The European Court of Justice has handed down a landmark judgment having implications as to the concept of brand and protectable trademarks in a case concerning the importation and distribution in the UK of perfumes that looked and smelled similar to L’Oréal’s fragrances. The English Court of Appeal referred five questions to the ECJ relating to the interpretation of Directive 89/104 (Trade Marks Directive) and Directive 89/104 (Comparative Advertising Directive) that addressed the meaning of “unfair advantage” and whether “free riding” amounts to trademark infringement even where there is no blurring, tarnishment or other negative impact on a registered mark. L’Oréal v. Bellure, Case No. C-487/07 (ECJ, June 18, 2009).

The ECJ confirmed that unfair advantage does not require a likelihood of confusion or detriment to the mark and covers cases in which, “by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation.”

To determine whether the use of a sign took unfair advantage of the distinctive character or repute of the mark, it was necessary to undertake a global assessment, taking into account all relevant factors, including the strength of the mark’s reputation, the degree of distinctive character of the mark, the degree of similarity between the marks, the nature and degree of proximity of the goods or services, as well as whether there was a likelihood of dilution or tarnishment of the mark.

Specifically, the ECJ stated that unfair advantage was taken “where that party sought by that use to ride on the coat-tails of the mark with a reputation in order to benefit from the power of attraction, the reputation and the prestige of that mark and to exploit, without paying any financial compensation, the marketing effort expended by the proprietor of the mark in order to create and maintain the mark’s image.”

Further, the stricter trade mark protection provided for identical goods/services and for well known marks does not require damage to the essential function of a trade mark (of guaranteeing the origin of goods/services), provided that at least one of the other functions of the mark were affected. Those other functions included “in particular that of guaranteeing the quality of the goods or services in question and those of communication, investment or advertising.”

Finally, the ECJ considered the extent to which the Comparative Advertising Directive provides a defence to trademark infringement. It pointed out that the Comparative Advertising Directive provided cumulative conditions that advertisements have to meet to be permissible under the directive, each of which must be met to qualify.

The court also indicated that an advertisement need not explicitly state that the product is an imitation and that the statement of imitation can relate only to “an essential characteristic” of that product (such as the smell of the goods in question).

Practice Note: The decision has been warmly welcomed by owners of well known brands as it strengthens and clarifies the requirements for “unfair advantage” infringement of marks with a reputation. Whereas dilution and tarnishment have recently been held to require a “change in economic behaviour” of consumers, no such requirement is mentioned in cases of unfair advantage. Indeed, it is now explicit that no confusion or other detriment to the mark or its owner is required and that transfer of the image of the mark can suffice. However, the judgment may also restrict the extent to which comparative advertisements can refer to individual elements of the characteristics of a competitor’s goods. Thus, in terms of so-called famous marks, it seems that EU and China may be moving in opposite directions, with the EU set on expanding the concept of brand and protection of famous marks. See IP Update Vol. 12, No. 7, “The Supreme People’s Court Set Limits on Recognition of Well-Known Trademark.”