In April the Gazette previewed the ECJ decision on L’Oreal and ors v Bellure NV (see [2009] Gazette, 2 April, 15), which has now been handed down. The decision will effectively destroy the market in ‘imitation’ products – and extends the reach of well-known brands beyond the limits so far set by the English Courts.

Bellure produced ‘smell-alikes’ of a number of scents, including Anaïs Anaïs and Noa, which it sold under names such as ‘Nice Flower’ and ‘Sweet Pearls’. Bellure also produced a comparison list, in which it explained to customers that that ‘Nice Flower smells like Anaïs Anaïs’, ‘Sweet Pearls smells like Noa’, and so on. L’Oreal and its fellow claimants own registered trademarks to ‘Anaïs Anaïs’, ‘Noa’ and the other luxury brands that appeared in the comparison list, and it sued Bellure on the grounds that using these names in this way constituted an infringement of its trademarks.

It is worth pausing here to remember that a registered trademark does not give its owner an absolute say over when, where and how its mark is reproduced. I am reproducing several registered trademarks in this column, but I am not infringing them. A trademark is infringed in the UK if it is used in a way that breaches section 10 of the Trade Marks Act 1994. Classical infringement, embodied in sections 10(1) and (2) of the act, requires use of a sign in the course of trade and confusion on the part of the public between the registered trademark and the infringing sign. Obvious examples of classical infringements are counterfeit Rolexes, or watches sold under a brand that is so similar to the Rolex brand that buyers confuse it with the real thing.

In this case, though, there was no question of confusion. The whole point of Bellure’s marketing was that its Sweet Pearl scent was like Noa, but was not Noa – which was why it was so much cheaper. Everyone (including L’Oreal) agreed that no one buying Sweet Pearl would have thought they were buying a luxury L’Oreal product – these were imitations, not counterfeits. It is also worth pointing out that, outside of the trademark claims, there was nothing wrong with what Bellure was doing. Bellure had started from scratch in creating its imitations and had not used any L’Oreal trade secrets. Anyone is entitled to try to copy a smell, in much the same way that anyone is entitled to try to copy a taste.

L’Oreal therefore based its action on some additional provisions of trademark law that protect well-known brands. Section 10(3) of the act (based on article 5(2) of the Trade Mark Directive 89/104/EEC, which is the provision on which the ECJ based its findings) provides that, where a registered trademark has a reputation in the UK, it will be infringed by the use of an identical or similar sign in relation to identical or similar goods, which ‘without due cause, takes advantage of, or is detrimental to, the distinctive character or the repute of the trademark’. No confusion with the well-known mark is needed for the provision to bite, only ‘detriment’ or ‘taking advantage’, ‘without due cause’.

The case reached the UK Court of Appeal, which sought guidance from the ECJ. The key question essentially referred to whether it would still be ‘taking unfair advantage’ if the well-known trademark escaped unscathed, as it were, from the use to which it had been put. The Court of Appeal asked whether it would be ‘taking unfair advantage’ to use the well-known mark where (a) there was no risk to the registered trademark’s function as a guarantee of origin, (b) the registered trademark’s reputation was not tarnished or blurred, (c) the trademark owner’s sales were not impaired, (d) the trademark owner was not deprived of any of his reward for promoting, maintaining or enhancing the mark, but (e) the trader gets a commercial advantage simply by reason of its similarity to the registered mark.

These questions all seem rather academic. Both UK and French governments intervened to submit that it is not likely that using a well-known trademark to market imitation goods will not cause concomitant harm to the goods imitated. But it had been held at first instance that Bellure had not caused harm to L’Oreal’s mark – the products occupied different markets and had very different customers. Purchasers of Sweet Flower would not dream of frittering away their money on a luxury product, while purchasers of Anaïs Anaïs would not stoop to buying a cheaper imitation.

The ECJ’s judgment was highly anticipated. If a generic imitator of a product cannot make a like-for-like comparison, it could be fatal to the imitator business model. How else could the public know the intention behind the product? From a policy point of view, the argument raged both ways. Imitators argued that the public have a right to choose whether to purchase a cheaper product over an expensive brand, and to have access to the information that would enable them to make this choice. The perfume houses and other innovators argued that they make considerable investment in developing and marketing luxury high-end products, and should not have to put up with copy-cats riding on their coat-tails.

L’Oreal won the day. Marketing comparisons telling customers that an imitation product is ‘like’ the product imitated will, if the product imitated is sold under a well-known trademark, ‘take advantage’ of and infringe the well-known mark.

This is not to say that you cannot use third-party brands in your advertising. Comparative advertising, including using well-known brands to make the comparison, is expressly permitted under its own directive (84/450). The directive did not protect Bellure because it excludes advertisements that present goods or services as imitations or replicas. But if you are not selling an imitation, then so long as you comply with the terms of the directive it is perfectly permissible to use someone else’s brand to compare your goods with theirs (see [2008] Gazette, 31 July, 13). It is even possible, if you are not selling an imitation, to use a well-known brand to describe your product (Holterhoff v Freisleben [2002] ECR 1-4187, in which the defendant used the competitor plaintiff's trademark as a description for a particular cut of diamond).

Nor is it to say Bellure cannot continue to sell its Sweet Pearl perfume, and indeed to create other smell-alikes, but since it cannot make a comparison with the relevant luxury brands, its business model may well be dead.

But the brand-owner’s victory went beyond simply crushing the market in imitation products. Go into any supermarket and you will find products which, by their name or packaging, bring to mind more prestigious products. Think of the number of cola drinks sold in curved bottles with red labels and white lettering that call to mind Coca-Cola, or the men’s antiperspirants in distinctive black bottles that call to mind Lynx. All of these products take advantage of – in the sense of benefit from – the reputation of the well-known mark. But their producers would doubtless argue that the advantage taken is not ‘unfair’ because their brands are so clearly differentiated that shoppers cannot confuse them.

That defence will no longer be available. In a key passage, the ECJ held that: ‘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… the taking of unfair advantage of the distinctive character or the repute of a mark, within the meaning of that provision, 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.’

So that’s that. Where a trademark is well-known, any other similar mark that calls the mark to mind and benefits by association with it may be infringing, even if there is no risk of confusion with, or detriment to, the well-known mark. The Court of Appeal had earlier rejected this view (see its earlier finding in this case, [2007] EWCA Civ 968), but has effectively found itself reversed.

The penumbra of protection around well-known marks is therefore wide, and significantly wider than the UK courts have so far held. Competitors will need to take great care that new brands are not similar to well-known brands, and even some existing brands may need to be re-engineered. Since not only brand names and logos can be registered as trademarks, but jingles, colours and shapes too, competitors will need to check carefully what trademarks are registered for well-know products, and give them a wide berth.

To see some law in action, you will just have to watch the changes on the shelves in your supermarket.

Richard Taylor, DLA Piper, SheffieldM