IP Insight: Agree Before You Disagree, A Cautionary Tale

This case pertains to a trade mark dispute between a supplier and former distributor resulting in a subsequent IPEC decision. Notably, the dispute could have been wholly avoided had the parties entered into a distribution agreement at the start of their commercial relationship. Instead, the parties traded on the Supplier’s standard Terms and Conditions which did not cover many of the aspects of their legal relationship.

Pliteq Inc & Pliteq (UK) Ltd v iKoustic Ltd & Ricky Lee Parsons [2020] EWHC 2564 (IPEC)

By Lauren Waterman and Charlie Bond

Background

This was an interesting case brought by a supplier, Pliteq Inc and Pliteq (UK) Ltd (“Pliteq”) against its former UK distributor, iKoustic Ltd, and its director Mr Parsons (iKoustic) for trade mark infringement, not by using an identical or similar mark, but by alleged “bait and switch” selling. This was explained in Och-Ziff Management Europe Ltd v Och Capital LLP [2010] EWHC 2599 (Ch) [2011] F.S.R. 11 by Arnold J (as he was), as a situation where “the defendant deliberately uses the claimant’s trade mark as a bait to attract the consumer’s attention, and then exploits the opportunity thus created to switch the consumer’s purchasing intention to his own product or service.”

Pliteq sells acoustic damping and sound control products under two trade marks: “GENIEMAT” and “GENIECLIP”. In 2012 they appointed iKoustic as their distributor in the UK for these products. As the parties did not enter into a negotiated commercial agreement, iKoustic began to distribute the products on a non-exclusive basis.

In 2018, the relationship between the parties broke down. iKoustic began to sell and market its own range of competing goods under its own brands “MuteMat” and “MuteClip”. There was no suggestion that these marks infringed Pliteq’s trade marks.

Instead, Pliteq alleged that iKoustic were using their trade marks in a number of ways, including Google Ads to draw visitors to their website and purchase their own alternative products, rather than those of Pliteq – particularly when they were low on Pliteq stock and insufficient to fulfil typical orders of this type.

This, they allege, amounted to trade mark infringement by “bait and switch” selling i.e. that iKoustic were luring customers in using Pliteq’s trade marks, then selling their own product to them instead.

The Judgment

Miss Recorder Amanda Michaels was the Judge hearing this case and dismissed the claim for trade mark infringement in full.

The Judge felt that there was no evidence of dishonesty on the part of iKoustic – particularly as they had offered to sell any Pliteq goods back to Pliteq at cost and therefore cease all use of their trade marks.

It was held that iKoustic could rely on the exhaustion defence under s12 Trade Marks Act/Art 15 EUTMR, as their use of Pliteq’s trade marks was to simply advertise Pliteq’s goods for sale.

This was simply a case of fair competition – there was nothing wrong in iKoustic offering an alternative product for sale.

It was held that there was not sufficient evidence to prove that iKoustic was using Pliteq’s trade marks to this end. Particularly as iKoustic offered to sell the goods back to Pliteq and cease all use of the trade marks.

Accordingly, the Judge rejected the claim that iKoustic’s real motive was to use Pliteq’s trade marks to sell their own products.

Our Insight

This case illustrates the importance of scoping out a commercial relationship right at the start and to ensure you have properly drafted bespoke agreements in place to reflect this.

Unfortunately, in this instance, Pliteq did not have any legal recourse to prevent iKoustic from selling their own competing goods and attempted a novel trade mark infringement action involving bait and switch selling to achieve a result which could have been reached in a properly drafted distribution agreement.

This is a costly lesson for Pliteq and something we help our clients to avoid by highlighting the importance of investing in properly drafted commercial agreements now to save money and problems years down the line. Such agreements can determine the specific relationship between parties and responsibilities of the same, including what happens at the end of the relationship, limiting the likelihood of negative consequences.

Who are Virtuoso Legal

Virtuoso Legal is a specialist team of IP solicitors, founded in 2007 by Elizabeth Ward and based in London and Leeds.

The team offer a comprehensive IP offering with registration, commercialisation and litigation expertise - all present in-house.

In recent years, the Virtuoso Legal team have represented cases in the UKIPO, EUIPO, IPEC, High Court, Court of Appeal and Supreme Court of the United Kingdom.​