UK: L'Oréal Wins A Sweet Smelling Victory Against Free-Riding

The Court of Appeal has handed down its much awaited judgment following the decision of the ECJ in the case of L'Oréal v Bellure. It will be welcomed by leading brand owners as providing greater protection against free-riding and may lead to a raft of new cases based on such claims.

Background

This case involved a number of products that smell like famous luxury branded perfumes. The Defendants marketed the products by use of comparison lists, showing which of their products smelt like each famous product and referencing the famous marks. The question was whether the use of the comparison lists infringed L'Oréal's trade marks and whether such comparisons were protected as permissible comparative advertising.

The Court of Appeal initially referred 5 questions to the ECJ. The ECJ held that once members of the public have made a "link", unfair advantage can be taken by a third party, even if the use is not detrimental to the distinctive character or the repute of a mark or more generally, its proprietor, in accordance with Article 5(2) of Directive 89/104 (the "Trade Marks Directive"). To see our Law-Now on the ECJ decision, click here.

Decision

Jacob LJ stated that the question before the Court of Appeal was: "Does trade mark law prevent the defendants from telling the truth? Even though their perfumes are lawful and do smell like corresponding famous brands, does trade mark law nonetheless muzzle the defendants so they cannot say so?". The Court of Appeal concluded that the ECJ had ruled that it did and therefore, reluctantly (and expressly so), had to find in favour of L'Oréal.

Issue (a) within Art. 5(1)(a)?

The Court of Appeal followed the ECJ's ruling that in "same mark/goods cases where the defendant claims that his use is descriptive so as to take him outside of Art. 5(1)(a) he will only succeed if his use is for 'purely descriptive' purposes". The ECJ found that the defendants' use of the marks went beyond being 'purely descriptive' because it was used in advertising and affected the communication, advertising and investment functions of the marks. The Court of Appeal made reference to the fact that a line must be drawn between using marks to gain a sale and using marks for the general purpose of advertising. The Court stated that they did not know where the line was but that they were bound to follow the ECJ's ruling.

Issue (b) Comparative Advertising Directive

If the use falls within Art. 5(1)(a), it will not be an infringement if it complies with all the conditions set out in Art 3a(1) of the Comparative Advertising Directive (the "CAD"). In the Court of Appeal's initial judgment, it had accepted that there was compliance with a number of these conditions and that the only conditions in contention were the subject of the ECJ reference in respect of unfair advantage and presenting the goods as imitations of the marks.

The Court followed the ECJ's wide interpretation of presenting goods as imitations of the goods bearing the marks and stated that advertising the fact that "the defendants' product has an essential characteristic (in the instant case smell) of the trade mark owner's product amounts to saying the product is an 'imitation or a replica' and so outside the protection of the CAD".

The Court therefore concluded that: the comparison lists fell within Art 5(1)(a); such use is not protected by the CAD as it does not comply with the condition in respect of imitations; it therefore amounts, automatically, to unfair advantage; and failure to comply with the conditions means that the use is 'without due cause' and so not within the exception to infringement under Art 6(1)(b) as it is not in accordance with honest practices.

However, it was made clear in the judgment that Jacob LJ disagreed strongly with the ECJ's conclusion. He stated that he "[can] actually see no rational basis for such rule" and that "if a man trades in lawful replicas...why should he not be able to inform the public what they are? And why should the truth be kept from the public?"

Free-riding: Art 5(2) infringement

As the Court had already concluded there had been an infringement, it held that it was not necessary to express any views on with there is also an Art. 5(2) infringement. It interpreted the ECJ decision as meaning that "if there is 'clear exploitation on the coat-tails' that is ipso facto not only an advantage but an unfair one at that." Further, that the ECJ's interpretation of this area of law resulted in all free-riding constituting unfair advantage as there was no distinction between 'permissible free-riding' and 'impermissible free-riding'.

The Court again stated that it "do[es] not agree with or welcome this conclusion" and added that it results in a "pointless monopoly", but that it was their duty to apply it.

Conclusion

The Court of Appeal has vocalised its disagreement with the decision (Jacob LJ stated that without the ruling by the ECJ, the Court would have held that "trade mark law should not prevent traders from making honest statements about their products") and made clear that it only made its decision that the comparative advertising amounted to unfair advantage "because the ECJ has said so".

This decision shows the English Court's reluctance in extending such potentially far-reaching protection to brand owners. The judgment had references to concerns about free speech and the importance of giving consumers information that allows them to make informed choices about their purchases and concluded that "the ECJ's decision ...means that poor consumers are the losers. Only the poor would dream of buying the defendants' products. The real thing is beyond their wildest dreams". In expressing its concerns as to the wider implications of the ECJ decision, the Court of Appeal sought to draw a parallel between this case of that of generic drug providers. However, there are clearly distinctions to be made between these scenarios which the Court of Appeal did not address in any detail.

Although the facts of this case centred on comparative advertising lists, it will be interesting to see how it is applied to other cases of potential free-riding, for example, supermarket lookalike own brand products.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 25/05/2010.

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