Phones4u Ltd & Anor v Phone4u.Co.UK & Ors

A claimant in passing off need show protectable goodwill, a damaging misrepresentation and actual or likely damage. It need not prove that consumers were diverted into buying from the defendant. Confusion which causes consumers to believe that businesses are connected, or which harms the claimant’s goodwill, can suffice.

The goodwill threshold differs from the higher distinctiveness requirement for trade mark registration. An inference of no deception from concurrent trading is justified only where there has been sufficient side-by-side trade to create a meaningful opportunity for deception to appear.

A registered trade mark expressly limited to specified colours under Trade Marks Act 1994 section 13 confers rights restricted by that limitation.

The claimants operated a nationwide mobile-phone retail chain under the name and logo “Phones 4u”. The defendants registered and used the domain name phone4u.co.uk. The claimants alleged passing off and infringement of a registered logo trade mark limited to red, white and blue.

A deputy judge in the Chancery Division dismissed both claims, holding that the claimants had not established sufficient goodwill at the relevant date and that the evidence showed, at most, mere confusion. He also rejected the trade mark claim. The claimants appealed from 2005 EWHC 334 (Ch).

The central issues were whether the domain name created actionable passing off and whether the colour wording in the registration restricted the scope of the registered trade mark.

1. Appeal allowed in part. The court held that passing off was established, but dismissed the appeal on trade mark infringement.

2. The deputy judge applied the wrong threshold to goodwill. The standard for acquired distinctiveness required to register a trade mark is materially higher than the standard for a protectable passing-off goodwill. By August 1999, the claimants’ substantial nationwide shop presence, sales and advertising made it untenable to find that the name had no material attractive force among the relevant public.

3. Applying the three elements stated in Reckitt & Colman v Borden [1990] 1 WLR 491, the court found a damaging misrepresentation. The evidence showed consumers who knew the claimants were attempting to contact them through the defendants’ site. Passing off protects goodwill against damage beyond direct diversion of sales, including the harm caused by a false belief that the defendant’s business is connected with the claimant.

4. The defendants’ domain name was an instrument of fraud in the sense explained in BT v One in a Million [1999] FSR 1. Once the claimants’ goodwill was established, no realistic use of the nearly identical domain name could avoid deception. The defendants’ attempt to sell the name after learning of the claimants supported that conclusion.

5. The absence of proven diverted sales during coexistence did not answer the claim. An inference of no deception requires evidence of substantial side-by-side trading. The defendants had supplied no sufficient evidence of the scale of their trade, while the emails themselves evidenced damaging deception.

6. For the registered mark, the words stating that the mark was limited to red, white and blue were a limitation of rights under Trade Marks Act 1994 section 13. The pre-registration correspondence could be examined for the limited purpose of deciding whether the proprietor had agreed to that limitation. It had. Accordingly, use of the uncoloured domain name did not infringe. Absent that limitation, the prominent verbal element of the logo would have made the domain name confusingly similar.

• Court of Appeal (Civil Division) — in [2006] EWCA Civ 244, allowed the appeal on passing off and dismissed it on registered trade mark infringement.
• High Court, Chancery Division — Deputy Judge Richard Sheldon QC dismissed the passing-off and trade mark claims in 2005 EWHC 334 (Ch).