Wednesday 11 April 2018
The problem with choosing a descriptive trade mark
The foundation and value of a good trade mark rests on its distinctiveness. Choose a trade mark that is distinctive and unique, and you lay a strong foundation for your brand. Choose a trade mark that describes the products or services you provide, and you might as well be building your brand on a pit of quick sand. Eventually, and probably quite quickly, it will be swallowed up in the crowded marketplace in which today’s businesses operate.
That’s a lesson hard-learned by National Mini Storage (NMS) in Auckland, which recently lost legal action it brought against a company entering the market using the trade mark National Storage.
NMS had been providing self-storage facilities at nine sites around the city of Auckland since 1991. Notably, although it uses the word ‘National’ in its branding, it had only ever provided services in Auckland. NMS took exception to an Australian company, National Storage, taking steps to set up self-storage facilities in Auckland. National Storage entered the New Zealand market in 2015 and also had nine sites in Hamilton and Christchurch. None were in Auckland though.
When National Storage announced it was planning to enter the Auckland market in February 2016, NMS wrote to it seeking an undertaking not to use the trade mark National Storage in the greater Auckland area. National Storage offered not to use ‘mini’ as part of its branding, but otherwise refused NMS’s demands, and litigation between the parties followed.
In court,NMS had to rely primarily on an action under the Fair Trading Act 1986. This means NMS had to prove that:
- it had acquired a reputation in the name NATIONAL MINI STORAGE and its logo, and
- a significant number of consumers were likely to be misled or deceived if National Storage offered its services in Auckland under the NATIONAL STORAGE brand.
It was accepted by all parties that NMS had acquired a reputation in the name National Mini Storage and its logo. However, NMS couldn’t convince the High Court or Court of Appeal that consumers were likely to be misled or deceived. Evidence before the court showed that consumer recognition of brands in the self-storage industry was low, and that NMS’s brand recognition was no different. Further, survey evidence showed that over 40% of respondents in the Auckland area couldn’t name a single brand, and only 6% in one survey could identify NMS without prompting.
NMS’s arguments in the Court of Appeal were also focussed on the risk of consumer confusion arising through the use of online searching by consumers. However, consistent with the brand recognition findings, the search results showed that 70% percent of key word searches were for unbranded terms like ‘storage’. This, and other factors, led the Court of Appeal to uphold the High Court’s findings and conclude that there was either no risk, or the chance of it arising was too low, to warrant a court order stopping National Storage using its name in the Auckland market.
The decision reflects the well-established legal proposition that a trader who uses a generic or descriptive trading name must be prepared to live with the possibility of other traders using a similar trading name, and that in some circumstances it may cause confusion. That is the trade-off for adopting a generic or descriptive trading name..
The key takeaway from this case is when you’re choosing a trade mark to represent your products and services, make sure it’s distinctive like a peacock and not run-of-the-mill like a sheep. Otherwise, you’ll have to live with being part of the crowd instead of standing out from it.
If you’d like strategic advice about choosing, protecting and enforcing your trade marks, please contact us and we can help create an IP strategy that meets the needs of your business.