HomeInsightsIntellectual Property Enterprise Court considers “bait and switch” selling

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Bait and switch selling is a known technique by which “the defendant deliberately uses the claimant’s trade mark as a bait to attract the consumer’s attention, and then exploits the opportunity thus created to switch the consumer’s purchasing intention to his own product or service.”[1].

In the recent case of Pliteq v iKoustic[2], Pliteq accused iKoustic of just such behaviour, alleging trade mark infringement and passing off.  Pliteq lost on all grounds, bar one small point and the court’s decision makes it clear that, without good contractual provisions, it will be difficult for a trader to stop a former non-exclusive distributor from legitimately selling off old stock, whilst at the same time selling its own competing products.

Plitec owns registered trade marks for GENIECLIP and GENIEMAT. GENIECLIP is used on clips used for fixing panels to walls and GENIEMAT is used on acoustic mats. Both products are very successful and the Marks have become well-known to professionals in the construction business.

iKoustic was a non-exclusive distributor of Pliteq’s products.  There were no agreed written terms between them, and no express agreement that iKoustic should not stock products competing with Pliteq’s products.  After the relationship broke down, iKoustic continued to hold and sell stocks of Pliteq’s products, but also sold its own competing products under its own MUTE mark. The key question was whether iKoustic could continue to use Pliteq’s Marks after the end of the distribution agreement, even though it held only limited, and dwindling, stock of Pliteq’s products.

Pliteq alleged that during the period when iKoustic continued to hold Pliteq stock, iKoustic used the Marks on-line to attract customers, which it then diverted to iKoustic’s own goods. Pliteq said that iKoustic’s website was luring internet users into purchasing iKoustic’s products, by advertising Pliteq’s’ products when iKoustic could not provide them.  It alleged that use of the Marks was a cover for sales of iKoustic’s competing goods and so was an infringement.  iKoustic countered that the Pliteq products had been put on the market by Pliteq, that Pliteq had therefore exhausted its rights in them, and that iKoustic could continue to sell them.

The Court noted that as a matter of law there was nothing wrong in principle with iKoustic offering a potential customer an alternative product to the one the customer was originally looking for. Crucially, it did not agree with Pliteq that that conduct had to stop when iKoustic ceased to have “sufficient stock to meet any significant orders”, as it was virtually impossible to calculate when that stage was reached.  None of the trade mark functions were damaged, and the exhaustion defence applied.

It seemed to the Court to be an everyday and unobjectionable commercial reality that alternative products are offered to a customer who has inquired about goods by reference to a mark, at least where there is no obligation to sell those goods exclusively.

The Court rejected Pliteq’s argument that there would be trade mark infringement if a customer, attracted to the iKoustic website because it stocked Pliteq’s products, was then able to navigate to another page on that website showing iKoustic’s products.  If that was trade mark infringement, no retailer would be able to advertise goods under one mark but offer products from different undertakings on its website. It would be clear to the customer that they were being offered alternative products.  iKoustic was selling genuine Pliteq goods so had due cause to use the Marks.

There was one exception to this.  iKoustic had one page on its website which said that GENIECLIPS were no longer stocked but invited the customer to contact iKoustic “to find out about iKoustic’s new alternative sound isolation clip” and continued “If you only want GenieClip ® and are not interested in the alternative sorry we couldn’t help you”.  That use of GENIECLIP infringed, as it invited customers to choose MUTECLIP products instead of GENIECLIP products, which iKoustic no longer had.  That use of the GENIECLIP mark could therefore be seen as use in relation to MUTECLIP products (which iKoustic was not authorised to do).

Having found that iKoustic was transparently offering alternative products to Pliteq’s, the Court held that by using the names GENIEMAT and GENIECLIP, iKoustic had not misrepresented that their Mute products were Pliteq’s, so there was no passing off.

iKoustic had used a single photograph on the iKoustic website of one GENIEMAT product, when offering two MuteMat products for sale.  It did not seem likely, and there was no evidence to suggest, that a banal photograph of the purely functional GENIEMAT would generate goodwill. And even if it did, iKoustic’s use would not realistically have damaged that goodwill.

[1] Och-Ziff Management Europe Ltd v Och Capital LLP

[2] Pliteq v iKoustic [2020] EWHC 2564 (IPEC)