Pyrrhic victory hits brands the hardest

Both Asda and United Biscuits are claiming victory in the Penguin copycat case. But with the High Court unclear on what changes to insist upon, other brand manufacturers may think twice before taking action.

The court battle between United Biscuits and Asda was supposed to define once and for all the boundaries between flattering imitation and brand theft (MW March 21). It was always a lot more than simply asking when is a Puffin bar actually a Penguin.

For the first time a brand owner had made it to court with a passing-off case since the explosion in lookalike products three years ago. It was a landmark case, even before any evidence was given or a judgment considered. In the past, brand owners have avoided such high-profile legal battles against their customers – the retailers – fearing retaliatory action against other brands should they win in court.

But rather than clearing up the situation, the court case has only contributed to further confusion, with many observers believing the outcome of the case will give a green light to copycatters and leave brand owners reluctant to seek legal redress. Inevitably, it will also lead to pressure on the next Government, whether Labour or Conservative, to introduce unfair competition legislation (see over).

In legal terms, the result of last week’s case is “one-one”. McVitie’s allegation that the Puffin biscuit represented a passing-off of the

Penguin bar was upheld, but its charge of trademark infringement was not. As a result, both sides are claiming victory.

But look past the legalities, and it is clear that Asda has got the upper hand, whatever capital McVitie’s may make out of the technicalities. And this is what all other packaged goods manufacturers, and retailers, will be most closely investigating.

Asda has been cleared of infringing McVitie’s trademark on the Penguin brand, and can continue to use the Puffin name. Interbrand deputy group chairman Tom Blackett says: “This is a Pyrrhic victory for McVitie’s. Asda must be laughing its head off. It has been allowed to keep the name, which is its brand.”

And although the judge pronounced Asda guilty of passing-off, defined as confusing consumers by passing goods off as those of another trader, and said it must change its packaging, he did not make clear how radical the changes have to be.

If it means that the biscuits have to be sold, say, in tubes, then this would be a material difference. If, however, it means that Asda just has to tweak the pictures on the packaging, it would not. Asda has 35 days from the day of judgment in which to change its packaging or appeal against the decision. Within that period the judge, Justice Robert Walker, will make a more detailed statement on the extent of the changes he believes are necessary.

Blackett continues: “I’m surprised that the judge did not show a little more imagination and say: look, this is passing off and it must stop. He should have said whatever the law is, they are ripping you off.”

It is also still not clear whether Asda can retain the Puffin bird character, although the judgment seems to indicate that it can. The issue is further muddied by the fact that although the Penguin character has been trademarked, McVitie’s now uses a different design of bird, which has not been registered.

As for costs, McVitie’s has had the costs of the action – excluding the cost of an NOP consumer survey it commissioned, initially used, but then withdrew as evidence – awarded in its favour. Asda in turn, has had the cost of its counter action – the revocation of certain trademarks – awarded to it.

A High Court source suggests the two sets of costs will cancel each other out.

Details should be more clear in a couple of weeks, when Justice Walker’s full statement, including details of the amount of costs and any damages, is issued by the High Court. But the outcome of the case is already seen by some as offering a green light for copycatting.

“My feeling is that this will not stop lookalike products,” says British Brands Group director John Noble. “There is a product which is deemed to be illegal, which is guilty of passing-off, but even so it will remain on the shelves.”

Manufacturers will look at how much this case has cost, the uncertainty of the result, and may decide not to bother taking retailers to court to challenge copycatting. They may argue that if all that can be achieved is a slight change in packaging, why bother?

One thing this case has served to underline is the power of the retailer. One source close to Asda says: “Asda always uses these kind of things as PR stunts. To be honest Asda can’t lose – publicity is gained by showing it gives good value to customers.”

Retailers, not the only copycats but certainly the ones with most clout, awaited the verdict to see how far they can push the legal barriers. Asda is even considering changing the name of the biscuit, possibly just temporarily, from Puffin to “Nothing” – a further snook cocked at McVitie’s and the High Court.

The retailer is due in court again on June 23 to defend another copycat case. This time International Distillers & Vintners (IDV) is bringing the case. It alleges that the Asda-branded Windward, Peach Schnapps, Daniel Boone and Deep South infringe Malibu, Archer’s Peach County Schnapps, Jack Daniel’s and Southern Comfort respectively.

Whether the case is affected by this week’s judgment is not yet clear, but Blackett says: “I think that IDV will think very carefully about things.” IDV was not available for comment.

UB, which maintains that it “won” the action against Asda, defends its decision to prosecute. “Our decision to take legal action against a valued customer was not taken lightly but we have a duty to protect our brand assets and we have a long-standing policy of doing so,” says a spokesman. “Our Penguin brand is 65 years old and has never been so popular, with sales growing by 24 per cent last year alone.”

But the High Court judgment painted a different picture, underlining the damage done to brands like Penguin from own-label and copycat products and revealing why UB was so determined to take action. It revealed that in 1992, gross sales of Penguin were worth 40m – they are now running at 30m, while ad spend has risen above 4m.

The only way copycats can be stopped once and for all is by changing the law, argues Blackett. “The law is far too lenient. An extremely well established brand like Penguin has been challenged by Puffin and the law cannot stop it. If this is the law, then the law is an ass.”

He is renewing calls for unfair competition law similar to those in other European countries. Demand for such a law was last heard before the introduction of the Trades Mark Bill in 1994.

Noble says: “People say that the big brands monopolise, but that is exactly what retailers are doing. Distinctive packaging is an essential tool of competition.” This case could have set a precedent to protect the distinctiveness of packaging. Instead it appears to have let a retailer off the hook.

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