ECJ decision on L'Oreal

The European Court of Justice's decision in L'Oreal SA & others v Bellure NV & others is one of the most significant trade mark cases this year. The decision is a welcome result for well known brand owners and their fight against copycats with their (often cheaper) imitation, own-label products; a business that could become increasingly common in hard economic times.

Background

L'Oreal is the manufacturer of high-end luxury fragrances such as Tresor and Miracle and has registered trade marks for both their names, bottles and packaging. The dispute arose in relation to Bellure's own-label fragrances which were intentionally manufactured to replicate the smell of L'Oreal's fragrances and were sold in similar shaped bottles and packaging. Bellure explicitly marketed the fact that its products imitated the smell of L'Oreal's by using a comparison list comparing Bellure's products to its L'Oreal equivalent.

European trade mark law protects proprietors of trade marks that have a reputation against the use of a similar mark which, without due cause, damages the trade mark with the reputation in one of three ways:

(1) if it causes detriment to the distinctive character of the trade mark or damages its ability to distinguish the trade mark's goods from another party's ("dilution");

(2) if it causes detriment to the repute of the trade mark or damages the trade mark's powers of attraction ("tarnishment"); or

(3) if it takes an unfair advantage of the distinctive character or repute of the trade mark ("free riding").

L'Oreal and Bellure's products were not in competition with one another. L'Oreal had no evidence to suggest that consumers of its products might now switch allegiance to Bellure because its fragrances were in similar bottles and packaging. Furthermore, there was no evidence of confusion on the part of the public; it was always clear that Bellure's products were rip-offs of L'Oreal's high quality ones. Arguably, therefore, no damage had been caused. However, a question of interpretation for the ECJ was whether Bellure had nevertheless gained an unfair advantage from "giving a wink of an eye" to L'Oreal's products.

The Decision – Unfair Advantage

The ECJ held that evidence of confusion or damage to the trade mark was irrelevant to the question of whether or not an unfair advantage had been taken. There did need to be a connection in the minds of the public between the trade mark with the reputation and the later mark and factors such as the strength of the trade mark's reputation and the similarities between the marks and their goods and/or services, could all point to a link.

Once the necessary link had been shown, the ECJ held that an unfair advantage had been taken by seeking to "ride on the coat-tails of the mark with a reputation in order to benefit from the power of attraction, the reputation and 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."

In other words, brand owners would need to show to the Court that the defendant had sought to create an association with its reputable trade mark for promotional purposes. In the L'Oreal case, the fact that Bellure's products were marketed as imitation versions of L'Oreal's supported the fact that there was a clear intention that consumers would associate Bellure's products with L'Oreal's. Indeed, Bellure's witnesses acknowledged they were intended to "wink" at L'Oreal's products.

However, in other less obvious cases, disclosure of the defendant's design briefs and market research and careful cross-examination may be needed to demonstrate the requisite intent. It is not necessary, though, for brand owners to show that the owners of the similar marks had gained an economic advantage - which would be particularly difficult in cases such as L'Oreal where brand owners are not dealing with competitors but with two totally distinct markets. In this respect, the case departs from the ECJ's judgment in Intel where it was held that in order to prove a dilution, brand owners would need to demonstrate a shift in the economic behaviour of their customers towards the defendant's products.

The Decision - Damage

The ECJ then turned to the use by Bellure of the names of L'Oreal's fragrances (which are also registered trade marks) in its comparison lists. Whilst use of those trade marks did not affect their primary function (to identify and describe L'Oreal's goods) it was use in advertising and hence may damage the trade marks. For example, it may cause damage to the amount of investment and marketing effort expended on the trade marks and the messages that the trade marks communicated to the public through advertising and which relate to the quality of its goods or services.

The Decision – Comparative Advertising

The comparison lists were held to amount to comparative advertising for the purposes of the Trade Marks Directive on Misleading and Comparative Advertising (the "Directive"). The purpose of the Directive is to stimulate competition by permitting comparative advertising which compares one party's products with those of another by reference to their registered trade marks provided that it complies with certain conditions. Two of those conditions are that such advertising must not present goods as imitations or replicas of goods bearing a trade mark or take an unfair advantage of a trade mark.

The ECJ held that the purpose of the comparison lists was for Bellure to attract consumers' attention to L'Oreal's products in order to promote Bellure's products as imitations. The fact that Bellure was only indicating the smell of its products, rather than the products as a whole, imitated of L'Oreal's was irrelevant. It was it was inconsistent with fair competition explicitly or impliedly to present goods as an imitation or replica of the whole or part of another party's goods bearing a trade mark.

Practical Implications

Overall, the ECJ's judgment suggests both a wider view of trade mark infringement than the U.K. Courts have traditionally adopted and perhaps also a move towards a more Continental concept of unfair competition.

For brand owners with a reputation, there is a clear recognition of the commercial importance of brands in the modern world beyond their origin designator function. Brand owners may thus want to build on the success of their brands by registering all aspects – including packaging, shapes and colours – as trade marks and using advertising and marketing to educate consumers to recognise them.

Look-alike manufactures will need to take care to avoid using well known trade marks intentionally to free ride. Explicit design briefs to imitation or ignoring research highlighting similarities with well known brands may well be enough to indicate intent.