Pre-Brexit use in the UK irrelevant in EU cancellation proceedings heard after Brexit

24th November 2022

In an important decision (found here), the General Court has decided in favour of the EUIPO, holding that evidence of use of an earlier EU Trade Mark (EUTM) in the UK won’t assist those seeking to invalidate a later EUTM where the decision by the Board of Appeal was taken after the UK left the EU. 

Background

Shopify Inc. filed for a declaration of invalidity against Shoppi Ltd’s EUTM (see below). Shopify argued that the similarities between Shoppi’s later mark and their earlier mark, SHOPIFY, meant there existed a likelihood of confusion on the part of the public.

The Cancellation Division invalidated Shoppi’s mark but the Board of Appeal allowed Shoppi’s appeal. The Board of Appeal’s decision was based on Shopify’s mark having a low level of inherent distinctiveness and Shopify’s failure to demonstrate that the mark had acquired an enhanced level of distinctiveness through its use in the UK.

Shopify appealed to the General Court, challenging the Board of Appeal’s approach to distinctiveness.

Assessment of the marks

The General Court upheld the decision of the Board of Appeal, agreeing that the “shop” element of the mark was merely descriptive and the addition of the suffix “ify” did not elevate the mark to anything beyond a “low” level of distinctiveness for the English-speaking public and a “slightly higher than minimum level” for the non-English-speaking public.

The fact that the “shop” element was descriptive also meant that it could not dominate the marks in a visual, phonetical or conceptual way. As such, the distinctive elements were seen to be “ify” and “pi” which had a low degree of visual and conceptual similarity, and an average degree of phonetic similarity, meaning a likelihood of confusion was not established.

No obligation to consider use in the UK

The significant part of the General Court’s decision related to whether SHOPIFY had acquired enhanced distinctiveness through use in the UK. The application for Shoppi’s mark had been made on 8 May 2017 and this was the date for assessing the distinctiveness of the earlier mark. However, the General Court held that the Board of Appeal has been correct to ignore the evidence of use of SHOPIFY in the UK, even though, at that date, the UK was still in the EU. 

It noted that previous case law required that the owner of the earlier right had to establish that they could prohibit the use of the later EUTM, not only on its filing date, but also on the date on which the EUIPO makes its decision (whether that be in cancellation proceedings or in opposition proceedings). Since the Board of Appeal’s decision was dated 18 February 2021 and the UK had left the EU by that date, any evidence of enhanced distinctiveness through use in the UK had been correctly disregarded by the Board of Appeal. Shopify therefore failed to establish that its mark had enhanced distinctiveness.

The General Court also noted that the fundamental principle of territoriality of intellectual property rights meant that the public in the UK, post Brexit, was no longer part of the ‘relevant public’ since no conflict could arise in the UK between the two marks after the end of the transition period. 

Comment

This decision is important because it is contrary to earlier General Court judgments, in particular, the decision in Nowhere v EUIPO, sometimes called the APE TEES case (see here). Instead, it is in line with the Communication dated September 2020 from the Executive Director of the EUIPO on the impact of Brexit (see here) and with previous decisions of the Board of Appeal.

There is a key point of principle at play here. It is this: is it right in cancellation proceedings only to take into account the facts as they existed at the date that the later EUTM was registered? If it is, then it is possible for an EUTM to be invalidated on the basis of a right that, by the date of the decision, no longer exists and could, therefore, not be asserted in infringement proceedings against that EUTM.

It has been pointed out that applicants in invalidity proceedings (or indeed those opposing EUTM applications as the point applies equally to them) would not destroy their valuable positions during the pendency of the proceedings. However, for those relying on UK rights in such proceedings, they have no choice: Brexit saw to that.

With conflicting decisions at the General Court level, the matter will have to be decided by the Court of Justice of the EU. The APE TEES case has been appealed, as have other cases on the point, and this decision might also be appealed. It will be fascinating to see what the Court of Justice makes of this.