The Advocate General of the ECJ gave his opinion last week in the case of L'Oreal v Bellure, in which L'Oreal has sued makers of cheap 'lookalike'/'smellalike' perfumes for trade mark infringement and passing off. The allegedly offending perfumes are designed to smell just like the expensive fine fragrances produced by L'Oreal, and are often packaged in get-up designed to give a 'wink of an eye' to the packaging of L'Oreal's products. In the AG's view:

  • Comparison lists provided by the defendants to show which cheap perfumes smell like which fine fragrance will not offend trade mark law so long as they do not affect the essential functions of the trade mark, even where such use plays a significant role in the promotion of the advertiser’s goods. However, the AG expressly recognised that trade marks can have more essential functions than just their traditional 'badge of origin' function.
  • Such comparison lists might survive infringement of trade mark law but nevertheless be prohibited by comparative advertising law – particularly, the AG indicated, where the advertiser adopts a commercial policy focusing systematically on highlighting a comparison with a proprietor's well-known mark or its products.
  • Free-riding – namely taking advantage of a trade mark's repute by obtaining a "boost" to sales by ensuring that your customers associate your products with products sold under a well-known mark – can be both fair and unfair. However, where a free-rider cannot show due cause for his use of a sign similar to the well-known mark, his free-riding will automatically be unfair and prohibited under trade mark law.

Business Impact

  • The opinion indicates a slight lean in favour of the rights of well-known brand owners against those seeking to take advantage of those brands in some way, whereas the UK Court of Appeal had previously suggested the case might ultimately come out against brand owners;
  • If followed by the ECJ, it may become more difficult for advertisers selling cheaper versions of well-known products, or even new entrants to a market, to rely solely on comparative advertising to sell their products and demonstrate that they have characteristics in common with the market leaders;  
  • The confirmation of and support for the existence of functions beyond the essential "badge of origin" function of trade marks potentially opens up trade mark law to apply to other situations where there is no suggestion that consumers are confused or do not know what they are buying, such as search engine keyword advertising;  
  • It would not be possible to advertise products as being "[third party trade mark]-style" or "-type", owing to comparative advertising law's ban on promoting goods as imitations or replicas;  
  • Proprietors with well-known trade marks may prevent free-riders taking advantage of their reputation, particularly if those free-riders are not able to show 'due cause' for their behaviour – a narrow and uncertain concept which it may be the burden of the free-rider to demonstrate;  
  • The views of the Advocate General are in some places confused and unclear, and so it is hard to formulate clear advice for brand owners in respect of them. However, they are not binding on the ECJ – so may not be followed – as occurred in O2 v Hutchinson 3G, which also dealt with comparative advertising issues (see our IP newsflash of 13 June 2008). Issues opined on

In L'Oreal v Bellure C-487/07, five questions were referred by the UK Court of Appeal to the ECJ and opined upon by Advocate General Mengozzi. You can find these in full and further background in our earlier newsflashes of 17 October 2007 and 10 October 2006. Broadly, the questions addressed:

  1. The legality under trade mark law of comparison lists provided by the defendants to show which cheap perfumes smell like which fine fragrance;
  1. The legality of the same lists under comparative advertising law; and
  1. The meaning of 'taking unfair advantage of the repute of a trade mark' in both comparative advertising law and under Article 5(2) of the Trade Marks Directive (the "TMD") which provides protection to trade marks with a reputation.  

Comparison lists – trade mark law

The first issue concerned the use by the defendants of comparative tables distributed to wholesalers and other Bellure customers, explaining which smell-alike was meant to copy which original fragrance. At first instance these lists were held to infringe L'Oreal's trade mark rights, by using identical signs in respect of identical goods contrary to the UK equivalent provisions of Article 5(1)(a) of the TMD (namely section 10(1) of the Trade Marks Act 1994 (the "TMA")). The Court of Appeal was not so sure and asked the ECJ for clarification.

In the AG's opinion, the use of a trade mark in comparison lists – which both sides agreed was a form of comparative advertising – could not offend Art 5(1)(a) of the TMD so long as the use did not affect the functions of the trade mark, in particular the mark’s essential function of providing a guarantee of origin. This was the case in his view even where such use plays a significant role in the promotion of the advertiser’s goods and permits that advertiser to take unfair advantage of the mark’s reputation. However, the AG accepted that a trade mark can have numerous functions beyond the traditional, and essential, 'badge of origin' function, and that if one of these functions were offended, Art 5(1)(a) might be invoked. He was also clear that comparison lists would still be prohibited if they failed to meet the requirements of Directive 2006/114/EC concerning misleading and comparative advertising.

Much of the AG's view here (save the discussion of the possible multiple functions of a trade mark) follows from the ECJ's recent decision in O2 v Hutchinson 3G (link to our newsflash above), although strictly speaking that decision was confined to cases of Art 5(1)(b) TMD infringement (similar mark and identical or similar goods/services or identical mark and similar goods, plus a likelihood of confusion).

The express recognition of alternative functions of a trade mark is advantageous to L'Oreal, which has argued that it is entitled to protect the 'communication' function of its trade marks, a function which it says provides consumers with information about the goods identified by the mark – such as their quality, trustworthiness or reliability. Such other functions are important in the case of look-alike/smell-alike perfumes because L'Oreal accept that consumers are not confused by them, and thus the essential badge of origin function is unaffected. Arguments focusing upon these wider functions may be deployed in future in situations where trade mark law has previously been held not to apply – such as the use of replica trade marks on toys or in search engine keyword advertising.

Comparison lists – comparative advertising law

The AG considered whether comparison lists, although potentially able to escape liability for trade mark infringement, might nevertheless fall foul of comparative advertising law if the use of a third party trade mark in such a list took unfair advantage of the reputation of the mark. He concluded that the use of trade marks in comparison lists did not in itself take unfair advantage of the reputation of the mark – a sensible conclusion considering that any other would have undermined the ability ever to produce legitimate comparative advertising.

The AG agreed that where an advertiser causes the public to associate the proprietor of a well-known mark with the advertiser in such a way that the public "might associate by way of extension the reputation of the former’s products with the products sold by the latter"; the advertiser is 'taking advantage' of the reputation of the well-known mark.

As to whether or not the advantage was fair or unfair, this was an assessment for the relevant national court to make on a case by case basis. The key factor, in the AG's view, was the benefit of the comparative advertising to consumers. This was to be balanced by a number of other factors, an important one being the part played by comparative advertising in the advertiser's commercial policy – was comparative advertising sporadic or did the advertiser's commercial policy focus systematically on highlighting a comparison with the product identified by the well-known mark? L'Oreal complained of the latter in Bellure's case.

The AG then concluded that where comparative advertising contains genuine informative content (eg, 'this perfume smells like that perfume'), it cannot be ruled out that it might confer an unfair advantage on the advertiser where "an association with the reputation of another person’s mark is made by way of extension, that content is, viewed objectively, of limited value, the competitor’s mark enjoys high brand recognition and the funds invested for the purpose of promoting the advertiser’s product are used up in advertising which makes a comparison with the product identified by that mark." The thrust of this quote, in favour of L'Oreal, suggests that because, by means of Bellure's comparison lists, its advertising and marketing policy centred on an approach of communicating "buy our cheap versions, they smell the same as L'Oreal's", it might not be carrying out permitted comparative advertising and thus its actions would be prohibited.

There would be no objection however, in the AG's view, where the aim of a use of a trade mark in comparative advertising is solely to distinguish products and highlight differences objectively. In such a case the advantage gained cannot be unfair.

Presenting goods as imitations or replicas

European comparative advertising law forbids the presentation of goods as imitations or replicas of goods protected by a trade mark. The AG considered whether the comparison lists fell foul of this prohibition. The AG's view was that it was permissible for an advertiser to state that his product has an equivalent characteristic of the trade mark protected product, as long as he does not allude to the fact that the equivalence is due to the copying of the mark or one of its characteristics. It was not a problem if the advertiser's product was in fact an imitation or replica – but it could not be advertised as such, nor could it be advertised as "[third party trade mark]-style" or "-type". There is evidently a subtle distinction here between what is and is not permitted, and it is not clear from the AG's discussion of this topic on what side he felt Bellure's comparison lists fell.

Art 5(2), unfair advantage and free-riding

The last part of the AG's opinion addresses a question from the Court of Appeal concerning infringement under Art 5(2) TMD. By packaging its products with a 'wink of an eye' to L'Oreal's, Bellure was able to sell its products at higher prices, but without damaging sales of L'Oreal's products. Was this lawful?

The Court of Appeal thus asked whether, where a trade mark has a reputation, a trader could take unfair advantage of the repute of a mark without offending Art 5(2) TMD where the only effect – on the trade mark concerned and the sales of the trader and trade mark owner's products – was that the trader gained a commercial advantage from his use by reason of its similarity to the registered mark (ie, he could charge higher prices).

Article 5(2) – an optional provision of the TMD implemented as section 10(3) TMA – has a number of requirements, as supplemented by case law. For present purposes these are:

  • That the proprietor's trade mark has a reputation (satisfied here);
  • That the trader's sign must be sufficiently similar so as to cause the consumer to 'link' his mark with the proprietor's trade mark (or 'bring to mind' that mark, as per the ECJ in Intel v CPM Case C-252/07);  
  • That the trader's mark 'takes unfair advantage' of the repute of the trade mark; and  
  • That it takes unfair advantage 'without due cause'.  

The AG accepted that "unfair advantage" focuses on the benefit to the sign used by the third party rather than on harm to the well-know mark (contrasting with dilution or tarnishment of a trade mark), and involved a "boost" being given to the third party's sign as a result of the link with the well-known mark, drawing in both cases on remarks by AG Sharpston in the Intel case.

AG Mengozzi was satisfied that "taking advantage" could be established by demonstrating that the sign used by the trader "has a particular attraction for the consumer due to the fact that that sign is associated with positive qualities of the well-known mark in such a way as to induce the consumer to buy the products under that sign" (ie, it makes the trader's products easier to market). As to whether or not the advantage was unfair, the AG thought there were two possible scenarios. The first was where the trader could show he had 'due cause' for his use of the mark – a concept which has not yet been clearly defined by the courts and is applied narrowly in the UK. The AG provides no further guidance on what then is or is not unfair, this being in his view a question for the national court having considered all the circumstances.

The second scenario was where the trader could not show 'due cause' for his use of the similar sign. In this case, the AG's view was that he would automatically be taking unfair advantage of the repute of the mark. This is a bold conclusion – for which no real authority or discussion is provided. If followed by the ECJ it will create a significant obstacle for Bellure – as it would fall to it to justify its use of trade marks similar to those of L'Oreal. If it failed, it would have (the other elements of Art 5(2) having been satisfied) automatically infringed L'Oreal's trade marks.

Conclusion

We have set out above the business impacts the AG's view may have if it is followed – but the ECJ is by no means guaranteed to do so. In the meantime, given the sometimes confused and opaque comments made by the AG, it is hard to formulate any clear guidance and advice for brand owners as to when they can and cannot bring claims against comparative advertising and the use of their trade marks by third parties. A further newsflash will follow once the ECJ's decision is available, which may be more enlightening.