In the advertising world competitors frequently make use of their competitor’s trademark, which is an entirely legitimate practice. Comparative advertising is encouraged as long as it is not unlawful or deceptive. It can serve to highlight the strengths or aspects of a company’s products or services relative to those of a competitor. However Trade mark owners are more closely monitoring these kinds of comparative advertising campaigns as they may not wish their trade mark and products and services associated with it to be viewed in a less favourable light.
Under the laws of most jurisdictions, as long as an advertiser uses a competitor’s trademark in a lawful, accurate and non-deceptive manner in comparative advertising this will not constitute trade mark infringement or misleading and deceptive conduct. Comparative advertising is beneficial to consumers.
In the case of L’Oreal SA v Bellure NV  EWCA Civ 535 the European Court of Justice had issued a decision which not only contravenes freedom of commercial speech
but disadvantages consumers by favouring the interests of luxury trade mark owners without even requiring a trade mark owner’s business being detrimentally affected by comparative advertising by a competitor. Nor was there any confusion in the minds of consumers as to the source or origin of the products as the competitor’s products were clearly identified as being legitimate low cost imitation products of the trade mark owner’s luxury products.
Bellure is a Belgium company producing cheap perfumes and fragrances which they packaged initially in a similar manner to L’Oreal’s luxury products. Bellure also used comparison lists to compare the smell of the Bellure perfurmes with specific L’Oreal perfurmes such as Tresor, the names of which were L’Oreal registered trademarks. L’Oreal sued for trademark infringement and passing off in relation to Bellure’s use of both the comparison lists and packaging. After Bellure had changed the packaging of their products it became a moot issue and the court decided under principles of English law that passing off didn’t extend to something which was analogous to the tort of unfair competition or unjust enrichment (in Australia).
However, the question whether Bellure’s references to the ‘smell-a-like’ perfumes in the comparison list amounted to an infringement of trademark was referred to the ECJ who had to evaluate whether Bellure’s actions in comparing the smells of their perfumes with those of L’Oreal in the comparison lists constituted trade mark infringement under Article 5(1)(a) of the Trademark Directive. If they did, they were then required to consider whether Bellure had any defence under the Comparative Advertising Directive (CAD). The ECJ was also asked to consider whether use in the comparison list constituted trademark infringement under Article 5(2) of the Trademark Directive.
The ECJ concluded that Bellure’s references to L’Oreal’s trademarks within the comparison list did constitute trade mark infringement under Article 5(1)(a) in comparing identical goods/services, unless the relevant use could be characterised as purely descriptive use. The ECJ characterised the use in the lists as more than purely descriptive, being used for advertising purposes.
Did Bellure have a defence under the Comparative Advertising Directive?
In order to avail itself of the defence under the CAD the relevant use of the trade marks by Bellure had to comply with the conditions of the CAD. The CAD permits the practice of comparative advertising subject to certain conditions being satisfied, one of which is that the comparison ‘doesn’t take unfair advantage of the reputation of a trademark‘. A further condition is that the relevant comparison doesn’t ‘present goods or services as imitations or replicas of goods or services bearing a trademark‘. The ECJ interpreted “imitations and replicas” very widely, deciding that smell-a-like perfumes amounted to “imitations” of the original one. This was so even though the copies were not counterfeits but were conceded to be ‘smell-a-likes’.
The ECJ’s decision forced Lord Justice Jacob of the Court of Appeal to hold that Bellure hadn’t complied with the CAD and were therefore liable for trademark infringement, a decision that the Judge openly characterised as irrational. This isn’t surprising as a trader who produces replica goods should be able to inform the public that they were replicas and indeed this appears to be in the interests of consumers.
Justice Jacobs in the Court of Appeal didn’t have to rule whether Bellure was also taking unfair advantage of L’Oreal’s trademark under Article 5(2), as their use had already been found to amount to trade mark infringement under Article 5(1)(a) by the ECJ. However,the ECJ, in its decision, decided to make observations on this aspect of the Directive which will have an impact on all advertisers.
The ECJ defined “unfair advantage” broadly as being “where a third party attempts … to ride on the coat tails of a mark in order to benefit from its power of attraction, its reputation and its prestige … the advantage resulting from such use must be considered to be an advantage that has been unfairly taken”.
The ECJ noted that the stronger the relevant mark’s distinctive reputation the easier it would be to find that detriment had been caused to it. Furthermore, the more immediately and strongly the mark is brought to mind by the sign, the greater the likelihood that the use of the sign will take unfair advantage or will be detrimental to the mark.
Advertisers of products who associate itselfs with a trademark with an existing reputation could easily be regarded as taking unfair advantage of a trade mark under this test. Referring to a registered trademark in a comparison list is now likely to amount to an infringement of trademark. However, the decision also means that an advertiser who features or refers to a well-known registered trademark in its advertising to enhance its own product could also be liable for an infringement, even if the advertiser’s own product is in an entirely different category of goods and services.
Clearly, promotion of imitation products by comparison with famous brands is not permissible under the European Court of Justice’s trade mark and comparative advertising legislation.