A recent decision of the Court of Appeal for England and Wales has provided some interesting comments concerning the use of a competitor’s trade marks in comparative price lists.
In the case, L’Oréal S.A. brought proceedings against the defendants who were selling replica perfumes. The defendants sold three ranges of products called STITCH, CRÉATION LAMAIS and DORALL. Each member of the range smells like a famous luxury branded perfume known under a well-known registered trade mark. L’Oréal alleged that the defendants’ use of comparison lists for each of the defendants’ ranges of product, showing which products correspond to which L’Oréal perfume, infringe its registered trade marks for those perfumes.
The Factual Position
The Court summarized the factual position as follows:
- It is lawful to make and sell the smell-alike product;
- The best and only practical way to describe its smell is to inform people that it smells like “X”;
- The defendants have done this through the use of comparison lists;
- The defendants get a major promotional advantage from using such lists;
- Neither customers or ultimate consumers are deceived as a result of the use of the lists;
- Neither the image nor the distinctiveness of the trade mark for the comparable fine fragrance is impaired by the use of the list – there is no tarnishment or blurring;
- Sales of the corresponding fine fragrance are not affected by the use of the lists.
Consumers are not stupid. They will not see the cheap copy as being the same in quality as the original. They will see it for what it is and no more.
Some of the issues in the case had been referred by the Court to the European Court of Justice (“ECJ”) since they involved an interpretation of specific provisions of the Trade Marks Directive of the European Parliament. The ECJ found, for a number of reasons, that the use of the comparative advertisements was actionable. Once this judgment was received, it was up to the Court to implement the decision of the ECJ. While that decision was implemented, it appears to have been done very reluctantly. Jacob, L.J., a respected jurist, said his strong predilection, free from the opinion of the ECJ, would be to find that trade mark law did not prevent traders from making honest statements about their products where those products are themselves lawful.
Jacob, L.J. said the issue was whether trade mark law prevented the defendants from telling the truth. Even though their perfumes are lawful and do smell like the corresponding famous brands, does trade mark law nonetheless muzzle the defendants so that they cannot say so?
He had a number of negative comments concerning the judgment of the ECJ. First and most generally, he said he was in favour of free speech. There is no good reason to dilute free speech in cases where the speaker’s motive for telling the truth is his own commercial gain. Truth in the marketplace matters even if it does not attract quite the strong emotions as the right of a journalist or a politician to speak the truth.
The ECJ’s decision means that poor consumers are the losers. Only the poor would dream of buying the defendants’ products. The real thing is beyond their wildest dreams yet they are denied the right to receive information which would give them a little bit of pleasure; the ability to buy a product for a Euro or so which they know smells like a famous perfume. Also there was no harm to the trade mark owner.
Freedom to Trade
The second reason related to freedom to trade. If a trader cannot say “my goods are the same as Brand X (a famous registered trade mark) but half the price”, there was a real danger that important areas of trade will not be open to proper competition.
The final reason was that as a result of the ECJ decision, the EU will have a more “protective” approach to trade mark law than other major trading areas or blocks. Many countries, such as the US, have a healthy attitude to competition law and would not keep a perfectly lawful product off the market by the use of trade mark law to suppress truthful advertising.
A brief review of US law shows that the Court’s observation was correct. It seems that one may lawfully use the trade mark of another in comparative advertising so long as there is truthful disclosure and no likelihood of confusion.
The Canadian Position
Unlike the provision of the Trademarks Directive and the corresponding legislation in England, the Canadian Trade-marks Act (the “Act”) does not provide any exceptions for comparative advertisements of the type in issue in this case.
First, under the Act, the registration of the trade-mark in respect of wares, gives to its owner the exclusive right to the use throughout Canada of the trade-mark in respect of those wares. Presumably, this section would be applied and a finding of infringement would be made.
Second, section 22 of the Act is frequently applied in cases of this nature. This section provides that no person shall use a trade-mark registered by any person in a matter likely to have the effect of depreciating the value of the goodwill attaching thereto. Goodwill for these purposes consists of reputation and connection built up by years of work or gained through significant expenditure of money and which is identified with the goods distributed by the owner in association with the trade-marks.
The goodwill attached to a registered trade-mark may be depreciated if any of the following occur:
- the esteem in which the wares or services are held is reduced;
- direct persuasion and enticing of customers who would otherwise be expected to buy or continue to buy goods bearing the trade-mark;
- disparagement of the mark; or
- dilution of the distinctiveness or unique characteristics of the mark.
The application of this section is limited to use which any person may make in association with goods within the meaning of the Act of another’s registered trade-mark, in such a manner as to depreciate the value of the goodwill attaching thereto.
The difference between the requirements to show use for wares and services has led to somewhat surprising results. In one case, it was found that the reproduction of the plaintiff’s trade-marks on the defendant’s packages was use within the meaning of section 22 and actionable. However, the reproduction on the defendant’s brochures was not.
While there are significant differences between the wording of the legislation in England and the EU and the Canadian Act, the criticisms made by Jacob, L.J. are not dependent on statutory wording but are of broad application.