Smell-alikes and interpretation of ‘unfair advantage’ – L’Oréal v Bellure

01 August 2009

Zoe Fuller

This article was first published in the August edition of the World Intellectual Property Report.

The European Court of Justice (ECJ) has given a landmark ruling on the permissibility of advertisements that compare imitation products with well-known brands and has provided clarity on the ambit of “unfair advantage” under Article 5(2) of the Trade Marks Directive.

L’Oréal produces and markets fine fragrances and is the owner of several well-known trade marks in the UK.  The Defendants produced and marketed imitation fragrances and provided comparison lists to their retailers which indicated which of the Defendants’ range of products smelled like each of L’Oréal’s brands.

L’Oréal commenced trade mark infringement proceedings, alleging that the use of the comparison lists was an infringement under Section 10(1) of the Trade Marks Act and the imitation bottles and packaging constituted an infringement under Section 10(3).  The Defendants appealed to the Court of Appeal which stayed the proceedings and referred five questions to the ECJ concerning interpretation of the equivalent provisions of the Trade Marks Directive (namely, Articles 5(1) and 5(2)).

The first four questions referred to the use of L’Oréal’s trade marks in the comparison lists and the interpretation of Article 5(1) of the Trade Marks Directive and Article 3a(1) of the Comparative Advertising Directive.  The Court of Appeal’s fifth question requested guidance of the term ‘unfair advantage’ under Article 5(2) of the Trade Marks Directive.

Fifth Question

The ECJ chose to answer the fifth question first. This question asked whether Article 5(2) should be interpreted as meaning that a third party which uses a sign similar to a trade mark with a reputation can be held to take ‘unfair advantage’ where the third party gains an advantage in the marketing of its goods or services without giving rise, as far as the public is concerned, to a likelihood of confusion or causing (or risking causing) detriment to the mark or its proprietor.  The ECJ answered this question in the affirmative, confirming that an unfair advantage could be taken without their being a likelihood of confusion or a likelihood of detriment to the distinctive character or repute of the mark or its proprietor. 

The ECJ noted that Article 5(2) protects trade marks with a reputation against three types of injury: detriment to the distinctive character of the mark; detriment to the repute of the mark; and unfair advantage taken of the distinctive character or repute of the mark.  Any one of these is sufficient for Article 5(2) to apply.

In relation to the concept of unfair advantage, the ECJ held that it relates ‘not to the detriment caused to the mark but to the advantage taken by the third party as a result of the use of the identical or similar sign.  It covers, in particular, cases where, 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 a clear exploitation on the coat-tails of the mark with a reputation.’

To determine whether use of a sign does take unfair advantage, a global assessment is necessary which takes into account:

  • the strength of the mark’s reputation;

  • the degree of distinctive character of the mark;

  • the degree of similarity between marks at issue; and

  • the degree of proximity of the goods and services concerned.

The fact that there is a likelihood of dilution or tarnishment of the mark may also be taken into account.

The Court of Appeal had already concluded that there was a link between the packaging used by the Defendants and L’Oréal’s marks.  It was apparent that the link conferred a commercial advantage on the Defendants and was created internationally to create an association between fine fragrances and the imitations in the public’s mind.

The ECJ concluded that where a third party attempts to ride on the coat-tails of a mark with a reputation in order to benefit from its power of attraction, reputation and prestige and to exploit the marketing effort expanded by the proprietor of that mark in order to create and maintain the image of that mark, the advantage gained by such must be considered unfair.

First and Second Questions

The first and second questions asked essentially whether Article 5(1) of the Trade Marks Directive should be interpreted as meaning that the trade mark proprietor can prevent use by a third party of its mark in a comparative advertisement where the use does not jeopardise the essential function of the mark to guarantee the origin of the goods or services, but nevertheless plays a significant role in the promotion of the third party’s goods or services.

The ECJ noted at the outset that comparison lists such as those of the Defendants may constitute comparative advertisements, which could amount to trade mark infringement under Article 5.  However, to the extent that the advertisements comply with all the conditions set out in Article 3a(1) of the Comparative Advertising Directive, the proprietor is not entitled to prevent such use.

Article 5(1)(a) (the relevant provision in this case because of the identity of the marks and goods at issue) protects the proprietor’s specific interests to ensure that the trade mark can fulfil its functions.  These functions include not only the trade mark’s essential function of guaranteeing origin, but also its other functions, in particular that of guaranteeing the quality of the goods or services and those of communication, investment or advertising.

The ECJ concluded that the trade mark proprietor is entitled under Article 5(1)(a) to prevent use of its sign in a comparative advertisement that does not satisfy all the Article 3a(1) conditions, even where such use is not capable of jeopardising the essential function of the mark, provided one of the mark’s other functions is affected or is likely to be affected.

Third and Fourth Questions

The Court of Appeal’s third and fourth questions asked whether Article 3a(1) of the Comparative Advertising Directive must be interpreted as meaning that where an advertiser indicates through a comparison list, without causing confusion or deception in any way, that his product has a major characteristic similar to that of a product marketed under a well known mark of which it is an imitation, that advertiser would be:

(a) presenting goods or services as imitations or replicas (Article 3a(1)(h)), or
(b) taking unfair advantage of the reputation of the trade mark (Article 3a(1)(g)).

The ECJ noted that the purpose of the Article 3a(1) conditions was to strike a balance between different interests which may be affected by comparative advertisements.  Its aim was to stimulate competition whilst prohibiting anti-competitive behaviour.

Article 3a(1)(h) prohibits not only advertisements which explicitly evoke the idea of imitation or preproduction, but also those which, having regard to their overall presentation and economic context, are capable of implicitly communicating such an idea to the public.  The object and effect of the comparison lists was to draw the attention of the public to the original fragrance they imitate.  This therefore fell foul of Article 3a(1)(h). The ECJ commented that it was irrelevant whether the advertisements related to an imitation of the whole product which bears the protected mark or merely an imitation of an essential characteristic of the product, such as its smell.

The expression ‘takes unfair advantage’ in Article 3a(1)(g) must be given the same interpretation of ‘unfair advantage’ in Article 5(2) of the Trade Marks Directive.  The advantage gained by the advertisers as a result of advertisements which presented the advertiser’s produces as imitations was unlawful and therefore must be considered unfair within Article 3a(1)(g).

Comment

This judgment is of particular interest to owners of well-known brands and companies which market imitation products. 

The ECJ’s earlier ruling in Intel (C-252/07) indicated, somewhat controversially, that in order to prove detriment to the distinctive character of a mark, the proprietor would have to demonstrate a change in the economic behaviour of the average consumer consequent on the use of the later mark. This requirement was not re-iterated by the ECJ in L’Oréal. 

The ECJ has now given a clear message that business cannot hide behind the Comparative Advertising Directive and ride on the coat-tails of famous marks in order to promote imitations, even where no harm was caused to the mark or its proprietor.

L’Oréal SA & Ots v Bellure NV & Ots (C-487/07; 18.06.09)