L'Oreal v Bellure - the ECJ hands down judgment on the interaction of trade marks and comparative advertisements

In C-487/07, L'Oreal SA and ors v Bellure NV and ors, handed down on 18th June 2009, the ECJ has given definitive guidance on the relationship of trade mark law and the comparative advertising directive. The ECJ had previously given some guidance in O2 Holdings v O2(UK), a case involving a comparative advertisement which made use of bubbles similar to a registered trade mark of O2. However, that case was complicated by the fact that the defendant did not use a sign identical to the registered trademark. Thus, it was necessary for the registered proprietor to establish a likelihood of confusion in the context of a comparative advertisement. This is o

f course very different if context is allowed to be taken into account because of course, the whole purpose of such advertisements are to contrast and not to confuse two marks.

L'Oreal v Bellure was concerned with the more typical comparative advertisement where the advertisers uses the actual registered trade mark of a competitor. Thus, Art.5(1)(a) of the Trade Mark Directive is engaged. That does not require the proprietor to establish a likelihood of confusion.

L'Oreal was concerned with companies selling "smell-alike" perfumes to the top perfume brands. They were marketed in two ways (i) by the use of packaging and colour schemes which were suggestive of the top brands (ii) the use of comparison lists which matched a smell-alike with the top brand. Thus, it would be said that X smells like Chanel No.5

The Court of Appeal of England and Wales referred a number of questions to the ECJ about the lawfulness of such practices which, in essence, raised important issues about the interaction of trade mark law with the comparative advertising directive and more indirectly, the notion of unfair competition.

In a comprehensive judgment, the ECJ has given firm and clear guidance that such practices are unlawful. Furthermore, it has given guidance on the proper interpretation of certain provisions of the Comparative Advertising Directive. This is now discussed more fully.

 Law of unfair competition under Art.5(1)(a)

 The Court of Appeal was concerned whether Art.5(1)(a) of Trade Mark Directive was engaged at all in comparative advertising. As had been made clear in a number of ECJ authorities (e.g. Adam Opel), it was necessary to establish for the purpose of infringement of Art.5(1)(a) that the defendant's use would jeopardise the essential function of a registered trade mark, namely to act as an indication of origin, or other functions of the mark. However, with regard to the essential function, it was extremely difficult to see how any comparative advertisement would jeopardise the essential function of a registered trade mark.

First, the ECJ emphasised (relying upon O2 Holdings v O2(UK)) that use of a competitor's registered trade mark for the purpose of identifying his goods or services could be regarded as use for the advertiser's own goods and services for the purpose of Art.5(1) and Art.5(2).

Secondly, the ECJ emphasised that such use could not be prevented if the comparative advertisement complied with all the conditions of Art.3a(1) Directive 84/450 (again citing O2).

Thirdly, and most interestingly, the Court, recognising the case law culminating in Adam Opel that use of the defendant's sign must affect the functions of the mark said that the functions not only included the essential function but also "its other functions, in particular that of guaranteeing the quality of the goods or services in question and those of communication, investment or advertising". In doing so, the ECJ said that Art.5(1)(a) confers wider protection than Art.5(1)(b) (similar marks/similar goods) as such required the establishment of a likelihood of confusion and "accordingly the possibility that the essential function of the mark may be affected".

The Court thus said that the national court must establish for the purpose of Art.5(1)(a), that the use of the registered trade mark is liable to affect the functions of the mark - particularly the functions of communication, investment or advertising. These functions are not amplified or described as what they mean. However, they appear to hark back to many of the key concepts developed under Art.5(2).

By way of commentary, ex hypothesi, use of a registered mark in a comparative advertisement requires that mark to have a reputation. One cannot identify the registered proprietor's goods by reference to an unused mark.

Furthermore, it is difficult to see how use of a registered mark in a comparative advertisement will affect the functions of communication, investment or advertising without also giving rise to an action under Art.5(2). In other words, are there any set of facts whereby an action will fail under Art.5(2) (because the defendant does not take unfair advantage/tarnish/blur the registered mark) but succeed under Art.5(1)(a)? Possibly, it may be where the mark does not have a sufficient reputation to satisfy the requirements of Art.5(2) (i.e. it is not known to a significant part of the relevant public). This raises the interesting point whether Art.5(1)(a) can be used more generally (outside the narrow field of comparative advertisements) where it can be established that there is unfair advantage/detriment etc but there is not a sufficient reputation to succeed under Art.5(2). Of course, in a classic action under Art.5(1)(a), one does not need to show damage to such functions because damage to the essential function will be presumed. However, is there a set of cases outside the field of comparative advertisements where Art.5(1)(a) is engaged not because of damage to the essential function but because use is likely to jeopardise the investment, advertising and communication functions. 

Art.5(2)

The ECJ gave further guidance as to the proper interpretation of Art.5(2). This has been subject to scrutiny by the ECJ in a number of decisions including O2 and Intel. The approach to Art.5(2) has now further been refined. Many lawyers feel that Art.5(2) is a more natural home for a trade mark infringement action where there is a comparative advertisement than Art.5(1)(a). The Court made it clear that where a third party attempts to ride on the coat-tails of a registered mark's reputation without paying any financial compensation and without exploiting the marketing effort expended by the proprietor in order to create and maintain the image of the mark without being required to make efforts of its own in that regard, that such must be considered to be an advantage unfairly taken.

This guidance incorporates some of the CFI's and Boards of Appeal's approach to "unfair advantage". Furthermore, if unfair advantage is being taken, then because such is also a condition in the Comparative Advertising Directive, then such will mean that there is no defence under that directive.

Guidance to Art.3a of the Comparative Advertising Directive

The Court gave further guidance as to the meaning of the following provisions in Art.3a(1) of the Comparative Advertising Directive

(d) it must not create a likelihood of confusion

(e) it must discredit or denigrate the mark

(g) it must not take unfair advantage or the reputation of the mark

(h) it must not present goods or services as imitations or replicas of goods or services bearing the mark.

It summarised those conditions as meaning that the advertisement must not give rise to "situations of unfair competition".

With regard to (h) (imitation or replica), it said that such does not apply only to counterfeit goods but to any imitation or replica. It said that the object of (h) is "to prohibit an advertiser from stating in comparative advertising that the product or service maketed by him constitutes an imitation or replica of the product or the service covered by the trade mark". Such included advertisements that "having regard to their overall presentation and economic context, are capable of implicitly communicating such an idea to the public at whom they are directed". It considered that the comparison lists did indeed amount to presenting goods as imitations or replicas. The ECJ also held that it did not matter whether imitation related to an essential characteristic of the products such as smell of the goods.

With regard to (g), it said that comparison lists which present the advertiser's products as an imitation of a product bearing a trade mark is inconsistent with fair competition and thus unlawful, any advantage gained by the advertiser through such advertising will have been achieved as the result of unfair competition and must accordingly be regarded as taking unfair advantage of the reputation of the mark.

Thus, comparison lists where goods are marketed as imitations or replicas infringe Art.5(2) and are not saved by the Comparative Advertising Directive.

Health Warning!

There is a danger in this. Comparative advertising is all about comparing characteristics of the advertiser's goods with those of a competitor's goods. Normally, an advertisement which informs the public that X has the same characteristics as Y (i.e. for broadband, same speed, same amounts of faults etc) but it much cheaper is considered the foundation of competition. Yet, there is a fine line between informing the public that one's goods have the same characteristics as a competitor's goods and X's goods being seen as an imitation or replica of Y's goods. For instance, is there any difference between a comparison list which compares e.g. Virgin broadband with T-mobile broadband whereby T-mobile point out that their mobile telephony service is identical in every characteristic to Virgin but much cheaper and the facts in the L'Oreal case. Indeed, as has been said, it is very difficult to describe smell without using references e.g.. "it smells like Chanel No. 5". Yet, an advertisement which markets a wholly unknown brand by reference to a very well-known brand can often be thought of unfair competition because the unknown brand hitches a ride on the reputation of the well-known brand and thereby avoids a prolonged brand awareness campaign. So maybe the critical difference is where there is a substantial discrepancy between the reputation of the registered trade mark and the advertiser's brand.

Much food for thought!