ECJ gives limited right to stop comparative advertising

The European Court of Justice (ECJ) has said that trade mark owners cannot prevent comparative advertising unless it creates a likelihood of confusion among consumers

The Court ruled yesterday in a dispute brought by telecoms company 02, which owns a number of trade marks for bubbles, against rival Hutchison 3G (H3G), which ran an advertising campaign in 2004 that featured similar bubbles and used O2's logo with price comparisons.

In a ruling in 2006, the UK's Court of Appeal asked the ECJ to clarify three questions on the interpretation of the 1988 trade mark directive and the 1984 misleading and comparative advertising directive (updated in 1997).

While the trade mark directive gives trade mark owners the right to prevent the use of their trade mark in a comparative advertisement, the 1984 directive is designed to promote comparative advertising and therefore limits that right.

The ECJ stopped short of saying that trade mark rights can never be used to stop comparative advertising. But it said that trade mark rights only come into play if all the conditions under which comparative advertising is permitted are not satisfied.

Specifically, it said that "it is apparent from Article 3a(1)(d) of Directive 84/450 that comparative advertising is not permitted if there is a likelihood of confusion between the advertiser and a competitor or between the advertiser's trade marks, goods or services and those of a competitor". It added that "confusion" here should be interpreted in the same way as in the trade mark directive.

The Court clarified that the trade mark directive provides a four-step test: to prevent the use of his sign, a trade mark owner must show that the use is in the course of trade; without his consent; in respect of identical or similar goods or services; and must lead to a likelihood of confusion among the public.

The Court made it clear that, based on its understanding of the facts in this case, the advertising could not be stopped as it was not misleading: "The fourth condition required before the proprietor of a registered mark is authorised to prevent the use of a sign similar to his trade mark for goods and services identical with, or similar to, those for which that mark is registered is not satisfied in the case in the main proceedings."

The Court also stressed the importance of context in assessing the use of the sign, saying that "in order to assess whether the proprietor of the registered mark is entitled to oppose that specific use, the assessment must be limited to the circumstances characterizing that use".

Giles Crown of Lewis Silkin, who represents H3G, told Managing IP this clarified that comparative advertising can be treated differently to other forms of unauthorized trade mark use: "That is a very important point and has a wide impact on trade mark infringement claims."

Crown added that he believes the ruling balances the rights of trade mark owners and comparative advertisers: "It allows competition and a reasonable degree of freedom. Robust but fair comparative advertising is permitted."

But Gordon Harris of Wragge & Co who acts for 02, said the outcome of the case is "spectacularly uncertain" as the ECJ has stressed that trade mark rights can, in the right circumstances, be used against comparative advertising: "The uncertainty created works against comparative advertisers rather than in their favour."

"Advertisers will need to look carefully at the context, and ask if there is a likelihood of confusion. If so, nothing under the comparative advertising directive can save them," he added. "For example, clever parodies will go out of the window."

"It's going to be difficult to bring proceedings but not impossible. The judgment leaves things open for further referrals on the trade mark-owner side," Louise Zafer, a partner of Lovells in London, told Managing IP.

In particular, she said, brand owners might be able to take action for trade mark infringement where the comparative advertising creates confusion in the market or discredits or denigrates the trade mark, activities which are prevented under the comparative advertising directive. But she added: "You're going to need a pretty blatant breach before you will be able to take action."

The dispute now heads back to the Court of Appeal, which is likely to hold a hearing in the next few months.

In the meantime, two further referrals which may shed further light on these issues - involving L'Oreal and Intel - are due to be decided by the ECJ, with the Intel ruling due before the end of this month.

Source: Managing Intellectual Property
Author: James Nurton, Frankfurt