That.Legal succeeds in protecting augmented reality client's goodwill in Singapore

Introduction

On 10 May 2023, That.Legal’s very own, Gillian Tan (https://www.that.legal/gillian) successfully assisted a client in a trade mark opposition case on the grounds of passing off. This is the case summary of Zerodensity Yazilim Anonim Sirketi v Novel Brands USA LLC [2023] SGIPOS 11.

In the augmented reality space, the “Reality Engine” sign has fast become a household name. In reality (no pun intended), Reality Engine is the branding used for a real-time broadcast compositing system that enables real-time visual effects that feature video input/output, keying, compositing, and rendering in a single machine.

We acted for the Turkish company, Zero Density (the “Opponent”) and managed to successfully prove that “Reality Engine” had been sufficiently used such that the Opponent owned the goodwill in Singapore.

In 2019, Novel Brands USA LLC (the “Applicant”), a company based in the United States, sought to register the sign “REALITY ENGINE” as a trade mark in Singapore (the “Application Mark”), in respect of, amongst other things, “Downloadable and recorded computer software” in Class 9 (the “Application Goods”). 

Unfortunately, our client, the Opponent, had not registered the “Reality Engine” sign when it was first used in Singapore (before the Applicant’s priority date). As such, we could not oppose the Application Mark on relative grounds of, for example, trade mark similarity, and were left with only one option — to oppose the Application Mark based on the Opponent’s unregistered rights pursuant to Section 8(7)(a) of the Singaporean Trade Marks Act, which reads:

“A trade mark must not be registered if, or to the extent that, its use in Singapore is liable to be prevented —

(a)   by virtue of any rule of law (in particular, the law of passing off) protecting an unregistered trade mark or other sign used in the course of trade;”

(Emphasis added)

In Singapore, for an opponent to succeed on the ground of passing off, the “classic trinity” of (1) Goodwill; (2) Misrepresentation; and (3) Damage must be proven. Critically, the Opponent must be able to prove that its prior unregistered rights were sufficiently used in Singapore (before the Applicant’s priority date) such that it is adequately recognised by the relevant public as distinctive of the Opponent’s goods and/or services (goodwill), that the use of the Application Mark in respect of the claimed goods and/or services would be a misrepresentation that the Applicant was somehow connected to the Opponent (misrepresentation), and that such use would likely cause damage to the Opponent, whether by diversion, dilution or blurring (damage), in order to succeed in a claim of passing off.  

Goodwill

The priority date of the Application Mark was on 7 March 2019. This meant that the Opponent has to prove that it possessed the necessary goodwill in Singapore prior to this date.

The Opponent is based overseas but had offered its goods in Singapore since 2018. This was done through a non-exclusive distributor named Cgangs International Pte. Ltd. (“Cgangs”). The Opponent adduced evidence of various invoices that included items for a full license of the “Realty Engine” software to prove that it had the necessary goodwill before the priority date. In response, the Applicant contended that the evidence did not show that the Opponent used the sign on software as a “core good”.

The Assistant Registrar (“AR”) presiding over this case held that it is “immaterial that the Opponent also offers other goods and services alongside its “Reality Engine” software” and in any event, was satisfied that the Opponent’s Reality Engine sign had indeed been used in respect of software.

Misrepresentation

As per the locus classicus in determining misrepresentation in a passing off action in Singapore, a threshold inquiry relating to the distinctiveness of the sign must first be conducted followed by an inquiry on whether there is in fact, a misrepresentation. In other words, if a mark is not distinctive of the opponent’s products/services, the mere fact that the applicant has used a mark similar or even identical to the opponent’s in marketing and selling its products/services, would not amount to a misrepresentation. This is then followed by an analysis of whether the misrepresentation gave rise to confusion (or the likelihood thereof) which is assessed from the vantage point of a notional customer with imperfect recollection.

The AR found that the threshold inquiry was satisfied on the basis that quotations and invoices issued to Cgangs by the Opponent clearly designated the software as “Reality Engine” and that, in communications between the parties, Cgangs referred to the software license as the “Reality Engine license”.

On the issue of misrepresentation, the Applicant admitted that the Application Mark is identical to the Opponent’s sign but argued that the goods are not similar/identical. The AR disagreed with the Applicant and held that there was an overlap in the goods as both parties operated in the fields of Virtual Reality and Augmented Reality (collectively, “VR/AR”), and therefore, that the parties were in direct competition.  

On the issue of the likelihood of confusion, the Applicant submitted that the consumers targeted by the Opponent differed significantly from the consumers targeted by the Applicant. They argued that the Opponent’s consumers are “professionals in the business of organising events involving VR/AR technology”, who procure the Opponent’s goods in their professional capacities, using quotes (for distributors such as Cgangs) and from distributors (for end-users). On the other hand, the Applicant intends to distribute its goods from a website/application where consumers can immediately access and purchase or use the Applicant’s goods and software.

In support of this argument, the Applicant raised 3 main points. First, that the trade channels utilised by the parties were different (the “Trade Channel Point”). Second, the Opponent’s consumers would exercise particular care in purchasing the Opponent’s goods as they would be purchasing in their professional capacities — they would be expending corporate resources and not personal funds (the “Careful Purchase Point”). Third, the Opponent’s goods are sold in a specialised market consisting of persons engaging in a particular trade, making it essential for the Opponent to adduce evidence of the likelihood of confusion/deception from persons of this trade. In the absence of such actual evidence, the officer hearing the matter may not proffer his own opinion on the likelihood of confusion/deception (the “Evidence of Likelihood of Confusion Point”).

The AR considered all these points, but ultimately, disagreed with the Applicant’s arguments.

On the Trade Channel Point, the AR held that the Applicant’s intention to market its goods directly to consumers and developers were irrelevant because the Application Mark would, once registered, not prevent the Applicant from marketing its software goods to the actual and/or potential consumers of the Opponent’s goods.

On the Careful Purchase Point, the AR accepted that the consumers of VR/AR products would exercise a greater level of care when purchasing. Nevertheless the AR held that it would not be sufficient to prevent a likelihood of confusion due to the fact that the marks are identical and that there is a significant overlap in the parties’ goods of interest.  

On the Evidence of Likelihood of Confusion Point, the AR held that the Opponent’s goods were not only sold to professionals in the business of organising events involving VR/AR technology, but also includes end-users or indirect consumers just as much as Cgangs. Such consumers may not be familiar with the product offerings and/or service providers in the VR/AR industry. In this vein, the AR opined that she was entitled to form her own opinion of the likelihood of confusion, despite the absence of evidence of trade witnesses.  

When viewed in totality, the AR was satisfied that allowing the Application Mark to be registered would result in a likelihood of confusion.

Damage

Having found that the goodwill and misrepresentation limbs of the “classic trinity” were satisfied, the AR found that there would be damage to the Opponent’s goodwill, via, among other things, diverting trade from the Opponent to the Applicant.

Conclusion

Having considered the evidence and submissions, the AR held that the Application Mark should be refused registration, and awarded the Opponent costs.

With that, we successfully assisted our client in protecting its goodwill in Singapore, even though it did not, as of the Application Mark’s priority date, have a trade mark registration over the word “Reality Engine”.

Since then, the Opponent has applied for trade mark registration for the same in classes 9, 38 and 42. If the Opponent had done so before the Application Mark’s priority date, this case may not even have arisen.

While we recognise that it is impossible to file trade marks in all countries for cost considerations, we typically suggest that our clients file trade marks in the countries that they intend to sell their goods/services within the next 3 years ahead of time, whether they intend to enter these markets by themselves or in collaboration with partners (such as distributors). Doing so may help prevent issues, such as the present case, from even arising.

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Disclaimer

This article does not constitute legal advice or a legal opinion on any matter discussed and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and practice in this area. That.Legal LLC represents neither party in this dispute and is not privy to any confidential information pertaining to the parties. All facts stated herein are compiled from publicly available sources. If you require any advice or information, please speak to a practicing lawyer in your jurisdiction. No individual who is a member, partner, shareholder or consultant of, in or to any constituent part of That.Legal LLC accepts or assumes responsibility, or has any liability, to any person in respect of this article.