Apple: iWatch out of time?


25 July 2017

Wearable technology is the new must-have fashion item. However, trade mark issues often arise when companies expand into new categories of consumer products. Despite Apple, Inc. (“Apple”) launching its smart watch under the name APPLE WATCH, it clearly anticipated using the name IWATCH trade mark at some point due to a UK application filed for the name which ran into troubled water.

 

Background

Brightflash USA, LLC (“Brightflash”), a company affiliated to Apple, filed a UK trade mark for the name IWATCH in March 2014 covering goods in Class 09 (such as computer software and computer hardware) and Class 14 (such as chronometric instruments).

The application was originally refused for the goods in Class 14 on the grounds that it was descriptive for the goods covered given that the mark consisted of the pre-fix ‘I’ (a generic abbreviation for Internet) combined with the common name of the goods, “WATCH”. After deleting the goods in Class 14, the application was accepted by the UK Registry where it encountered oppositions from Arcadia Trading Ltd (on absolute grounds that the mark was descriptive and non-distinctive of the goods in Class 09 and had been filed in bad faith) and Swatch AG (on relative grounds that it conflicted with its earlier rights). During the oppositions, the trade mark application was assigned to Apple.

 

Swatch

Opposition

Swatch opposed the application on the basis that it conflicted with its earlier rights for (i) iswatch which was protected for horological products in Class 14 and (ii) SWATCH which was protected for goods in Class 09 such as software and mobile telephone and smartphones and Class 14 such as horological products. Swatch relied upon there being a likelihood of confusion and harm to its reputation.

The opposition partially succeeded under the likelihood of confusion ground. The Registry held that iswatch and IWATCH were similar marks (particularly visually and aurally), the respective goods in Class 09 were similar as Apple’s specification included goods which encompassed smartphones or wearable technology and there was a likelihood of confusion (notwithstanding Apple’s family of i–prefixed marks which, whilst it may help to stop later i-prefix marks, could not negate the risk of confusion with an earlier mark).

However, the opposition was dismissed under the harm to reputation ground, largely due to the Registry only considering it in relation to the surviving goods in Class 09 (such as “computer software”) which it was held were simply too far away from Swatch’s reputation for watches.

 

Appeal

Apple appealed the decision arguing that the Registry wrongly assessed the similarity of the marks and goods. The High Court did not overturn the findings in respect of the similarity of the marks. In respect of the similarity of the goods, the High Court upheld the finding that “computers; computer hardware; wireless communications devices” encompassed “smart phones” but criticised the degree of similarity, particularly for wider goods such as “cameras” and “radios” which, whilst they may be a function of smart watches, are quite a long way from analogue watches per se. As a result, the High Court downgraded the similarity to low.  In view of the reduced degree of similarity between the goods, Apple’s appeal was allowed and the High Court held there was no likelihood of confusion.

 

Arcadia

Opposition

Arcadia initially objected to the application for IWATCH on the basis that it was descriptive as it was formed by a simple juxtaposition of the two English terms “I” and “WATCH”. Subsequently, after the opposition had been filed and the trade mark was assigned from Brightflash to Apple, it amended the opposition to include a claim to bad faith on the grounds that the original applicant did not have a bona fide intention to use the mark. Arcadia argued that either (a) Brightflash was an independent company and filed the application as an “instrument of fraud” to obtain monies or other compensation from Apple or (b) Brightflash was used as a sham or proxy company to intentionally hide the fact that they were controlled by or associated with Apple.

The Registry agreed that the mark was descriptive for the vast majority of the goods in Class 09 as the broad definition of goods in Class 09 included computer hardware (which encompassed the objectionable goods, “smart watches”) and computer software (which is so closely connected to “smart watches” that the objection extended across).

Apple tried to overcome the opposition by claiming that the name IWATCH had acquired a distinctive character (that is, consumers would recognise it as originating from Apple) as a result of the use of a family of i-prefix marks, such as iPad, iPhone and iTunes. The Registry was not convinced by this argument as no use had been made of the mark applied for which was required by a literal reading of the relevant provision. In any event, even if that was wrong, the Registry held that there was evidence of third parties using the i- prefix, such as BBC IPLAYER.

The Registry rejected the bad faith ground in its entirety. Apple argued that Brightflash was an affiliated company which intended to exclusively license the trade mark to Apple (even though it was subsequently assigned). Consequently, the Registry found there was a bona fide intention to use the mark either by the applicant or with its consent. Moreover, the Registry held that using a shell or affiliate company to apply for trade marks in order to avoid drawing unwanted attention to future product launches would not constitute bad faith (rather it would constitute prudent behaviour which a manufacturer is entitled to take to protect its commercial interests).

 

Appeal

Apple appealed the decision on three grounds; that is the Registry wrongly:

  1. held the specification in Class 09 covered “smart watches” Apple put forward a number of arguments for why the specification should not be deemed to cover smart watches, namely the term was not expressly included in the Internationally agreed classification system at the time the application was filed, the term ‘smart watches’ was not included in the specification which included broader terms such as ‘computer hardware’ and the specification had been misconstrued by reference to its commercial intentions.The High Court rejected this in its entirety as classification is purely administrative, it is possible for multi-functional products to appear in multiple-classes (such as Class 09 and class 14), the UK Registry had merely correctly identified that ‘computer hardware’ can include ‘smart watches’, and to be registrable for a broad category of goods, the trade mark must be free from objection for all goods falling within that category. It was also noted that Apple could have put forward a narrowed specification excluding the objectionable goods but it had not done so (presumably as its scope of protection would have been narrowed to exclude the goods for which it wanted to obtain protection).
  2. held that IWATCH was descriptive for “software” The High Court rejected this ground as ‘smart watches’ depend for their operation on software they incorporate. As a result, the Registry was entitled to consider the mark descriptive for software, specifically computer software incorporated into smart watches.
  3. rejected the claim to acquired distinctiveness based on use of other marks which shared the same pre-fix The High Court also rejected this ground, although some reservations were expressed. Whilst it is correct to say that a literal reading of the provision for acquired distinctiveness requires use of the mark as filed, the judge noted it stems from a European Union directive which should not be interpreted purely literally (instead it should be interpreted by reference to context of the provision and the objectives of the legislation). However, the door has not been fully closed on this argument as the judge did not receive “the fullest of arguments” in terms of the context or objectives of the provision.  

 

Summary

A number of key points arise from the decision which brand-owners should be aware of, namely:

  1. clearance searches should not just be carried out by reference to the wearable technology (e.g. “smart watches”), but also by reference to the analogue product (e.g. “watches”);
  2. whilst future proofing wearable technology applications is difficult, broad terms such as “computers; computer hardware; wireless communication devices” are likely to encompass new product lines (such as “smart watches”);
  3. a family of trade marks is primarily a sword against later applications, rather than a shield against earlier registrations;
  4. inherently distinctive names are easier to protect and enforce;
  5. it is difficult to protect descriptive pre-fixes plus descriptors of the goods, such as IWATCH (even if there is a family of marks);
  6. if a trade mark is descriptive for hardware which relies upon software for its operation, it is also likely to be objectionable for software per se;
  7. multi-functional goods may be properly classified in multiple classes;
  8. using an affiliate company to shield the ultimate owner of trade mark filings will not generally be regarded as bad faith;
  9. a claim to acquired distinctiveness should generally be based on use of the trade mark as filed. If the mark has not been used, consideration should be given to whether the mark should be launched using a composite brand including a house-mark (such as Apple iWatch) to mitigate risks posed by third parties whilst building up evidence of use.

 

For more information or to discuss your trade mark issues and how we can help you please get in touch with Kate Ellis or Peter Dawson.

Kate Ellis , Principal Associate
e: kateellis@eversheds-sutherland.com
t: +44 161 831 8296
Peter Dawson , Trade Mark Attorney
e: peterdawson@eversheds-sutherland.com
t: +44 161 831 8562