Is it safe to bring abandoned brands back to life?

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The practice of resurrecting disused, abandoned trade marks and launching them back on to the market is becoming increasingly popular, leading to such marks being dubbed zombie brands. But in such cases does the original brand owner have any legal recourse? While reviving the brand can offer consumers more choice and provide new commercial opportunities, the original brand owner might object on the basis that consumers will be deceived, or that they still have a legitimate interest and retain goodwill in the brand. A number of cases in the UK have addressed the questions around goodwill, while in the US two recent cases have considered when and under what circumstances a mark was abandoned. It is clear from these judgments that the law is finely balanced and savvy entrepreneurs need to carefully consider the trade mark issues.

It is hard to deny the evident cultural popularity of zombies across so many platforms of modern entertainment, ranging from TV shows and film to books and video games. Now it seems that even IP cannot escape, with the booming interest in the resurrection of zombie brands.

A few years ago, enquiries regarding the possibility of historic brand revival suddenly seemed to begin flooding in, and they have not stopped. The practice of resurrecting disused, abandoned trade marks and launching them back into the marketplace led to them being widely dubbed as zombie brands – they had once lived, had since died, and were now being resurrected, albeit they were not quite the same entities that they once were.

The burning question for those seeking to adopt a zombie brand, as newcomers with no connection to the original business, is whether or not the original brand owner still has any available legal recourse to stop them. While much seemed to have been written on the subject from a US law perspective, there appears to be relatively little legal commentary from a UK or EU law perspective.

Of all of the brands under enquiry, it is clear that they all share one common characteristic: heritage. They are all old, iconic brands that once enjoyed widespread notoriety and recognition in their commercial field. It is evident that some degree of the goodwill and reputation that they acquired all those years ago lives on in the hearts and minds of a generation of consumers long after their departure from the marketplace.

Heritage brands therefore resonate with consumers as they represent a connection to the past. They evoke feelings of nostalgia – fond memories resurface from a happy bygone era. This all serves to create an emotional connection to the brand in question, which marketing people tell us usually translates into consumer trust and loyalty. This is what savvy new entrepreneurs have recognised: heritage brands retain brand equity and value that they can capitalise on by reviving them.

In this day and age, as consumers we are all increasingly guarded against the counterfeits and fakes that flood the market. As a result, quality and authenticity are key selling points and a consumer is far more likely to trust, and hence purchase, a branded product that they instantly recognise from their childhood. It appears to them that the (zombie) brand that they recognise has stood the test of time, so it must be good!

Time savings: It is this immediate recognition and trust that gives a heritage brand an inherent edge over the competition as it offers significant time and cost savings on marketing and advertising expenditure. By triggering immediate consumer demand, it automatically provides a significant catapult forwards. There is no doubt that a new brand will take years to earn that same degree of recognition, trust and loyalty. This results in a lower business risk in bringing a product to market and it can also translate into premium charging prices.

Wasted commercial opportunity: Those for brand revival argue that an abandoned, lifeless brand is a wasted commercial opportunity. If the original brand owner is not going to capitalise on it, then why shouldn't they? Is brand revival not just a form of brand recycling?

Increased consumer choice: They argue that brand revival increases consumer choice in the marketplace and generates economic activity where there would otherwise be none. Even if it is nostalgia that motivates the consumers to purchase, they are nonetheless being given the opportunity to purchase the goods and services that they have missed and wish to buy.

Policy – use it or lose it: From a policy perspective, they argue that unused marks should not be permitted to block the legitimate exploitation of a brand by an active trader in the marketplace. Once a mark is abandoned, it should become available for others to use. Obviously this line of argument mirrors the underlying policy which provides for the revocation of registered marks on the grounds of non-use.

However, opinion about this commercial practice is greatly divided and those that are against the resurrection of abandoned marks are generally the original brand owners.

Unfair commercial advantage: There is no doubt that if an historic brand is to be resurrected, the new adopter would immediately benefit from some degree of instant recognition by nostalgic consumers. Capitalising on this goodwill is exactly the point of a brand revival – after all, what would be the incentive to revive a brand that no one remembers? Those against brand revival argue that this gives the new adopter an unfair commercial advantage, particularly where the mark is used for the same or similar goods or services as previously. They argue that trade mark law should not permit the adopter to ride upon the coat tails of the previous owner's existing reputation, benefitting from their years of marketing and advertising expenditure.

Deception: It is a fundamental tenet of trade mark law that marks must serve as a badge of origin so that consumers can navigate the marketplace with confidence. Assuming that the original owner has no connection to the new goods or services, including no control over their quality, then one could reasonably argue that the use of the zombie mark could deceive and confuse consumers. After all, the consumer is being drawn in by a familiar name, and expects the same standards of quality that they remember. That brand was once trusted as being an indication of origin from one particular source, but now those duplicated goods derive from another entirely unrelated source. Is this a deception which undermines one of the core essential functions of the trade mark?

External circumstances: Another argument that is often raised by original brand owners is that the original cessation of trade was forced upon them by external circumstances. They argue that, although they are not now trading, they have not abandoned their interests in, or rights to, the brand at all because they have a genuine intention to resume business and active trading at some point in the future. This question of intentional "abandonment" is of great relevance to whether or not they can establish an action for passing-off under UK law.

Legal implications: Given the fact that the brands under enquiry have in all cases been abandoned for many years, it is generally the case that any previous trade mark registrations that the original brand owner may have held have long since lapsed. As such, there is usually no longer any risk of statutory trade mark infringement to consider.

Passing off: The primary concern for those seeking to breathe new life into such orphaned high-profile marks is therefore whether or not the original brand owner has an actionable case for passing off against them. This is a concern both in terms of a cause of action to prevent any use of the revived mark, but also if the newcomer seeks registration of the mark. Under UK law, the original owner can oppose the registration of a new UK trade mark application on the grounds of earlier unregistered rights under Section 5(4)(a) Trade Marks Act 1994. Likewise, a new EU trade mark application can be opposed under the corresponding provisions of Article 8(4) Council Regulation (EC) 207/2009 if the opponent can establish that they would be entitled to prevent the use of the mark under the national law of the member state concerned.

Goodwill: In the UK, the common law tort of passing off will protect unregistered marks only for as long as goodwill subsists in them. It is well established that "goodwill is the attractive force that brings in custom" and that the property right is in the goodwill, rather than in the mark itself. While a business that has goodwill will invariably also have reputation, it is worth remembering that the two are separate legal concepts, although regrettably the terms are often used interchangeably. Unlike goodwill, reputation is merely a state of fact and not a form of legal property, and so it cannot be owned, assigned or enforced in the same way as goodwill.

Goodwill is normally created by actual trading and cases such as Star Industrial Co Ltd v Yap Kwee Kor [1976] FSR 256 have reiterated that goodwill has to be shown in a sign in connection with a business. It follows that just because an historic trade mark still has a reputation in the UK, it does not mean that the proprietor still owns any protectable goodwill, because they may not trade or do business any longer.

How much goodwill is enough?

It is slightly vague to say that it will be a question of fact in every case, but the law of passing off will not intervene to protect goodwill which any reasonable person would consider trivial. At the same time, case law such as Minimax GmbH & Co Kg v Chubb Fire Ltd [2008] EWHC 1960 (Pat) has confirmed that it is difficult to determine a “minimum threshold” for a finding of residual goodwill. In practice, the original brand owner will need to produce a significant body of evidence to prove the scale of the reputation that they once enjoyed and their efforts to maintain that goodwill by keeping it in the mind of the public. The original brand owner should be aware that it can certainly be a time consuming and costly exercise to collate all of the necessary evidence to prove the existence of residual goodwill.

Residual goodwill: So if the original brand owner ceased trading years ago, is the goodwill immediately destroyed when a business ceases trading? The short answer is no. There is a body of case law that confirms that ownership of the valuable goodwill may be retained long after use of a mark was abandoned by the original owner, and long after the business itself has ceased trading. Indeed, the degeneration of goodwill has been confirmed to be a gradual process. Goodwill does not disappear or completely lose its value overnight, rather it will slowly fade away over time. This is known as residual goodwill.

In Maslyukov v Diageo Distilling Limited and another [2010] EWHC 443 (Ch), Mr Justice Arnold found that the "mere cessation of business is not enough" for a finding that goodwill in a mark has been abandoned. He continued: "…cessation of production of goods or provision of services does not necessarily mean that there has been a cessation of business capable of sustaining goodwill, still less a destruction of the existing goodwill."

In summary, it seems that as long as a claimant has not intentionally chosen to abandon their goodwill, it remains as an asset protectable from damage by passing off proceedings.

Professor Christopher Wadlow in The Law of Passing-Off (4th Edition) states:

That being the case, if an original brand owner does intend to resume trading, but has not yet, then how long will the residual goodwill last in order to be protectable by passing-off?

Kerly's Law of Trade Marks and Trade Names (15th Edition) advises that:

This view was supported by Sutherland v V2 Music Limited [2002] EMLR 28.

Authorities such as Knight v Beyond Properties Pty Ltd & Ors [2007] EWHC 1251 (Ch) (May 24 2007) also confirm that the greater the reputation originally established, the longer it may be that residual goodwill may continue to exist, rather like the wake of a large ship.

A further factor likely to contribute to a finding of surviving residual goodwill is the extent to which the original brand owner has tried to keep the mark and its reputation in the public eye. For example, the following can be taken as being persuasive that the original owner did not intend to abandon their rights and can thereby help to preserve their residual goodwill:

• the presence of a significant enthusiast following and a thriving second hand market;

• the continuing provision of spare parts or servicing by the original owner;

• retaining the corporate entity that originally held the trade mark rights;

• not behaving in a way so as to suggest that the owner has no intention of carrying on business, for example releasing statements to the press that they are closing down, selling off customer lists or any necessary plant or equipment needed to trade.

Different commercial field: Would-be brand adopters also often query whether the revival and use of a zombie brand for a different commercial field will escape liability. For a long time, it was thought that there could be no passing-off unless the parties are engaged in a "common field of activity". However, this was discredited by the England and Wales Court of Appeal in Harrods v Harrodian School [1996] RPC 697. As the law stands today, there is certainly no rule of law that a claimant cannot succeed in a passing off action in the absence of a common commercial field. Rather, the presence or absence of a common field of activity is just one of many important factors to be considered.

Zombie brands in the United States

The proprietor of a US trade mark acquires federal rights based on commercial use of that mark for the goods and/or services recited in the corresponding registration. Where there is no commercial use of a mark, Section 45 of the Lanham Act (the legislation that governs US trade mark law) addresses abandonment: failure, on the part of proprietor, to use its trade mark for a continuous three-year period constitutes prima facie evidence of abandonment. While the language concerning abandonment is clear, contesting the ownership of a zombie brand is not. The La Salle case From 1927 until 1940, General Motors applied the Lasalle [one term] trade mark to a successful make of vehicles under the Cadillac Motor Car Division but it had not sought any registrations for the trade mark. In 2004, Aristide & Co filed an application for the mark La Salle [two terms] in connection with a number of different types of motorised vehicles including automobiles; GM opposed (General Motors Corp v Aristide & Co, Antiquaire de Marques [2008] US TTAB Opp No 91167007). In its opposition GM asserted that it had not abandoned its mark, that it was common practice in the automotive industry to reintroduce historic brands, and that it had contemplated doing so "on numerous occasions since 1946". Guided in part by Section 45 of the Act, the Board dismissed the opposition stating: "The fact that brands in the automobile industry are sometimes re-introduced does not exempt the industry in toto from the normal statutory presumption that trademarks can become abandoned and that trademark owners must have an intent to resume use and an explanation for any non-use." One should not assume, however, that any amount of evidence supporting an intention to reintroduce the brand after 65 years of non-use would be sufficient to cure abandonment. Macy's v Strategic Marks More recently, Macy's, Inc, one of the premier department stores in the US, sued Strategic Marks, LLC when it filed a number of trade mark applications for clothing under well-known regional heritage brands, which Macy's had absorbed into the Macy's brand several years earlier (Macy's Inc v Strategic Marks, LLC [2016] US Dist Ct ND Cal, Case Nos 11-cv-06198-EMC & 15-cv-00612-EMC). When Macy's brought a motion for summary judgment before the Northern District of California earlier this year, Strategic argued that Macy's had abandoned its trade marks through failure to operate stores under the brands. The District Court Judge noted: "…the fact that the regional departmental stores affiliated with the Heritage Marks are closed does not invalidate the registrability and enforceability of the marks. Consumers may still be confused as to whether the alleged infringing goods are authorized by and affiliated with the owner or registrant of the mark." If this Court is suggesting that a legally abandoned trade mark retains its goodwill – subject to the strength of reputation whilst the trade mark was still valid – it does not give any indication of when goodwill begins to fade. Proprietors of US brands should be mindful of the consequences they may face when deciding to discontinue use of a trade mark. There are a few limited measures a proprietor can take when its mark has gone zombie but at the core is the requirement that the proprietor demonstrates a verifiable intention to resume use of its mark. Such measures might include awaiting regulatory approval, engagement with potential distributors or maintaining detailed internal records of discussions surrounding revival of the brand. Failing these types of activities, US brand owners should expect to re-acquire their rights by financial means from the brand recycler and not by the legal system. It seems, for now at least, the recycling of previously owned intellectual property has found traction, and as such, the best deterrent to avoid a loss of brand ownership is to use it–or lose it. Tony Dylan-Hyde Tony Dylan-Hyde is a trainee trade mark attorney at Stobbs IP and was previously a senior trade mark paralegal in the US

Due diligence: In order to clear the path to brand revival, a meticulous process of due diligence must be undertaken. Case law makes it clear that this obligation extends far beyond a simple check that a pre-existing registration has been allowed to lapse, and even that the business concerned has ceased trading, as it is still entirely possible that residual goodwill still subsists therein. It follows that a comprehensive use investigation should be undertaken.

The trade mark registers are the obvious place to start to determine the status and ownership of any registered rights. Even if the previous owner has kept them alive by simply paying the renewal fee every 10 years, the registration may of course be vulnerable to revocation on the grounds of non-use. That said, while revocation may be an option, ideally it would be preferable to secure an assignment of ownership of those historical rights, preferably with the goodwill.

Of course, even in the face of lapsed registrations, the marks may still be very much in use in the course of trade by either the original owner or by a third party. There may even have been an assignment of the associated goodwill only behind the scenes. It follows that the next step must be good old fashioned internet searches to try to establish any current common law use of the mark in question – who, if anyone, is using the mark now; alternatively, who used it last, and when did they stop?

Direct approach: The next step in the due diligence process must be for proactive and direct approach to be made to the original owner and/or most recent user to determine whether there would be any objection to the revival of the brand. Indeed, this may go some way in rebutting an allegation of bad faith. Past case law has also demonstrated that the new adopter will be criticised for failing to contact the original owner to confirm if the mark has been abandoned and to ascertain if they have any future intentions for the mark (Simmons O-468/12 (UK IPO) unreported).

Licensing or collaboration: If the original owner does not have any intentions for the brand, it is surely in their interests to capitalise on that asset by way of its sale to the new party interested in commercially exploiting it, rather than simply allowing it to fade into history or languish on financial balance sheets. A further practical way forward may be to explore the possibilities of a licensing arrangement, or alternatively, a joint venture may even be possible whereby the brand is reintroduced back into the market with the original owner's collaboration, thereby also ensuring the same level of quality and so on.

Gromax Plasticulture v Don&Low Nonwovens [1999] RPC 367 defined bad faith as "dealings which fall short of the standards of acceptable commercial behaviour". It follows that if an approach to the original owner is met with stiff opposition, then any reasonable person must consider the subsequent adoption of that brand in the face of such objection to be unacceptable behaviour. Failure to observe this refusal will undoubtedly result in expensive litigation from an enraged original brand owner.

Unfortunately, contacting the original owner may not always be so straightforward. If the original company is dissolved, actually tracing any of its directors, or any possible successors in title, may not be easy or even possible. Obtaining the last accounts should assist in identifying the directors and the contact details of the last accountants/auditors. In these circumstances, it is probably sensible to employ the services of a professional investigator so that every possible avenue to try to identify and contact the relevant people has been explored as far as can reasonably be expected.

While one may speculate that it is the recession that has caused these brands to fall victim to abandonment in the first place, it may also be the current economic climate that is giving others the impetus to seek out any possible new form of commercial advantage that they can muster.

Upon reading the body of case law where parties have litigated over this issue, both at a UK Registry level and in the UK courts, one can only conclude that whether or not the revival of an abandoned heritage brand is permissible will be highly fact dependent in each case. It is also clear that it will be highly dependent upon the amount of evidence that the original brand owner can produce, as a lack of evidence can have a material impact upon a finding, or not, of residual goodwill in order to establish an actual, or notional, action for passing-off under UK law.

While some may not be deterred by the extent of due diligence required, there can be no escaping the fact that the resurrection of an abandoned brand carries a hefty price tag in terms of time and effort. Similarly, as appealing as zombie brands may be, there is a risk that in some cases the cost of clearing the path for revival may outweigh the value of the existing brand equity.

The concepts of abandonment and residual goodwill are not straightforward, and nor is their application, as the law must carefully balance the interests of the original owner and the new brand adopter. Whichever side of the argument you most empathise with, ultimately it seems that historic brand revival is a growing commercial practice that is here to stay. That being the case, it seems likely that savvy new entrepreneurs seeking a foothold in the marketplace will continue to raise this question with their trade mark advisers in the future.

Carrie Bradley

© Carrie Bradley 2016. The author is a senior trade mark attorney with Stobbs IP in Cambridge, UK