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Interim injunctions for product launches: has the horse bolted?

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Robert Dickens

Associate

London

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15 November 2022

The High Court has refused to grant an interim injunction against a start-up’s product, despite a possible passing off claim. It held that an injunction might cause the product launch to lose momentum and possibly result in employee redundancies, which would be difficult to quantify in damages if the injunction turned out to be wrongly granted. This case is a reminder that interim injunction applications are challenging, and particularly so in passing off cases. To protect rights ahead of trial, claimants need to catch start-ups before any infringing product launch (or have strong evidence of deception post-launch).  

Au Vodka Ltd applied for an interim injunction to restrain NE10 Vodka Ltd from marketing and selling a new range of vodkas on the basis of passing off. The High Court declined to grant the injunction finding that the defendant’s fledgling business would not be adequately compensated by damages if the interim injunction was ultimately found to be wrongly granted. The Court found that the defendant would suffer a loss of momentum in the ongoing launch of its new product range and possible redundancies, which would be difficult to quantify. By contrast, the Court found that the claimant would be adequately compensated for any confusion between its earlier products and the defendant’s later products, given the evidence was limited and inconclusive.

When is an interim injunction granted?

Where granted, an interim injunction requires a party to do, or refrain from doing, particular acts ahead of a final decision being made at trial. The key principles for determining whether an interim injunction should be granted are set out in American Cyanamid:

  1. Is there a serious issue to be tried?
  2. Will damages be an adequate remedy for the applicant if it succeeds at trial?
  3. Will damages be an adequate remedy for the defendant if the court were to grant an interim injunction which, following trial, was wrongly granted?

The Court noted that the purpose of the American Cyanamid criteria is to avoid a mini-trial. However, where passing off is in issue, “it is frequently necessary to form a view as to the strength of the claimant’s claim in order to understand the scale of any likely damage”. Further, the Court recalled that “the task of the Court is to adopt whichever course seems likely to cause the least irremediable prejudice”.

The law on passing off

As readers will be aware, there are three elements to the tort of passing off that a claimant must demonstrate:

  1. Goodwill for the goods/services supplied by the claimant associated with their get-up;
  2. Misrepresentation by the defendant to the public leading or likely to lead the public to believe that the goods/services offered by the defendant are those of the claimant; and
  3. Damage suffered by the claimant as a result of the misrepresentation.

The Court noted that, generally, consumers do not make assumptions about the origin of products based on the shape of the goods in the absence of any graphic or word element. The Court also noted that deception of the public is critical to the tort of passing off.

Reasoning

The Court concluded that there was a serious issue to be tried on the basis of passing off:

  1. The Court held that there was “no doubt” the Au Vodka had a reputation in the appearance of its products. However, this reputation resided primarily in the name on the bottle “Au”. The evidence showed that consumers referred to Au Vodka’s product as “Au Vodka” and not, for example, “the gold vodka” or “the one in the gold bottle”;
  2. The evidence did not show actual deception. At most, consumers would believe that NE10 Vodka’s product “comes from the same stable” as Au Vodka’s product. Ultimately, the Court held that the evidence showed “consumers wondering whether there is a connection as opposed to actually believing that there is one”.

The Court found that damages would largely compensate Au Vodka because there were only a small number of “inconclusive” instances of deception. By contrast, the Court found that damages would not be an adequate remedy for NE10 Vodka, if the injunction turned out to be wrongly granted, because NE10 Vodka would suffer loss of momentum in the launch of its new product range and possible redundancies, which would be difficult to quantify. As such, the Court refused to grant an interim injunction.

Comment

Passing off cases are difficult to make out. Interim injunctions are challenging to obtain. Accordingly, Au Vodka’s claim for interim relief was never going to be straightforward. However, this judgment arguably gives too much weight to ongoing product launches in passing off cases, particularly when orchestrated by start-ups. In short, it appears start-up defendants may have an advantage in being able to avoid interim injunctions, merely by being new businesses, particularly where there is no strong evidence of actual deception.

Claimants must move quickly if they wish to rely on passing off to obtain injunctive relief. On the basis of this judgment, injunctive relief is best sought prior to the launch of a potential infringing product. Where this is not possible, as will often be the case, claimants should obtain clear evidence of actual deception in order to tip the American Cyanamid principles in their favour.

This case is also a helpful reminder that claimants seeking an interim injunction on the basis of passing off should also expect at least an initial assessment of the merits of the case. Claimants should therefore adduce as much evidence as possible in relation to each of goodwill, misrepresentation and damage, as well as clear justification for an injunction as opposed to compensation. Claimants are also reminded that the goodwill they assert must reside in the part of the claimant’s packaging that are alleged to have been replicated by the defendant.

Case: Au Vodka Ltd v NE10 Vodka Ltd and another [2022] EWHC 2371 (Ch)