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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> L'Oreal SA & Ors v Bellure NV & Ors  EWCA Civ 535 (21 May 2010)
Cite as:  Bus LR 1579,  EWCA Civ 535,  ETMR 47,  RPC 23
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COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION INTELLECTUAL PROPERTY
THE HON MR JUSTICE LEWISON
Strand, London, WC2A 2LL
B e f o r e :
THE RT HON LORD JUSTICE WALL
THE RT HON LORD JUSTICE RIMER
| L'Oréal SA
Lancome Parfums et Beaute & CIE
Laboratoire Garnier & CIE
|- and -
Malaika Investments Ltd (t/a Honeypot Cosmetic
& Perfumery Sales)
(7) Starion International Ltd
for the Claimants/Respondents
Roger Wyand QC and Tom Moody-Stuart (instructed by Field Fisher Waterhouse)
for the Defendants/Appellants
Hearing date: 2 March 2010
Crown Copyright ©
 So the factual position can be summarised thus:
(i) It is lawful to make and sell a smell-alike product.
(ii) The best and only practical way to describe its smell is to inform people that it smells like X.
(iii) That is done by the use of the comparison lists.
(iv) The Defendants get a major promotional advantage from using such lists.
(v) Neither customers nor ultimate consumers are deceived as a result of the use of the lists.
(vi) Neither the image nor the distinctiveness of the trade mark for the comparable fine fragrance is impaired by the use of the lists – there is no tarnishment or blurring.
(vii) Sales of the corresponding fine fragrance are not affected by the use of the lists.
 I would add that a touch of reality is called for here. Consumers are not stupid. They will not see the cheap copy as being the same in quality as the original. They will see it for what it is and no more.
A finding of unfair use or likelihood of detriment to the repute of the marks hinges on whether the offending expression is protected under section 16(1) of the Constitution or not. If the expression is constitutionally protected, what is unfair or detrimental, or not, in the context of section 34(1) [the provision defining infringement, corresponding closely to Art. 5(2) of the Directive] must then be mediated against the competing claim for free expression.
And at :
That in turn impels us to a construction of section 34(1)(c) most compatible with the right of free expression …. Courts must be astute not to convert the anti-dilution safeguard of renowned trade marks usually controlled by powerful financial interests into a monopoly adverse to other claims of expressive conduct of at least equal cogency and worth in our broader society."
 This raises a very important topic indeed. I observed at the outset of my judgment in O2 that, deep down, the question in that case involved the philosophy of how competitive the law allows European industry to be. The allowability or otherwise of comparison lists is another aspect of this. For it is not only smell-alike merchants who use that sort of list. One can think of many others who do the same sort of thing: a generic drug merchant for instance will need to tell his customers (and perhaps patients and doctors) that he is selling the generic (or perhaps his own brand) version of a drug well-known under a trade mark. For that purpose he will want and need to have a list of comparisons of well-known trade mark, generic name and (if any) his own brand name. And he will want to supply that list to his customers or at the very least use the information on it to say "this product is the generic version of X", X being the well-known brand. Or a dealer in print cartridges will maintain a list using the trade marks of the leading brands of printer, the various numbers used by those brands for cartridges for various models and his equivalent number – rather like the Stitch comparison lists here. Dealers in generic spare parts will maintain similar sorts of list. And so on.
 It is important to accept and appreciate that in all these cases the merchant who uses such a list does so to promote his product. So there is a kind of "free riding". Although that expression has crept into European Trade Mark law (see also Mango v Diknak  ETMR 5 at ) it is, to me at least, subtly and dangerously emotive: it carries the unwritten message that it ought to be stopped. That is far from being necessarily so. The needs of proper competition and lawful free trade will involve an element at least of "free riding." The problem for trade mark law is where to draw the line between permissible and impermissible "free riding." Using the epithet does not solve the problem.
 It is also important to note here that there are different sorts of "free riding". There are cases of out-and-out counterfeiting. At the other extreme there are cases where, without deceiving or confusing anyone, the defendant is in competition with the trade mark owner and advertises fairly but comparatively. Then there are cases where although he gets some benefit from the fame of the trade mark, his actual activity is such that he is not in competition with the trade mark owner and does not impinge on his trade. This sort of case may, or may not, involve some adverse effect on the fame, distinctiveness or repute of the trade mark. To lump them altogether under the same name "free riding" confuses the debate.
While the ECJ's conclusion largely condemns the practices of the defendants in L'Oréal, it does so without providing clear guidance as to where the line is drawn between unfair and fair advantage. It might be read to suggest that all advantage is unfair. This would render the word 'unfair' in the article redundant, as was Jacob LJ's concern when he reviewed the previous free-riding authorities in the Court of Appeal.
Gangee and Burrell say this in the Modern Law Review  282:
In L'Oréal v Bellure the European Court of Justice decided that free riding, or taking advantage of the reputation enjoyed by an earlier mark, is actionable per se. In reaching this conclusion, the ECJ significantly expanded the scope of trade mark protection but provided little justification for doing so. Referencing activity and building on the efforts of others are fundamental to creative and competitive processes. This comment argues that L'Oréal's broad prohibition on free riding is theoretically unsound, runs counter to the thrust of European trade mark law and could negatively impact on the competitiveness of the European marketplace.
And Jonathan D C Turner says this in Intellectual Property and EU Competition Law (Oxford, 2010):
However, it remains to be seen whether the trend towards enlarging the functions and justified scope of rights in branding will progress further, or whether there may be consolidation or retrenchment. For example, as matters stand, it appears that the owner of a trademark which has a reputation may oppose advertising which identifies a competing product as an imitation of the product sold under the mark, even though the statement is accurate and the imitation itself is lawful, in that the competing product is not within the scope of any intellectual property right protecting innovation or creativity. This restriction on competition has been justified on the ground that such advertising takes unfair advantage of the reputation of the mark; but future scrutiny may lead to a qualification or even a reversal of this view, with consequential implications for the application of EU competition rules to conduct justified on the basis of this scope of protection [footnotes omitted].
It [i.e. the restriction on competition he refers to] also appears to conflict with recital 14 to Directive 2005/29 concerning unfair business-to-consumer practices …]
That recital reads:
(14) It is desirable that misleading commercial practices cover those practices, including misleading advertising, which by deceiving the consumer prevent him from making an informed and thus efficient choice. In conformity with the laws and practices of Member States on misleading advertising, this Directive classifies misleading practices into misleading actions and misleading omissions. In respect of omissions, this Directive sets out a limited number of key items of information which the consumer needs to make an informed transactional decision. Such information will not have to be disclosed in all advertisements, but only where the trader makes an invitation to purchase, which is a concept clearly defined in this Directive. The full harmonisation approach adopted in this Directive does not preclude the Member States from specifying in national law the main characteristics of particular products such as, for example, collectors' items or electrical goods, the omission of which would be material when an invitation to purchase is made. It is not the intention of this Directive to reduce consumer choice by prohibiting the promotion of products which look similar to other products unless this similarity confuses consumers as to the commercial origin of the product and is therefore misleading. This Directive should be without prejudice to existing Community law which expressly affords Member States the choice between several regulatory options for the protection of consumers in the field of commercial practices. In particular, this Directive should be without prejudice to Article 13(3) of Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector .
Clearly the suppression of truthful information for the consumer does prevent him from making "an informed and thus efficient choice."
(a) Does the use of the registered marks on and in relation to the comparison lists fall within Art. 5(1)(a)?
(b) If so does that use comply with the Comparative Advertising Directive?
(c) Should L'Oréal be permitted to include a claim under Art. 5(2) (and its equivalent Art 9(1)(c) of the Regulation?)
(d) If so, does that use infringe those Arts.?
Issue (a) – within Art. 5(1)(a)?
55 It should also be pointed out that it is not in dispute that, in the comparison lists relating to perfumes, [the defendants] have used the word marks Trésor, Miracle, Anaïs-Anaïs and Noa, as registered by L'Oréal and Others, and not signs which are merely similar to those marks. Furthermore, that use was made in respect of products which are identical with those in respect of which those marks were registered, that is to say, perfumes.
56 Such use falls within the scope of application of Article 5(1)(a) of Directive 89/104 and not that of Article 5(1)(b).
57 The first sentence of Article 5(1) of Directive 89/104 provides that the registered trade mark is to confer on the proprietor exclusive rights therein. By virtue of Article 5(1)(a) of that directive, those exclusive rights entitle the proprietor to prevent all third parties not having his consent from using, in the course of trade, any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered.
58 The Court has already held that the exclusive right under Article 5(1)(a) of Directive 89/104 was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions and that, therefore, the exercise of that right must be reserved to cases in which a third party's use of the sign affects or is liable to affect the functions of the trade mark (Case C-206/01 Arsenal Football Club  ECR I-10273, paragraph 51; Case C-245/02 Anheuser-Busch  ECR I-10989, paragraph 59; and Case C-48/05 Adam Opel  ECR I-1017, paragraph 21). These functions include not only the essential function of the trade mark, which is to guarantee to consumers the origin of the goods or services, but also its other functions, in particular that of guaranteeing the quality of the goods or services in question and those of communication, investment or advertising.
59 The protection conferred by Article 5(1)(a) of Directive 89/104 is thus broader than that provided by Article 5(1)(b), the application of which requires that there be a likelihood of confusion and accordingly the possibility that the essential function of the mark may be affected (see, to that effect, Davidoff, paragraph 28, and O2 Holdings and O2 (UK), paragraph 57). By virtue of the 10th recital in the preamble to Directive 89/104, the protection afforded by the registered trade mark is absolute in the case of identity between the mark and the sign and also between the goods or services, whereas, in case of similarity between the mark and the sign and between the goods or services, the likelihood of confusion constitutes the specific condition for such protection.
60 It is apparent from the case-law cited in paragraph 58 of this judgment that the proprietor of the mark cannot oppose the use of a sign identical with the mark on the basis of Article 5(1)(a) of Directive 89/104 if that use is not liable to cause detriment to any of the functions of that mark (see also Arsenal Football Club, paragraph 54, and Adam Opel, paragraph 22).
61 Thus, the Court has already held that certain uses for purely descriptive purposes are excluded from the scope of application of Article 5(1) of Directive 89/104, because they do not affect any of the interests which that provision is intended to protect and accordingly do not constitute 'use' within the meaning of that provision (see, to that effect, Case C-2/00 Hölterhoff  ECR I-4187, paragraph 16).
62 It must, however, be made clear that the situation described in the main proceedings is fundamentally different from that which gave rise to the judgment in Hölterhoff, in that the word marks belonging to L'Oréal and Others are used in the comparison lists distributed by Malaika and Starion not for purely descriptive purposes, but for the purpose of advertising.
63 It is for the referring court to determine whether, in a situation such as that which arises in the main proceedings, the use which is made of the marks belonging to L'Oréal and Others is liable to affect one of the functions of those marks, such as, in particular, their functions of communication, investment or advertising.
Issue (b) – Comparative Advertising Directive
(g) it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products;
(h) It does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name.
3. Article 3a(1) of Directive 84/450, as amended by Directive 97/55, must be interpreted as meaning that an advertiser who states explicitly or implicitly in comparative advertising that the product marketed by him is an imitation of a product bearing a well-known trade mark presents 'goods or services as imitations or replicas' within the meaning of Article 3a(1)(h). The advantage gained by the advertiser as a result of such unlawful comparative advertising must be considered to be an advantage taken unfairly of the reputation of that mark within the meaning of Article 3a(1)(g).
In short, if in a comparative advertisement you do not comply with (h) you are taking unfair advantage within the meaning of (g). Actually, of course, if you fail to comply with (h) it does not matter whether or not you comply with (g) – you will not have complied with all the conditions anyway.
 The particular object of the condition laid down in Article 3a(1)(h) of Directive 84/450 is to prohibit an advertiser from stating in comparative advertising that the product or service marketed by him constitutes an imitation or replica of the product or the service covered by the trade mark. In that regard, as the Advocate General stated in point 84 of his Opinion, it is not only advertisements which explicitly evoke the idea of imitation or reproduction which are prohibited, but also those which, having regard to their overall presentation and economic context, are capable of implicitly communicating such an idea to the public at whom they are directed.
 It is not in dispute that the object and effect of the comparison lists at issue in the main proceedings are to draw the attention of the relevant public to the original fragrance of which the perfumes marketed by Malaika and Starion are purportedly an imitation. Those lists thus attest to the fact that those perfumes are imitations of the fragrances marketed under certain marks belonging to L'Oréal and Others, and they consequently present the goods marketed by the advertiser as being imitations of goods bearing a protected trade mark within the meaning of Article 3a(1)(h) of Directive 84/450. As the Advocate General stated in point 88 of his Opinion, it is irrelevant in that regard whether the advertisement indicates that it relates to an imitation of the product bearing a protected mark as a whole or merely the imitation of an essential characteristic of that product such as, in the present case, the smell of the goods in question.
Member States shall ensure that adequate and effective means exist to combat misleading advertising and for the compliance with the provisions on comparative advertising in the interests of consumers as well as competitors and the general public.
(b) Art. 4(2) allows Member States to implement this either by conferring a direct power on the courts to order cessation of unpermitted comparative advertising (so creating a cause of action which could be pursued in the courts by a competitor and perhaps others, such as consumer organisations) or by order of an administrative authority (the UK has chosen the latter).
(c) In either case the power to make a cessation order is subject to a qualification, namely that such an order is to be made where the court or administrative authority deems:
Such measures to be necessary taking into account all the interests involved and in particular the public interest.
(d) Unless and until a cessation order is made, comparative advertising is not of itself rendered unlawful by the CAD. And whether such an order will be made involves the overall public interest.
(e) In this case the overall public interest requires that the defendants be able to tell the truth, both in the interests of a trade in lawful product and of the public's right to be informed. So no cessation order should be made were the UK administrative authorities (the Office of Fair Trading) to apply for one.
(a) On any view if the Art. 3a conditions are not all complied with, the CAD regards a comparative use of a trade mark such as in the comparison list as "unpermitted". An activity is either permitted or not. The choice is binary. Just because an order actually banning an unpermitted activity has not been made does not make it an acceptable activity. It simply goes against the grain to say that an "unpermitted" activity can be carried on "with due cause" (I have removed the double negative) or is an honest practice.
(b) The ECJ clearly regards comparative advertising which does not comply with Art. 3a(1) of the CAD as unlawful. In  of its judgment in this case it said:… an advertiser who states explicitly or implicitly in comparative advertising that the product marketed by him is an imitation of a product bearing a well-known trade mark presents 'goods or services as imitations or replicas' within the meaning of Art 3a(1)(h). The advantage gained by the advertiser as a result of such unlawful [my italics] advertising must be considered to be an advantage taken unfairly of the reputation of that mark within the meaning of Art.3a(1)(g).
And in Pippig it said at :
Directive 84/450 carried out an exhaustive harmonisation of the conditions under which comparative advertising in Member States might be lawful [my italics].
Conclusion on Art. 5(1)(a) infringement
(1) The comparison lists fall within Art. 5(1)(a) – same mark/same goods and not "purely descriptive" because used in advertising.
(2) The use is not protected by the CAD because it does not comply with condition 3a(1)(h) and therefore also not condition 3a(1)(g).
(3) Failure to comply with the CAD conditions means the use is "without due cause" and so not within the exception to infringement of Art. 6(1)(b) because not "in accordance with honest practices".
Art 5(2) infringement
(a) Art. 5(2) applies to same mark/same goods case, see cases cited at ;
(b) If a "link" in the mind of the public is established between the sign complained of and the registered mark, then there may be Art.5(2) type infringement;
(c) For such infringement it is necessary to show one of the types of injury against which Art.5(2) is directed, namely detriment to distinctive character, detriment to the repute of the mark or unfair advantage taken of the distinctive character or repute of the mark – see [36-38].
(d) The court explains the first two types of injury a little more in [39-40]. It is not necessary to go into these here because of the factual findings of no blurring and no tarnishment. What matters is its explanation of the third type – unfair advantage. Here is what it says: As regards the concept of 'taking unfair advantage of the distinctive character or the repute of the trade mark', also referred to as 'parasitism' or 'free-riding', that concept relates not to the detriment caused to the mark but to the advantage taken by the third party as a result of the use of the identical or similar sign. It covers, in particular, cases where, by reason of a transfer of the image of the mark or of the characteristics which it projects to the goods identified by the identical or similar sign, there is clear exploitation on the coat-tails of the mark with a reputation. … where a third party attempts, through the use of a sign similar to a mark with a reputation, to ride on the coat-tails of that mark in order to benefit from its power of attraction, its reputation and its prestige, and to exploit, without paying any financial compensation and without being required to make efforts of his own in that regard, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark, the advantage resulting from such use must be considered to be an advantage that has been unfairly taken of the distinctive character or the repute of that mark.
So far as I can see this is saying if there is "clear exploitation on the coat-tails" that is ipso facto not only an advantage but an unfair one at that. In short, the provision should be read as though the word "unfair" was simply not there. No line between "permissible free riding" and "impermissible free riding" is to be drawn. All free-riding is "unfair." It is a conclusion high in moral content (the thought is clearly that copyists, even of lawful products should be condemned) rather than on economic content.
Lord Justice Wall:
Lord Justice Rimer: