Introduction

Businesses continuously strive to mark themselves out from their competitors in order to gain a competitive advantage. Comparative advertising, where an advertiser identifies a competitor or a competitor’s goods and services in its advertising, is an increasingly popular way of doing this and it can be extremely successful in presenting the advertiser’s goods and services as being more attractive than the competitor’s.

However, not all comparative advertisements are permissible. Recent developments in European case law and legislation present an opportune moment to review this area of law, and this article seeks to outline the current position.

Trade mark infringement

The use of trade marks in Europe is principally regulated by Council Directive 89/104/EEC (Trade Marks Directive)1, which starts from the premise that a registered trade mark proprietor has a monopoly right to use the trade mark and anything confusingly similar to it for the goods and/or services for which it is registered2. Trade marks registered under the Trade Marks Directive’s regime give the proprietor a right of action against anyone using, in the course of trade:

1. An identical sign on identical goods or services (Article 5(1)(a));2. An identical or similar sign on identical or similar goods or services where there is a

likelihood of confusion on the part of the public (Article 5(1)(b)); and3. An identical or similar sign on any goods or services where the mark enjoys a

significant reputation and the use of the mark takes unfair advantage of or causes detriment to the distinctive character or repute of the trade mark (Article 5(2)).

If infringement of a trade mark is found, the proprietor will usually be entitled to an injunction to stop the infringing use, and damages or an account of profits in respect of the use.

There are a number of exceptions to trade mark infringement set out in Article 6 of the Trade Marks Directive: the proprietor cannot stop anyone from using his own name or address, or from using indications concerning characteristics of the goods or services (for example, to refer to the fact that the product is made in Champagne), or from using the mark where it is necessary to indicate the intended purpose of his goods or services (for example, in order to make clear that a spare part fits a certain make of car). These exceptions are only available if the use is in accordance with honest practices.

Footnotes

1. The Trade Marks Directive has been implemented by national legislation in the EU member states. In the UK, the implementing legislation is the Trade Marks Act 1994.

2. Trade marks are registered for particular goods and/or services; these are currently divided into 45 classes.

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Comparative Advertising: European legislative framework

Comparative advertising is governed by European Directive 2006/114/EC(Misleading and Comparative Advertising Directive), the purpose of which is “to lay down the conditions under which comparative advertising is permitted”3. These are set out in Article 4, and in this article are referred to as the “Comparative Advertising Conditions”.

i. The advertisement must not be misleading4;ii. It must compare goods or services meeting the same needs or intended for the same

purpose;iii. It must objectively compare one or more material, relevant, verifiable and

representative features of those goods and services, which may include price;iv. It must not discredit or denigrate the trade marks, goods, services etc. of a competitor;v. For products with a designation of origin (such as Champagne), it must relate to

products with the same designation;vi. It must not take unfair advantage of the reputation of a trade mark;

vii. It must not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name; and

viii. It must not create confusion among traders, between the advertiser and a competitor or between the advertiser’s trade marks, goods, services etc and those of a competitor.

Before the Misleading and Comparative Advertising Directive, comparative advertising in Europe had been permitted in a slightly piecemeal fashion. Directive 84/450/EEC concerned misleading advertising, but specifically made provision for comparative advertising to be regulated at a later date. Directive 97/55/EC (1997 Directive) fulfilled this task. The European legislature however felt that the approach to comparative advertising was still somewhat disparate, and so the Misleading and Comparative Advertising Directive was adopted in order to “codify” what had gone before. Its effect was to repeal and replace the previous two Directives, but as far as comparative advertising is concerned, the conditions in the 1997 and 2006 Directives are virtually identical. Indeed, Article 10 of the Misleading and Comparative Advertising Directive states that “[r]eferences made to the repealed Directive shall be construed as being made to this Directive”. Accordingly, references in this article to the 1997 Directive should be held as also referring to the Misleading and Comparative Advertising Directive and vice versa (although note that the numbering differs between directives); the body of law on the 1997 Directive remains good.

Comparative advertising was further complicated in the UK by section 10(6) Trade Marks Act 1994, which states:

(6) Nothing in the preceding provisions of this section shall be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor or a licensee. But any such use otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark if the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.

The effect of this has been to permit comparative advertising in the UK, but its status has been unclear as the wording is not derived from the Trade Marks Directive. Given the clarifications of the law set out below, this provision is now largely regarded as being redundant in the UK (and indeed Jacob LJ expressed his strong belief that this should be so in the O2 case discussed in more detail below).

Footnotes

3. Article 1.4. Misleading advertising is separately defined and regulated in the same directive.

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Comparative Advertising: The O2 case

Neither the 1997 Directive nor the Misleading and Comparative Advertising Directive addressed the interplay between the comparative advertising regime and the trade marks regime. This led to confusion as to which rules applied in which circumstances, and several cases across Europe have been referred to the European Court of Justice (ECJ) for interpretation of aspects of the Directives.

The latest in this series is O2 Holdings and O2 (UK) Limited (together, O2) v Hutchison 3G UK Limited (H3G)5. This is a UK case brought by O2 in respect of a televised comparative advertisement put out by H3G in 2004 using both O2’s name and images which were similar to O2’s “bubbles” images in making a price comparison between the two companies’ services.

O2 owns UK registered trade marks for “O2” and for static bubbles images. It brought trade mark infringement proceedings against H3G in respect of the use of both the O2 mark and the bubbles marks. The claim in respect of the O2 mark was refused in a preliminary hearing because it fell within the defence provided by section 10(6) Trade Marks Act 1994. O2 pursued the claim for infringement of its bubbles marks on the grounds that the signs used were similar to its registered trade marks and there was a likelihood of confusion, and that the marks enjoyed an extensive reputation of which H3G was taking unfair advantage and to which H3G was causing detriment (particularly as it had used a distortion of O2’s bubbles marks rather than the marks themselves) (i.e., infringement under the UK equivalent of Articles 5(1)(b) and 5(2) Trade Marks Directive respectively).

At first instance O2’s claims were refused. It was held that O2 had not made out the ground relating to extensive reputation. It had, on the other hand, made out the ground relating to infringement under Article 5(1)(b), but since the advertisement complied with the 1997 Directive, H3G had a defence to trade mark infringement.

O2 appealed in respect of the Article 5(1)(b) point, arguing that the 1997 Directive did not provide a defence to trade mark infringement. Further, Recital 14 of the 1997 Directive states:

Whereas it may, however, be indispensable, in order to make comparative advertising effective, to identify the goods or services of a competitor, making reference to a trade mark or trade name of which the latter is the proprietor6.

O2 therefore also argued that the recital added to the Comparative Advertising Conditions a requirement that the use of the trade marks must be indispensable in order to make the comparative advertisement, and that using its secondary trade marks (the bubbles) was not in fact indispensable; the comparative effect was achieved by using “O2” alone. Therefore H3G had not in any event complied with the Comparative Advertising Conditions.

H3G, for its part, argued that the Judge had been wrong to find that its use of O2’s marks fell within Article 5(1) (b) Trade Marks Directive at all, as its use of the marks was purely descriptive and was therefore not trade mark use. It also argued that it had a separate defence to trade mark infringement under Article 6 Trade Marks Directive (with which the Court of Appeal agreed), and that the Comparative Advertising Conditions did not on a proper interpretation require indispensability.

It is worth exploring at this point the difference between “purely descriptive” use of a mark and “trade mark use”. As mentioned above, in order to infringe, the mark must be used “in the course of trade”. There has been substantial judicial and academic debate about the precise meaning of this7 and it is now broadly accepted that use “in the course of trade” means “trade mark use”, which in turn means use which is liable to affect the essential function of the trade mark to guarantee the origin of the goods or services. Where a mark is being used in a purely descriptive manner, it does not affect that function of the mark and therefore is not regulated by the Trade Marks Directive. This reflects the fact that a registered trade mark does not give a total monopoly over all uses of it even for the relevant goods and services, but is intended instead to protect the proprietor’s legitimate business interests. It is beyond the scope of this article to examine this issue in any depth; it is sufficient for current purposes to say that the Court of Appeal was unsure whether or not the use in this case was trade mark use and therefore whether it fell under the Trade Marks Directive. It therefore referred a question on this to the ECJ:

Whether, where a trader, in an advertisement for his own goods or services used a registered trade mark owned by a competitor for the purpose of comparing the characteristics (and in particular the price) of goods or services marketed by him with the characteristics (and in particular the price) of the goods or services marketed by the competitor under that mark in such a way that it did not cause confusion or otherwise [jeopardise] the essential function of the trade mark as an indication of origin, his use fell within either (a) or (b) of Art. 5 of Directive 89/104 (the Trade Marks Directive).

In other words, does non-trade mark use in a comparative advertisement infringe a trade mark? Jacob LJ, giving the lead judgment for the Court of Appeal, gave his own view on this: he thought the answer was “no”, and that the use of a competitor’s trade mark in a comparative advertisement was not trade mark use as it was not being used to indicate the origin of the advertiser’s goods, as distinct from the proprietor’s goods. He therefore believed that trade mark law had no role to play in regulating comparative advertisements.

Turning to the issue of indispensability, the Court of Appeal did not believe that it was clear either way. Previous cases had asked the ECJ the same question8, but the ECJ had declined to answer the question directly. Accordingly, the Court of Appeal referred the following questions, requesting the ECJ to answer them only if the answer to the first question was “yes”:

i. Whether, where a trader used, in a comparative advertisement, the registered trade mark of a competitor, in order to comply with Article 3a of Directive 84/450 [the Comparative Advertising Conditions] as amended that use had to be ‘indispensable’ and if so the criteria by which indispensability was to be judged;

ii. In particular, if there was a requirement of indispensability, whether the requirement precluded any use of a sign which was not identical to the registered trade mark but was closely similar to it?

Again, Jacob LJ gave his own views on the questions, stating his belief that there was no requirement of indispensability in answer to question 2, and that if that was wrong, then the answer to question 3 was that the advertiser was not restricted only to using marks identical to those registered. There is an obligation9 to interpret comparative advertising in the sense most favourable to it. Requiring indispensability would not comply with that obligation.

Footnotes

5. ECJ judgment: Case C-553/06, [2008] E.T.M.R. 55; Court of Appeal decision referring questions to ECJ: [2006] EWCA Civ 1656.

6. The Recital is reproduced verbatim as Recital 14 of the Misleading and Comparative Advertising Directive.

7. See, most pertinently, C-206/-1 Arsenal Football Club plc v Matthew Reed, [20O2] ECR I-1O273.

8. See, for example, Case C-44/01 Pippig Augenoptik GmbH & Co KG v Hartlauer Handelsgesellschaft mbH, [2004] E.T.M.R.5.

9. Imposed by C-l 12/99 Toshiba Europe GmbH v Katun Germany Gmbh. [20O2] E.T.M.R. 26.

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The ECJ’s findings

The ECJ gave its judgment in June 2008. It began by considering the relationship between the Trade Marks Directive and the 1997 Directive. It held that as a comparative advertisement was aimed at promoting the goods and services of the advertiser, use of the competitor’s trade marks by the advertiser could indeed be regarded as use for the advertiser’s own goods and services for the purposes of the Trade Marks Directive, and could therefore be prevented by the Trade Marks Directive where it met the relevant criteria.

This suggests that the ECJ maintains the traditional position that infringing use must be use in respect of the infringer’s (rather than the proprietor’s) goods and services. However, on a strict analysis, a comparative advertisement uses the competitor’s mark to identify the competitor’s goods rather than those of the advertiser. This leads to a discrepancy regarding what type of use is required for trade mark infringement, which was behind the Court of Appeal’s question. The ECJ was not explicit about its reasoning on this; however, it took the broad view that, even though the use of the competitor’s mark is to identify the competitor’s goods and services, since the comparative advertisement generally seeks to promote the advertiser’s goods and services, then that use is also use in respect of the advertiser’s goods and services, and may therefore be prevented where appropriate by the Trade Marks Directive.

The ECJ went on to reiterate that the Community legislature considered comparative advertising to be a good thing and that the need to promote it meant that the trade mark owner’s rights were necessarily limited. It therefore stated that Articles 5(1) and 5(2) of the Trade Marks Directive were to be interpreted so that the trade mark proprietor could not prevent a sign identical or similar to his mark being used in a comparative advertisement which satisfied the Comparative Advertising Conditions. However, where there was confusion sufficient to found an action under Article 5(1)(b) Trade Marks Directive, the advertisement would not satisfy the Comparative Advertising Conditions and therefore

amounted to trade mark infringement. The latter point, it will be noted, is self-evident from the relevant directives, and from a practical perspective, if a comparative advertisement causes confusion between the goods or services of the compared businesses, then it has failed as an advertisement.

On the other hand, where there was no confusion, the trade mark proprietor could not use Article 5(1)(b) to stop the use of its marks in a comparative advertisement whether or not the advertisement complied with the Comparative Advertising Conditions. The ECJ’s reasoning seems to be that just because a sign identifies or brings to mind a particular entity; it is not enough to show trade mark infringement given the rationale of the Misleading and Comparative Advertising Directive.

As question 1 had been answered “no”, the ECJ did not go on to consider the issue of indispensability. However, various cases including this one would suggest that indispensability is not a requirement, and, therefore, that both word and logo trade marks, as well as signs which are both identical and similar to those marks, can be used in comparative advertising.

The case will now be remitted to the Court of Appeal for it to apply the clarified law to the case (although the ECJ has gone rather further than it ought to have done in applying the law to the facts). It would be surprising if the Court of Appeal now held that there had been confusion and therefore trade mark infringement. O2 has accepted that there was no suggestion of a trade connection between the two companies, and the ECJ has confirmed that confusion is to be assessed in all the circumstances; the use will therefore be considered in the advertisement as a whole rather than in the artificially narrow O2 section of the advertisement.

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Practical implications

For advertisers

The ECJ stopped short of saying that when considering comparative advertisements, only the comparative advertising regime should be considered to the exclusion of the trade marks regime (thereby not adopting the Attorney General's Opinion). The trade marks regime is still relevant, but there will be no trade mark infringement if the Comparative Advertising Conditions are fulfilled. Therefore, for practical purposes, the Misleading and Comparative Advertising Directive, where it is complied with, is to be viewed as a complete defence to trade mark infringement.

Advertisers would therefore be well-advised to adhere strictly to the conditions set out in that directive to avoid both trade mark infringement and falling foul of the Misleading and Comparative Advertising Directive itself. They should also be careful to comply with the provisions on misleading advertising set out in that Directive (an analysis of which is beyond the scope of this article).

For trade mark owners

It would seem that a trade mark owner can no longer claim trade mark infringement in respect of a compliant comparative advertisement which uses its marks. However, where the comparative advertisement is not compliant, it would appear that it is still open to it to bring a trade mark infringement action in the normal way.

The Misleading and Comparative Advertising Directive is expressed to be enforceable by allowing interested parties either to take legal action against the advertisement or to bring the advertisement before an administrative authority which can decide on complaints or initiate legal proceedings. In the UK10, the Misleading and Comparative Advertising Directive is enforceable by local enforcement authorities, i.e., Trading Standards and the Office of Fair Trading. The trade mark owner could also complain to the Advertising Standards Authority under the voluntary codes of conduct which it regulates.

Footnote

10. Where the comparative advertising provisions of the Misleading and Comparative Advertising Directive have been implemented by the Business Protection from Misleading Marketing Regulations 2008, which came into force on 26 May 2008. Note that these regulations refer only to goods, and not to services.

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Limitations of the O2 judgment

It is worth noting that the ECJ’s reasoning was primarily concerned with Article 5(1)(b) infringement, despite its final answer to question 1 being in respect of Articles 5(1) and 5(2) in their entirety. Therefore it is possible that in the future, questions on comparative advertising which specifically relate to Articles 5(1)(a) and 5(2) could be referred separately to the ECJ. The ECJ did, however, make it clear that the position would be the same whether the use was of a sign which was either identical or similar to a registered trade mark.

In this connection, the UK case of L’Oreal SA v Bellure NV11 concerning smell-alike perfumes has referred questions to the ECJ which, if answered, will provide not only guidance on “unfair advantage” (required for Article 5(2) infringement) but also on “presenting goods or services as imitations or replicas” for the purposes of the Comparative Advertising Conditions. The answer to the former is likely to clarify the assumption which O2 leaves that a compliant comparative advertisement cannot infringe Article 5(2).

Footnote

11. 2007] EWCA Civ 968.

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Conclusion

The position on comparative advertising, and in particular the interplay with trade mark infringement, is certainly clearer in the UK after the O2 case, and this is to be welcomed. Although the L’Oreal v Bellure questions have yet to be answered, it is likely that the clarity already given by the O2 judgment will encourage advertisers to engage in comparative

advertising. This is particularly the case in Member States which have chosen to give enforcement powers under the Misleading and Comparative Advertising Directive to administrative authorities, thereby leaving the trade mark owner with no direct right of redress. Trade mark owners are no doubt hopeful that the administrative enforcement procedures will prove sufficiently robust to protect their interests.

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