Céline SA, a luxury fashion brand, was founded and registered in Paris in 1928. In 1948, the company registered Céline as a French word mark for clothes and shoes, among other things. In 1950, Adrien Grynfogel founded Céline, a business for selling clothing and accessories in the French city of Nancy. The business entered the local trade register in 1950 and registered as a French limited liability company (Sàrl) in 1992. After having discovered Céline Sàrls existence in 2003, Céline SA initiated a procedure for trademark infringement and unfair competition against Céline Sàrl. The Nancy Regional Court granted the infringement, ordered Céline Sàrl to discontinue the use of the term Céline, and ordered Céline Sàrl to change its name and pay a sum of EUR 25,000 in damages to Céline SA. Céline Sàrl appealed at the Court of Appeal, which decided to bring the matter before the ECJ for a preliminary ruling. The Court of Appeals question was whether Article 5(1) of the Trade Marks Directive (89/104/EEC of 21 December 1988) must be interpreted as meaning that the adoption, by a third party without authorisation, of a registered word mark, as a company, trade or shop name in connection with the marketing of identical goods, amounts to use of that mark in the course of trade which the proprietor is entitled to stop by reason of his exclusive rights. It is important to keep in mind that in case of Céline Sàrl, only the company is named Céline and no clothing branded Céline is sold.
The ECJ left the infringement issue per se under Article 5(1)(a) of the directive to the Court of Appeal but added that the use of a trade or shop name identical to an earlier mark in connection with identical goods constitutes an infringement under Article 5(1)(a) given that the functions of the mark are affected or are liable to be affected. Advocate General Sharpston described the guarantee of the origin of the product as the essential function of the trade mark.
Applying its Anheuser-Busch judgement the ECJ held that the defence under Article 6(1)(a) of the directive allows a third party to use its own name and address in a fair way toward the legitimate interests of the trade mark proprietor. Furthermore, the ECJ held that the own name defence applies to natural as well as legal persons. On the issue whether third parties may use a sign that is identical to a registered word mark as a company or trade name, the ECJ held that Article 6(1)(a) can only be applied if the third party acts in accordance with honest practices in industrial or commercial matters. The honest practices are to be assessed on (i) whether the extent of use by a third party is understood by a significant part of the relevant public as indicating a link between the third partys goods and services and the trade mark proprietor, and (ii) whether the third party is aware of the earlier proprietor and the extent to which they might profit from the trade marks reputation.