AIWA v AIWA: Trade mark risks in acquiring zombie and distressed brands

In Aiwa Co. Ltd V Aiwa Corp, the High Court held that the sale of second-hand goods with the consent of a trade mark proprietor does not suffice as "genuine use" to avoid revocation for non-use.

The Aiwa brand was originally founded in the 1950s in Japan and became globally well-known for speakers and stereos before becoming unprofitable in the 1990s. It was bought up by Sony in 2002 and eventually fell by the wayside in 2008 other than in relation to spare parts and second hand sales.

More recently, there was a degree of renewed interest in the AIWA trade marks due to a combination of nostalgia and brand confidence amongst older consumers alongside the popularity of retro “analogue" audio technologies more generally.

In 2016, US company Aiwa Corporation acquired the Sony’s US trade marks for AIWA and marketed an AIWA branded speaker. It filed a UK trade mark application for the mark AIWA in July 2017.

In 2017, Japanese company Aiwa Co Ltd acquired the remaining AIWA trade mark registrations and opposed Aiwa Corporation’s application. In retaliation, Aiwa Corporation sought to revoke Aiwa Co Ltd’s historic UK registered trade marks. In the revocation proceedings, the hearing officer found that second-hand sales of AIWA branded products did not constitute genuine use. The revocation applications were upheld and the opposition (which had been brought on the basis of the historic registered trade marks) was dismissed.

On appeal, Mr Justice Mann stated that the approach of the hearing officer was erroneous. He noted that the revocation proceedings should have considered separately the questions of genuine use and use by the proprietor or with its consent, rather than automatically concluding that no proprietorial consent meant no genuine use.

Aiwa Ltd argued that Sony’s initial sales had exhausted its UK rights and had implied consent to onward sales, which was a consent to genuine use of the mark in the course of onward sales, including any second-hand sales. This argument was rejected, except in relation to after-sales services provided by Sony and Aiwa Ltd which constituted genuine use but which, in this case, was insufficient to maintain a market share.

The Court held that although use of a mark on second-hand goods could technically constitute genuine trade mark use, identifying the origin of the goods; in isolation this would mean that virtually any second-hand sale would constitute a genuine use of the mark. The Court therefore found that the level and nature of activity in relation to second-hand sales was incapable, on its own, of maintaining a market share or preserving an outlet for goods bearing the mark.

Consequently, the Court ultimately agreed with the hearing officer’s assessment of no genuine use despite following different reasoning. The Court also found that there was no genuine use of the marks with the consent of the proprietor, and the appeal was therefore dismissed.

Although sales of brands where the proprietor is still (or has only recently ceased) trading are unlikely to be problematic, this decision highlight the issues associated with reviving brands whose portfolios have been dormant for some time.

Some uncertainty remains in view of Mr Justice Mann’s comments that there might be some instances where dealings in second-hand goods could amount to genuine use. In view of this and as referrals to the CJEU on such issues will no longer be possible post-Brexit, UK trade mark law could eventually diverge from the EU on this point.