ECJ boon for owners of well-known brands in L'Oréal
decision
In a decision that broadens the protection given to well-known
brands, the European Court of Justice (the ECJ) has ruled that it
is not necessary to demonstrate harm to a trade mark in order for
there to be unfair advantage (L'Oréal -v- Bellure(1)).
Comparative advertising is not permitted in the EU where, among
other things, it takes unfair advantage of a mark's reputation. The
ECJ held that an advantage is unfair where the third party "seeks
by that use to ride on the coat-tails of the mark with a
reputation". By providing a broad interpretation of the functions
of a trade mark, the ECJ has also made it easier for brand owners
to challenge use of their rights in third party marketing, even
where the third party's use does not jeopardise the principal
function of the mark, i.e. as an indicator of origin.
The ECJ gave wide protection to marks with a reputation, stressing
the need to prevent third parties from "free-riding" and thereby
taking advantage of this reputation. The protection granted seems
to be considerably broader (and easier to prove) than that given to
rights holders to prevent against "dilution" following the Intel decision (which we considered in our our February 2009
IP/IT newsletter). In Intel, the need to indicate a
"change in the economic behaviour of consumers" creates a difficult
hurdle for rights holders. The ECJ also held that a trade mark
owner can prevent a third party's use of a trade mark in
comparative advertising even where such use does not harm the
mark's essential function as an indicator of origin, as there are
other "functions" that the mark protects (e.g. guarantee of
quality, investment or advertising). Based on this decision,
businesses when marketing their products or services by reference
to their competitors should be careful to avoid being seen to
benefit from their competitors' reputations. It will be interesting
to see how the ECJ applies the reasoning in this judgment to the
numerous pending references on Google AdWords.
Dior decision means more good news for luxury
rights holders
In Copad SA -v- Christian Dior SA(2), the European Court
of Justice (the ECJ) found that a licensee who contravenes a
provision of a licence agreement prohibiting sales to discount
stores, and the discount stores themselves, could be infringing the
trade mark owner's rights. The licensee acts in breach not only of
its contractual obligations but also of the owner's trade mark
rights if the provision barring discount sales is intended to
protect the mark's prestige, and if the sale in such stores would
in fact damage the "allure and prestigious image which bestows on
those goods an aura of luxury". This is good news for luxury brand
owners who may be keen to protect the reputation of their brands by
avoiding sales from discount retailers including, potential, via
the internet.
This decision helps to reinforce the rights of luxury brand owners,
potentially enabling them to ensure resale of branded products
along the supply chain. It highlights the importance of clear
quality control provisions in the licence agreement, which should
include the wide definition of "quality" provided by the ECJ, i.e.
the "aura of luxury", together with express prohibitions on resale
to discount and internet retail outlets. For a detailed analysis of
this case, please see our June
2009 IP newsflash.
No liability by common design for eBay
The news for luxury brand owners is not all good. In L'Oréal SA
-v- eBay International AG(3), the High Court ruled that eBay
was not liable for trade mark infringement as a joint tortfeasor
for the sale by third parties of infringing or counterfeit products
on its auction site. While Arnold J agreed that the sale of these
goods infringed L'Oréal's rights, and sympathised with its
suggestion that eBay could do much more to prevent infringement, he
failed to find joint liability. Arnold J held that as a matter of
common law, eBay was under no legal duty to prevent infringement,
despite arguably facilitating infringement by its sellers. Arnold J
pointed out that eBay's actions might, in future, attract liability
under Article 11 of the Enforcement Directive(4) entitling the
trade mark owner to an injunction - but this would not affect
liability for past infringements. He decided to refer questions to
the ECJ based, among other things, around the scope of Article 11
injunctive relief against intermediaries. He also referred
questions relating eBay's practice of buying "keywords" on internet
search engines to attract sponsored links to eBay's site (similar
questions had already been referred by other EU courts in relation
to Google AdWords).
This case is likely to frustrate some luxury rights owners and
highlights legal discrepancies across the EU - parallel proceedings
by L'Oréal have failed in France and Belgium while being successful
in Germany. Article 11 of the Enforcement Directive requires Member
States to ensure that rights owners can apply for injunctive relief
against intermediaries whose services are used by infringing third
parties. The best course for the rights owner against online
auction houses is likely to involve an application for injunction
Article 11, depending on what answers the ECJ gives.
Notes:
(1) Case C-487/07, 18 June 2009.
(2) Case C-59/08, 23 April 2009.
(3) [2009] EWHC 1094 (Ch), May 22 2009.
(4) Directive 2004/48/EC on the enforcement of intellectual
property rights.
Please click on the links below for the other articles in
the July 2009 IP/IT newsletter
Contacts
Mark Lubbock
T: +44 (0)20 7638 1111
E: mark.lubbock@ashurst.com
Ian Starr
T: +44 (0)20 7638 1111
E: ian.starr@ashurst.com
This newsletter is not intended to be a comprehensive review of
all developments in the law and practice, or to cover all aspects
of those referred to. Readers should take legal advice before
applying the information contained in this publication to specific
issues or transactions.