Alert 362 - EU - L'Oréal v Bellure. A travesty of justice, or a breakdown in communication


The decision of the Court of Appeal in L’Oréal v Bellure has been widely reported.  Yet did it really interpret the judgment of the Court of Justice of the European Union correctly?  And if not, was that because the Court of Justice was far from clear in what it said?

The English Court of Appeal reluctantly held that use of registered trade marks in lists comparing cheap smell-alike perfumes with famous brands was unfair, and therefore infringed those trade marks.  In a strongly worded judgment, the Court of Appeal regretted having to come to that conclusion, but did so because it believed the Court of Justice of the European Union had given it no choice.

It appears however that there may have been a break-down in communication between the two courts, and that the Court of Justice will have the opportunity to clarify the issues in the pending reference to it from Interflora v Marks and Spencer.

Background

L’Oréal and its subsidiary Lancome own registered trade marks for famous luxury perfume brands such as Trésor (the Marks).  The Defendants dealt in cheap perfumes which smelled like the famous perfumes.  Some, such as Stitch, were sold in plain packaging.  The packaging for others, such as Création Lamis, resembled the packaging of the smell-alike famous brand, but not so closely that consumers would be confused.

The cheap perfumes were sold using comparison lists, which indicated, for example, that Coffret d’Or smelled like Trésor.

L’Oréal sued for trade mark infringement.  The Court of Appeal asked the European Court for guidance on whether use of the Marks on the comparison lists infringed the Marks.

The Court of Justice

The Court of Justice took the view that the lists would infringe if

(i) they affected any of the functions of the Marks, including guaranteeing origin, quality, communication, investment or advertising  (the Functions); or

(ii) they took unfair advantage of the reputation of the Marks.

They would take unfair advantage if they were used to ride on the coattails of the Marks, to exploit L’Oreal’s marketing efforts in creating and maintaining the Marks’ image, without compensation.   

The Defendants would have no defence under (ii) if their advertising was not permitted under the Comparative Advertising Directive (CAD).  CAD does not permit advertisements which present goods as imitations, or take unfair advantage of marks.

The ECJ noted that the Defendants had intentionally used packaging and bottles similar to the well-known brands to help them market their perfumes, and gained a commercial advantage from doing so. It left it to the English Court to decide whether any of the Functions were affected, or whether the advantage gained was unfair.  They said that the English Court should take into account, particularly, the fact that the use of similar packaging was intended to take advantage of the reputation of the Marks.

The Court of Appeal decision

By the time the issue came back to the Court of Appeal, the Defendants had changed their packaging, and had accepted that, in the light of the judgment of the Court of Justice, their historic packaging infringed.  The only issue, therefore, was whether the comparison lists infringed the Marks.

The Court of Appeal held that even saying, truthfully, that the Defendants’ product had an essential characteristic (the smell) of the trade mark owner’s product, amounted to saying that that product was an “imitation” and therefore not protected by CAD.  Furthermore, the use was not purely descriptive.  That, said the Court of Appeal, meant that it had no choice but to say that the use affected the Functions.  Therefore, the Defendants were infringing.

Comment

The Court of Appeal makes it very plain that it considered this conclusion to be wrong, and that its effect was to muzzle defendants from telling the truth.  It said that the Court of Justice decision means that poor consumers are the losers, and that there is a real danger that important areas of trade will not be open to proper competition.

The Court of Appeal expressed concern that it did not fully understand the “Functions” of a trade mark which the Court of Justice had identified.  It understood the Court of Justice to say that those Functions are affected if a third party uses the Marks in anything other than a descriptive sense.

Comparative advertisements by their very nature use third party marks, and take advantage of the reputation of those marks.  That cannot always affect their function, or be unfair, as otherwise all comparative advertisements would be banned.  Yet if the Court of Appeal has correctly understood, that appears to be what the Court of Justice is saying.

We believe that the Court of Justice did not go that far.  They did not intend the Court to hold that all use in advertising affects one of the Functions, or takes unfair advantage.  The High Court has asked the Court of Justice to provide further clarity, by the questions referred in Interflora v Marks and Spencer.  The European Commission has suggested, in that case, that the Court of Justice should reconsider its decision in L’Oreal v Bellure.  Our view is that the Court of Justice will make it clear that in some circumstances, use of trade marks in comparative advertisements is perfectly acceptable.  Until then, comparative advertisers will have to ensure that they avoid imitations, and are as fair as possible.