Lookalikes: what is their impact -- and what can be done?

The IPKat thinks it is a great pity that the response of the British Brands Group (BBG) response to the Intellectual Property Office's report, "The Impact of Lookalikes: similar packaging and fast-moving consumer goods", coincides with a time when so many people are diverting their attention from serious issues and focusing instead on the attractions of their holidays in the sun.  It's difficult to summon up a feeling that there is an urgent need to do anything when one is busy with buying sunblocks, tourist guides to exotic parts and all the other ritual appurtenances of one's vacation.  Let's hope that the urgency for which the BBG calls will be easily summoned up when everyone's back for business this September.  This is what the BBG says:

On 11 June the IPKat invited comments and constructive criticisms of the study commissioned by the Intellectual Property Office into lookalikes. The British Brands Group, which provides the voice for brands in the UK, has just published a review of it which hopefully provides both. The study “The Impact of Lookalikes. Similar packaging and fast-moving consumer goods” is long (394 pages including annexes) and has taken a long time to complete, nearly three years. 

 While the study may seem broad, it actually focuses only on similar packaging of own label products produced by retailers. Having narrowed its approach, it does not explore key aspects of this dimension that might influence lookalike effects, such as the retailer often being both customer and competitor to the brand owner they copy, having advance information of brand owners’ new product and marketing plans, setting the retail price of both the branded product and the copy and controlling both the shelf display and all in-store communication. These aspects are well-known so it is not clear why the authors ignored them. The report requires careful reading. It is impenetrable in places, particularly in the analysis of its own consumer research, and error prone. It also makes some bold, far reaching and arguably far-fetched assumptions. Those who seek a shortcut and read only the Executive Summary and Chapter 9 (which claims to bring the literature and research together) should take particular care.  

The legal analysis

The "legal" element is described in terms which may imply an underlying question whether the UK should legislate on misleadingly similar packaging. In fact the UK has existing obligations both under European law (the Unfair Commercial Practices Directive (UCPD)) and international treaty (Article 10 bis of the Paris Convention and Article 2 of TRIPS) both to legislate and provide effective enforcement against misleadingly similar packaging that affects consumers’ transactional behaviour. The Government committed to review the adequacy of its implementation of the UCPD by 2010 but has not yet done so. 

 While the application of the UK's existing obligations are touched on in the study, it goes broader to explore a range of wider questions such as own label effects generally, consumer detriment (used by public authorities to determine their enforcement priorities) and business harm. However, focusing on the core questions, the study supports the view that the UK is currently not complying with its existing obligations and that private rights of action for brand manufacturers provide a potential solution.  

Is there a lookalike effect?

The study reaches clear, unequivocal conclusions on whether there is a lookalike effect: 

*       mistaken purchase: its review of previous surveys concludes that consumers report making mistakes in what they have bought and in high numbers. In its own research, the study finds that substantial proportions (50-60%) of the UK, German and US populations have purchased a lookalike accidentally or mistakenly at least once or twice; 

*     common origin: the survey review concludes that, where packaging is similar, it appears that more people think the own brand has a common origin with the manufacturer. In its own research it finds a significant correlation between similarity of packaging and perceptions of common origin of the products; 

*        perceptions of quality: the survey review quotes research from the Consumers’ Association that found that, as packaging similarity increases, it becomes more likely that consumers perceive the quality of products to be the same. Its own research found a significant correlation between similarity of packaging and higher perceptions of price, quality and suitability for intended use; 

*        likelihood to buy: the study reported that recent studies indicate that consumers are more likely to buy own brand products where they look more like the branded product. 

Not all lookalikes are harmful ...

The study therefore makes clear that similarity of packaging misleads and causes large numbers of consumers to buy products they would not have bought had the packaging been more distinct. This transactional effect is prohibited under the UCPD, regardless of whether the consumer suffers detriment or complains. The study also shows that similar packaging causes consumers to be more inclined than they would otherwise be to believe that the similar goods come from the same source and/or share qualities, something that is likely to cause some consumers to buy copies when they would not otherwise. This also falls foul of the UCPD where those consumers are misled. Consequently there is a requirement for effective enforcement against over-similar packaging that leads to mistaken purchase. Unless this is available, the UK is not complying with its existing obligations.  

Interviews

The interviews with brand manufacturers explore whether and how they can act against misleadingly similar packaging: 

1.     manufacturers are likely to be reluctant to litigate for a range of reasons, including the potential harm to their customer relationship, litigation costs and a sense that available civil remedies such as passing off may not be as helpful or applicable as those in other markets such as Germany; 

2.     Manufacturers know that, while the Regulations implementing UCPD ought to be applicable, those currently able to enforce them (OFT and Trading Standards principally) do not have the resources to do so and prioritise other things. 

Manufacturer concerns about relationship and cost do not demonstrate lack of effective redress or enforcement but rather a laudable desire to resolve matters commercially if possible. The findings on manufacturers’ acceptance that the OFT and Trading Standards will not enforce are, however, directly relevant to the question of whether UCPD is adequately implemented in the UK where manufacturers have no private right of action.  

Legislative policy

This is discussed in chapter 10 (with further discussion in Annex III). It concludes that it is probable that prevention of misleadingly similar packaging is within the scope of UCPD. Should this be correct, as the EU guidelines suggest it is, the study draws out the following consequences: 

1.     because the UCPD is a maximal harmonisation measure, the UK is not free to enact (non-IP) legislation to prevent similar packaging that goes further than UCPD; 

2.     Misleadingly similar packaging that causes consumers to take transactional decisions they would not otherwise have taken are already unlawful under the UK Regulations implementing UCPD; 

3.     This is "of little significance" if Trading Standards (or others empowered to do so) do not have the resources to take action.

 The study goes on to discuss the option of providing private rights of action, as happens in the majority of other member states (22 member states according to the report). It notes in particular that Ireland, with its very similar legal system, provides for private rights of action against breach of UCPD and that this has not led to anything approaching a flood of legal actions (whether about similar packaging or otherwise). It notes that the mere existence of private rights of action may in fact help achieve a commercial resolution. This comment is highly consistent with the findings from the interviews with manufacturers who would much prefer to resolve these kinds of disputes commercially to avoid the legal costs and relationship damage caused by litigating with their retail customers.  

Where next?

The ball is now in the court of Ministers and officials to determine how best the UK may meet its obligations under the UCPD, Paris Convention and TRIPS. It is hoped they will do so with a greater sense of urgency than they have shown to date. It is of great frustration to industry that the government embarked on this lengthy three-year study rather than review its implementation of the UCPD as it promised to do in 2007. This has put back a discussion on remedies by around two years. 

A fuller analysis of the IPI study can be found on the Group’s website.