The European Court of Justice (ECJ) is likely to rule that the use of a competitor’s trade mark is more widely permissible in comparative advertising than previously thought, following publication of the Advocate General’s opinion.

The Court of Appeal has also, in the interim, referred further key questions to the ECJ regarding when comparative advertising is permissible - in particular, what constitutes a “fair” comparison.

Together, these cases should provide useful guidance on what is “fair” or “unfair” practice in terms of comparative advertising. This is important for your compliance both under the Comparative Advertising Directive (CAD)1 and the Trade Marks Act 1994 (the Act).

O2 v 3G – questions to the ECJ regarding trade mark use in comparative advertising

We reported on the decision of the Court of Appeal in 02 v 3G2 in our August 2007 Alert. There, the Court of Appeal decided that compliance with the CAD, which essentially requires that comparisons be fair, true and objective, meant that use of a trade mark as part of the comparison would automatically be permissible under the Act. In addition, the Court referred two questions to the ECJ for clarification:

  • whether purely descriptive use of a trade mark (eg in a comparative advertisement to identify the trade mark owner or their goods) could ever be an infringement of a registered trade mark (which usually requires a non-descriptive use)
  • whether it was necessary for the use in question to be “indispensable” to the comparison before the comparative advertising defence could be made out.

The ECJ’s Advocate General has advised the ECJ that the answer to both these questions should be “no” so that the use of O2’s “bubbles” trade marks in comparative advertising should be allowed.

The recent decision in L’Oréal

In the recent decision of L’Oréal v Bellure3 the same Court and the same judge (Lord Justice Jacobs) has now had an opportunity to put further questions to the ECJ which will “flesh out” the above response.

L’Oréal produces high-value, exclusive perfumes for which it owns a variety of marks. Bellure produces low-value “imitation” perfumes, selling for a fraction of the price, with packaging that admittedly “owes something” to the original. However, it was clear that no part of the market would be deceived by or confused between the two products, nor would buy the imitation as opposed to the original as a result.

Bellure also produced “straight” comparison tables, setting out the name of the original product and its price (necessarily with reference to L’Oréal’s trade mark) on one side and the name and price of their own product on the other.

L’Oréal sued Bellure for trade mark infringement and passing off. The Act states that there is infringement of a registered trade mark with a reputation if “unfair advantage” is taken of that reputation. “Unfair advantage” is also a factor in the context of a defence to an infringement claim under CAD, which states the conditions under which comparative advertising can be permitted, including where “unfair advantage” is not taken.

Lord Justice Jacobs considered the following dilemma: whilst UK trade marks laws, and indeed many EU jurisdictions, do not permit “free-riding” on the goodwill of another brand ie, gaining a commercial advantage through the use of the claimant’s trade mark, there must be some circumstances where this is allowed as this is an inevitable part of comparative advertising, an activity permitted under the CAD (under certain conditions).

Essentially, the question is “where is the borderline?” Lord Justice Jacobs considered that whilst the defendant would inevitably accrue some commercial advantage (by, as in this case, referring to the claimant’s trade mark in its advertisements), this was permitted unless there was a clear detriment to the claimant’s business (for example, sales being lost on a “one-for-one” basis to the defendant, or damage to the trade mark’s reputation), which would change the advantage gained by the defendant from being “fair” to being “unfair” and, therefore, be an infringement with no corresponding defence under the CAD or Act.

Two additional questions on the subject of “unfair advantage” were therefore put to the ECJ:

  • In the context of infringement of a registered trade mark with a reputation, whether gaining advantage from using a trade mark is “unfair” if the “essential function of the registered trade mark (of providing a guarantee of origin) is not impaired or put at risk”, nor sales or reputation impaired nor the trade mark’s owner deprived of any reward for the “promotion, maintenance or enhancement of his trade mark”?
  • in the context of a defence to an infringement claim citing CAD as a defence, “what is the meaning of “take unfair advantage of” - in particular, where a trader in a comparison list compares his product with a product under a well-known trade mark, does he thereby take unfair advantage of the reputation of the well-known mark?”

Given the opinion of the Advocate-General in O2, it seems likely that the answer to the first question will be that there is no unfair advantage in such circumstances.

Having established these parameters, the answer to the second question should hopefully provide some much needed clarity on exactly where the threshold lies between taking a legitimate, versus an unfair, advantage of another’s brand.