UK: Comparative Advertising - Has The Bubble Burst?

Last Updated: 7 July 2008
Article by Andrew Bowler and Paul Walsh

It seems likely that the ECJ Judgment in O2 v H3G has, for practical purposes, foreclosed brand owners' ability to sue for trade mark infringement when their trade marks are used unfairly in comparative adverts. Instead brand owners in the UK will have to rely on the European Misleading Advertising Directive and this can only be enforced by Trading Standards departments. An increase in aggressive comparative adverts is to be expected.

The long running saga of the comparative advertising dispute between O2 and Hutchison 3G neared an end last week with the Judgment of the European Court of Justice.

To recap, O2 sued H3G for trade mark infringement in respect of (among other things) a TV advert in which H3G made adverse price comparisons referring to O2 by means of animated bubbles. For use of a trade mark in a comparative advert to amount to infringement the Trade Marks Directive provides that the use must be other than in accordance with honest practices. At first instance H3G argued successfully that their advert complied with the European Misleading Advertising Directive (which also governs comparative advertising) and that, as a consequence, there could be no trade mark infringement.

The Court of Appeal shared the concerns of the High Court but had a more fundamental concern: does a reference to another's trade mark in a comparative advert even amount to "use of a trade mark" in the sense contemplated by the European and UK trade mark legislation? "Use in a trade mark sense" typically involves use which indicates the origin of your goods or services or impairs the ability of another trade mark owner to use his mark in a way that identifies his goods or services. It was only once it was decided that there had been any use in a "trade mark sense" that one had to consider whether there was a defence based on compliance with the European Misleading Advertising Directive.

The Court of Appeal expressed doubt whether a comparative advert which refers to a third party trade mark can ever be "use in a trade mark sense". The whole purpose of a comparative advert is to identify the competitor's goods or mark and then distinguish yourself by means of a comparison which favours you. The comparative advert would not normally affect the competitor's ability to use his trade mark to identify his own goods or services.

The Court of Appeal referred two issues to the ECJ:

  1. Is this type of use covered by the infringement provisions of UK and Community law (i.e. is it use "in a trade mark sense"?); and

  2. If such use is covered, is compliance with the European Misleading Advertising Directive a defence to what otherwise would amount to infringement?

The ECJ ruling broadly favours the makers of comparative adverts. In essence, what the ECJ has to balance is the competing policies of trade mark and comparative advertising law. It has held that use of a competitor's mark in a comparative advert is "covered" by the infringement provisions of European trade mark law. However, the ECJ noted the competing policy of promoting comparative advertising in the European Misleading Advertising Directive and held that if a comparative advert complies with all of the requirements of that Directive, the advert (and its use of a competitor's trade mark) is permitted with the following limited exception. If the use of a competitor's trade mark in a comparative advert is such as to create a likelihood of confusion between the advertiser/its mark and the competitor/its mark then there will be trade mark infringement. The confusion may be "classic" confusion where the reader/viewer of the advert mistakes one mark or proprietor for the other or where the advert gives some false impression of trade connection. This is indeed a limited exception - only if the comparative advert is so ineptly framed as to cause confusion rather than distinguish between competing marks will trade mark infringement law apply.

One important issue which remains unresolved by the ECJ's Judgment is what happens if the comparative advert denigrates or takes unfair advantage of the reputation of a competitor's trade mark. In such a case, the advert would not comply with the European Misleading Advertising Directive and could fall within the infringement provisions of European trade mark law. Guidance is required from the ECJ on whether the competitor's complaint should be based on breach of the Misleading Advertising Directive or (in appropriate cases) for trade mark infringement. It seems likely that the competitor would be restricted to a complaint under the Misleading Advertising Directive but the ECJ will hopefully confirm the position in the near future, perhaps in response to the issues referred to it by the UK Court of Appeal in the case of L'Oreal v Bellure.

The ECJ Judgment in O2 v H3G, and any future Judgment on this issue, has widespread practical implications in the UK because it seems likely that, for the vast majority of comparative adverts, the "wronged competitor" will have no private right of redress through legal action (unlike many Member States). Instead complaint will have to be made to the relevant administrative enforcement body, Trading Standards or ultimately OFCOM. It is highly unlikely that such bodies will have the resource or inclination to take legal action. As a result of the ECJ Judgment one can expect comparative advertising in the UK to become far more aggressive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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