The High Court in London ruled that husband and wife duo Ebastian and Victoria Brealey, who together run jewellery business JSC Jewellery, infringed trade marks belonging to Nomination and that they were also responsible for 'passing off'.
"It is unsurprising that the court found that selling genuine links of a charm bracelet in combination with the seller’s own links amounted to trade mark infringement when the advertising did not make clear that the buyer would receive a mixture of the two," intellectual property law expert Iain Connor of Pinsent Masons, the law firm behind Out-Law.com, said.
"This is not a judgment about rights holders overreaching their rights to control goods already put on the market with their consent but rather a consumer protection decision to ensure that traders can’t oversell non-genuine products by combining them with genuine products," he said.
According to the High Court's ruling, the Brealeys bought Nomination bracelets from retailers in Italy, Germany and the UK. Those bracelets were made up of detachable links which were each branded with Nomination's trade mark. The couple disassembled the Nomination bracelets, repackaged them into bundles of individual links and then sold them on eBay along with links it made itself for charm bracelets.
The JSC Jewellery links and Nomination links were interchangeable, and the Brealeys stated on their eBay listing in January 2011 that its product 'fits Nomination'. In February 2013 the couple updated the page to remove that reference and in July 2018 it stopped selling the bundled links altogether.
However, Nomination said JSC Jewellery's advertising and sales of the bundled links infringed its trade marks and that the sales also passed the goods off as being made, authorised or otherwise associated with Nomination.
JSC Jewellery argued, though, that Nomination had exhausted its trade mark rights when it first placed its goods for sale on the EU market, claiming that Nomination was therefore not entitled to prevent it from marketing the Nomination goods it had bought from the trade mark owner's chosen retailers, whether in whole or in part.
In the EU, businesses that hold trade mark rights are able to exercise control over how their brand is exploited. However, to promote the free movement of goods and competition within the EU single market, the rules generally prevent trade mark holders from controlling subsequent sales of goods which have been put on the market by, or with the consent, of the trade mark owner.
The High Court considered that Nomination had placed its goods for sale on the EU market and consented to the onward sale of individual links from its bracelets. However, it considered that Nomination could nevertheless prohibit JSC Jewellery's marketing of its goods. Nomination had a legitimate reason for doing so because it was likely that JSC Jewellery's choice of packaging would damage the reputation of Nomination's trade marks, the court held.
"I am satisfied that the elegant packaging of Nomination's bracelets will convey an image of luxury to purchasers and that this increases the reputation of the trade marks," judge Hacon said in his ruling. "The receipt of Nomination's products in a small blister pack or polythene bag is likely to damage that reputation."
Under EU trade mark law, the rules on exhaustion of rights upon first sale do not apply "where there exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market".
In his ruling, judge Hacon did reject a number of the other arguments that Nomination raised which it claimed gave it legitimate reason to object to JSC Jewellery's activities under trade mark law.
In particular, the judge dismissed concerns raised by Nomination about the fact JSC Jewellery had not always identified itself as the business that had carried out the repackaging in the packs it supplied to customers. Nomination said that this breached principles established in case law, but the judge said he was "not satisfied" that they applied beyond cases that concern "repackaged pharmaceuticals or products of an equally sensitive nature".
"It would be important to be able to trace all stages of supply of pharmaceuticals in the event of, say, a health scare. There is no such sensitivity attached to the sale of bracelets," the judge said.
A similar comparison was given by the judge in rejecting concerns Nomination raised about the damage risk it said JSC Jewellery's repackaging posed to the condition of its links.
"Pharmaceuticals are liable to be damaged by poor repackaging, caused by exposure to damp or heat or physical impact, more liable than bracelet base links anyway," judge Hacon said. "I was given no sound reason to believe that the blister packs or polythene bags used by JSC would expose the links to damage in circumstances where Nomination's packaging would not have done."
After considering the way JSC Jewellery advertised its goods, the judge found that JSC Jewellery had used Nomination's trade marks and that the company was responsible for misrepresentation by failing to make sufficiently clear to consumers that its own bracelet links were not supplied by Nomination.
The law of passing off applies where businesses acquire goodwill in a trading name or style through use. Where such goodwill has been acquired, businesses are entitled to prevent other companies offering copycat goods or services that consumers may confuse as coming from the more recognised brand.