The ECJ has held that comparative adverts ARE subject to trade mark law, so advertisers should be wary how they refer to their competitors’ marks, particularly in view of the alternative sanctions under new unfair commercial practices laws. Emily Devlin fights her way through the bubbles.
Who: O2 Holdings Limited & O2 (UK) Limited ("O2") v Hutchison 3G UK Limited ("3")
When: 12 June 2008
Where: European Court of Justice ("ECJ")
Law Stated As At: 12 June 2008
Earlier this month brand owners and advertisers were given the judgment they had all been waiting for – the ECJ has finally given its ruling in the now infamous "bubbles" litigation that has been simmering for almost four years now between the mobile giants O2 and 3.
The judgment confirms that an action for trade mark infringement is a legitimate cause of action that a brand owner can take against a competitor using its trade mark in a comparative advert, providing that certain conditions of the Comparative Advertising Directive 84/450 ("CAD") are met.
The judgment also confirms that use of a confusingly similar mark will automatically fall foul of the CAD requirements.
The story began back in the summer of 2004 when the relatively new mobile network, 3, decided to commission a rather cheeky set of television advertisements that compared its own pay-as-you-go mobile 'phone services with those of the "big four", including O2, using imagery that was redolent of each of their distinctive brands.
The first 10 seconds of the O2 advert (found here http://www.youtube.com/watch?v=U_XFVYrQbzg) consisted of a screen full of dirty grey bubbles, accompanied by a voiceover explaining O2's call prices. O2, a company for whom brand identity is key and which had spent considerable sums protecting its "bubble" trade marks ("Marks"), quickly sued 3 for trade mark infringement, claiming that the use of its Marks in the advert:
- Was gratuitous and unnecessary;
- Took advantage of the distinctive character and repute of its trade marks;
- Distorted the marks to the detriment of O2's brand image; and
- Blurred the distinctive character of the Marks.
At first instance, Lewison J held that 3's use of the Marks infringed section 10(2) of the Trade Marks Act (Article 5(1)(b) of the Trade Marks Directive 49/104- "TMD") – but not section 10(3) (Article 5(2) TMD).
Articles 5 (1) and (2) of the TMD read as follows:
1. The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:
(a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;
(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.
2. Any Member State may also provide that the proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical with, or similar to, the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
Lewison J held that all the requirements of the defence set out in the CAD were met, and thus the infringement claim failed (see Marketing Law Bulletin here – http://www.marketinglaw.co.uk/articles/2006/6889.asp).
O2 appealed, claiming that, until certain questions were answered definitively by the ECJ, the interplay between trade mark law and the CAD was unclear (see Marketing Law Bulletin here – http://www.marketinglaw.co.uk/articles/2006/8074.asp). The Court of Appeal decided that it did not need the ECJ to tell it that the CAD provided a defence to trade mark infringement, but did refer the following questions.
The Questions Referred
1. When an advertiser uses a competitor's trade mark in a comparative advert in a way that does not cause confusion or otherwise jeopardise the function of that trade mark as an indicator of origin, can that use amount to infringement?
2. When an advertiser uses a competitor's trade mark in a comparative advert, does that use have to be "indispensable" to the comparison and what are the criteria by which indispensability are judged?
3. If the use of the trade mark must be indispensable, does that prevent the use of a sign that is not identical, but closely similar to it?
The ECJ's focus was primarily in relation to whether use of a competitor's trade mark in a comparative advert amounted to use of the mark in relation to the advertiser's goods or services, and whether, in fact, trade mark law was engaged at all in the consideration. The ECJ concluded that, for the purposes of Article 5(1) and (2) of the TMD:
- Use of a competitor's trade mark in a comparative advert does amount to use within the meaning of Article 5 (1) and (2) of the TMD;
- Use of a sign that is identical or similar to a competitor's trade mark in a comparative advert can also amount to use in relation to the advertiser's own goods or services; and
- There will not be infringement under Article 5(1) or (2) if the provisions of the CAD are met, including the requirement at Article 3a(1)(d) that "it does not create confusion". Therefore, in an action for infringement pursuant to Article 5(1)(b), where there exists a likelihood of confusion, that CAD requirement will necessarily not be met and an infringement claim will be made out. In this case, the ECJ found that the use of the Marks by 3 was not confusingly similar
In short, therefore, unless a trade mark owner can demonstrate that a competitor's use of a similar mark in a comparative advert gives rise to a likelihood of confusion, it is irrelevant whether the other provisions of Article 3a(1) CAD are met as the infringement case is not made out.
The ECJ did not address the position under Article 5(1)(a) TMD, as such an infringement does not require a likelihood of confusion, and the unanswered questions regarding the indispensability of such use are still live.
So when can a trade mark infringement action be brought over a comparative ad?
Turning to the circumstances in which an action for trade mark infringement can be brought against a comparative advertiser, the ECJ identified four conditions that must be met:
(1) the use must be in the course of trade;
(2) the use must be without the consent of the proprietor;
(3) the use must be in respect of goods or services which are identical with, or similar to, those for which the mark is registered; and
(4) the use must affect or be liable to affect the essential function of the trade mark, which is to guarantee to consumers the origin of the goods or services, by reason of a likelihood of confusion on the part of the public.
Why This Matters:
The judgment will come as a relief to brand owners following the Advocate General's controversial Opinion in February 2008.
The AG suggested that, in comparative advertising, trade mark rights were not engaged at all; rather, the CAD regime applied (now contained in the Business Protection from Misleading Marketing Regulations 2008 (SI 1276) – "BPRs") – a finding that would only give brand owners the option of referring the matter to the relevant authorities (OFT and local trading standards), a course of action where there is no guarantee of action and over which the brand owner has no control (see Marketing Law Bulletin here – http://www.marketinglaw.co.uk/articles/2008/9605.asp).
The use of a trade mark (whether identical or similar) in a comparative advert that does not meet the conditions of Article 3a(1) CAD will risk amounting to trade mark infringement (and that will come down to the trade mark analysis under Article 5(1) TMD).
Where an identical mark is used, there is likely to be prima facie trade mark infringement, subject to the application of Article 3a(1) CAD, and the questions of indispensability will come into play.
Where a similar mark is used, likelihood of confusion must be demonstrated and that use will, de facto, fall foul of Art 3a(1)(d) CAD. However it might be said that most effective comparative advertising is unlikely by definition to create any confusion as to whether the advertiser or the competitor referred to is the source of the competitor's products.
BPR complaint route open to brand owners
Another implication of this judgment is that if a mark similar to the registered trade mark of a competitor is used in a comparative ad and there is no likelihood of confusion, but the advertisement does fail to meet the other conditions of Art 3a(1) CAD, then the trade mark proprietor can still make a complaint to the relevant enforcement authorities under the BPRs. Whilst it remains to be seen how effective the enforcement of the BPRs will be, it would be a brave advertiser that uses a mark that is similar to his competitor's registered trade mark, but not confusingly so, relying on being able to defend their corner simply on the basis that the competitor has no trade mark infringement claim following O2 v 3.