If the European Court of Justice follows the Advocate General in the O2 v H3G reference, businesses in the UK will not only be powerless to sue for breach of the Comparative Advertising Directive (only public bodies have rights of action) but they will also be unable to sue for infringement of their Intellectual Property (IP) rights - or recover damages - in comparative advertisements. The only cause of action available will be to persuade the public bodies to take action under the Comparative Advertising Directives. Is it now open season in the field of comparative advertising in the UK?

Experts in the IP team have put together an analysis of this issue.

A review of the opinion of the Advocate General in O2 v Hutchison 3G

Headlines

  • If the European Court of Justice (ECJ) follows the opinion of Advocate General Mengozzi in the O2 v H3G case, trade mark owners will no longer be able to sue to protect their trade mark rights in relation to comparative advertising in the UK.
  • The Advocate General's view is that where a competitor uses your trade mark (or something similar to it) in a comparative advertisement then the only law applicable is the Comparative Advertising Directive (as amended). The Trade Marks Directive has no application because the use of your brand is within a comparative advertisement.
  • In the UK individuals and businesses do not have any cause of action under the Comparative Advertising Directive – all that you can do is refer your complaint to the Office of Fair Trading (OFT), the Advertising Standards Authority (ASA) or, from 1 April this year, the Trading Standards Offices. Those bodies have restricted finances and staff time and will prioritise complaints to those where there is a clear public interest. In any event, you will not be entitled to damages.
  • So, if the ECJ follows the Advocate General, brand owners can say goodbye to any effective and timely protection of their brand in relation to comparative advertising. 

Background

In 2004, Hutchison 3G (H3G) ran a series of television advertisements comparing its services and prices favourably with other mobile telephone companies, including O2. Its O2 advertisement featured images of bubbles, though not the blue iridescent bubbles featured in O2 advertising – rather a cluster of black/grey bubbles which popped and dispersed on screen. The bubbles were accompanied by a gloomy soundtrack and a downbeat voiceover.

O2 complained that the use of bubble imagery which was similar, but not identical, to its registered trade marks was not justified (H3G could have used the O2 logo and name or the actual bubble registered trade marks) and amounted to trade mark infringement. H3G argued that its advertising complied with the requirements of the Comparative Advertising Directive and that should be the end of the matter.

In the High Court, the judge found trade mark infringement under the Trade Marks Directive because H3G's actions gave rise to a likelihood of confusion. However, the judge also held that H3G had a defence under the Trade Marks Directive because it had complied with Article 3a of the Comparative Advertising Directive. That says that use must be "in accordance with honest practices in industrial or commercial matters". The High Court also found that H3G's use of O2's marks needed to be "indispensable" if the advertisement was to comply with the Comparative Advertising Directive but gave this term a wide meaning. It held that H3G's use was indispensable in this TV advertisement.

O2 appealed against the non-infringement finding and H3G appealed against the finding that its use fell within the scope of the Trade Marks Directive at all. Its argument was that use of a trade mark (or something similar to it) in the context of comparative advertising was governed exhaustively by the Comparative Advertising Directive.

The Court of Appeal referred the following three questions to the ECJ:

  1. 'Where a trader, in an advertisement for his own goods or services uses a registered trade mark owned by a competitor for the purpose of comparing the characteristics (and in particular the price) of goods or services marketed by him with the characteristics (and in particular the price) of the goods or services marketed by the competitor under that mark in such a way that it does not cause confusion or otherwise jeopardise the essential function of the trade mark as an indication of origin, does his use fall within [the Trade Marks Directive]?
  2. Where a trader uses, in a comparative advertisement, the registered trade mark of a competitor, in order to comply with Article 3a of [the Comparative Advertising Directive] as amended must that use be "indispensable" and if so what are the criteria by which indispensability is to be judged?
  3. In particular, if there is a requirement of indispensability, does the requirement preclude any use of a sign which is not identical to the registered trade mark but is closely similar to it?'

The Advocate General suggested that the European Court of Justice answer these questions as follows:

  1. The use of a sign identical or similar to the registered trade mark of a competitor in an advertisement which compares the characteristics of goods or services marketed by that competitor under that trade mark with the characteristics of goods or services supplied by the advertiser is covered exhaustively by Article 3a of [the Comparative Advertising Directive], and is not subject to the application of [the Trade Marks Directive].
  2. Article 3a of [the Comparative Advertising Directive] permits the use, in a comparative advertisement, of a sign identical or similar to the registered trade mark of a competitor even when that use is not indispensable to identify the competitor or the goods or services concerned.

Comments

If the ECJ follows the Advocate General then, in the UK, the only action a trade mark owner can take against a comparative advertisement will be to make a complaint to the regulatory authorities. In practice this means notably the ASA (to which OFCOM has contracted out its broadcast advertising responsibilities and to which the OFT delegates the majority of advertising issues) and, from 1 April, Trading Standards. Article 3a of the existing Comparative Advertising Directive 1984/450/EC has been reproduced almost identically in the Comparative Advertising Directive's successor, Misleading and Comparative Advertising Directive and so the impact of the Advocate General's opinion if followed by the ECJ will have far-reaching effect.

The relevant regulatory authorities will have to choose which complaints to focus their limited resources on. Not surprisingly, these bodies prioritise complaints which have a clear public interest. Interim injunctive relief actions will be rare and the trade mark owner will no longer have any opportunity to claim damages for the loss they have suffered, however serious the damage done to their brand by the unlawful advertisement.

Given the width of some of the language used by the Advocate General in his reasoning, it is possible to argue that the Comparative Advertising Directive is not only a trump card over trade mark rights, but also over any other rights, including copyright or design right in brand get-up or logo and even defamation. It is difficult to see that this was intended by the legislators.

In brief, if the ECJ follows the Advocate General then we predict an open season on trade marks in the field of comparative advertising (and probably all other Intellectual Property rights as well) given that your competitors will know that you cannot sue them but are dependent on public bodies taking up your cause.