The High Court has given judgment in an innovative ruling granting declarations of fact on whether comparative advertising satisfied the Misleading and Comparative Advertising Directive.

Business Impact

  • The interface between legitimate comparative advertising and a competitor's trade mark rights has become a battleground, after the uncertainty caused by the ECJ Judgments in L'Oreal v Bellure and Lidl v Vierzon.
  • The implementation of the Misleading and Comparative Advertising Directive in the UK under the Business Protection Regulations 2008 left no private right of enforcement. The High Court has shown itself to be innovative in being prepared to grant declarations of fact on whether certain representations were made and, if made, whether they are misleading or not. This is an unusual move for the court, stretching its jurisdiction to grant declarations from non-essentiality in telecom patent cases now to advertising disputes. This offers many advantages for brand owners in having significant commercial disputes settled by a court, rather than by the ASA under the Codes, which are a blunt tool, open to abuse and may result in unfairness.
  • The High Court helpfully endorsed the view in Lidl that comparisons of the properties of competitors' products are to be encouraged and that it is not open to a party to object to such comparisons simply because they are unfavourable to its products. The difficulty for brand owners and their competitors is where to draw the line as to what is legitimate comparative advertising or not.
  • This case shows that a party may fall foul of the rules on comparative advertising, whilst acting in good faith and even where there is no evidence of any customer complaints. Specialist advice should be sought.

Background

Kingspan manufacture insulation materials made of plastic foam. Rockwool manufacture non-combustible stone wool insulation materials. The case concerned Rockwool's advertisements which showed the relative performance of the parties' insulation materials in fire-growth tests.

These advertisements took the form of road shows that featured small-scale fire demonstrations in 2007-2008 to an industry audience; and marketing DVDs produced of footage of large-scale fire tests carried out independently under the ISO 9705 fire test standard by SP Technical Research Institute of Sweden: Rockwool was trying to demonstrate the difference between combustible and non-combustible insulation products, as it believed there was a misconception in the market.

Claims

Kingspan issued proceedings for malicious falsehood and trade mark infringement, alleging that the road shows and DVDs falsely represented that its products were dangerous. Kingspan also sought a number of declarations that the road shows and DVDs did not comply with the Misleading and Comparative Advertising Directive: 2006/114/EC (the "MCA Directive"), as implemented in the UK by the Business Protection Regulations 2008.

Rockwool denied the allegations, arguing that SP's tests were objective, compared like for like and formed the basis of legitimate comparative advertisements. As such, it argued that the use of Kingspan's trade marks was permitted under the MCA Directive and was not unlawful.

Malicious falsehood

The High Court rejected outright Kingspan's claim for malicious falsehood on the basis that Rockwool "acted throughout in good faith". In particular, Rockwool produced the DVDs in "close association with SP, a highly reputable institute"; and provided the DVDs to Kingspan for comment in advance of their distribution.

Trade Mark Infringement

Whilst Kitchin J ruled that Rockwool had infringed Kingspan's trade marks in relation to an early version of the fire DVD created in 2007 and at the 2007 road shows, the fire DVD distributed since 2008 and made available on Rockwool's website did not infringe Kingspan's trade marks. In particular, the court found that the dramatic results of the ISO 9705 tests showing flashover in a test rig:

  • were not appropriate for drawing conclusions about how Kingspan's roof panels would behave in a real fire when properly installed; and
  • suggested that Kingspan's products are dangerous when properly installed and used for their intended purpose.

Despite the ECJ's comments in Intel v CPM, Kitchin J made clear that a "serious risk" of damage in the future is sufficient to establish infringement (taking unfair advantage of, or being detrimental to the distinctive character or repute of the trade mark) under Article 5(2) of the Trade Marks Directive, rather than actual damage. This was despite the fact that no evidence was put forward of any actual damage or complaints from customers of Kingspan.

Comparative Advertising

The law of comparative advertising has been harmonised exhaustively throughout the EU under the MCA Directive.

A lawful comparative advertisement will not affect any of the functions of a registered trade mark (L'Oreal) and will not amount to trade mark infringement.

The purpose of the MCA Directive is to stimulate competition to the consumer's advantage while prohibiting unfair practices that are detrimental to competitors or consumer choice: Lidl v Vierzon.

Kitchin J made the following points:

  • "Comparisons of the properties of competitors’ products are to be encouraged and it is not open to a party to object to such comparisons simply because they are unfavourable to its products".
  • Comparative advertising should be assessed using the criteria "laid down in the European legislature".
  • The assessment is perspective of the average consumer, who is reasonably well informed, observant and circumspect: Lidl.
  • There are eight requirements for lawful comparative advertising and these are cumulative: L'Oreal (Article 4 of the MCA Directive).
  • These requirements must be "interpreted in the sense most favourable to permitting advertisements... while ensuring... that comparative advertising is not used anti-competitively and unfairly or in a manner which affects the interests of consumers": Lidl.

Rockwool was unable to rely on the MCA Directive to permit the comparative advertising as it was found to have infringed Kingspan's trade marks and therefore failed to fulfil all of the conditions of Article 4 for legitimate comparative advertising.

The outcome serves as a reminder that proving the lawfulness of comparative advertising continues to pose a challenge.

Declaratory Relief

This case also illustrates the court's increased willingness to grant declaratory relief. Kitchin J granted declarations of fact (at the invitation of the parties) in respect of the alleged misrepresentations on the basis that this would "resolve an issue of real substance between the parties."

This is a practical way for parties to seek to resolve in the courts whether advertising is misleading or not, when the Business Protection Regulations 2008 provide no private right of action or remedy in damages.

In another context, this is the same reason why Lord Justice Pumfrey agreed to grant an unprecedented declaration of non-essentiality in the patent case of Nokia v InterDigital.

Whilst the High Court found that certain representations made upon the DVDs and at the live fire demonstrations were misleading, it also agreed that Kingspan's sandwich panel, KS1000 MR, is a surface product and so falls within the scope of the standard (ISO 9705), and that the test on the sandwich panels was conducted properly in accordance with the method required by ISO 9705. This may allow conclusions to be drawn as to the consequences of using that product for its intended purpose.

A further hearing on 14 April will determine the precise form of the declarations of fact made and other relief.