Pliteq Inc & Anor v Ikoustic Ltd & Anor

Use of a trade mark to advertise genuine goods is not ordinarily infringement merely because the reseller also offers competing goods. The exhaustion defence depends principally on whether the use objectively relates to goods placed on the market by or with the proprietor’s consent. The reseller’s subjective motivation is generally immaterial, and limited remaining stock does not by itself remove the defence. Offering a clearly identified alternative product does not affect the origin function where the customer understands the different trade origin. A different result may follow where the mark is used to advertise the alternative product rather than to re-commercialise genuine goods. Legitimate reasons to oppose further commercialisation are not confined to damage to reputation, but parallel competition and transparent resale did not establish such a reason here.

The claimants owned GENIECLIP and GENIEMAT trade marks for acoustic products and had formerly appointed the first defendant as a distributor. After the distributorship ended, the defendants sold their own MuteClip and MuteMat products while retaining and selling stock of the claimants’ goods. The claimants alleged trade mark infringement through website content, Google advertising and direct customer dealings, including bait-and-switch selling, and also alleged passing off.

The central issues were whether the defendants used the marks in relation to genuine goods, whether the use affected a trade mark function, whether the exhaustion defences under the Trade Marks Act 1994 and the EUTMR applied, and whether the defendants had legitimate reasons to oppose further commercialisation.

1. Trade mark use. The defendants’ use of Google dynamic advertisements constituted use of the marks. They had employed Google to produce the advertisements and retained the ability to control the webpages and keywords included or excluded. The absence of a positive selection of the marks did not prevent use where Google acted on the defendants’ behalf.
2. Functions and bait-and-switch selling. The claimants did not prove confusion or substitution without the customer’s knowledge. Offering an alternative product, where its different origin was made clear, did not by itself affect the origin function. Fair competition could require the proprietor to adapt its advertising or investment efforts without infringing those functions. The authorities concerning initial-interest confusion and bait-and-switch selling did not establish infringement on these facts. The defendants’ conduct was distinguishable from the situation in Cosmetic Warriors Ltd v Amazon.co.uk Ltd [2014] EWHC 1316 (Ch), where no genuine goods had ever been stocked.
3. Exhaustion. The relevant question under section 12 and Article 15 was objective: whether the use related to goods already placed on the market by or with the proprietor’s consent and would be understood by the average consumer as referring to those goods. Motivation was not material. Limited stock, including stock insufficient for some larger orders, did not create an additional restriction unsupported by the statutory wording.
4. Exception. The webpage at Annex C used GENIECLIP to announce that the genuine product was unavailable and to promote MuteClip. That was use in relation to the defendants’ goods, not re-commercialisation of exhausted goods. The exhaustion defence therefore failed for that use, which infringed.
5. Legitimate reasons and passing off. The claimants proved no damage to the marks’ reputation, false implication of a trade connection, or confusion. Selling competing goods transparently did not amount to unfair advantage or a legitimate reason to oppose resale. The passing-off claims also failed because no operative misrepresentation or protectable goodwill in the functional product photograph was established.
6. Disposition. The trade mark infringement claim succeeded only in relation to the Annex C webpage. The remaining infringement allegations and the passing-off claim failed.