This article was originally published in Solicitors Journal on 1 October 2024
The continued growth of the circular economy has brought with it legal complexities for holders of intellectual property rights who may see their products reappear on the aftermarket having undergone refurbishment, conversion or other ‘upcycling’ practices. A recent decision in the Intellectual Property Enterprise Court (IPEC) has provided guidance as to the steps that a reseller of such products can legitimately take in its acts of refurbishment/conversion and also when marketing those refurbished products (AGA Rangemaster Group Limited v (1) UK Innovations Group Limited (2) Michael Patrick McGinley [2024] EWHC 1727 (IPEC)).
The decision also highlights the ongoing tension between the traditional UK approach to copyright protection for functional designs (which provides only a limited scope for copyright to apply) and that adopted by the Court of Justice of the European Union (CJEU). As the claimant has been given permission to appeal the IPEC’s finding on copyright, we hope to receive clarification from the Court of Appeal on how this tension can be resolved in due course.
Background
The claimant (AGA) manufactures and sells its well-known range of cookers under the trade mark AGA. AGA cookers have been sold in the UK since 1929 and are known for their length of service.
In 2020, the first defendant (UK Innovations Group Limited) launched a range cooker with an electronic control system called ‘the eControl System’. The eControl System can be added to AGA cookers, converting them to run on electricity rather than traditional fossil fuels. AGA did not object to the supply of eControl Systems to customers to fit to their AGA cookers. It also accepted that there is a legitimate aftermarket in the refurbishment and resale of AGA cookers. However, it did object to the defendants retrofitting AGA cookers with the eControl System, arguing this went beyond what was permissible and amounted to trade mark infringement. It also complained about the defendants’ marketing of its eControl Cookers using the AGA mark.
The first defendant had retrofitted eControl Cookers using AGA cookers obtained from trade suppliers or as customer trade-ins. The retrofitted cookers retained the AGA badges and externally looked the same as an AGA cooker except that, in place of the temperature gauge, an eControl System badge was fitted (see below).
Advertisements for eControl Cookers included phrases such as ‘Buy an eControl AGA’ with no attempt to clarify that they were not sourced from, or connected to, AGA.
The decision
Trade mark infringement
AGA claimed trade mark infringement, relying on various word marks for AGA, as well as a ‘badge mark’, a 2D AGA mark and a 3D AGA mark. Based on the defendants using signs identical and/or similar to AGA’s marks, and AGA alleging this affected (or was liable to affect) one of the functions of its and/or gave rise to a likelihood of confusion, AGA brought claims under sections 10(1) and 10(2) of the Trade Marks Act 1994 (TMA). AGA also argued that the defendants’ use was detrimental to the reputation of its marks and took unfair advantage of their distinctive character, leading to infringement under section 10(3) TMA.
The defendants denied infringement and also sought (unsuccessfully) to invalidate two of the claimant’s trade marks.
Section 12 defence – exhaustion of trade mark rights
The main defence relied upon by the defendants was the ‘exhaustion’ defence in section 12 TMA. When goods bearing a mark have been put on the relevant market (here, the UK) by the trade mark owner, or with their consent, a reseller ‘besides being free to resell those goods, is also free to make use of the trade mark in order to bring to the public’s attention the further commercialisation of those goods’ (Parfums Christian Dior SA v Evora BV C-337/95). Where the defence applies, a trade mark proprietor cannot object to further dealings with those goods using the mark – its rights are said to be ‘exhausted’.
However, the proprietor may be able to object to further dealings in the goods under s.12(2) TMA, namely where there are legitimate reasons to oppose further dealings, in particular where the condition of the goods has been changed or impaired after they have been put on the market. (Section 12(2) was recently amended to provide that the proprietor’s opposition to further dealings must not interfere with the rights of any other person any more than is necessary to achieve the purpose of protecting the proprietor’s property, but the facts arising in this case were considered under the previous version of the provision.)
AGA argued that it had such legitimate reasons because: (1) the defendants had changed the condition of the AGA Cookers in ways that might result in serious damage to the reputation of AGA’s marks and (2) the way in which the eControl Cookers were marketed and sold might lead people to believe that there was a commercial connection between the defendants and AGA.
The Judge (Nicholas Caddick KC sitting as a Deputy Judge) recognised the importance of striking a fair balance between protecting the proprietor’s interest in its trade marks and the interests of others, such as the purchaser of the original goods and those who operate in the aftermarket.
The Judge concluded that AGA did have legitimate reasons to object to the way in which the defendants had marketed and sold the eControl Cookers. The advertisements had given the impression that there was some commercial connection between the defendants (or their products) and AGA. For example, use of ‘eControl AGA’ would not be seen as purely descriptive, but as part of the brand for the eControl Cookers, and these would be linked to AGA’s name, even though customers were making a considered and relatively expensive purchase.
However, AGA could not object to the defendants’ refurbishment and conversion works. The court also rejected the argument that there was a serious risk that the defendants’ actions might damage the image of the AGA marks:
- In regard to the defendants’ renovation/refurbishment works, the Judge recognised that there could be a point where refurbishment works are so extensive that the resulting product is no longer a refurbished/renovated version of the original, but is a new and different product. That was not the case here. Given the ‘reasonably extensive aftermarket’ in second-hand refurbished AGA cookers, customers would understand that a second-hand AGA was likely to contain replacement parts, and would not assume that those parts would necessarily be of the same quality as the originals.
- In regard to the defendants’ conversion works, converting a fossil fuel AGA cooker by fitting an eControl System was clearly a significant change in its condition, but this was not enough – the proprietor must still show it has legitimate reasons to object to further dealings in the product with the changed condition. Again, that was not the case here.
- In regard to reputation, although AGA argued the AGA badge used was a poor quality replica, the court concluded there were no legitimate reasons based on alleged damage to its reputation.
Turning to post-sale confusion, AGA argued that the eControl System badge would lead people to believe there was a commercial connection between the parties. However, this alone was not sufficient to give legitimate reasons to object to the defendants’ activities as it would not give the impression of a connection with AGA. Rather, it was descriptive to indicate the fitting of the eControl System. It was foreseeable that works would be done to AGA Cookers already on the market.
Section 11 TMA – descriptive use
The court went on to reject a defence under section 11 TMA (a defence of descriptive use, provided in accordance with honest practices).
The defendants argued they used ‘AGA’ to explain the purpose of the eControl Cookers, to indicate that the eControl System converted the AGA cookers. However, the use of ‘AGA’ on their website and invoices did not fall within the defence because it suggested that the eControl Cookers and the eControl System were associated with AGA. Further, the use would not in any event be consistent with honest practices.
Section 10 TMA - infringement
The court found liability under sections 10(1) and 10(2) TMA because the defendants’ use of the AGA marks had affected or was liable to affect one of the functions of the AGA marks and/or gave rise to a likelihood of confusion. It also found infringement under section 10(3) TMA, namely that: (1) AGA had considerable reputation in relation to the AGA marks, based on evidence of extensive use and (2) the defendants’ activities were detrimental to the reputation of the AGA marks and took unfair advantage of their distinctive character.
Copyright infringement
The second main issue concerned a copyright infringement claim relating to a CAD drawing for the design of the control panels for electric AGA cookers. AGA argued this was an artistic work under the Copyright, Designs and Patents Act (CDPA), which had been infringed by the defendants’ control panels for their eControl Cookers.
The court rejected the defendants’ argument that, because the appearance of the control panel was dictated by technical considerations and the author applied no/very limited creative choices, it did not meet the originality standard. Whilst it was influenced by the panel’s intended function, it was not dictated by that function; instead, there were ‘creative or aesthetic choices driven by [the designer’s] wish to create a design that captured […] the historic look of the traditional AGA Cookers’. On infringement, whilst there were ‘points of difference’, the defendants’ control panel was found to have copied a substantial part of the panels on the AGA cookers, amounting to indirect infringement of the copyright in the CAD drawing.
Section 51 CDPA
However, the defendants had a defence to copyright infringement under section 51 CDPA.
Section 51 CDPA provides that it is not an infringement of copyright in a design document to make an article to the design in that document (or to copy an article made to that design), unless the relevant design is for something which would itself be considered an artistic work. The provision was introduced to limit the availability of copyright protection for so-called industrial designs. The court concluded, on the wording of section 51, that the defence applied – this was because the control panel itself was not an artistic work.
However, the court also highlighted the ongoing debate in relation to the status of section 51, particularly in light of the approach under EU law including the CJEU’s decision in Cofemel (C-683/17). Whilst Cofemel supports a less restrictive view as to what might be protected by copyright, the court could not construe section 4 (re artistic work) and/or section 51 in such a way as to say that the control panel itself was an artistic work. The conflict between the ‘closed list’ approach in the CDPA and the CJEU Cofemel approach is an open issue, with an IPEC judgment on this issue awaited (Waterrower (UK) Limited v Liking Limited).
The court recognised that it could be argued, on the one hand, that section 51 does not set any additional requirement for copyright to subsist. However, section 51 also went ‘far beyond anything’ that had been envisaged by the InfoSoc Directive as a permitted exception to infringement. Indeed, in Cofemel, the CJEU had taken the position that unwarranted copyright protection for industrial designs could be avoided by a rigorous assessment of the originality requirement.
Director liability
The last issue was whether the second defendant was liable as a joint tortfeasor. This is also a developing area of law, with the Supreme Court handing down its decision in Lifestyle Equities v Ahmed [2024] UKSC 17, after the hearing in this case. In Lifestyle Equities, the Supreme Court confirmed that a director must have had ‘requisite knowledge’, i.e., of the essential facts of the trade mark infringement, in order to be personally liable. The court found the second defendant did not have (all of) the requisite knowledge. The evidence did not show he had reason to believe that the first defendant’s activities could affect the origin function of the AGA marks, lead to a likelihood of confusion, or be detrimental to the reputation and/or distinctive character of the AGA marks.
Whilst the case demonstrates the higher threshold that applies to impose personal liability on directors following Lifestyle Equities, AGA had not, due to the timing of that decision, been able to address the issue of the second defendant’s knowledge. The outcome may be different in another case, depending upon the facts.
Comment
The copyright issues raised in this case are particularly complex (the Judge noted that the section 51 point was the most difficult part of the copyright claim, upon which he had received limited submissions from the parties) and highlight the tension between Cofemel (which gives a broad basis for copyright protection for industrial designs) and the policy behind section 51 to limit copyright's role in protecting such designs. It will be interesting to see how this is dealt with by the Court of Appeal. Meanwhile, the decision provides useful guidance on aftermarket refurbishment activities, though these will need to be assessed on a case-by-case basis.