revival - “NO-ZOMBIE”
Division of opposing views – the “nerve” someone has “snatched” it!
Unfair advantageRiding on coat tails of their reputationBenefitting from marketing and advertising expenditure
DeceptiveBadge of origin for consumers No connection or control – zombie brand conflictsDrawn in by familiarity – expect standards/quality recallOnce trusted source – unrelated = consumer deceived
External circumstances Cessation of trade forced upon them Not abandoned - genuine intent to resume
Zombie brands
Legal implications
Original brand owner position Assume any registrations lapsedActionable passing-off? • Cause of action to prevent use
• Prevent registration –opposition grounds s.5(4)(a)/Art.8(4)
Zombie brands
Goodwill• Passing-off claim requires goodwill
“Attractive force that brings in custom”• Property right is in the goodwill, not mark
itself• Goodwill and reputation - separate
concepts!Reputation is merely a state of fact not a form of
legal property• TM reputation doesn’t mean protectable
goodwill• Goodwill created by actual trading and
must be shown in connection with a business.
What if brand owner ceased trading? Goodwill destroyed? No!
Zombie brands
Residual goodwill• Case law confirms goodwill may be retained long
after use abandoned and long after the business ceased trading
• Goodwill does not disappear or lose value overnight –
gradual process of erosion – will slowly fade away= residual goodwill
Zombie brands
Residual goodwillDiageo: “Mere cessation of business is not enough”
• Wadlow, Law of Passing-off (4th ed) 3-220• Evidence original owner intended to resume
trading?Company dissolved, assets broken up and sold, no
assignment of goodwill?• Any evidence to point to temporary cessation -
forced upon brand owner by external circumstances?
Evidence of definitive abandonment of goodwill
= no passing-off
Zombie brands
Residual goodwillHow long does it last?
• Kerly (15th ed): “question of fact”• Case law supports view:
Greater scale reputation originally established
& its strength when use stopped = longer it may exist
• Court will consider how & extent mark and reputation kept in the public eye. Persuasive if: Ongoing servicing or provision of spare parts Retaining corporate entity No asset disposal (equipment needed to trade, customer lists) No press statements Thriving second hand market Owner maintained blogs/chat forums to keep interest alive
Zombie brands
Residual goodwill The longer business left un-resumed, the more the goodwill
will dwindle
How much is enough?• “Question of fact” but goodwill must not be “trivial”• Will protect goodwill small/large business - difficult to set minimum
threshold • Significant body of evidence required • Prove scale of the reputation once enjoyed and ongoing efforts to
maintain so exists at relevant date. Time consuming and costly exercise.
Different commercial field?• “No passing off unless common field of activity” - discredited in
Harrods• Presence/absence just one factor relevant to misrepresentation
and damage – no more than rule of thumb• No rule of law cannot succeed in absence of common field
Zombie brands
Case Study – SIMMONS UKIPO Invalidity (O/459/11) & Appeal to AP (O/468/12)
Helpful real life example of heritage brand revivalLessons on how original brand owner proved residual goodwill
Why brand adopter actions = bad faithBoth decisions set out law very clearly
• Well known hexagonal shaped electronic drums• Invented by brand owner - cutting edge of
technology • Trading between 1978 – 1997 – achieved
widespread notoriety in music industry – endorsed by famous musicians – Phil Collins, Spandau Ballet – Top of the Pops!
–Manufactured in UK – sold worldwide
Zombie brands
Case Study – SIMMONS UKIPO (O/459/11) & (O/468/12)
• Exported to US Company retailer/distributor from 1989-1994
• Substantial retail chain – scale: top selling drums in US in 1986
• US$10 million SIMMONS drums alone• Electronic drums fell out of fashion – ceased
manufacture 1997• TM registrations lapsed but continued to supply spare
parts• In 2006, US company registers UKTM - SIMMONS• Application for invalidity s.5(4)(a) and s.3(6)
Zombie brands
Case Study – SIMMONS UKIPO (O/459/11) & (O/468/12)
• Despite 9 year gap in trade – establish residual goodwill
• Gathered vast body of evidence of extent and scale of use and reputation + independent evidence from trade = goodwill
• Residual goodwill - company not dissolved (although dormant) = consistent with intent to resume
• Continuing servicing and second hard parts kept goodwill alive
• Thriving second hand market – protectable goodwill survived
• Adopter criticised - did not seek to contact the original owner – “no excuse” = s.3(6) bad faith.
Appeal failed.
Zombie brands
Practical stepsDue diligence!
• Trade Mark Registers – status/ownership• Lapse? Assigned?
• If renewed/alive, vulnerable to revocation BUT assignment preferable
• Late renewal / still using / assigned goodwill?
• Internet research – company registers, news reports
• Common law searches – identify any use?
Zombie brands
Practical stepsStill not in the clear!
Case law – obligation extends beyond lapsed registrations or dormant business
• Proactive and direct approach original owner
• Modest sum for written consent and undertaking not to challenge?
• Experience – pragmatic approachCapitalise on sale v. fade into history/languish on balance
sheets• Helpful – suggesting other contacts, explaining
history
Zombie brands
Practical steps• Dissolved company - not always possible
to trace• Ex-directors / chain of successors in title
• Obtain last accounts – contact accountants/auditors/liquidators
• Employ professional investigator
Zombie brands
Collaboration?Licensing arrangement?
Joint venture with original owner?
Refusal = expect litigation/opposition!Bad faith – 3(6)/Art.52(1)(b)
Zombie brands
Bona Vacantia “ownerless property”
• Another route to explore purchasing IP of dormant companies
• Dissolved company - IP assets – by law pass to Crown• Treasury Solicitor’s Department (‘TSol’) now
Government Legal Department (GLD) • Bona Vacantia Division (BVD) of GLD - acts for
Crown to administer these BV IP assets • Website guide
No title guarantee, representations or warranties (express or implied)
Trade marks do not include any goodwill• Restoration of company – assets back
Zombie brands
Conclusion
Economic climate provided impetus?Case law - permissible practice? Highly fact
dependent!Evidence of goodwill – material impactDifficult concepts to apply – balance
interestsCost for revival may outweigh value of brand
equityGrowing commercial practice
