"Warning: may contain nuts" - What harm or damage must a well known trademark proprietor show to establish unfair dilution?

27 November 2012

Vikram Ramasamy

Sarika Connoisseur Cafe Pte Ltd v Ferrero SpA [2012]
SGCA 56

Facts

Sarika owns and operates a chain of cafés offering customers various coffee beverages. Ferrero owns the “NUTELLA” mark, used in connection with a cocoa-based hazelnut spread. After Sarika introduced a beverage named “NUTELLO”, which included the “NUTELLA” spread as an ingredient, Ferrero sued Sarika.

The High Court held that Sarika (a) was liable for trade mark infringement and passing off; and (b) had diluted the “NUTELLA” mark.

Decision

The Court of Appeal (the CA) upheld the High Court’s decision. As to what sort of damage would suffice to establish dilution, the CA held that it is sufficient to show “a real or serious probability of damage to the well known trademark’s advertising quality or symbolic function”. It is not necessary for the trade mark proprietor to show proof of actual or immediate damage such as loss of sales / profits or an adverse change in the economic behavior of its customers because of the other party’s use of its sign. However, if it is able to do so, this merely adds further weight to its dilution claim.

CA’s Reasons

First, to establish dilution under Section 55(3)(b)(i) of the Trade Marks Act (the Act), it is irrelevant whether the goods in question are similar. Where the goods are dissimilar, adducing evidence of adverse changes in consumer economic behaviour is not possible as the goods are not consumption substitutes and are therefore not purchased in direct competition to each other.

Second, the definition of “dilution” in Section 2 of the Act states that it can occur “regardless of whether there is any competition between the proprietor of the trade mark and any other party”. As showing competition is not necessary, the trade mark proprietor will find it difficult to show marked adverse changes to its profits or sales because of the other party’s use of its sign.

Third, dilution involves a mark’s “death by a thousand cuts”, occurring slowly over time. As such, showing immediate and apparent damage is difficult in practice and to insist on evidence of actual damage would result in well known marks being under-protected.

Fourth, the first use of an identical or similar sign may indicate a real and serious likelihood that detriment to the well known mark’s distinctive character will occur in the future. Therefore, the well known mark’s proprietor should not be required to wait until harm is actually done to the mark’s distinctive character before it may obtain an injunction against dilution.

Comments

The CA did not provide any guidance as to the meaning of “real or serious probability of damage to the well known trademark’s advertising quality or symbolic function”. Nevertheless, given the nebulous definition of dilution, Courts should require strict proof of “real or serious probability of damage” lest bona fide businesses be subject to frivolous dilution claims.

This article was written by:

Vikram Ramasamy
Associate
vikram.ramasamy@twobirds.com

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