The world of beauty has well and truly come of age. No longer are women (and increasingly, men), limited to the application of crushed carmine beetles and lead to accentuate their facial features. There is a whole world of beauty products out there and consumers are not afraid to spend money on them. With the beauty industry providing employment for more than one billion people and having an estimated value of £17 billion in the UK alone, the beauty economy is serious business.
There are myriad issues of relevance to the beauty industry, from parallel imports to commercial transaction considerations, but we have picked three subjects which are particularly topical in the digital age: counterfeits, lookalikes and online advertising. This article will focus on cosmetics and perfumery that make up (no pun intended) a substantial portion of beauty industry revenue. For this article, our perspective is UK-focused and so the law referred to will be that of England and the EU, but we have introduced global viewpoints where relevant.
A major concern for any consumer goods company is the proliferation of counterfeit goods, and cosmetic companies are no exception. The increasing digitalisation of the retail market has not only made our shopping experience easier, it has made the lives of counterfeiters easier. Purchasing online removes the customer’s opportunity to verify the products, and with a wealth of generic images available on every search engine, it is hardly surprising that imitation beauty items are cropping up on rogue websites, as well as eBay and social media platforms. While it may seem unfair that brand owners are responsible for dealing with unaffiliated counterfeiters, it is important for brand owners to protect the value of their products and the goodwill they have built up in them.
It has been estimated that in the UK alone, counterfeit cosmetics cost the beauty industry £201 million every year. The impact is even greater on an EU level: the beauty economy sacrifices £6.8 billion in sales revenue to counterfeiters, according an EU Observatory on Infringement and Intellectual Property Rights report. While headlines have previously been plagued by the lethal impact of imitation goods in the medical industry, recently the media has turned its gaze to the very real health threats posed by imitation beauty products.
In May of this year, the Police Intellectual Property Crime Unit (PIPCU) began a campaign to warn consumers of these risks. The “Wake up - don’t fake up!” slogan hit the mainstream press in large part due to certain shocking facts that emerged about the ingredients that could be found in counterfeit beauty goods, including arsenic, rat droppings and human urine—not what anyone wants to put on their face.
So, how can rights holders and others in the beauty industry deal with counterfeits? Customs notices (based on IP rights, most commonly registered trademarks) in the EU and beyond can be put in place to help to stop goods at the border. Customs notices (together with training of customs officials) are a key element of anti-counterfeiting strategies, helping to identify sources of counterfeit goods and to prevent their entry onto the market. China is always a key focus with regard to anti-counterfeiting strategies, but Turkey is increasingly becoming a hub for counterfeit cosmetics.
In some jurisdictions, there are national organisations that deal with counterfeit goods once they arrive onto that country’s soil. In the UK, for example, Trading Standards keep a close eye on goods for sale and also monitor consumer complaints, but they do not have eyes and ears everywhere.
Third-party online retailers selling a variety of brands have started trying to combat this issue by spot-checking the products they sell as a way of keeping tabs on their quality. We are also seeing companies increasingly making use of barcode and QR code technology to enable customers to verify the authenticity of their goods following their purchase. China’s Authentic Beauty Product Alliance (ABPA) was the first nationwide initiative set up to target imitation cosmetics products. On the ABPA website, customers can trace the source of their purchased goods for all participating brands.
These approaches are practical ways to enable brand owners to deal with the counterfeiting issue, especially as trademark infringement actions (which is the usual approach taken to deal with known counterfeit goods) can be difficult to bring, not least because it can be difficult if not impossible to locate counterfeiters.
Aside from the select few beauty products that manage to achieve cult status, the majority of cosmetics suffer as short a shelf life as the continually changing trends on the catwalks. The fleeting timeframe within which a nail varnish shade is considered ‘on trend’ makes brand protection a complex issue for cosmetic companies.
One of the largest threats to beauty products is the wealth of lookalike or copycat goods which saturate the market (also known as ‘beauty dupes’). As soon as Tom Ford reveals its latest lipstick hue, a range of suspiciously similar shades with a much lighter price tag are likely to crop up in your nearest high street pharmacy or online marketplace. The issue with these products is that while consumers will not necessarily be confused as to the origin of these goods (and there is unlikely to be the requisite misrepresentation for a passing off action), these dupes will effectively be taking unfair advantage of a well known brand’s product, which is not exactly fair. The UK does not have a tort of unfair competition unlike a number of other countries, so where does this leave beauty brand owners?
L’Oréal v Bellure is a landmark case in this area. Often referred to as the ‘smell-a-like’ case, L’Oréal took action against Bellure, which made use of L’Oréal’s trademarks in comparison lists that indicated which of Bellure’s fragrances smelt like certain perfumes produced by L’Oréal. While Bellure’s bottle design and packaging were not sufficiently similar to confuse retailers or customers as to the identify of the brand, Bellure admitted that its intention was to give ‘a wink of an eye’ towards its French counterpart.
The Court of Appeal eventually applied the Court of Justice of the EU finding of infringement under Article 5(1)(a) and Article 5(2) of the Trademark Directive.
Brand owners will be pleased to note that the court held that unfair advantage of a mark could exist without the need to show a likelihood of confusion or harm to the “essential function” (the origin function) of the trademark. While there was a lack of guidance from the then ECJ in terms of what it counted as “riding on the coat-tails” of a trademark, with unfair advantage requiring the requisite global assessment, this case does show that trademark infringement can be an avenue for brand owners to pursue (albeit one which will be very fact dependent). Design protection remains a cornerstone of protection against lookalikes although it is something of an unloved set of rights. Design rights can be registered or unregistered and UK or EU based.
It is beyond the scope of this article to go into extensive detail with regard to designs law (which can be technical and complex), but the key point to bear in mind is that the more unique a design is, the better the chance of obtaining design protection will be.
Copyright protection provides another avenue for brands to consider when the appearance of their design has been copied. However, this is not a simple way for brands to protect their work. In order for a design to qualify as a copyright work in the UK, it must be original (a relatively low bar) and constitute either an “artistic work” or a “work of artistic craftsmanship” (a relatively high bar). In practice, it is not easy for a beauty brand to demonstrate that one of its products meets this definition and so copyright protection may be limited to designs on packaging, which may not be that helpful.
Usually, it is the appearance of a product rather than the product itself that is being copied. Nevertheless, if a brand owner is developing and manufacturing its own formulae, it is important to ensure they are protected. If they are not patentable (lots of formulae will not be, lacking the requisite novelty or inventive step), brand owners are likely to be reliant on trade secrets, and so it is important to ensure that there are confidentiality agreements in place at every link of the development and manufacturing chain. While these won’t physically stop information being shared, they will provide contractual recourse in the event of a breach.
One point to consider is that, with the exception of copyright, unjustified threat provisions apply to IP rights and so it is important to tread carefully if considering accusing a party of infringement.
Celebrity and blogger endorsements
Celebrities and endorsements have always gone hand in hand. When the mighty power of the celebrity is paired with a savvy branding team, the results can be transformative.
Social media has morphed from being little more than a platform for the self-indulgent to download the minutiae of their days, to an essential branding tool at the core of any company’s business plan. Brands are increasingly using this tool to promote their famous fans.
The Advertising Standards Authority (ASA) will generally interpret endorsements on social media as marketing communications, which will make them subject to the Committee of Advertising Practice’s (CAP) code on advertising.
It is crucial that businesses identify posts that are marketing communications, and prevent these from being interpreted as personal messages. One method of doing this is adding a requirement for the brand endorser to feature either “#ad” or “#spon” in any online posts.
A favoured approach of many a beauty brand in recent years has been the shift in focus towards bloggers and ‘normals’ as a means of promoting product lines. Bloggers have become an influential force in the beauty industry with a number of them performing consultancy services for brands and others bringing out their own cosmetic lines. While bloggers may not be celebrities in the traditional sense, deriving their popularity from their girl or boy next door-ness, their endorsement can be powerful in the beauty world. As such, it is important to remember that their mentions of products will be marketing communications if sponsored by brands and should be clearly marked accordingly.
A recent ruling of the ASA will be of particular interest to the beauty industry. Procter & Gamble’s YouTube channel Beauty Recommended was found to have fallen foul of the ASA’s strict guidelines for marketing communications. Various aspects of the channel were criticised for not making it clear enough that Procter & Gamble was behind the channel and using it as a method of advertising. The key takeaway from this is that it is important to eliminate the risk of consumers being confused as to whether a YouTube channel, tweet or other social media post is advertising or not.
As the beauty industry goes from strength to strength, the brand protection and monetisation issues we have highlighted above will similarly grow in importance.
This article was first published in Issue 50 of IPPro Life Sciences.