The ECJ has held today, in the L'Oreal reference from the English Court of Appeal, that:

  • Trade mark infringement can occur where there has been "free-riding", without the need to show damage in the form of confusion or detriment.  
  • A trade mark proprietor may prevent the use of its mark on identical goods even where there is no damage to the "essential" function of the mark (as a badge of origin), provided some other function is affected.
  • Comparative use of trade marks in relation to imitation products contravenes the Misleading and Comparative Advertising Directive and therefore cannot be lawful comparative advertising (and may amount to trade mark infringement).

Business Impact

  • In a decision that will be welcomed by brand owners, the ECJ has made it clear that intentional "riding on the coat-tails" of a mark with a reputation (to benefit from the power of attraction that mark carries and exploit the marketing efforts of the brand owner) is to take unfair advantage of the distinctive character or repute of a trade mark. It can be assessed as such by national courts without the need for evidence of damage to the brand or its proprietor or of confusion (which is often difficult to prove in practice).
  • The conclusion that these acts fall foul of the Misleading and Comparative Advertising Directive's (MCAD) requirements removes recourse to a comparative advertising defence.  
  • However, the ECJ's findings apply only to trade marks "with a reputation". Given the expansion of the breadth of protection afforded to trade mark proprietors by this decision, it is expected that the entry level for the category of "marks with a reputation" will be the subject of much debate in the near future.  
  • The use of the term "unfair competition" to justify the conclusion that the use of famous brand names in comparison lists was taking unfair advantage and thus contravened MCAD's criteria for legitimate comparative advertising, will ring warning bells. Is this a law of unfair competition by the back door?  

Summary

The reference to the ECJ was made by the English Court of Appeal in L'Oreal v Bellure. The case concerned the use of identical or similar shape marks to those registered for several famous perfume brands (e.g.Tresor) on the packaging of imitation perfumes, as well as the use of the brand names on a marketing list comparing the smell of the imitation product with the genuine perfumes (e.g. Anais Anais).

L'Oreal and other perfume brand owners claimed infringement under Article 5(1)(a) (equivalent to section 10(1) of the UK Trade Marks Act 1994 (TMA)) in respect of the use of the marks on a comparison list. Further, they claimed under Article 5(2) (section 10(3) TMA) that use of the similar packaging amounted to taking unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark. The Court of Appeal was concerned that there should be some damage involved, before there could be section 10(3) infringement; free riding that did not cause actual damage was not necessarily "unfair" commented Jacob LJ and he referred a question (5) on this point specifically to the ECJ.

See our previous IP newsflash of 17 October 2007 for the questions referred and further background.

Comparison lists:

The ECJ held that the proprietor of a trade mark is entitled to prevent the use by a third party of a sign identical with that mark (under Article 5(1)(a) – section 10(1) TMA), even where such use is not capable of jeopardising the "essential function" of the mark (to indicate the origin of the goods), provided that such use affects or is liable to affect one of the other functions of the mark, such as guaranteeing quality, communication, investment or advertising. Thus, although there was no evidence of loss of sales to the famous brands, this did not prevent this use being infringing under Article 5(1)(a).

The advantage gained by an advertiser of imitation products through the use of a comparison list with genuine products is achieved as the result of "unfair competition", said the ECJ, and must, accordingly, be regarded as taking unfair advantage of the trade marks within the meaning of the Misleading and Comparative Advertising Directive (MCAD) (Article 3a(1)(g)).

MCAD also provides that presenting goods as imitations or replicas of trade marked goods (Article 3a(1)(h) is not legitimate comparative advertising. The ECJ held that the use of the comparison lists to sell imitation perfumes contravened this provision without the need for them to be misleading or even counterfeit. The imitation does not need to be of the whole product – it can just be an imitation of an essential characteristic (here the smell).

For more on the relationship between comparative advertising defences and trade mark infringement see our IP newsflash of 13 June 2008 on the decision of the ECJ in O2 followed by the ECJ in L'Oreal.

Free-riding

The ECJ's decision confirms that the taking of unfair advantage of the distinctive character or the repute of a trade mark is enough for infringement under Article 5(2) (equivalent to section 10(3) UK Trade Marks Act 1994) and does not require that there be a likelihood of confusion or a likelihood of detriment to the mark or its proprietor.

Only one of the three types of "injury", against which Article 5(2) ensures protection for the benefit of trade marks with a reputation, need be present for there to be infringement, said the ECJ. The three types of injury are:

  • Detriment to distinctive character of the mark – "dilution", "whittling away", "blurring" – a weakening of the mark's ability to identify the goods and services for which it is registered
  • Detriment to the repute of the mark – "tarnishment", "degradation" – a use of the mark by a third party which reduced the mark's power of attraction perhaps through negative connotations  
  • Taking unfair advantage of the distinctive character or repute of the trade mark – "free-riding", "parasitism" – a concept relating not just to the detriment caused to the mark but also to the advantage taken or gained by the third party as a result of its use of the mark.  

There is no requirement under Article 5(2) (section 10(3) equivalent) for there to be a likelihood of confusion or a likelihood of detriment to the distinctive character or the repute of the mark or its proprietor for there to be infringement. Unfair advantage alone will suffice.

As the ECJ put it: "Where a third party attempts, through the use of a sign similar to a mark with a reputation, to ride on the coat-tails of that mark in order to benefit from its power of attraction, its reputation and its prestige, and to exploit, without paying any financial compensation and without being required to make efforts of his own in that regard, the marketing effort expended by the proprietor of that mark on order to create and maintain the image of that mark, the advantage resulting from such use must be considered to be an advantage that has been unfairly taken of the distinctive character or the repute of that mark."

In order to determine whether there has been unfair advantage taken of the distinctive character or repute of the mark, the ECJ says that a global assessment must be undertaken. This should take into account all the factors of the case including:

  • The strength of the mark's reputation
  • The degree of distinctive character of the mark
  • The degree of similarity between the marks at issues
  • The nature and degree of proximity of the goods or services concerned
  • Any likelihood of tarnishment or dilution of the mark
  • Whether commercial advantage is conferred by any link created between the products
  • Intention to take advantage  

See our IP newsflash of 18 February on the AG's opinion in this case