When it comes to trademarks, the eminent judges of the Court of Justice of the European Union (CJEU) – the ultimate arbiters of trademark law in the European Union – must sometimes feel like students trying repeatedly to pass ever-trickier examinations set for them by English judges, and yet never pleasing their examiners.
The examinations get trickier because they find themselves having to answer the questions based on a legal framework formed in large part by their answers in previous years, some of which were less than satisfactory. The last year has seen the English judges again marking the CJEU down on its examination answers, but it now has some further opportunities to redeem itself – at least in the eyes of the English judges – even though doing so may involve owning up to having been wrong about some things in the past.
The focus of the current controversy is the CJEU decision of 18 June 2009 in Case C-487/07 L’Oréal SA v Bellure NV. This concerned so-called “smell-alike” or imitation perfumes and the use of well-known registered marks (Tresor, Miracle, Noa and Anais Anais) in price and smell comparison charts, as well as other marks for packaging. The attacks on the judgment take three forms. The first concerns having perpetuated the confusion as to what constitutes use as a trademark in Article 5(1)(a) of the Directive. The second relates to broadening the scope of Article 5(2) of the Directive to cover “free-riding” absent any showing of a likelihood of confusion or a likelihood of detriment to the distinctive character or the repute of the mark or its proprietor. The third focuses on its chilling effect on commercial free speech.
As to the Article 5(1)(a) aspect (identical mark and identical goods), here relating to the use of word marks in the comparison charts, the CJEU held that a trademark could be used to prevent the use by a third party, in a comparative advertisement (where this was not permitted under the separate Directive dealing with comparative advertising) “of a sign identical with that mark in relation to goods or services which are identical with those for which that mark was registered, even where such use is not capable of jeopardising the essential function of the mark, which is to indicate the origin of the goods or services, provided that such use affects or is liable to affect one of the other functions of the mark.” The problem with this is that it perpetuated, but did nothing to clarify, the requirement – not in the provision itself but introduced by previous CJEU case law – that, to constitute infringement under Article 5(1)(a), the use in issue must “affect or be liable to affect the essential functions of the trademark, in particular its essential function of guaranteeing to customers the origin of the goods or services.” The difficulty with this condition had been thoroughly demonstrated only a month before the CJEU decision, by the English judge Mr Justice Arnold in his decision in L’Oréal v eBay, and in which he also referred questions to the CJEU. Mr Justice Arnold is not alone in his criticism. It has been echoed by Lord Justice Jacob when applying the decision of the CJEU to L’Oréal v Bellure in the English Court of Appeal, who suggested that it would make more sense simply to drop it as a condition. Even more significantly, however, it has also been echoed by the European Commission in their own observations on another reference made to the CJEU by Mr Justice Arnold, in Interflora v Marks & Spencer.
As to Article 5(2) (which also applies to similar marks and, by virtue of CJEU case law, similar as well as dissimilar, goods but protects against use which, without due cause, takes unfair advantage of or is detrimental to the distinctive character or repute of a mark with a reputation, and so to this extent also concerned the defendant’s lookalike packaging) the CJEU held that the “unfair advantage” aspect of this “does not require that there be a likelihood of confusion or a likelihood of detriment to the distinctive character or the repute of the mark or, more generally, to its proprietor”. Thus there was no need for any showing of dilution or tarnishment. As to what constitutes an “unfair advantage” for this purpose, the CJEU went on to rule that this occurred where that party “seeks by that use to ride on the coat-tails of the mark with a reputation in order to benefit from the power of attraction, the reputation and the prestige of that mark and to exploit, without paying any financial compensation, the marketing effort expended by the proprietor of the mark in order to create and maintain the mark’s image.”
In order to establish infringement under Article 5(2) the relevant public must make a connection between the allegedly infringing sign and the registered mark, or recognise a “link” between them, which results from the similarity between the two. Here the defendants’ own witnesses had said at the hearing before the English court that the perfume packaging was designed to give “a wink of an eye” towards the original perfumes. However, there was no confusion as the public knew that the perfumes in issue were not the real thing and had no trade connection with the trademark owner, but the “link” that was made helped the defendants in marketing their products. The focus in the decision is thus on the commercial advantage obtained by the defendants rather than damage to the trademark owner. Even if no one is confused and there is no harm, the competitor may have still benefited from the investment which has gone into creating the iconic status or cachet of the well-known brand, and so Article 5(2) is engaged. The consequential apparent breath of Article 5(2), which is welcome to brand owners, has been criticised but it may not in practice have too great an effect away from the special fact pattern of L’Oréal v Bellure. This is shown by two subsequent English cases which have considered this aspect of L’Oréal v Bellure, namely Daimler v Sany in which it was assumed that it would be necessary to show an intention “to ride on the coat-tails” of the mark with a reputation, and in Whirlpool Corporation v Kenwood Limited, a case involving shape marks for kitchen mixers. Here the English Court of Appeal held that there could be no intention by Kenwood to ride on the coat-tails of Whirlpool since Kenwood had its own goodwill, and that even if a commercial advantage had been obtained as a result of the perceived similarity between the shapes of the mixer, there was no evidence that this was unfair. Where, exactly, the line will be drawn between unfair and fair advantage is therefore an area where there is scope to interpret the ruling in different ways.
As in the case of the word marks in issue in L’Oréal v Bellure, Article 5(2) will overlap with Article 5(1)(a) in so called “double identity” cases in which there are identical marks and identical goods. Although this is a consequence of well-established CJEU case law (which disregards the requirement in the literal wording of Article 5(2) that the goods or services in issue be dissimilar to those for which the mark is registered), the relationship between them is unclear, as Mr Justice Arnold also pointed out in Interflora v Marks & Spencer. This is an issue which his pending reference to the CJEU in Interflora v Marks & Spencer raises, and as to which, apparently, the Commission in its own observations in this, considers that Article 5(1)(a) should be restricted to use which affects or is liable to affect the origin function of the mark, whilst use which only affects or is liable to affect other functions should only be prohibited under Article 5(2).
The reference to the CJEU in Interflora v Marks & Spencer has, however, been cut back in some respects from that originally made in 2009, as the questions it had raised, relating to the use of keyword advertising on the internet, were to a degree answered by the CJEU on 23 March 2010 in its decisions in Joined Cases C-236/08 to C238/08, all on references from the French Court of Cassation, and all involving Google France. Insofar as the CJEU found that Google France, by offering keywords to advertisers that corresponded to a trademark, was not itself “using” the trademark, its decision, whilst not unnaturally criticised by brand owners, was not unexpected and did no damage to the underlying fabric of the law by affecting such understanding as there was of Article 5(1)(a). If anything, it attracted favourable academic comment. However, it has made no contribution to the controversies over Article 5(1)(a) identified above by interpreting it as meaning that “the proprietor of a trademark is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with that trademark which that advertiser has, without the consent of the proprietor, selected in connection with an internet referencing service, goods or services identical with those for which that mark is registered, in the case where that advertisement does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the proprietor of the trademark or an undertaking economically connected to it or, on the contrary, originate from a third party.” It had not answered questions concerning the application of Article 5(2) in this context, nor issues also raised in the questions referred to the CJEU in Interflora v Marks & Spencer.
The latest, and by far the most strongly expressed, manifestation of the English courts’ disappointment with the CJEU and with its decision in L’Oréal v Bellure was made by Lord Justice Jacob, on 21 May 2010 in the English Court of Appeal in determining what orders to make in L’Oréal v Bellure as a consequence of the decision of the CJEU. He criticised the CJEU’s approach to Article 5(1)(a), as discussed above, and also criticised the CJEU’s approach to the interpretation of the separate Directive that addresses comparative advertising, showing how a more liberal approach to interpreting this would have brought the defendant’s activities within its scope and thus provided a defence to trademark infringement. Observing that his duty as a national judge was to apply the CJEU ruling, he stated that he did not agree with or welcome what amounted to a “pointless monopoly”, muzzling honest and truthful statements about lawful products, preventing consumer choice and restricting competition. He expressed regret that “the ECJ in this case has not addressed the competition aspects of what it calls ‘riding on the coat-tails’, observing that “the trouble with deprecatory metaphorical expressions such as this (‘free-riding’ is another), containing as they do clear disapproval of the defendants’ trade as such, is that they do not provide clear rules by which a trader can know clearly what he can and cannot do.”
This coming year will see the CJEU returning to L’Oréal v Bellure territory in the two references to it by Mr Justice Arnold – Case C-324/09 L’Oréal v eBay and Case 323/09 Interflora v Marks & Spencer. We must wait to see whether its efforts are rewarded with better marks from the English courts than its efforts in L’Oréal v Bellure, but it seems that to achieve these the CJEU will have to own up to some errors of its past.