The Court of Appeal has today handed down its long-awaited decision in L'Oreal v Bellure. The decision implements the responses given by the European Court of Justice (ECJ) (as it then was) in June 2009 to questions referred to it by the Court of Appeal. Notably, it also includes an extensive explanation by Lord Justice Jacob of the reasons why he disagrees with the ECJ's approach, although he recognises that the Court of Appeal is bound by it.
This is a long-running dispute concerning fragrances intended to be "smell-alikes" for some of L'Oreal's most famous perfumes. The defendants - Bellure, Malaika and Starion - had been using comparison lists which matched their copy perfumes to some of L'Oreal's well known perfumes, using the L'Oreal registered marks.
L'Oreal contended that this was an infringement under Article 5(1)(a) of the Trade Marks Directive (89/104). Historically, there were also issues relating to the design of the defendants' packaging, which the defendants had conceded.
The Court of Appeal's questions to the ECJ related to whether the defendants' use of look-a-like packaging had taken unfair advantage of the reputation of the relevant L'Oreal marks even though it did not "jeopardise the essential function of the registered trade mark as a guarantee of origin". They also concerned the use of comparison lists.
Further background may be found in an article on the ECJ's decision by Cerryg Jones of Wragge & Co.
Jacob LJ provided the leading judgment; Rimer LJ and Wall LJ concurred. He noted that it is lawful to make and sell a smell-alike product, that there was no customer confusion between L'Oreal's perfumes and the cheap copies and that there was no tarnishment or blurring to the image or the distinctiveness of L'Oreal's trade marks.
Nor was there any effect on sales of the corresponding fine fragrances, since consumers who buy a "smell-alike" do so knowingly and would not purchase the genuine product. Nevertheless, the evidence showed that the defendants achieved a promotional advantage by informing consumers which luxury perfumes the copy perfumes imitated, by reference to the claimant's trade marks.
Jacob LJ's view is that the ECJ has gone a step too far. He says that traders should not be prevented from making honest statements about lawful products, or competition will be impaired. In his view the ECJ's approach is unnecessary and amounts to muzzling free speech; it also deprives consumers of choice.
In his view the ECJ's approach imposes a more restrictive and protective approach than in many other jurisdictions. These are substantive and very serious comments, aimed in part at the Commission's forthcoming review of EU trade mark law and referencing also the Commission's submissions in a current reference to the Court of Justice of the European Union (the ECJ as was) in a current "Adwords" case (Interflora Inc v Marks and Spencer Plc  EWHC 925 (Ch)).
The ECJ concluded that use of the trade marks to refer to L'Oreal's product was not an infringement under Article 5(1)(a). However, it held that use of the marks in the comparison lists also included use with reference to the copy perfumes for the purpose of advertising them, and such use did amount to infringement under Article 5(1)(a).
The defendants had argued that such use is merely descriptive (as, for instance, in the case C-200 Hölterhoff  EC I-4187). However, the ECJ found that while the defendants' use of the marks did not affect their essential function it nevertheless affected other functions.
Such functions include the guarantee of quality, and the advertising, communication and investment functions. Jacob LJ has commented that these functions are ill-defined and vague, and this is an aspect of the case which he wishes to draw to the attention of the Commission. In his view Article 5(1)(a) infringement should be confined to the essential function of distinguishing origin.
What is not clear from the ECJ's reasoning is whether Article 5(1)(a) can, like Article 5(2) in respect of unfair advantage, cover circumstances where there is no direct harm to the mark. The result is that trade mark owners in similar situations as L'Oreal should always allege infringement or Article 5(2) in order to ensure that unfair advantage (or "free-riding" - a term to which Jacob LJ takes exception) is covered.
Comparative Advertising Directive
Defendants have a 'get out of jail free card' if the trade mark use complies with all the conditions set out in Art 3a(1) of the Comparative Advertising Directive (CAD). The conditions in issue were (g); it does not take unfair advantage of the reputation of a trade mark or of the designation of origin and (h); it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark.
The defendants argued that (h) was confined to counterfeits; that is what imitations and replicas means. However, the ECJ gave the condition a wide meaning and held that the imitation does not have to be explicit. It can be implicitly communicated by the advertisement and the imitation does not have to be in relation to the product as a whole. It can merely be the imitation of an essential characteristic of that product, such as the smell of the product.
Jacob LJ felt bound to follow this reasoning although he commented that he could not see any rational basis for the rule. Failure by the defendants to comply with CAD means that they do not fall within the exception for trade mark infringement under CAD and therefore were not acting in accordance with honest practices.
For Article 5(2) infringement it is necessary to show detriment to either distinctive character or repute of the mark or unfair advantage taken of the distinctive character or repute of the mark. The ECJ ruled that use of the L'Oreal marks amounted to "free-riding", which was per se taking an unfair advantage. Jacob LJ observed that this was far too broad a conclusion.