Another key UK comparative advertising case is en route to Luxembourg after a major Court of Appeal decision in the ongoing fight between L’Oreal and others against “smell-alike” traders using product comparison charts. Because we’re worth it? Emily Devlin and Richard Menzies answer.
Who: L'Oréal SA & others v Bellure NV and others (10 October 2007)
Where: Court of Appeal, UK
Law stated as at: 10 October 2007
L'Oréal had sued Bellure for trade mark infringement and passing off as a result of Bellure's sale of smell and look-alike perfumes, and the use of L'Oréal's trade marks on a comparison chart. At trial, Lewison J upheld the trade mark infringement claim for some of the defendants' products, but he dismissed the passing off claim. All parties appealed – L'Oréal on the passing off/unfair competition points and the defendants on the issue of trade mark liability.
In the leading judgement given by Lord Justice Jacob (Jacob LJ), the Court of Appeal rejected L'Oreal's appeal but referred a series of questions to the ECJ, the first being nearly identical to the question posed in the pending reference to the ECJ in O2 v Hutchison 3G.
The defendants argued that since their products were intended to mimic the characteristics of L'Oreal's products they needed to describe their products by reference to the brand name of the perfume in question. Since the mark was used descriptively for the purposes of comparison they said, this did not amount to "trade mark use" within the meaning of Article 5(1)(a) of the Trade Marks Directive (the "Directive"). Alternatively, the use would come within the defence under Article 6(1)(b) of the Directive, which allows descriptive use of a registered mark if it is in accordance with honest practices in industrial or commercial matters.
L'Oréal argued that the use of comparison charts went beyond the realm of mere comparison and was intended to promote the defendants' goods by reference to the luxury qualities of L'Oréal's goods. Jacob LJ thought that the use of the comparison lists enabled the defendants to sell their products on the basis that they smelled like L'Oreal's perfumes, but he did not think that the image or the essential function of the trade marks for the originals were adversely affected by the lists, stating: "The public are not stupid. It is not suggested that anyone ever thinks a 'replica' product of the kind with which we are concerned is the original …[n]or is it suggested that anyone thinks a replica is anything other than a cheap imitation of the original or is likely to be of the same quality as the original, even though it may smell somewhat the same."
In relation to the defence under Art 6(1)(b), Jacob LJ noted that in all cases of comparative advertising a trader would invariably take advantage of a universally recognized product to sell its own product. As an example, the judge cited the necessity of the generic drug merchant who will need to tell his customers that he is selling the generic version of a drug that is well-known under a trade mark.
Was unfair advantage taken by free riding?
L'Oreal brought a further claim under Art 5(2) of the Directive, which states that a trade mark holder may prevent a third party from using the trade mark in a manner that takes unfair advantage of, or is detrimental to, the reputation of the trade mark. Jacob LJ noted that the connection between the defendants' packaging and the registered mark did confer an advantage on the defendants since it enabled them to charge more than they would have otherwise been able to if such a connection did not exist. However, Jacob LJ did not believe that such use was unfair, stating "where there is no harm, present or prospective, caused to the mark, its distinctive character or to the mark owner or his business, present or reasonably prospective, I see no reason to say that such a use is 'unfair.'
Passing off and unfair competition
Jacob LJ held that an action in passing off could not be established as consumers were unlikely to confuse genuine L'Oréal products with cheaper imitations, even if they smell similar. Jacob LJ pointed out that products in question do not compete with each other, are priced differently and are aimed at separate markets.
Jacob LJ also rejected L'Oréal's argument that the common law should be extended to embrace a tort of "unfair competition" which did not require misrepresentation, stating that it was not for judges to legislate into existence new categories of intellectual property rights. Moreover, he pointed out that "there are real difficulties in formulating a clear and rational line between that which is fair and that which is not".
The Court of Appeal referred a series of questions to the ECJ, including asking whether use by the defendants of L'Oréal's marks in comparison lists constitutes infringement under Article 5(1)(a) of the Directive, and whether such use is permitted under the "honest practices" defence under Article 6(1)(b) of the Directive and the Comparative Advertising Directive (97/55/EC). It also asked what factors need to be considered when deciding whether a later trade mark has taken unfair advantage of, or is detrimental to, the distinctive character or repute of an earlier trade mark under Article 5(2) of the Directive.
Until we know the answers to these questions, Jacob LJ's judgment in this case in relation to comparative advertising issues is persuasive but not final.
Why this matters:
The key message in this case is that the courts continue to be reluctant to adopt an excessively protective approach to trade mark rights in the context of comparative advertising. As Jacob LJ stated: "my concern is that EU trade mark law ought not to be over-protective. Freedom to compete or just to trade is an important foundation of the EU and should only be restricted, including by trade mark law, where necessary. Trade marks need protection to play their vital part in a competitive economy, but it is very questionable whether they need more protection than for that purpose." It will be interesting to see whether a similar approach is adopted by the ECJ.
Trade mark rights eroded?
In this case one of the key factors for the decision was the argument that the disparate markets of L'Oreal and the defendant meant that no harm could be done to L'Oreal's marks. However, it is not entirely clear what approach the court would take where there is a degree of overlap in markets and there is still uncertainty pending the reference to the ECJ in this and the O2v Hutchison 3G case. Until then, advertisers will still need to exercise caution when advertising their goods by comparing them to others.