The Court of Appeal has partly upheld easyGroup’s appeal in a case concerning the use of various signs comprising the words easy, live and auction (pictured below).
At first instance, Sir Anthony Mann dismissed easyGroup’s claim for passing off, having found that there was misrepresentation but no damage. He also made certain findings regarding non-infringement of trade marks by the defendants, which easyGroup also appealed.
What constitutes damage?
In a judgment with which the other two judges agreed, Lord Justice Arnold noted that:
“It is extremely rare for a passing off claim to fail on the ground that, although the claimant owns goodwill and the defendant has made an actionable misrepresentation, the claimant has not suffered any damage. This is because of the obvious propensity for relevant misrepresentations to be damaging to the claimant's goodwill.”
The first instance judge found no realistic suggestion of diversion of trade and no likelihood of damage to repute. Both these findings were unchallenged. However, easyGroup appealed the judge’s finding that its ability to charge others for a licence would be diminished.
Upholding this point, Arnold LJ said that it was clear from the Eddie Irvine, Fine & Country and Rihanna cases that “in principle, the claimant in a passing off action may claim damages on the footing that it has lost licensing income as a result of the misrepresentation”.
In this case, Arnold LJ said the claim was justified as a matter of principle: “Given that the juridical basis of the action is invasion of property, it naturally follows that damages assessed according to the user principle should be available. This also explains why the alternative remedy of an account of profits is available.”
However, damage, or the likelihood of damage, is an essential ingredient of passing off. Arnold LJ said these two principles can be reconciled:
“a claimant who has no existing or prospective endorsement or licensing business cannot rely solely upon the loss of the fee that it would have charged for consenting to the acts complained of as completing its cause of action; but a claimant which does have an existing endorsement or licensing business can in principle rely upon the loss of that fee for that purpose even if the acts complained of are not of precisely the same kind as the claimant has previously endorsed or licensed; and the same may be true of a claimant which has a prospective endorsement or licensing business (e.g. a celebrity who has not yet started such a business but is at the point where they could do so).”
In this case, easyGroup had a well-established licensing business and could rely upon its loss of the fee which it could have charged the defendant. It was also obvious (and did not require supporting evidence) that easyGroup’s ability to attract paying licensees, particularly in the auction field, would be reduced if an unlicensed competitor can take advantage of its goodwill.
The first instance judge had found that signs 2 and 3 in the list above infringed the trade mark but that use of the signs 1 and 4, the words EASY LIVE AUCTION and or EASYLIVEAUCTION in plain text, and the domain name easyliveauction.com, did not infringe.
The Court accepted easyGroup’s argument that the declaration granted was too uncertain. However, Arnold LJ said the problem could be fixed by amending it by adding the words underlined: “in any non-stylised, non-logo form used by the First Defendant before 13 October 2022”.
What does this mean?
The Court of Appeal has heard several cases on passing off recently. The tort can be a powerful weapon, as it can go beyond the scope of registered IP rights. However, claimants have to prove goodwill, misrepresentation and damage.
This judgment provides useful guidance on what can constitute damage and importantly clarifies that it can include lost licensing income. This will be useful for any business that earns revenue from licensing brands.