20 April 2021

Is Colin the Caterpillar anti-competitive?

By Victoria Hewson

The British love nothing more than a story about a twee, mediocre national icon, bringing us together in slightly self-conscious, self-deprecating pride/outrage (delete as appropriate).

So in these tense times, Marks and Spencer claiming violations of its intellectual property rights over the bafflingly popular Colin the Caterpillar cake has been gratefully seized upon.

Last week, M&S lodged infringement proceedings against Aldi, claiming that the German retailer’s Cuthbert the Caterpillar ‘rides on the coat tails’ of Colin’s distinguished reputation, infringing the trade marks that M&S holds in the Colin brand.

Lawyers have speculated that M&S may also have a claim in the common law tort of ‘passing off’, which would require them to show that Aldi has misrepresented the Cuthbert brand (with features like the name, packaging and general ‘get-up’), causing customers to confuse it with Colin and damaging M&S’s sales. The caterpillar style of cake is widely available – with all of the main supermarket chains offering their own interpretation, and a proliferation of recipes for those who wish to make their own – and the ‘caterpillar’ part of the trade mark is descriptive, so there is no restriction on its use in the market. This all means it could be a difficult case for M&S to win. It’s hard not to see this move by M&S as tactical litigation, even rent seeking. It’s possible that the legal action and the associated media coverage will work out well for both M&S and Aldi – M&S get to highlight the superior quality and heritage of Colin while Aldi get publicity for the cheeky, insurgent (cheaper) Cuthbert, highlighting their irreverent challenger brand in the process.

Neither M&S nor Aldi is a stranger to legal action in the field of IPR. Aldi recently saw off a challenge to its £4 hair oil by a premium brand, after the judge found there was no way a customer would have confused it for the £30 luxury product. And M&S was party to one of the most hard fought battles in the digital arena, concerning whether buying the top paid-for search result on Google for the word ‘Interflora’ was an infringement of the trade mark of the specialist florist.

Does all of this suggest that our system of intellectual property rights is fundamentally anti-competitive? The legitimacy of intellectual property rights protection is a hotly debated topic amongst free market supporters. I’m not going to analyse these arguments in detail here. It’s clear that some rights holders do try to leverage their IPR for anti-competitive purposes (though the market for caterpillar cakes seems quite vibrant), but it’s equally clear that the concept is here to stay. So what can and should be done to reform the laws in this area to minimise the opportunities for rent-seeking and protectionism? For a start, novel rights should be resisted, such as press publication rights that would entitle news publishers to royalties just for linking to their content. Happily, the UK has not adopted the EU Copyright Directive that will bring this into effect, but threats of regulation in this area remain on the table.

There are numerous other aspects of EU intellectual property law that the UK could usefully review and reform in a more pro-competition direction. A previous attempt to liberalise copyright that was found to infringe EU rules on fair compensation to rights holders could be revived. Database rights have been controversial since their inception in an EU directive in 1996, and have been criticised for causing legal uncertainty. The whole idea now seems quaint and outdated, a fresh look at the law here, in the wider context of data rights and privacy, could be a great contribution to the post-Brexit regulatory reform agenda.

Protected geographic indications are another aspect of EU laws that are considered to be protectionist and anti-competitive in their effects. Highly valued by their holders, the EU insisted on continuation of protection for EU PGIs in the Brexit withdrawal agreement, even though it related to the future relationship. The UK should be moving away from protecting geographical indications to the greatest extent possible, given those commitments made to the EU. As with M&S and Colin the Caterpillar, if a producer considers that the quality of their goods is distinctive and valued by consumers, they must surely believe that their product will come out on top in the market, prevailing over cheap imitations. Incumbents should not be given the protection of the law, just in case it doesn’t.

The levity surrounding Colin v Cuthbert has drawn attention to some of the undesirable features of intellectual property rights protection, but the costs from getting the balance of rights and protections wrong are very serious.

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Victoria Hewson is Head of Regulatory Affairs at the Institute of Economic Affairs.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.