Trademark dilution has traditionally represented a grey area for lawyers in Common Law countries. While trademark owners are protected against brand erosion in European jurisdictions through a general concept of 'unfair competition', in Common Law jurisdictions rights owners have been saddled with the need to prove likelihood of confusion to protect brands against loss of distinctiveness through imitation.
The EC Trade Marks Directive, as implemented by the Trade Marks Act 1994, has imported into English law certain provisions which have their origin in the concept of unfair competition. Two such provisions are sections 5(3) and 10(3) of the 1994 Act. The first provides a ground upon which an application to register a trademark can be refused where it is similar to a well-known registered trademark. The second provides the owner of a well-known registered trademark with the right to stop the use of a similar sign, in cases both where unfair advantage is taken or detriment caused to the distinctive character or reputation of the well-known trademark.
To date, however, there has been very little judicial guidance from Europe on how the English courts should apply this alien concept of unfair competition. The European Court of Justice (ECJ) ruling in the case of Intel v CPM in autumn 2008 has started to clarify the issue, but some confusion still remains.
Encouraging fair play
In 1997, Intel Corporation Inc applied in the English courts for an order invalidating registration of the trademark 'Intelmark', as registered in Class 35 for marketing and telemarketing services by CPM. Intel’s trademark had been registered in Classes 9, 16, 38 and 42 for computers and computer-linked goods and services. The English court recognised that the mark Intel had a 'huge reputation' in respect of computers and computer-related goods and services, even before 1997 when the later trademark, 'Intelmark', was registered. However, although the trademarks were similar, the court had difficulty in concluding that, merely because of the similarity in the marks, unfair advantage was taken of Intel, or detriment caused to its reputation or distinctive character by the use of Intelmark. The English Court of Appeal referred the question to the ECJ asking whether, for the purposes of invalidation proceedings, it was sufficient that the later mark merely 'brought to mind' the earlier well-known mark.
The ECJ published its judgement on 27 November 2008. It ruled that it is not sufficient that the earlier mark is merely 'brought to mind' to justify the invalidity of a later trademark. Instead it set down a two-stage test for the protection of marks with a reputation: firstly, there must be a 'link' between the two marks, and secondly harm or a likelihood of harm must be shown to result from use of the later mark. This harm must result from either the taking of unfair advantage (‘free-riding'), or detriment to the distinctive character or repute of the earlier mark (dilution or tarnishment).
The ECJ listed certain relevant factors for assessing the existence of a link, while stressing that the presence or absence of one or more of these factors would not automatically mean that a link was not present. Those factors include: (i) the similarity of the marks; (ii) the nature of the goods or services and whether their consumers overlap; (iii) the strength of the earlier mark's reputation, particularly if the reputation of the mark goes beyond its group of usual consumers; (iv) the distinctiveness of the earlier mark, particularly if it is unique; and (v) the existence of a likelihood of confusion, although confusion is not required for protection.
'THE FACT THAT THE EARLIER MARK HAS A HUGE REPUTATION FOR SPECIFIC TYPES OF GOODS OR SERVICES WAS NOT DEEMED TO BE SUFFICIENT IN ITSELF TO ESTABLISH "UNFAIR ADVANTAGE"'
The ECJ noted that a link was present in the Intel case because the average consumer would think of 'Intel' on seeing 'Intelmark'. However, the ECJ rejected Intel’s argument that its case should automatically succeed once a link was proved, and instead stressed the need to establish harm in the form of unfair advantage or detriment to the distinctive character or the repute of the earlier mark.
The ECJ held that the existence of this harm must be assessed globally, taking into account all factors relevant to the circumstances of the case, including the criteria set out above in relation to the requirement to prove a link. In particular, the stronger the link between the two marks, the greater the likelihood of proving such harm.
Applying this test, the ECJ noted that the factors raised in the Court of Appeal's questions to the ECJ, namely that 'Intel' has a huge reputation and is unique in respect of goods and services, that the goods and services involved are dissimilar, and that 'Intel' would be brought to mind when the average consumer encounters 'Intelmark', were not sufficient on their own to prove unfair advantage or detriment.
The ECJ ended its judgment by ruling that, in order to prove detriment to distinctive character, it is necessary to provide evidence of change, or a serious likelihood of change, in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered consequent on the use of the later mark. This means that there is no dilution where Intel's sales remain unaffected.
Identifying unfair advantage
Little help was offered by the ECJ on what constitutes 'unfair advantage', as opposed merely to accidental or incidental advantage. The Court merely noted that it is not necessary to show that the earlier mark has been damaged, but if damage has not yet occurred, it is necessary to establish at the very least that there is a serious risk that it will. By implication, the ECJ appears not to have followed the opinion of Advocate General Eleanor Sharpston. In June 2008 she stated that, even where no harm occurs to the earlier mark, unfair advantage can be proved where the later mark derives commercial benefit from being linked to it. This interpretation is more akin to the continental concept of parasitic trading. However, as none of the questions referred by the English court was directed specifically at this issue, the ECJ has not yet given a ruling on the meaning of 'unfair advantage'.
It will, however, be considered shortly in another case referred to the ECJ by the English Court of Appeal: L'Oréal & Others v Bellure & Others. This case concerns smell-alike perfumes sold with a list of the names of famous perfume brands against the smell-alike equivalent.
At present, the use of a famous trademark in a comparative advertisement is permitted under the Comparative Advertising Directive (CAD) if certain conditions are met, including a condition that the advertisement must not 'take unfair advantage of the reputation of a trademark of a competitor'.
Most comparative advertisements are used by traders to compare the characteristics (usually price) of their goods or services to those of their main competitor or market leader. The aim is to attract customers away from their rivals by associating goods or services with those of the market-leading brand.
The expression 'unfair advantage' should be construed consistently into CAD and sections 4(2) and 5(2) of the Trade Marks Directive, if it is to be interpreted in the manner suggested in Intel by Sharpston AG. However, if so, the intention of the European Parliament to liberalise the comparative advertising regime, and thereby improve the information provided to consumers and to promote competition between traders, will suffer a significant setback.
This article first appeared in IP Review, issue 24
