Who: LUMOS Skincare Ltd, Sweet Squared Limited.
Where: Court of Appeal, London
When: 6 June 2013
Law stated as at: 27 June 2013
The Court of Appeal has overturned the decision of Mr Recorder Douglas in the Patents County Court and allowed a passing off case brought by LUMOS Skincare (“LUMOS”) to succeed. LUMOS sells four specialist anti-ageing skincare products to beauty salons under its “Lumos” mark. It also sells to the general public through salons and other retail outlets. In October 2010 Sweet Squared Ltd (“SSL”) began to sell nail care products under the same name.
Lord Oliver in the Jiff Lemon case established that the following elements are required to prove passing off:
1. Goodwill or reputation must be attached to the goods or services. Mr Recorder Justice held that the necessary goodwill and reputation in LUMOS’s products was established in October 2010 when SSL’s nail care products were first marketed.
2. Misrepresentation by the Defendant to the public leading or likely to lead the public to believe that the goods or services offered by him are the goods or services of the Claimant. This second limb of the test was the subject of the appeal as discussed below.
3. Damage to the Claimant by reason of the erroneous belief engendered by the defendant’s misrepresentation that the source of the Defendant’s goods or services is the same as the source of those offered by the Claimant. Mr Recorder Douglas had stated that LUMOS’s goodwill would be likely to be damaged if misrepresentation were shown to have occurred. Therefore the Court of Appeal did not unduly focus on this limb of the test.
First instance decision
Mr Recorder Douglas had held that there was no misrepresentation by SSL because he considered that there was a clear division between the skincare and nail care industries. He also held that LUMOS was unable to show that a substantial number of members of the public had been misled by SSL. He decided that, as the relevant customers for assessing any potential passing off were beauty salon owners (“trade customers”), the lack of evidence that they were misled into believing that there was a link between the two companies was determinative.
Court of Appeal
Lloyd LJ gave the lead judgment in the majority appeal decision. He held that Mr Recorder Douglas had misdirected himself in relation to the relevant market, the identity of LUMOS’s actual and potential customers and the significance of an email from a trade customer.
Lloyd LJ held that, although skincare and nail products are different, their markets are quite similar. As a consequence, SSL could not rely on the argument that LUMOS’s customers would never come into contact with SSL’s products. In addition, although SSL do not currently sell their products in the same outlets as LUMOS, there was nothing preventing this from happening in the future.
Mr Recorder Douglas had applied Neutrogena Corporation v Golden Ltd and held that the “misrepresentation” element of passing off was not present due to the absence of evidence that a substantial number of the public had been misled . However, Lloyd LJ stated that, given the very small market for LUMOS’s goods, a “substantial number” would never be large in absolute terms. Therefore the absence of evidence of widespread confusion amongst multiple customers could not preclude the passing off claim from succeeding.
End users were relevant customers and were more likely to be misled
Lloyd LJ also held that LUMOS’s customers were not simply the trade customers but they also include the end users who purchased the products directly on the internet or from the beauty salons. These end users were more likely to be misled then trade customers because they were less knowledgeable about the beauty sector.
Following this argument, Lloyd LJ also attached weight to an email from Ms MacMillan, a trade customer, who wrote an email to LUMOS asking whether the nail products were a different branch of LUMOS Skincare. He stated that
“In a sense the force of Ms. MacMillan’s comment is that, even though she was a trade customer, she had been misled and this shows that non-trade customers might be misled as well.”
Lloyd LJ argued this email supported Jacob LJ’s requirement for passing off in Phone4U Limited v Phones4u.co.uk Internet that a substantial amount of people went from “I wonder if there is a connection” to “I assume there is a connection”. Ms MacMillan had clearly assumed that there was a connection between the two products and, if a trade user was misled, then numerous end users were likely to be confused as to the origin of SSL’s products.
There was also discussion within the Court of Appeal judgment about whether the first instance judge had misdirected himself and then interpreted the facts accordingly. Sir Bernard Rix in his dissenting judgment felt that this meant that the Court of Appeal had essentially retried the case. However, Lloyd LJ argued that “it is open to the Court of Appeal to undertake the process … to consider the evidence adduced and use his own common sense and his own opinion as to the likelihood of deception”.
Why this matters
This case highlights the fact that all categories of customer can be relevant in determining whether there have been misrepresentations for the purposes of “passing off”.
Moreover Lloyd LJ’s application of Neutrogena Corporation v Golden Ltd means that the number of customers required to show that a “substantial number” of customers were misled will depend on the product in question.
However, the majority judgment of the Court of Appeal is unlikely to be the last word. Although an injunction has been granted in general terms, this has been suspended pending appeal to the Supreme Court on an expedited basis.
Intellectual Property Litigation