Open season?

Recent decisions in the UK and European courts have restricted the use of trade mark law to resolve comparative advertising disputes, making it easier for an advertiser to use a competitor's trade mark in its own adverts. Such disputes should now be dealt with under the Misleading and Comparative Advertising Directive, but brand owners believe this provides them with a far less rigorous mechanism of enforcement and redress. So, what has happened to bump the challenging legal field of comparative advertising out of the arena of trade mark law? Georgie Collins takes a closer look at the two cases in question.

02 and Hutchinson 3G (2008)

Hutchinson 3G was a late entrant to the mobile phone market. In asserting itself in the market it launched an advertising campaign which compared its cheaper pre-pay service to those of its rivals 02, T-Mobile, Vodafone and Orange. 02 owns a number of trade marks but of relevance in this case was its registrations for a range of 'bubble' images.

The 3G ad in question used the word "02" together with moving pictures of bubbles. Whilst 02 did not claim that 3G's advert was misleading, it sued for trade mark infringement in the UK claiming that the images were confusingly similar to its own bubble image trade marks. 3G defended saying that its advertisement complied with the Misleading and Comparative Advertising Directive ("the Directive") which sets out the criteria that comparative adverts must meet to be permitted.

The Directive requires that the advert:

1. must not be misleading;

2. must objectively compare goods or services meeting the same needs or intended for the same purpose;

3. must objectively compare features of the goods including prices;

4. must not discredit or denigrate the trade marks or other activities or services of the competitor;

5. where it relates to products with a designation of origin, relates only to products with the same designation;

6. must not take unfair advantage of the competitors trade mark or its reputation;

7. must not present the goods or services as imitations or replicas of those bearing the trade mark; and

8. must not create confusion between the advertiser and trade mark owner.

3G claimed its advertisement fell squarely within the above criteria. The High Court agreed and dismissed O2's action. In fact the court held that, whilst 3G had infringed 02's marks by virtue of its use of bubbles similar to 02's registered bubbles, it nonetheless did indeed have a defence under the Directive.

O2 then took its case to the Court of Appeal, claiming that under the construction of the Directive 3G had to show that it was "necessary" for it to use 02's trade marks but that there was no need to use bubbles because 3G could simply have referred to O2 by name.

3G counter-argued that "necessity" was not required under the Directive. Furthermore it said that, even if the court considered that the directive had not been complied with, 3G also had a defence pursuant to section 10(6), Trade Marks Act 1994 because it had used 02's trade marks in a purely descriptive manner.

In October 2007 the Court of Appeal commented that the defence afforded by section 10(6) was a "home-grown" UK provision which did not reflect the wording of the Trade Marks Directive (from which the UK Trade Marks Act is derived) and so should be repealed as an unnecessary distraction, to and complication of, UK law.

The Court of Appeal then referred three questions to the European Court of Justice (the ultimate forum in which EU member states questions of trade mark interpretation are determined) and the Advocate General delivered an interim decision on 31 January 2008. (Whilst the Advocate General's opinion is only a precursor to the ECJ's own decision, in the majority of cases the ECJ does follow it.)

The questions referred by the Court of Appeal were as follows.

Question 1: Does the use of registered trade marks in comparative advertising cases fall foul of the trade mark infringement provisions dealing with the use of those marks, particularly if the use of the trade mark in the advertisement does not cause confusion or jeopardise the function of the trade mark?

The Advocate General stated that comparative advertising had been harmonised in Europe by the misleading and comparative advertising directive and, consequently, comparative adverts should not be considered under rules relating to trade mark infringement.

Question 2: Where a trader uses the registered trade mark of a competitor in a comparative advertisement must that use be necessary if it is to comply with the provisions which permit comparative advertising? (See points 1-8 above.)

The Advocate General said that use of the trade mark in an advertisement did not have to be "necessary" as this was not a requirement specified by the legislation or by previous case law. In fact, if a requirement of necessity were introduced, this would run counter to the spirit of the comparative advertising directive which sought to encourage comparative advertising.

Question 3: If there is a requirement of necessity, does this preclude any use of a sign which is not identical to the registered trade mark but is closely similar to it?

In view of the Advocate General's response to question two this question no longer required an answer.

Boehringer v Vetplus (2007)

The Court of Appeal's decision in Boehringer v Vetplus in June 2007 added a twist for any brand owner seeking an injunction to restrain publication of a comparative advertisement.

Boehringer and Vetplus both produce and market nutritional supplements for dogs. Boehringer sought an interim injunction to prevent Vetplus from publishing an advert comparing their respective canine comestibles. The Vetplus advert claimed that Boehringer's product contained one nutrient in lower levels than was claimed on the product labelling. Boehringer claimed in turn that Vetplus' tests for determining the percentage levels of nutrients were unreliable and that it would suffer detriment to its brand if the advert was allowed to be published. The High Court initially granted an injunction restraining publication of the advert pending trial, but when the parties returned to court for the full trial of the case the court refused to maintain the injunction.

Boehringer then appealed to the Court of Appeal which also dismissed its claim.

The Vetplus defence to Boehringer's trade mark claim was that it honestly and reasonably believed that its statements about the results of its nutrient content tests were true even though they subsequently turned out to be incorrect. The Court of Appeal held that a party could not avail itself of the defence of acting in accordance with honest practices if it made a statement it thought to be true which later turned out to be false but then refused to compensate the person who had suffered damage as a result of that statement.

Notwithstanding the fact that the Vetplus defence failed, Boehringer still failed in its application for an injunction. The Court of Appeal took the opportunity to review the law and criteria relating to the granting of injunctions in comparative advertising cases, having particular regard to the impact of the Human Rights Act which seeks to protect freedom of expression.

Section 12(3) of the Human Rights Act states that no interim relief is to be granted so as to prevent publication before trial unless the court is satisfied that the applicant seeking the relief is likely to establish that the publication should not be allowed. The Court of Appeal reviewed the usual test applied to interim injunction applications, known as the American Cyanamid rules, which require that the applicant seeking an interim injunction demonstrate that there is a serious issue to be tried.

However, in this case Lord Justice Jacob said that since comparative advertisements involve freedom of expression, the correct test was whether the applicant was more likely than not to succeed at trial. On this basis the Boehringer appeal against the court's refusal to grant it an injunction was refused.

What these decisions mean for brand owners

If the ECJ follows the Advocate General's decision in the O2 case, brand owners will not be able to use trade mark legislation either to prevent a comparative advertisement (through an injunction) or to sue in respect of its use. There is no provision under the Directive for a trade mark owner to bring legal proceedings in its own name: this means that the brand owner loses control over the misuse of its trade mark(s) and must instead rely on the Advertising Standards Authority and Office of Fair Trading (the enforcing bodies under the directive) to take action.

The impact of the 02 and Boehringer cases will be felt most by large brand owners where competition is high and products and services are price sensitive.

If the ECJ adopts the Advocate General's opinion then the law relating to comparative advertising will effectively have been rendered toothless. However, it will be interesting to see the decision of the ECJ and any gloss it adds to the judicial comments already made. The ECJ's role is only to answer the questions referred to it; once it has delivered its judgment the 02 case will be remitted back to the UK courts for them to interpret the ECJ decision and apply it to the facts of the case.

As the Boehringer case highlights, advertisers need to take care with regard to the claims they make; if it is found that the claims are not in accordance with honest practices substantial damages may be payable.

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.