Smells Like Bad News for Brand Owners

Report Headline

The Court of Appeal has referred further important trade mark questions to the European Court of Justice, as well as indicating its own view, that the sale of cheap "smell-a-like" products does not infringe the rights of the known brands whose high end products are used as comparators .

The Parties

L'Oreal, Lancome & Garnier -v- Bellure & Others

The Citation

(2007) EWCA Civ 968

The Tribunal

Court of Appeal (Leading Judgment Jacob LJ).

The Context

How far can a brand with a registered trade mark, with significant reputation and goodwill, prevent another brand from referring to the former's mark, expressly or implicitly, in the exploitation of its own product?

Article 5(1)(a) of the EC Trade Marks Directive (TMD) provides that the owner of a registered trade mark can prevent others from using commercially the same mark in respect of the same goods or services as those for which the mark is registered. (The most "basic" infringement provision).

Article 5 (2) TMD provides that the owner of a registered trade mark with a reputation can prevent others from using commercially the same or a similar mark in respect of dissimilar goods or services, if the use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark. (Which actually covers four different scenarios, but these are usually referred to as dilution, tarnishing and free riding).

Article 6 (1) TMD provides that the registration of a trade mark does not enable its proprietor to complain about use of the mark by others by way, inter alia, of using "indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services", so long as they are used "&hellip in accordance with honest practices in industrial or commercial matters". (The provision by which comparative advertising is in principle possible without automatically infringing a trade mark).

The EC Comparative Advertising Directive (CAD) permits comparative advertising, as long as certain conditions are fulfilled, as set out in Article 3a (1).

The Facts (Simplified here in order to concentrate on the key aspects – the full facts are more complex, and other defences and legal arguments were also involved).

The Claimants own a number of higher end perfumes and cosmetics, and a number of word, logo and shape registered trade marks protecting various aspects of their products, including Tresor, Miracle, Noa and Anais Anais.

The Defendants are involved in the sale of low end (£1-2 per piece) fragrances. The packaging and design of many of these are in some ways vaguely reminiscent of the Claimants' products. It was accepted that this is intended to give "a wink of an eye to an existing branded product", and also to indicate what the products smell like. The brands include Coffret d'Or, La Valeur, Pink Wonder, Sweet Pearls and Nice Flower.

The Defendants circulated comparison charts, cross referring between some of their perfumes and some of the (named) brands of the Claimants.

The judge at first instance held that a) the use of the marks in the comparison charts was not in accordance with honest practices in industrial or commercial matters and was therefore an infringement of the registered marks under Article 5(1)(a) TMD (the Comparative Advertising aspect), and that b) some of the packaging used by the Defendants was an infringement under Article 5 (2) TMD (the Dilution aspect).

The relevant findings of fact were as follows:-

It is lawful to make and sell a smell-alike product
The best and only practical way to describe its smell is to tell people that it smells like X
That is what the Defendants' comparison charts achieve
Using the lists is a real promotional advantage for the Defendants
Neither customers (ie retailers/traders) nor ultimate consumers are deceived
Neither the image nor the distinctiveness of the registered marks is impaired by the use of the lists – no tarnishment or blurring
Sales of the "corresponding" fine fragrances are not harmed.

The Decision

In his leading Judgment, Jacob LJ found as follows.

There was no confusion, and so no passing off. Further, although there might be scenarios in which the smell-alike products might be used to deceive or confuse the public, nothing material was shown, and the existence of this possibility did not turn the products into "instruments of deception" within the guidelines established in One in a Million (1999).
The authorities on passing off have not developed beyond protecting against confusion, and have certainly not established a broader tort of unfair competition.
Trade Marks. Dealing separately with the two aspects:-

Comparative Advertising

The first provisional finding mirrors that in O2. Namely, relying on authority from Hoelterhoff (ECJ, 2002) (and including the recent Adam Opel case), is this use of the Claimants' marks use of the right kind for Article 5(1) TMD to apply at all? (in shorthand, is it "trade mark use"?). The Court referred its First Question to the ECJ, in terms very similar to the reference in O2. Where a trader uses another's registered mark, for the purposes of comparing the characteristics (and in particular the smell) of the goods, and does so in a way that there is no confusion and there is no jeopardy to the essential function of the trade mark as an indication of origin, does that fall within the infringing provisions of Article 5 TMD?
The Court asked a further, Second Question, designed to establish the breadth of the underlying principles. This time, it adds the assumption that not only does the use not cause confusion or harm the essential function of the trade mark, but that it does not affect sales of the products bearing the well-known mark, and does play a significant role in the promotion of the trader's product.
The Court then turned to the CAD. So IF there is a prima facie infringing act at all, is it saved under Article 6(1) TMD? It held, unsurprisingly, that the use of comparison lists falls within the definition of comparative advertising. And recited the established law that if a trader complies with the conditions set out in article 3a CAD he is acting honestly, but if he does not, then he is not acting honestly. 3a (g) requires that the use "does not take unfair advantage of the reputation of a trade mark&hellip&hellip. of a competitor&hellip". So the question boils down to whether the use here took unfair advantage; the Claimants arguing that it did, as it was the purest type of "free riding", and the Defendants arguing that it did not, because it was for comparison purposes, no-one was misled ("Consumers are not stupid"), the Claimants' mark was not harmed nor were its sales, and so if this is unlawful, any comparative advertising must also be unlawful. So the Court referred its Third Question to the ECJ, asking to be given the meaning of the phrase "take unfair advantage of" in this context, and asking specifically whether the use of a well-known mark in comparison tables takes unfair advantage of that mark.
The Fourth Question to the ECJ concerns the meaning of the provision in 3a (h) CAD, which requires that the comparative advertising does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name. The Court of Appeal has therefore asked the ECJ for the meaning of "presenting goods or services as imitations or replicas", and specifically whether it covers the case where a trader truthfully (and without causing confusion) says that his product has a major characteristic (smell) like that of a well known product which is protected by a trade mark?

Jacob LJ added his own view, that "such lists, even where there is a degree of what can be called "free riding", should be lawful. European trade mark law should not be overprotective".

Article 5 (2) TMD. Dilution.

This aspect concerned the packaging, and has two key components.

First, were the Defendants' goods "similar" to the registered mark(s)? The Court explained that European authorities (especially Adidas-Salomon -v- Fitnessworld) have decided that deception is not necessary, but merely a "link". English authorities, however, have held that this must be more than a mere "calling to mind" of the other mark. (This is the key aspect in the pending reference from the Court of Appeal to the ECJ in R -v- Intel). Jacob LJ's view is that there has to be some effect on the consumer's economic behaviour

Without referring any questions to the ECJ, the Court held that:-

The requisite degree of similarity is that which is necessary to give rise to a link.
"not called to mind, but moved in any degree to buy by reason of the use of D's signs
Global appreciation test considered. Claimants' extraneous marketing materials cannot be considered. The comparison is with the mark as registered.
But it may be possible to take into account the global circumstances of the Defendant's use: the test is how the Defendant's sign is perceived.
The Claimant must prove that the link is caused by the similarity of mark and sign.

It did not overturn the Judge's ruling, that there was a link in respect of one set of current packaging (La Valeur) (and there had been in respect of two of the "historical" forms of packaging, which had already been changed), but not in respect of the others.

The second key question concerned the meaning of "unfair advantage". It was accepted that the Defendants gained an advantage. But there was no disadvantage to the Claimants, their marks or their sales.

At first instance, the Judge had adopted the test contained in the OHIM 2005 decision, Mango Sport -v- Diknak, which held in essence that it is unfair to piggyback on someone else's investment. Jacob LJ considers that this is probably not right, as it actually means that any advantage will be unfair.

The Court of Appeal therefore added a Fifth Question for the ECJ, limited to the scenario in which a similar (but not confusingly similar) mark is used in such a way that:-

The essential function of the mark is not impaired
There is no, and no risk of, tarnishment or blurring
And no effect on the proprietor's sales
And the proprietor is not deprived of any expected reward for his promotion, maintenance or enhancement of the trade mark
And the other trader gets a commercial advantage

Is that an "unfair advantage" within Article 5(2) TMD?

"My own view is that the answer ought to be "no"".

Comment

This is a very important case for trade mark lawyers and brand owners. Many commentators believe it is the latest in a line of cases which are together seriously undermining the value of registered trade marks, and opening the way for cheap imitations to compete with impunity. It deals with important questions about the impact of trade mark laws on comparative advertising, and also with fundamental issues about the extent of coverage or exclusivity provided by a long-standing registered mark with a high reputation.

Its full impact will not be known until the ECJ provides its views on the questions referred (assuming that the cases do not settle in the meantime), but until then it will worry brand owners, as well the two other recent Court of Appeal trade mark decisions which are currently the subject of pending ECJ references, O2 -v- Hutchinson and R -v- Intel.