You’re nicked!

Imitating someone else’s brand can be a quick way to get noticed. But as EN discovers, it can also attract the unwelcome attention of m’learned friends.

In March this year Claire Robertson, the manager of the Woolworths store in Dorchester until the retailer collapsed into administration last Christmas, reopened the shop under a new name – Wellworths.

The re-launched shop was quickly dubbed “Wellies” and is staffed by 20 of Robertson’s former Woolies employees. But the colours have been changed – the red and white replaced with blue, white and orange – and while pick ’n’ mix is still a feature alongside children’s toys and clothes, Wellworths doesn’t stock CDs and video games.

There’s no doubt Wellworths has benefi ted from its association with one of the country’s most iconic high street brands – Radio 2 DJ Chris Evans opened the store and a media frenzy followed – but don’t let this case fool you into thinking any brand is fair game.

According to all of the intellectual property (IP) lawyers questioned by EN, few SMEs that choose to sail so close to the wind would be likely to get away with it. So what makes Robertson any different?

Rob Hawley, partner at intellectual property fi rm Mathys and Squire says, “I’d imagine there is more to be lost by Shop Direct [the new owner of the Woolworths brand, which now operates an online-only model] by taking legal action against a local woman who has kept a store going and maintained 20 jobs. The backlash could have been horrible for them in PR terms.”

Tom Lingard, senior associate in the intellectual property and dispute resolution group at law firm Stevens & Bolton summarises the general rules to consider if you’re thinking about copying another business’s brand: “You need to consider whether you are using an identical trade mark or one that is only similar; whether the goods to which you are applying that mark are identical, similar or completely different to the brand owner, and whether there is likelihood that the public will be confused.”

Hawley continues, “The greater the reputation a brand owner has, the stronger the trademark rights will generally be. A lot of people think you can just change a letter, or change a vowel, or just change the ‘c’ to a ‘k’, but it’s really not that easy.”

While its association with Woolworths has brought Wellworths only good PR so far, Lingard says there are very few situations where it pays, in the long run, to copy or imitate someone else’s brand.

He explains, “For new businesses one of the most important things is obtaining investment, and any investor worth their salt is going to check whether you have a ‘clean’ brand and are not likely to be taken to court by an established competitor.

“Copying someone’s name may be an easy way to get your brand up and running, and to indicate to potential consumers the type of products you are offering, but if you are forced to change your name further down the line then this can seriously damage the goodwill that you have built up – as well as being an expensive exercise in its own right.”

The most important factor, though, is not necessarily the extent to which you’ve copied the logo or the name or whether you’re confusing the public. In practice, very often it comes down to whether the brand owner has the money and the inclination to take action.

Supermarkets’ own brands provide the best example of how trademark battles often come down to power struggles. The leading case in the fi eld of “rip-off” supermarket brands is United Biscuits (United Kingdom) Limited v Asda Stores Limited [1997]. The judge ruled in favour of United Biscuits and considered that the use on the supermarket’s own “Puffi n” biscuit’s packaging of “a prominent picture of an upright dark coloured sea bird with a white front, in addition to the word ‘Puffi n’, suggested a connection between the manufacturer of the ‘Puffin’ biscuit and the manufacturer of ‘Penguin,’” and meant United Biscuits won its “passing off” action (a form of intellectual property enforcement).

But very few cases like this one make it to court.

Because supermarkets are the biggest route to market and the main stockists for most brands, they are often unchallenged by brand owners who are keen to remain on good terms with their biggest clients.

Hawley says, “Supermarkets can punch above their weight. But an average SME isn’t going to have that leverage.”

So what risks are run-ofthe- mill SMEs running if their imitation isn’t perceived as flattery?

Hawley says, “If you are looking at the worst case scenario, they could spend a lot of money on getting themselves up and running, they are ready to start trading, they have spent money getting the nice branding for themselves with a design agency, promotions done and advertising – they could have spent thousands.

“Then they go to start trading and on day one they get landed with a legal letter saying they cannot trade, perhaps a temporary injunction that stops them in their tracks immediately. Then the case might go to court, there would be legal costs and potentially damages. They might have to change their name voluntarily. All of that costs, not to mention the fact that it would be embarrassing.

It could potentially scupper a business’s chances and send them under.”

So, for any business bold enough to risk infringing a wellknown brand, the penalties are clear. But just because you think your brand name and design is unique and you don’t know of any fi rm using the name, doesn’t mean it’s safe to go ahead and get the business cards printed and the sign painted.

Hawley says, “A lot of the time a business person will say ‘I know my market and I don’t know of any companies using this name so I must be safe’. A brand owner with a case could be out there. They
could have a brand that they haven’t used – if it’s registered as a trademark, they have five years before they have to start using it and during those five years they can still bring an action.”

The experts do recommend running any business names on internet search engines and through online business directories to see if anything comes up but, they say, the results can’t guarantee you’re safe. The website of the Intellectual Property Offi ce (www.ipo.gov. uk) is a great resource on all
things IP-related and allows business owners to apply to register trademarks directly but, for novices, the process can be baffling.

Hawley says, “My advice is to do as much searching as you can yourself but do try to fi nd room in your budget to have a trademark search conducted or speak with a trademark attorney because for the sake of between £200 and £500 you can get some strong advice and it’s better spending that than have an injunction land on your doorstep when you have spent £20,000 trying to get up and running.”

According to research among more than 200 businesses, carried out by intellectual property law fi rm
Marks & Clerk, businesses have upped the ante when it comes to protecting their brands during the recession.

The survey found that 84 per cent of executives believe brands are more important in a downturn than in favourable economic circumstances.

Alexander Carter-Silk, head of IP at law fi rm Speechly Bircham says there are a number of explanations for the heightened concern:

“When the market was flabby, someone would buy a company on the basis that it was making money. In a downturn or in a tighter market, people start looking at the rights which generate that money and start discounting them if the rights aren’t enforced or enforceable.

“On a couple of occasions recently, during the due diligence on SMEs, we’ve flagged up that the rights
haven’t been as well protected as possible and that has produced quite a significant discount.

“I think businesses are doing two things. They are certainly tightening up their rights to plan exits and they are tightening up their rights to preserve capital, in other words, to ensure that the values of their businesses are maintained.”

However, the Marks & Clerk research also showed that just 20 per cent are devoting more time than
before to brand protection, while corresponding budgets are coming under fire. That’s nothing new: EN is told that cost has always been the biggest barrier for SMEs wanting to protect their brand.

In light of this, the UK Intellectual Property Office (IPO) introduced the “Right Start” service in October to cut the cost of registering trade marks for small businesses.

Before its introduction, a £200 fee was required before a company could even find out whether the application satisfied the criteria for registration – the Right Start service enables businesses
to defer payment of half the application fee until after the IPO has assessed whether it is acceptable for registration.

Hawley says, “Brand owners and SMEs in particular might just say, ‘Okay, let’s just see how I get on before I spend that money,’ but, for ten years’ protection with a trademark, you’d do well to spend much more than a thousand pounds.”

Carter-Silk is less convinced: “The difficulty is – and I’m saying this against lawyers – there are a lot of SMEs that have been given advice to do an awful lot of protection and a lot of registration work which will never add anything to their lives.

“The answer is, if they are genuinely building a business on a reputation, on a brand, they’d have to be insane not to protect it. But it’s what I would call a ‘grudge purchase’: you go out and you buy more stock and sell it, you can see where you are earning money, but it’s difficult for an SME who has got to pay the rent to visualise how important IP is to his business.

“The difficult question for an SME is, ‘How much do I spend on protection and how much do I spend on development?’ The smart ones will do it but it’s often a hard bullet to bite if you are on limited revenue.”

The basic cost for a UK trademark (logo or brand name) registration, including professional fees is between £500 and £750. But that alone, according to Carter-Silk, will be insufficient for some and worthless to many.

“If you are growing a business, at the very least you want a European trademark.

You may be importing from China so you want a Chinese trademark to stop them exporting infringing goods. Suddenly you are into thousands of pounds.”

And it’s not just about branding. Steve Kuncewicz, IP and media lawyer with law firm Ralli, says SMEs often don’t realise how much intellectual property they own.

He says, “People automatically think about patents and trademarks – they are registered parts of IP that you have to spend money to protect. But there’s other stuff that businesses don’t look at like confidential information, client lists, and copyright in terms of manuals. Things like that tend to be protected from the moment they are put down on paper so there is no necessity to register them. You’d be surprised at how much tends to be lurking in a business.

“Most importantly, I think, you could argue that there are very few original ideas left and if you come up with one you have to do the work to show that it’s original and protect it like you would protect any other asset.”

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