O2 Holdings Ltd (formerly O2 Ltd) v Hutchison 3G Ltd (No 2)

JurisdictionEngland & Wales
CourtChancery Division
JudgeMr Justice Lewison
Judgment Date23 Mar 2006
Neutral Citation[2006] EWHC 534 (Ch)
Docket NumberCase No: HC04C02776

[2006] EWHC 534 (Ch)

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Before:

Mr Justice Lewison

Case No: HC04C02776

Case No: HC04C03779

Between:
(1) O2 Holdings Limited
(2) O2 (UK) Limited
Claimants
and
Hutchison 3G Limited
Defendant

Mr Richard Arnold QC and Mr Mark Vanhegan (instructed by Wragge & Co for the Claimants

Mr Geoffrey Hobbs QC and Ms Emma Himsworth (instructed by Lewis Silkin for the Defendant

Hearing dates: March 2 nd, 3 rd 6 th 8 th 9 th

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

Mr Justice Lewison

Introduction 4

Brands 6

Launch of O2 7

O2's advertising 8

Use of the trademarked bubbles 14

Technical 14

Fizz 14

Relax 14

Continuous 15

Monochrome reproductions 15

O2's television advertising 15

The success of the advertising 16

Customer numbers 16

Industry recognition 17

Press comment 18

O2's protection of its brand 19

H3G 20

Toil and trouble 20

Toil: H3G's campaign 20

Trouble: the offending advertisement 25

The success of H3G's campaign 27

The proceedings so far 29

Interim injunction refused 29

Reference to ECJ refused 30

Survey evidence 31

The issues: 32

The legal framework 32

The Trade Marks Directive 32

Invalidity: burden of proof 37

A short digression 37

Distinctiveness 38

Use in conjunction with other identifiers 42

Significance of the form of the registration 43

Device marks and moving images 46

What kind of use counts as infringement? 48

The ingredients of infringement under article 5 (1) (b) (section 10 (2)) 58

Mark for sign? 58

Identity of services 65

Likelihood of confusion 65

The ingredients of infringement under Article 5 (2) (section 10 (3)) 71

Reputation 71

Misuse of the sign 71

Without due cause 73

Takes unfair advantage 74

Detriment 75

The Comparative Advertising Directive 77

Must comparative advertising comply with the Directive? 78

Is compliance with the Directive restricted to registered marks? 82

What is indispensable? 86

Section 10 (6) 88

Validity of registration 89

Inherent distinctiveness 89

Acquired distinctiveness 89

The use of bubbles in brand recognition 89

The experts 90

Common ground between the experts 90

Are H3G's bubbles confusingly similar to O2's? 91

Are H3G's bubbles similar to bubble marks with a reputation? 97

The bubble reputation 97

Are H3G's bubbles similar to Relax? 98

O2's criticisms of H3G's advertisement 99

Summary 99

Confusion 100

Denigration 101

Erosion of distinctiveness 105

Piggy-backing 108

Was the use of the bubbles indispensable? 109

In the round 110

Actualities not risks or likelihoods 111

The Comparative Advertising Directive checklist 111

Is it misleading? 112

Does it compare goods or services meeting the same needs or intended for the same purpose? 112

Does it objectively compare prices? 112

Does it create confusion in the market place between the advertiser and a competitor? 112

Does it discredit the trade marks or services of O2? 112

Does it take unfair advantage of the reputation of O2 or O2's trade marks? 112

Result 113

Introduction

1

This is a case about bubbles. The claimants, O2 Holdings Ltd and O2 (UK) Ltd (collectively "O2"), are providers of telecommunications services, especially mobile phones. So is the Defendant, Hutchison 3G UK Ltd ("H3G"). During the summer of 2004 H3G ran a series of advertisements on national television and radio to promote the launch of its new pay-as-you go service "ThreePay". The advertisements compared the pay-as-you-go services offered by H3G to those of its competitors, including O2. It is accepted, for the purposes of this action, that the text and soundtrack of the advertisements (including a reference to O2's registered trade mark "O2") was lawful, in the sense of being permitted comparative advertising both under domestic law and under European law. However, O2 complains that in the course of the television advertisement H3G infringed four of its trade marks by showing bubbles.

2

O2 regard this case as important for the protection of their brand identity. They have invested a great deal in establishing the brand. They say that H3G is not entitled to use for the purpose of comparative advertising signs which they say are confusingly similar to O2's registered trade marks when (a) that use is gratuitous and unnecessary (b) it enables H3G to take advantage of the distinctiveness and reputation of the marks to grab consumers' attention and enhance the reputation of H3G's brand (c) the use involves distorting the marks to the detriment of O2's brand image and (d) the use blurs the distinctiveness of the marks. Mr Arnold QC, who appears with Mr Vanhegan on behalf of O2, says this case is about whether, and if so in what circumstances, it is acceptable for an advertiser to use a competitor's brand imagery, rather than simply its brand name, in comparative advertising. He says that it is unnecessary to use competitors' brand imagery, and doing so presents a significantly greater risk that the advertisement will take unfair advantage of the reputation of the competitor's brand. Furthermore, use of a competitor's brand imagery leads to a blurring of the distinctions between the brands which undermines the functions of the marks both as origin indicators and as carriers of the brand's cachet. This is particularly so if what is used is not the exact brand imagery used by the competitor but a distorted version of it. This is damaging to brand owners who invest large sums in building up distinctive brands, and it is contrary to the interests of consumers who depend upon well-differentiated brands for making informed choices.

3

For its part H3G, appearing by Mr Hobbs QC and Ms Himsworth, say that they have done nothing unlawful; and in any event they say that the bubble trade marks on which O2 relies should not have been registered at all, because they lack distinctiveness.

Brands

4

Brands are big business. They can be worth many millions of pounds. The value of the Coca Cola brand has been said to be worth sixty per cent of the market capitalisation of the Coca Cola Corporation. Defining a brand is not easy. A lawyer would tend to think of goodwill, trade marks and so on. But a brand includes more elements; such as image and reputation; the values that the brand owner tries to inculcate in the buying public. A brand is what customers choose to buy. Many decisions about brands are made by customers emotionally or intuitively rather than rationally. Successful brands create a relationship of trust between the customer and the brand.

5

Important to all this is the overall idea of the "brand image". The brand image can be created in a variety of ways: personal experience; word of mouth; how the brand is presented in stories in the media; packaging; point of sale display; retail staff; and, of course, advertising. The value of a brand lies in brand awareness; perceived quality; brand association and brand loyalty. The distinctiveness of a brand is of particular importance where the product offered by competitors in a given field of activity has few substantive differences. The provision of mobile phone services is one such field. Car insurance is another.

6

A brand that customers can call to mind easily is called a "salient" brand. Many brands have readily recognisable images which are almost indelibly associated with the brand. Sometimes this is packaging (for example, a Perrier bottle). Sometimes it is an image associated with advertising (such as the Dulux dog). Sometimes it is a combination of elements (for example, the Coca Cola bottle, the distinctive font for the logo and the colour red). (It has been said that the reason that Father Christmas is represented in red, rather than in his original green, is because of the influence of Coca Cola's branding).

7

English law does not, however, protect brands as such. It will protect goodwill (via the law of passing off); trade marks (via the law of trade mark infringement); the use of particular words, sounds and images (via the law of copyright); shapes and configurations of articles (via the law of unregistered design right) and so on. But to the extent that a brand is greater than the sum of the parts that English law will protect, it is defenceless against the chill wind of competition.

Launch of O2

8

What ultimately became O2 started life trading as BT Cellnet, part of British Telecom. In November 2001 it demerged from British Telecom. It then traded as mmO2. In May 2002 it launched the O2 brand; and that brand name has been used ever since in the UK, Germany, Ireland and Austria. It has, more recently, been taken over by Telefonica, a Spanish telecommunications company. In preparation for the launch of the O2 brand, O2 commissioned Lambie Nairn, a firm of designers, to devise the brand. What O2 wanted was a brand that would be distinctive and recognisable. It had to be simple, and capable of being consistently applied. Lambie Nairn devised the brand O2. It was based on the concept of oxygen. It was to have four key identifiers:

i) The O2 name;

ii) The logo "O2" which represents the chemical symbol for oxygen;

iii) Bubble imagery; and

iv) A blue graduated background with the lighter portion of the graduation at the bottom.

9

This concept was taken to Abbott Mead Vickers, an advertising agency. Although they came up with an advertising strategy, O2 did not like it as it had not carried forward Lambie Nairn's design concept. So they went to a new agency that became VCCP.

O2's advertising

10

Since the launch of the O2...

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