On 29 February 2019, the Amsterdam Court of Appeal overturned a decision of the Amsterdam District Court of 17 August 2016 between the Dutch fashion company Scotch & Soda and the Dutch company My Brand regarding the use of the sign SHRUNK on clothing.
Scotch & Soda, a well-known Dutch fashion company with over 200 shops and 8000 points of sale worldwide, is the owner of inter alia three Benelux trade marks for 'SCOTCH SHRUNK' (23 July 2009), 'SHRUNK' (23 November 2015), and 'SHRUNK IN AMSTERDAM' (29 November 2007), all registered for, amongst other products, clothing in class 25. Scotch & Soda has sold boys clothing under the name 'SCOTCH SHRUNK' since 2002. An example of such clothing is shown above left.
My Brand sold a sweater with the sign 'SHRUNK' on it in 2015, which is shown above right.
Scotch & Soda sent a warning letter to My Brand after which My Brand agreed (during a telephone call) to cease the sale of the sweater. However, contrary to My Brand's confirmation, Scotch & Soda found the sweater again in one of My Brand's stores in Amsterdam in September 2015 and My Brand offered the sweater during a sample sale in December 2017.
Scotch & Soda commenced proceedings before the Amsterdam District Court, arguing that My Brand infringed its trade mark rights in SHRUNK and/or SCOTCH SHRUNK and claiming a declaratory decision and an injunction under pain of a penalty.
The Amsterdam District Court held that the word mark was only registered on 23 November 2015 and therefore after the alleged infringement by My Brand. It found there was no alleged continuing infringement and held that Scotch & Soda could not rely on the SHRUNK word mark but only on the SCOTCH SHRUNK word mark.
The Court found that SCOTCH SHRUNK is not identical with the sign SHRUNK as used by My Brand under Article 2.20(1)(a) of the Benelux Convention on IP ("BCIP"). The Court then turned to Article 2.20(1)(b) BCIP and found that there is only a limited visual, aural and conceptual similarity between the sign SHRUNK and the SCOTCH SHRUNK mark.
The main reason for this finding is that it claimed SCOTCH is the most distinctive element in the trade mark and that this element is missing in the sign used by My Brand. Based on that assumption, the Court found that there is no likelihood of confusion on the relevant part of the public.
Scotch & Soda also relied on Article 2.20(1)(c) BCIP, arguing that the SCOTCH SHRUNK mark had a reputation in the Benelux and that My Brand was taking unfair advantage of the reputation of the mark. The Court however denied this claim as well based on the lack of evidence supporting the reputation of SCOTCH SHRUNK.
Scotch & Soda finally relied on Article 2.20(1)(d) BCIP, which contains an infringement ground that is not included in the European Trade Mark Regulation and that gives Benelux trade mark owners the right to prevent use of a sign where such sign:
"...is used for purposes other than those of distinguishing goods or services, where use of the sign without due cause, would take unfair advantage of or be detrimental to the distinctive character or the repute of the trade mark."
This can be a very useful ground to rely on if a trade mark owner anticipates that a defence is put forward that the sign is not used to distinguish goods or services but, for example, as mere decoration. In this case, however, this infringement ground was denied as well because Scotch & Soda apparently did not substantiate sufficiently that My Brand used the sign other than to distinguish goods. As a result, the Court denied all of Scotch & Soda's claims.
On appeal however, Scotch & Soda did prevail. It first of all argued that the Amsterdam District Court wrongfully concluded that the SHRUNK mark (of 23 November 2015) should be disregarded since there was proof of continuing infringement and that the mere threat of a new infringement is sufficient. Secondly, it argued that the District Court was wrong in concluding that the element SCOTCH is the most distinctive element in the SCOTCH SHRUNK mark and that SHRUNK was more descriptive.
Although the Amsterdam Court of Appeal was also of the opinion that Scotch & Soda failed sufficiently to substantiate that the marks SCOTCH SHRUNK and SHRUNK have a reputation, it overturned the first instance decision by finding that My Brand has infringed the SHRUNK mark. It first found the goods for which the SHRUNK sign was used are identical to the goods for which the SHRUNK mark has been registered. Then, it held that the SHRUNK sign is identical to Scotch & Soda's SHRUNK mark.
My Brand argued that the word 'shrunk' is descriptive for clothing since it can be understood by the Dutch public – which is very familiar with the English language – as a reference to a characteristic of clothing, being a (very) small size of clothing.
The Court of Appeal thought otherwise and referring to CJEU case law concluded that the relevant public might associate 'shrunk' with something being small but the link with children's clothing is not a sufficiently direct and specific relationship to enable the public concerned immediately to perceive, without further thought, a description of the goods at issue or one of their characteristics.
The continuing infringement (sample sale proof of December 2017) was crucial, despite My Brand's non-convincing defence that the sweater was sold by mistake by an intern. The Court of Appeal found that this sale in 2017 was trade mark infringement under Article 2.20(1)(b) BCIP since the use of SHRUNK on the My Brand sweater could lead to a likelihood of confusion on the relevant part of the public.
My Brand was ordered to cease any trade mark infringement of SHRUNK under pain of penalty, to provide Scotch & Soda with a written declaration regarding the sale of all infringing goods and to have the remaining stock destroyed.
In conclusion, My Brand's chances dramatically shrunk as a result of only one sale made during a sample sale in 2017. If it had not sold that sweater during that sample sale, it was questionable if the Court would also come to the conclusion that there was trade mark infringement.
