On 18 June 2009, the European Court of Justice handed down a landmark judgment in L’Oréal v Bellure (Case C-487/07), concerning “unfair advantage” taken of well known marks, the extent to which the comparative advertising directive provides a defence to trade mark infringement and the functions of a trade mark under European Union law.
The case concerned importation and distribution in the UK of “imitation” perfumes which looked and smelled similar to L’Oréal’s fragrances. L’Oréal sued the Defendants in the English High Court in respect of the various “lookalike” and “smellalike” perfume products and price lists comparing the Defendants’ products to the trade marks of products which they were intended to imitate. The Court of Appeal of England and Wales referred five questions to the ECJ [see Annex for full text of questions] relating to the interpretation of Directive 89/104 (the “Trade Marks Directive”) and Directive 84/450 (the “Comparative Advertising Directive”). These questions addressed the meaning of “unfair advantage” and particularly whether “free riding” amounts to infringement even where there is no blurring, tarnishment or other negative impact on a registered mark.
Unfair Advantage for Marks with a Reputation
The ECJ answered the fifth question first, which was characterised as relating to the situation where use of a mark gives an advantage in marketing, without giving rise to a likelihood of confusion or causing or risk causing detriment to the mark or to its proprietor.
The ECJ confirmed that the three types of injury under Article 5(2) of the Trade Marks Directive of unfair advantage, tarnishment and dilution, are quite distinct although for each type of injury, a “link” in the minds of consumers is a necessary but not a sufficient component. It was sufficient for merely one of these types of injury to be proven in order for Article 5(2) to apply.
It was thus held that unfair advantage does not require a likelihood of confusion or a likelihood of detriment to the distinctive character or the repute of the mark or its proprietor. It covers, in particular, cases where, “by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation”.
The ECJ stated that in order to determine whether the use of a sign took unfair advantage of the distinctive character or the repute of the mark, it was necessary to undertake a global assessment, taking into account all relevant factors, including:
The strength of the mark’s reputation
The degree of distinctive character of the mark
The degree of similarity between the marks
The nature and degree of proximity of the goods or services
Whether there was a likelihood of dilution or tarnishment of the mark
The stronger the mark’s distinctive character and reputation were, the easier it was to accept that detriment had been caused to it. Further, the more immediately and strongly the mark was brought to mind by the sign, the greater the likelihood that the current or future use of the sign would take unfair advantage of the distinctive character or the repute of the mark and be detrimental to it.
On the facts of this particular case, the Court referred to a number of factors which appeared influential in the reasoning. Specifically, the Court stated that unfair advantage was taken “where that party sought by that use to ride on the coat-tails of the mark with a reputation in order to benefit from the power of attraction, the reputation and the prestige of that mark and to exploit, without paying any financial compensation, the marketing effort expended by the proprietor of the mark in order to create and maintain the mark’s image.”
Infringement when the Essential Function of a Mark is Not Affected
The first and second questions referred by the Court of Appeal of England and Wales dealt with the issue as to whether use of the names of L’Oréal’s perfumes could amount to trade mark infringement under Article 5(1)(a), notwithstanding that the essential function of the trade mark was not affected, or no function of the trade mark was affected, but the sign nevertheless played an important commercial role for the Defendant.
The ECJ stated that price comparison lists were a form of comparative advertisement and that use of a mark in comparative advertising could constitute trade mark infringement. Thus, the use of a mark as an advertisement could be distinguished with use in a descriptive sense (per the ECJ decision in Hölterhoff).
Further, the stricter protection afforded by Article 5(1)(a) (compared to cases of similarity under Article 5(1)(b)) does not require damage to the essential function of a trade mark (of guaranteeing the origin of goods/services), provided that one of the other functions of the mark were affected. Those other functions included “in particular that of guaranteeing the quality of the goods or services in question and those of communication, investment or advertising.”
The ECJ left it for the national courts to determine whether use is such as to be liable to affect one of the other functions of those marks. However, little guidance was provided as to how such determinations should be conducted.
The Court also added that such use in the absence of harm to the essential function could constitute infringement as an unfair advantage under Article 5(2).
“Unfair Advantage” and “Imitations” under the Comparative Advertising Directive
The third and fourth questions related to whether Article 3a(1) of the Comparative Advertising Directive provides a defence if, in a comparison list, the use of a sign does not cause deception or confusion but is used to indicate that a product has a major characteristic similar to a branded product. The specific questions related to whether such circumstances amounted to the taking of “unfair advantage” under Article 3a(1)(g) and presentation as “imitations or replicas” under Article 3a(1)(h).
The ECJ pointed out that Articles 3a(1)(a) to (h) list cumulative conditions which comparative advertisement have to meet in order to be permitted. In essence, use of the mark is permitted if it does not create a likelihood of confusion, discredit or denigrate the mark or take unfair advantage of the reputation of the mark and it does not present goods or services as imitations or replicas. Thus, each of these were distinct conditions, each of which had to be satisfied to qualify under the Comparative Advertising regime.
The Court gave some guidance as to whether a product is to be considered to be presented as an imitation or replica under the regime as follows:
- The presentation need not be misleading or create a likelihood of confusion
The presentation need not explicitly evoke the idea of imitation or reproduction (those which, “having regard to their overall presentation and economic context, are capable of implicitly communicating such an idea” are also covered)
It is irrelevant whether the advertisement indicates an imitation of the product as a whole or merely the imitation of an essential characteristic of that product such as, in the present case, the smell of the goods in question
In contrast, little clear guidance was provided as to determine whether any particular comparative advertisement provides an “unfair advantage” or otherwise how such a phrase should be interpreted. Instead, the ECJ stated that the phrase must be interpreted in the same way as under the Trade Marks Directive, and that presentation of goods as imitations or replicas would in fact confer on the user an unfair advantage.
The decision will be warmly welcomed by owners of well known brands as it strengthens and clarifies the requirements for “unfair advantage” infringement of marks with a reputation. Whereas dilution and tarnishment have recently been held to require a "change in economic behaviour" of consumers, no such requirement is mentioned in cases of unfair advantage. Indeed, it is now explicit that no confusion or other detriment to the mark or its owner is required and that transfer of the image of the mark can suffice.
The judgment also goes some way to define the "non-essential" functions of trade marks to encompass operating as a guarantee of quality, communication, investment and advertising. Such characteristics arguably reflect the commercial reality and approach adopted by large brand owners, particularly those engaged in sophisticated activities to build “brand equity” outside of their main field of activity.
In the field of comparative advertising, although based on a particular set of circumstances where imitation was clear, the decision may also go some way to limit acceptable practices - for example when comparing any one “essential characteristic” of the advertised goods with those of a competitor product.
1. Where a trader, in an advertisement for his own goods or services, uses a registered trade mark owned by a competitor for the purpose of comparing the characteristics (and in particular the smell) of goods marketed by him with the characteristics (and in particular the smell) of the goods marketed by the competitor under that mark in such a way that it does not cause confusion or otherwise jeopardise the essential function of the trade mark as an indication of origin, does his use fall within either (a) or (b) of Article 5(1) of Directive 89/104?
2. Where a trader in the course of trade uses (particularly in a comparison list) a well-known registered trade mark for the purpose of indicating a characteristic of his own product (particularly its smell) in such a way that:
It does not cause any likelihood of confusion of any sort
It does not affect the sale of the products under the well-known registered mark
It does not jeopardise the essential function of the registered trade mark as a guarantee of origin and does not harm the reputation of that mark, whether by tarnishment of its image or dilution or in any other way
It plays a significant role in the promotion of the trader’s product
Does that use fall within Article 5(1)(a) of Directive 89/104?
3. In the context of Article 3a(1)(g) of Directive 84/450, what is the meaning of “take unfair advantage of” and in particular, where a trader in a comparison list compares his product with a product under a well-known trade mark, does he thereby take unfair advantage of the reputation of the well-known mark?
4. In the context of Article 3a(1)(h) of the said Directive, what is the meaning of “present[ing] goods or services as imitations or replicas” and in particular does this expression cover the case where, without in any way causing confusion or deception, a party merely truthfully says that his product has a major characteristic (smell) like that of a well-known product which is protected by a trade mark?
5. Where a trader uses a sign which is similar to a registered trade mark which has a reputation, and that sign is not confusingly similar to the trade mark, in such a way that:
The essential function of the registered trade mark of providing a guarantee of origin is not impaired or put at risk
There is no tarnishing or blurring of the registered trade mark or its reputation or any risk of either of these
The trade mark owner’s sales are not impaired
The trade mark owner is not deprived of any of the reward for promotion, maintenance or enhancement of his trade mark
But the trader gets a commercial advantage from the use of his sign by reason of its similarity to the registered mark
Does that use amount to the taking of an “unfair advantage” of the reputation of the registered mark within the meaning of Article 5(2) of Directive 89/104?