When can legitimate goods be modified and resold using the original trade mark?

Summary

In the case of AGA Rangemaster Group Ltd v UK Innovations Group Ltd and Another [2024] EWHC 1727 (IPEC), the Intellectual Property Enterprise Court addressed questions of trade mark and copyright infringement within the secondary market. In particular, the Court had to consider when a brand owner can prevent the refurbishment and modification of genuine goods which it has placed on the market.

This article examines the legal principles of trade mark exhaustion and explores how brand owners can manage their reputation after goods have been sold.

Background

The Claimant, AGA Rangemaster Group Ltd (AGA), brought a claim for trade mark and copyright infringement against UK Innovations Group Ltd (UKIG) and its director.

For context, AGA manufactures cookers and UKIG converts AGA cookers to run on electricity. However, AGA did not complain that the supply or conversion of cookers infringed its rights. Instead, AGA’s complaint was that UKIG was selling genuine AGA cookers which had already been retrofitted with the conversion. AGA’s position was that the sale of cookers bearing the AGA trade mark was infringement.

While acknowledging the legitimate aftermarket, AGA argued that the extensive modifications meant the cookers were no longer original AGA products, thus infringing its trade marks. AGA also claimed that UKIG’s control panels infringed its copyright in the design of its electronically controlled cookers.

Trade Mark Infringement

AGA alleged that UKIG’s practices violated sections 10(1), 10(2), and 10(3) of the Trade Marks Act 1994. In particular, AGA alleged that the use constitutes infringement because:

• under section 10(1) the use of an identical mark in relation to identical goods and is liable to affect one of the functions of the trade mark;
• under section 10(2) the use of an identical mark on identical or similar goods creates a likelihood of confusion;
• under section 10(3) the use of an identical mark takes unfair advantage of and is detrimental to AGA’s reputation or distinctive character without due cause.

UKIG denied the allegations under section 12 of the Act on the grounds that the rights were exhausted and under section 11(2)(b) and (c) of the Act because their use of AGA was descriptive.

The Court chose to focus first on whether the rights were exhausted. If they were then the trade mark infringement allegations would fail.

The law

At the relevant time when the alleged acts took place, section 12 of the Trade Marks Act 1994 stated:

12   Exhaustion of rights conferred by registered trade mark

• A registered trade mark is not infringed by the use of the trade mark in relation to goods which have been put on the market in the United Kingdom or the European Economic Area under that trade mark by the proprietor or with his consent.

• Subsection (1) does not apply where there exist legitimate reasons for the proprietor to oppose further dealings in the goods (in particular, where the condition of the goods has been changed or impaired after they have been put on the market).[1]

The effect of section 12(1) was summarised by the CJEU in Parfums Christian Dior SA v Evora BV[2] as follows:

“… when trade-marked goods have been put on the Communitymarket by the proprietor of the trade mark or with his consent, a reseller, besides being free to resell those goods, is also free to make use of the trade mark in order to bring to the public’s attention the further commercialisation of those goods“.

This is often referred to as the exhaustion of a trade mark proprietor’s rights, meaning that the proprietor cannot object to further dealings with those goods by others using the mark. However, by reason of section 12(2), this exhaustion of rights does not apply where the proprietor has legitimate reasons for opposing such further dealings.

Legitimate reasons include circumstances where the condition of those goods has been changed or impaired after being put on the market. Other examples are where the further dealings might seriously damage the reputation of the trade mark[3] or give the impression that there is a commercial connection between the person responsible for those dealings and the trade mark proprietor and, in particular, the impression that that person’s business is somehow affiliated to the trade mark proprietor or that there is a special relationship between them[4].

Application of the law

The Court found that the refurbishment and conversion work alone was not sufficient to give the trade mark owner legitimate grounds to oppose further dealings with the goods. It did find however that the way in which the refurbished and converted items were marketed and sold were legitimate reasons to stop the use of AGA.

The goods were found to be marketed and sold in a way in which customers would believe that there was a commercial connection between UKIG and AGA. In other words, a normally informed and reasonably attentive customer would be unable, or would be able only with difficulty, to ascertain whether the goods originate from AGA or from an unrelated third party, such as the Defendants.

The Court found:

51. In effect, the website was offering customers the opportunity to “Buy an eControl AGA”… with a warranty… in one of a range of colours and/or the opportunity to convert an existing AGA Cooker using the eControl System.

52. In my judgment, these statements taken as a whole were likely to give customers the impression that what they were being offered was an AGA product…

54. Ultimately, if the Defendants wished to sell these converted cookers, there was a need for them to ensure that customers were not given the impression that the conversion was somehow connected to the Claimant and even… to take steps to dispel such an impression. As set out above, the website and invoices did the opposite.

UKIG therefore had no defence under section 12 to the trade mark infringement allegations.