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CASE COMMENT Jennifer Sunderland The Court of Appeal has handed down its long-awaited decision in L’Oreal v Bellure. The decision implements the responses given by the ECJ (as it then was) in June 2009 to questions referred to it by the Court of Appeal. Notably, it also includes an extensive explanation by Lord Justice Jacob of the reasons why he disagrees with the ECJ’s approach, although he recognises that the Court of Appeal is bound by it. This is a long-running dispute concerning fragrances intended to be “smell-alikes” for some of L’Oreal’s most famous perfumes. The defendants – Bellure, Malaika and Starion – had been using comparison lists which matched their copy perfumes to some of L’Oreal’s wellknown perfumes, using the L’Oreal registered marks. L’Oreal contended that this was an infringement under Article 5(1)(a) of the Trade Marks Directive (89/104). Historically there were also issues relating to the design of the defendants’ packaging, which the defendants had conceded. The Court of Appeal’s questions to the ECJ related to whether the defendants’ use of look-alike packaging had taken unfair advantage of the reputation of the relevant L’Oreal marks even though it did not “jeopardise the essential function of the registered trade mark as a guarantee of origin”. They also concerned the use of comparison lists. Further background may be found in an article on the ECJ’s decision by Cerryg Jones of CASE COMMENT Court of Appeal applies ECJ’s guidance reluctantly L'Oréal SA, Lancome Parfums et Beaute & CIE, Laboratoire Garnier & CIE –and- Bellure NV, Malaika Investments Ltd (t/a Honeypot Cosmetic & Perfumery Sales), Starion International Ltd, Court of Appeal [2010] EWCA Civ 535, Lord Justice Jacob, Lord Justice Wall and Lord Justice Rimer, 21 May 2010, Original Language: English. Jennifer Sunderland reports... Wragge & Co, available at www.wragge.com/analysis_4657.asp. Outcome Jacob LJ provided the leading judgment; Rimer LJ and Wall LJ concurred. He noted that it is lawful to make and sell a smell-alike product, that there was no customer confusion between L’Oreal’s perfumes and the cheap copies and that there was no tarnishment or blurring to the image or the distinctiveness of L’Oreal’s trade marks. Nor was there any effect on sales of the corresponding fine fragrances, since consumers who buy a “smell-alike” do so knowingly and would not purchase the genuine product. Nevertheless the evidence showed that the defendants achieved a promotional advantage by informing consumers which luxury perfumes the copy perfumes imitated, by reference to the claimant’s trade marks. Policy decision Jacob LJ’s view is that the ECJ has gone a step too far. He says that traders should not be prevented from making honest statements about lawful products, or competition will be impaired. In his view the ECJ’s approach is unnecessary and amounts to muzzling free speech; it also deprives consumers of choice. In his view the ECJ’s approach imposes a more restrictive and protective approach than in many other jurisdictions. These are substantive and very serious comments, aimed in part at the Commission’s forthcoming review of EU trade mark law and referencing also the Commission’s submissions in a current reference to the Court of Justice of the European Union (the ECJ as was) in a current “Adwords” case (Interflora Inc v Marks and Spencer Plc [2010] EWHC 925 (Ch)). Article 5(1)(a) The ECJ concluded that use of the trade marks to refer to L’Oreal’s product was not an infringement under Article 5(1)(a). However it held that use of the marks in the comparison lists also included use with reference to the copy perfumes for the purpose of advertising them, and such use did amount to infringement under Article 5(1)(a). The defendants had argued that such use is merely descriptive (as, for instance, in the case C-200 Hölterhoff [2002] EC I-4187). However the ECJ found that whilst the defendants’ use of the marks did not affect their essential function it nevertheless affected other functions. Such functions include the guarantee of quality, and the advertising, communication and investment functions. Jacob LJ has commented that these functions are ill-defined and vague, and this is an aspect of the case which he wishes to draw to the attention of the Commission. In his view Article 5(1)(a) infringement should be confined to the essential function of distinguishing origin. What is not clear from the ECJ’s reasoning is whether Article 5(1)(a) can, like Article 5(2) in respect of unfair advantage, cover 22 ITMA Review July/August 2010
circumstances where there is no direct harm to the mark. The result is that trade mark owners in similar situations as L’Oreal should always allege infringement or Article 5(2) in order to ensure that unfair advantage (or “free-riding” – a term to which Jacob LJ takes exception) is covered. Comparative Advertising Directive Defendants have a ‘get out of jail free card’ if the trade mark use complies with all the conditions set out in Art 3a(1) of the Comparative Advertising Directive (CAD). The conditions in issue were (g); it does not take unfair advantage of the reputation of a trade mark or of the designation of origin and (h); it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark. The defendants argued that (h) was confined to counterfeits; that is what imitations and replicas means. However, the ECJ gave the condition a wide meaning and held that the imitation does not have to be explicit, it can be implicitly communicated by the advertisement and that the imitation does not have to be in relation to the product as a whole, it can merely be the imitation of an essential characteristic of that product, such as the smell of the product. Jacob LJ felt bound to follow this reasoning although he commented that he could not see any rational basis for the rule. Failure by the defendants to comply with CAD means that they do not fall within the exception for trade mark infringement under CAD and therefore were not acting in accordance with honest practices. Article 5(2) For Article 5(2) infringement it is necessary to show detriment to either distinctive character or repute of the mark or unfair advantage taken of the distinctive character or repute of the mark. The ECJ ruled that use of the L’Oreal marks amounted to “freeriding”, which was per se taking an unfair advantage. Jacob LJ observed that this was far too broad a conclusion. Jennifer Sunderland, Wragge & Co LLP, jennifer_sunderland@wragge.com July/August 2010 CASE COMMENT Firstrung bad faith verdict Decision O-107-10 of the Appointed Person Professor Ruth Annand of 31 March 2010 in the matter of UK trade mark application no 2423826 FirstRung in the name of Helen Adams and opposition no 94845 thereto by Firstrung.com Limited. Geoff Weller reports... In this decision the Appointed Person upheld the finding that the application had been made in bad faith, given the applicant’s knowledge of the existing conflict between the parties over the name. The applicant for the FirstRung mark was the managing director of FirstRungNow Limited. That company owned and used the FirstRungNow (stylised) trade mark in relation to its online property and mortgage advice services. Ms Adam’s application was opposed by her company’s main competitor Firstrung.Com Limited. The opposition was based on section 5(4) (the application should be refused on the basis of the opponent’s earlier unregistered rights in a number of stylised “firstrung” marks) and section 3(6) (the application should be refused as it was made in bad faith) of the Trade Marks Act 1994. The hearing officer held that there was insufficient evidence to support the 5(4) ground. He did find the opponent successful on the s3(6) ground. On the facts he felt that Ms Adams had been aware of the conflict between her company and the opponent (the opponent had complained to Ms Adams almost a year before her application about the use of “Firstrung” (as opposed to “FirstRungNow”) on her company's website); and had applied for a right she knew could prevent (given the acknowledged confusion between the marks in the same field of activity) the opponent continuing to conduct its business under the name FirstRung. He held her application, given the facts, met the requirement for having been made in bad faith in that it “fell short of the standards of acceptable commercial behaviour observed by reasonable and experienced persons in the particular filed being examined” and should be refused. Ms Adams appealed. Decision The actual grounds of appeal were that the hearing officer had incorrectly relied on without prejudice correspondence, attributed too little weight to relevant factors, made wrong findings of fact and given too much weight to peripheral matters. In essence, the Appointed Person found that there had been no reliance on without prejudice material and there had been no material errors in the hearing officer's decision requiring a reassessment of the facts. The appeal was thus unsuccessful and the application should be refused. The without prejudice finding is worth noting by practitioners as on the Appointed Person's review she found that the alleged without prejudice documents (emails from applicant to opponent) were never actually seen by the hearing officer. What was seen was an evidence exhibit put in by the applicant herself. That exhibit contained an open letter from the opponent which quoted parts of the alleged without prejudice emails. The Appointed Person held that in such a circumstance even if the (unseen) original emails were covered by without prejudice it had been waived by the actions of the parties. Comment This case gives an example of facts in which a trade mark application will be held to be in bad faith. It is also useful reminder to be very careful what you put in as evidence. Geoff Weller, IPULSE, gweller@ipulseip.com ITMA Review 23
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