O2 Holdings Ltd and O2 (UK) Ltd v Hutchison 3G Ltd* (Jacob L.J.; Mummery L.J.; Staughton J.;  EWCA CIV 1656; 5.12.06)
This is an appeal from a first instance decision of Lewison J.
O2 Holdings Limited (O2) brought an action against its competitor, Hutchinson 3G Limited (H3G), in relation to H3G’s television advertisement which compared its mobile phone service to O2’s mobile phone service. The advertisement referred to O2 and featured images of bubbles. O2 commonly uses images of bubbles in relation to its products and has a number of registered trade marks for images of bubbles (although these were not the images featured in the advertisement). O2 alleged infringement of its registered trade marks.
In the first instance, Lewison J found that:
1. the use of the bubbles images in the advertisement constituted use in a trade mark sense, and that the use could still be infringing even if a trade mark is used to indicate that the origin of goods or services is the proprietor of the mark;
2. the advertisement complied with Article 3(a)(1) of the Misleading Advertising Directive (84/450) as amended by the Comparative Advertising Directive (97/55) (CAD); and
3. such compliance provided a defence as being within Article 6(1)(b) of the Trade Marks Directive (1989/104) (TMD).
The Court of Appeal, in a judgment delivered by Jacob LJ, commented that the case required a decision based upon the philosophy of how competitive the law allows European industry to be. Accordingly, it stayed its decision pending receipt of preliminary rulings from the ECJ on three particular questions, although it provided its views on each of those questions.
On the issue of whether H3G infringed O2’s trade marks, the Court of Appeal was not clear on this issue and therefore referred the following question to the ECJ:
Where a defendant in the course of trade uses a sign in a context purely for the purpose of comparing the merits (including price) of his goods or services with those of the trade mark owner and in such a way that it cannot be suggested that the essential function of the trade mark to guarantee the trade mark as an indication of origin is in any way jeopardised, can his use fall within either (a) or (b) of Article 5.1 of Directive 89/104?
Jacob LJ’s view was that the answer to this question is ‘no’, principally for the reason that the defendant is not using the mark to indicate the trade origin of his goods or services, nor even to indicate that he is dealing in those of the trade mark owner.
On the issue of whether H3G would have a defence to a finding of infringement, the Court of Appeal found that Article 6(1)(b) of Directive 89/104 is a defence covering comparative advertising as long as the advertising is in accordance with honest commercial practices (which in this context, means compliance with Article 3(a) of CAD). Accordingly, it is not a freestanding defence independent of CAD, but the Court accepted H3G’s argument that compliance with CAD provides a defence to trade mark infringement.
Compliance with Article 3(a) of CAD
On appeal, O2 argued that Recital 14 to CAD meant that to comply with CAD, a defendant would have to show necessity or indispensability in its use of its competitor’s mark. O2 argued that on the facts, 3G did not need to use the bubble images. On this issue, H3G argued that there was no such requirement of necessity.
The Court of Appeal was not sure of the correct position and accordingly referred the following question to the ECJ:
Where a defendant uses, in a comparative advertisement, the registered trade mark of another, in order to comply with Article 3(a) of Directive 84/450 as amended, must that use be ‘indispensable’ and if so what are the criteria by which indispensability is to be judged?
Jacob LJ’s view on the above question was that the answer is ‘no’. He gave a variety of reasons, including that:
1. a contrary answer would be inconsistent with the principle of construction laid down in Toshiba, Case C-112/99 and Pippig, Case C-44/01, namely that ‘the conditions required of comparative advertising must be interpreted in the sense most favourable to it’;
2. he could not think of any rational legal rules for the indispensability test proposed, as, after all, no-one has to advertise comparatively at all; and
3. the wording of CAD is not consistent with a restrictive interpretation or an overriding requirement of necessity.
Finally, O2 argued that CAD does not permit the use of a confusingly similar mark. Accordingly, Jacob LJ referred the following related question to the ECJ:
In particular, if there is a requirement of indispensability, does that requirement preclude any use of a sign so similar to the registered trade [mark] as to be confusingly similar to it?
Jacob LJ’s view was that he ‘could not see any reason why a requirement of necessity should include within it a requirement that the mark can only be used in a comparative advertisement exactly as registered’.