The European Court of Justice (the "ECJ") has handed down judgment in the L'Oréal smell-alike perfume trade mark case, giving guidance on whether the promotion of imitation products by comparison with famous brands is permissible under trade mark and comparative advertising legislation.

A point of particular interest for brand owners is that the ECJ has clarified the law on the extent of extended trade mark protection granted to marks with a reputation under Article 5(2) of the Trade Marks Directive

L’Oréal is a manufacturer of high quality perfumes and other beauty products aimed at the luxury end of the perfume and cosmetics market. The Defendants imported, distributed and sold a range of perfumes which comprised copies of some of L’Oréal’s products; these copies were not counterfeit in the normal sense, but were ‘smell-alikes’ and were marketed in packaging which L’Oréal alleged took advantage of its products’ names, packaging and brand image.

At first instance the High Court held that L’Oréal had established trade mark infringement under Article 5 of the Trade Marks Directive in relation to some (but not all) of the packaging and bottle shapes and in relation to the use of certain word marks on comparison lists (the lists which indicated which of the Defendants’ range of products smelled like each of the premium brands). On appeal, the Court of Appeal referred five questions to the ECJ.

The first four questions referred related to the use by the Defendants of L’Oréal’s trade marks in the comparison lists, and the interpretation of Article 5(1) of the Trade Marks Directive and the conditions under Article 3a(1) of the Comparative Advertising Directive which comparative advertising must satisfy in order to be permitted. The fifth question related to the use by the Defendants of the packaging and bottles similar to those of L’Oréal and concerned the interpretation of Article 5(2) of the Trade Marks Directive which gives protection to well-known marks to the extent that the use of such marks takes “unfair advantage of”, or is “detrimental to”, the distinctive character or the repute of the mark.

The Fifth Question

The ECJ dealt with the fifth question first, which asked whether a third party that uses a sign similar to that of a trade mark with a reputation can be said to take “unfair advantage” of the mark, where such use gives that party an advantage in the marketing of his goods, without risking causing detriment to the mark or to its proprietor. The ECJ noted that Article 5(2) protects against three types of injury:

  • detriment to the distinctive character of the mark;
  • detriment to the repute of the mark; and
  • unfair advantage taken of the distinctive character or repute of the mark.

Any one of these types of injury is sufficient for the purposes of Article 5(2); an advantage taken by a third party of the distinctive character or repute of a mark may be unfair, even if that use is not detrimental either to the distinctive character or to the repute of the mark or its proprietor. To determine whether such use does take an “unfair advantage” a global assessment should be carried out taking into account all factors relevant to the case, including:

  • strength of the mark’s reputation;
  • degree of distinctive character of the mark;
  • degree of similarity between the marks at issue;
  • the nature and proximity of the goods or services concerned; and
  • the fact that there is a likelihood of dilution or tarnishment of the mark.

The ECJ commented that the stronger the mark’s distinctive character and reputation are, the easier it would be to accept that detriment had been caused to it. Furthermore, the more immediately and strongly the mark is brought to mind by the sign, the greater the likelihood that the use of the sign will take unfair advantage or will be detrimental to the mark.

The Court of Appeal had already held that there was a link between the packaging used by the Defendants and L’Oréal’s marks. It was apparent that such a link conferred a commercial advantage on the Defendants and that the similarity was created intentionally by the Defendants with the aim of facilitating the marketing of the imitations. It was for the Court of Appeal to decide, taking these factors into account, whether an unfair advantage was being taken. However, the ECJ stated that where a third party attempts to ‘ride on the coat-tails of a mark with a reputation in order to benefit from its power of attraction, the reputation and the prestige of that mark and to exploit, without financial compensation, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark’, the advantage obtained by such behaviour must be considered to be unfair.

The First and Second Questions

The first and second questions referred asked whether Article 5(1) of the Trade Marks Directive entitled a registered trade mark owner to prevent use of its mark in comparative advertisements where such use is not capable of jeopardising the essential function of the mark (namely, to guarantee the origin of the goods or services) but nevertheless plays a significant role in the promotion of the goods or services of the third party.

The ECJ commented that the comparison lists were a form of comparative advertising and that use of a mark in comparative advertisements can be regarded as infringements under Article 5. However, a comparative advertisement which satisfies all the conditions set out in Article 3a(1) of the Comparative Advertising Directive will be protected from Article 5.

In this case, because the signs and goods at issue were identical, Article 5(1)(a) was the relevant provision, and there was no need to prove a likelihood of confusion. The ECJ noted that this provision protected not only against use by third parties which was liable to affect the essential function of the trade mark, but also the mark’s other functions, such as the guarantee of the quality of the goods or services and those of communication, investment or advertising.

To the extent that it does not fulfil all the Article 3a(1) conditions, the use of a sign in a comparative advertisement identical to a registered trade mark (and in relation to identical goods) which does not jeopardise the essential function of the mark can nevertheless be prevented by the trade mark owner provided such use is liable to affect one of the other functions of the trade mark.

The Third and Fourth Questions

Two of the Article 3a(1) conditions for a permissible comparative advertisement are that the advertisement must not:

(i) present goods or services as imitation or replicas of goods or services bearing a protected trade mark; and

(ii) take unfair advantage of the reputation of a trade mark.

The third and fourth questions asked whether an advertiser who indicates through a comparison list, without in any way causing confusion or deception, that his product has a major characteristic similar to that of a product marketed under a well-known mark, of which the advertiser’s product constitutes an imitation, would fall foul of (i) or (ii) referred to above.

The ECJ noted that the purpose of the Article 3a(1) conditions was to stimulate competition by allowing competitors to objectively highlight the merits of various comparable products whilst prohibiting anti-competitive or unfair practices or practices which affect the interests of the consumers.

In relation to (i), the ECJ confirmed that it prohibits not only advertisements which explicitly evoke the idea of imitation or reproduction, but also those which, having regard to their overall presentation and economic context, are capable of implicitly communicating such an idea. The ECJ further confirmed that it was irrelevant whether the advertisements relate to an imitation of the mark as a whole or an essential characteristic of the product as such, i.e., the smell. The object and effect of the comparison lists at issue were to draw the attention of the public to the original fragrance of which the Defendants’ products were imitations. The lists presented the goods marketed as being imitations of L’Oréal’s goods and thus fell foul of the condition in (i).

In relation to (ii), the ECJ noted that the term “unfair advantage” in that condition must be given the same interpretation of “unfair advantage” in Article 5(2) of the Trade Marks Directive. The ECJ concluded that the advantage gained by the advertiser as a result of advertisements which presented the advertiser’s products as imitations was unlawful and therefore must be considered to be an unfair advantage within the meaning of (ii).

The case will now be returned to the UK Court so the ECJ’s decision can be applied to the facts.

This is an important decision for brand owners. The ECJ has given a clear message that businesses cannot free ride off the back of famous brands in order to promote cheaper imitations, even if no harm was caused to the brand owner.

L'Oréal and Ots v Bellure and Ots (ECJ (First Chamber); C-487/07; 18.06.2009)

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