In an extraordinarily frank judgment on 21 May 2010, Lord Justice Jacob handed down the Court of Appeal’s (CA) final decision in the case L’Oreal SA v Bellure NV [2010] EWCA Civ 535, following last summer’s response by the European Court of Justice (ECJ) to a number of trademark questions referred to it by the CA. The judgment deals particularly with the issues of comparative advertising and the use of comparison lists for advertising purposes.
What is fascinating about the judgment is Lord Justice Jacob’s strong disagreement with the ECJ’s decision, and he makes it abundantly clear that he is following their decision extremely reluctantly. For the first 21 paragraphs of a 51 paragraph judgment, he criticises the ECJ’s decision, stating that in his view, it is contrary to the principle of freedom of commercial expression and it disadvantages poorer consumers, whilst favouring luxury brand owners, despite the fact that a brand owner’s business is unlikely to be affected to any significant extent by the sale of the legitimate low-cost imitation products.
The brief facts of the case are as follows. Bellure produces legitimate cheap perfumes, but packaged its products at the time of the case in a similar manner to L’Oreal’s high quality products. They also used comparison lists to compare the smell of the Bellure perfumes with named L’Oreal perfumes, such as Tresor, the names of which are all registered trademarks. L’Oreal sued for trademark infringement and passing off, in respect of both the comparison lists and the packaging. In the early stages of the case, the packaging of the Bellure products changed and was therefore no longer in issue, and the court also decided that under English law, passing off did not extend to some sort of “nebulous tort of unfair competition”.
However, the question as to whether references to the named smell-a-like perfumes in the comparison list were an infringement of trademark or not was referred to the ECJ. The ECJ was asked to decide whether Bellure’s action in comparing the smells of their perfumes with those of L’Oreal in comparison lists constituted trademark infringement under Article 5(1)(a) of the Trademark Directive, and, if so, whether Bellure had a defence under the provisions of the Comparative Advertising Directive (CAD). The ECJ was also asked to decide if the use in a comparison list was an infringement under Article 5(2) of the Trademark Directive.
The ECJ found that references to registered trademarks in a comparison list did fall within Article 5(1)(a) of the Trademark Directive: that is, that the use of an identical name to a registered trademark in a comparison list may amount to an infringement of trademark, when comparing identical goods/services, unless the use is purely descriptive. The ECJ went on to state that use in comparison lists is more than “purely descriptive” as it is used for advertising purposes.
Having decided therefore that the use fell within Article 5(1)(a), the ECJ considered whether the use complied with the conditions required by the CAD, and thus would prevent it being an infringement of trademark. The CAD allows comparative advertising provided that certain conditions are met. One of those is that the comparison “does not take unfair advantage of the reputation of a trademark” and another that the comparison does not “present goods or services as imitations or replicas of goods or services bearing a trademark”. The ECJ interpreted “imitations and replicas” very widely, and decided that smell-a-like perfumes would amount to “imitations” of the original one.
As a result of this decision, the CA was “forced to conclude” that Bellure had not complied with the provisions of the CAD, and thus that their comparison list amounted to an infringement of trademark. Lord Justice Jacob, in his judgment, stated that he saw “no rational basis” for this position. He considered that a trader, if he produces lawful replica goods, he should be entitled to inform the public of what they are: it was in the interest of the consumer for him to do so.
The CA did not need to consider whether Bellure was also taking unfair advantage of L’Oreal’s trademark under Article 5(2), since the use was already an infringement under Article 5(1)(a). However, both the ECJ in its decision and Lord Justice Jacob in his judgment, made observations on this provision of the Directive, which have a potentially significant effect on advertisers.
The ECJ defined “unfair advantage” widely, and stated that “where a third party attempts … to ride on the coat tails of [a] mark in order to benefit from its power of attraction, its reputation and its prestige … the advantage resulting from such use must be considered to be an advantage that has been unfairly taken”. To which, Lord Justice Jacobs said “I do not agree with or welcome this conclusion – it amounts to a pointless monopoly. But my duty is to apply it. For by the use of the comparison lists there is clearly free-riding of the sort condemned by the Court.”
Despite Lord Justice Jacob’s frankly-made reservations, the law is thus: any advertiser who tries to enhance its own reputation by using or associating itself with a trademark with an existing reputation (or “exploiting the coat tails” of the registered trademark, as the ECJ referred to it) will be regarded as taking unfair advantage of that trademark, and the use is likely therefore to amount to an infringement. Clearly, as a result of this case, referring to a registered trademark in a comparison list is now likely to amount to an infringement of trademark. However, the decision also means that an advertiser who features or refers to a well-known registered trademark in its advertising in order to enhance its own product could also be liable for an infringement, even if the advertiser’s own product is in an entirely different category of goods and services.
A double page comparative ad which Asda ran in January 2010 was found to be ambiguous and misleading by the ASA in a recent adjudication since it breached clauses 7.1 and 7.2 (Truthfulness), 18.1 and 18.3 (Comparisons with identified competitors and or their products) and 19.1 (Other Comparisons) of the CAP Code. The ad featured the statement that Asda had “Lower prices than any other supermarket”, followed an asterisk and caveat that price comparisons had been made against only three of its largest rivals and not against the sector as a whole. There was also the statement “Lower prices on everything you buy, week in week out” above a number of products in different product categories, accompanied with arrows on the opposite page stating the number of products that were cheaper at Asda than at Sainsbury’s, Tesco or Morrisons. The ASA was of the opinion that the ad could have been interpreted to mean that the price reductions highlighted had all occurred in the preceding week, which was not the case. The advert has now been banned from appearing again in its current form and Asda have been warned about its comparative advertising. The adjudication highlights the dangers for advertisers when making comparative ads, a practice which most of the major supermarkets seem to now participate in, with Waitrose launching its first comparative ad recently, comparing its prices to those of Tesco. Comparative advertising is permitted provided that the comparisons made are clear and not misleading, and that it is a like-for-like comparison. It seems that Asda have lost a battle on this occasion, but in comparative advertising the "Supermarket Wars" rage on.
