Who: Department for Business, Innovation & Skills
When: 13 October 2015
Law stated as at: 2 November 2015
After a year-long consultation, the government has decided that brand owners should not have the power to seek civil injunctions to prevent rivals copying the designs of their product packaging.
In its report on the issue of so-called ‘copycat packaging’, the Department for Business, Innovation & Skills (“BIS”) concluded that any change to the status quo would carry “risks of unintended consequences”, including an increase in litigation.
The debate stems from the UK government’s decision not to grant competing businesses direct enforcement rights when implementing the Unfair Commercial Practices Directive (“UCPD”) by way of the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”). Although the UCPD allows for competing businesses to be given powers to take civil injunctive action to stop copycat packaging, that option was not exercised by UK lawmakers and enforcement of the CPRs was instead left to ‘specified enforcement bodies’.
As a result, businesses currently have to rely on enforcers such as Trading Standards or the Competition and Markets Authority, who have criminal prosecution powers under the CPRs and civil enforcement powers under Part 8 of the Enterprise Act 2002. Consumer watchdog Which? represents the collective interests of consumers and is also designated as an enforcer under the same Act.
But brand owners have complained that the designated enforcers – often underfunded and limited in resources – have never shown a significant interest in cracking down on copycat packaging or the culprits behind the practice. From this perspective, stakeholders argue that the CPRs are somewhat toothless and do not adequately protect their valuable brands.
What does the law say about copycat packaging?
Broadly speaking, the CPRs prohibit misleading commercial practices that cause an average consumer to take a different transaction decision. The BIS report defines ‘copycat packaging’ as the act of “designing a product’s packaging to give it the look and feel of a competing well-known brand”. Such a practice potentially infringes the CPRs to the extent that:
- it amounts to false information about the nature, characteristics and origin of the product – regulation 5(2);
- it creates confusion with any products, trade marks or trade names or other distinguishing marks of a competitor, such that the average consumer may take a different transactional decision as a result – regulation 5(3); or
- it promotes a product similar to a product made by a particular manufacturer so as to deliberately mislead the consumer into believing that the product is made by the same manufacturer when it is not – paragraph 13, Schedule 1.
What about IP rights?
Brand owners commonly argue that the law of trade marks does not provide adequate protection from copycat packaging. There are limitations on what can be registered as a trade mark, and businesses cannot always rely on their trade mark rights because copycat packaging does not normally involve outright copying of trade marks. Moreover, there is often difficulty in establishing distinctiveness in court due to the pace with which packaging evolves.
With regards to unregistered rights, the tort of passing off also offers limited protection to brand owners, due to the difficulty (and consequential high cost) in establishing goodwill and misrepresentation.
The BIS report
The government consultation sought views on a range of issues, including the problems with the current enforcement position, the extent of consumer detriment from copycat packaging and the cost/benefit balance of giving brand owners power to take direct action.
The views expressed among the 34 respondents were markedly polarised. On the one hand, brand owners argued that the lack of enforcement under the CPRs has resulted in consumers being misled and sales being diverted from brand owners, which they say reduces innovation and distorts competition. Retailers, on the other hand, argued that direct enforcement powers could have anti-competitive results while not benefiting consumers.
Perhaps most compelling, however, is the observation in the BIS report that there appeared to be little appetite for change among consumers themselves, with suggestions that many deliberately buy copycat products (largely due to their lower price) and are generally happy with their purchases.
Reflecting this, the UK skills minister Nick Boles concluded in a parliamentary statement that “there is little clear evidence that the use of similar packaging is causing any significant consumer detriment or hindering competition or innovation”.
Why this matters:
Trade organisations including the British Brands Group have expressed disappointment with the outcome of the government review, and the complaint that the law does not adequately protect brands will no doubt continue to be voiced.
On the flipside, however, it is worth remembering that the CPRs are intended to protect consumers, rather than the commercial interests of brand owners. With little evidence of consumer detriment, it is perhaps no surprise that the government declined the opportunity to reinforce brand owners’ rights.
The conclusions reached in the BIS report, together with recent case law[i], clearly demonstrate the importance of a well-managed trade mark portfolio. Careful forward planning to identify and file the right registrations – including for marks covering the design of packaging (where possible) – remains the best strategy for brand owners.
For the time being, direct rights to challenge copycat packaging or lookalike products are as far away as ever, although this is unlikely to be the last we will hear on the issue. The on-going assessment of the misleading and comparative advertising directive (announced by the European Commission back in 2012) could well create another opportunity for the UK government to revisit copycat products.