On 12 June 2008 the European Court of Justice handed down its decision in relation to the questions referred by the UK Court of Appeal in the case of O2 Holdings Limited and O2 (UK) Limited v Hutchison 3G UK Limited. While the ECJ’s decision is yet to be addressed by the Court of Appeal, it undoubtedly gives more scope for comparative adverts. However, the decision only goes some way to clarifying the relationship between the EU Trade Mark Directive (First Directive 89/104/EEC of the Council, of 21 December 1988, to Approximate the Laws of the Member States Relating to Trade Marks – TMD) and the EU Comparative Advertising Directive (Council Directive 84/450/EEC of 10 September 1984 relating to the approximation of the laws, regulations and administrative provisions of the Member States concerning misleading advertising, as amended by Directive 97/55/EC of European Parliament and of the Council of 6 October 1997 concerning misleading advertising so as to include comparative advertising – CAD).
Given the competitive nature of the IT/telecoms industry, comparative advertising has become relatively common and, therefore, it is no surprise that two telecoms giants have entered protracted litigation on the issue. However, it is clear that as a result of the kind of the goods/services being advertised, IT/telecoms companies will need to show a higher degree of care when creating comparative adverts as it is difficult for companies to compare like for like due to the fact that different competing products may have different specifications/applications.
Set out below are some tips to ensure your comparative adverts fall within CAD, but first a summary of the recent ECJ decision and its context.
The Directives
The TMD, at article 5(1), provides that the proprietor of a registered trade mark shall be entitled to prevent all third parties, not having its consent, from using in the course of trade:
• any sign which is identical to the trade mark in relation to goods or services which are identical to those for which the trade mark is registered (article 5(1)(a));
• any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark (article 5(1)(b)).
Article 5(2) of the TMD provides that any Member State may also provide that the proprietor shall be entitled to prevent all third parties, not having consent, from using in the course of trade any sign which is identical, or similar, to the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark. The UK has implemented this provision (see the Trade Marks Act 1994, s 10(3)).
However, there are limits to trade mark owners’ rights to prevent third-party use of their marks, particularly if such use is simply descriptive. With this in mind, CAD, in article 3a(1), sets out the conditions under which comparative advertising (ie any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor) is permitted. For example, such advertising is permitted where:
• it compares goods or services meeting the same needs or intended for the same purpose;
• it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price;
• it does not create confusion in the market place between the advertiser and a competitor or between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor;
• it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of a competitor;
• it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products.
Background
The ECJ decision relates to a UK case between O2 and Hutchison 3G. O2 is the registered proprietor of various trade marks incorporating pictures of bubbles. In the summer of 2004, Hutchison launched a series of comparative adverts for its pre-pay mobile phone service which featured bubbles. O2 issued proceedings against Hutchison claiming that the adverts infringed its trade marks. While the High Court held that Hutchison’s actions constituted an infringement pursuant to article 5(1)(b) of the TMD, it dismissed O2’s claim on the basis that the adverts fell within CAD and therefore Hutchison had a defence under the TMD.
O2 appealed against this decision, contending that such a defence did not apply. The Court of Appeal stayed its decision and referred the following three questions to the ECJ:
1. Where a trader, in an advertisement for his own goods or services, uses a registered trade mark owned by a competitor for the purpose of comparing the characteristics of goods or services marketed by him with the characteristics of the goods or services marketed by the competitor under that mark in such a way that it does not cause confusion or otherwise jeopardize the essential function of the trade mark as an indication of origin, does his use fall within either (a) or (b) of Art. 5(1) of TMD? [emphasis added]
2. Where a trader uses, in a comparative advertisement, the registered trade mark of a competitor, in order to comply with article 3 of CAD, must that use be ‘indispensable’ and if so what are the criteria by which indispensability is to be judged?
3. In particular, if there is a requirement of indispensability, does the requirement preclude any use of a sign which is not identical to the registered trade mark but is closely similar to it?
Decision
In relation to the first question, the ECJ said that the case involved only article 5(1)(b) of the TMD as Hutchison had not used marks which were identical to O2’s registered marks. The Court found that the TMD and CAD must be interpreted to the effect that the proprietor of a registered trade mark is not entitled to prevent the use by a third party of a sign identical with, or similar to, his mark, in a comparative advert, if the advert satisfies all the conditions in article 3a(1) of CAD. However, the Court found that where the conditions required in article 5(1)(b) of the TMD are met, a comparative advert would not satisfy the condition in article 3a(1)(d) of CAD – ie if the advert is likely to cause confusion in the market, as required to show infringement by use of a similar mark, it cannot satisfy CAD.
As a result of its decision in relation to the first question, the ECJ found that it did not need to rule on the second and third questions referred by the Court of Appeal, although it can be inferred that use of a third-party mark does not need to be ‘indispensable’.
Analysis
The decision seems to be a sensible, and obvious, approach. The effect of the ruling is that if the advert compares a similar mark (rather than an identical mark) then there will need to be a likelihood of confusion for the brand owner to be able to prevent use of the mark. If there is no likelihood of confusion, there can be no infringement under TMD, irrespective of whether or not the comparative advert satisfies all the conditions laid down in article 3a(1) of CAD. However, if the advert is unfair or derogatory but does not constitute trade mark infringement, there are other mechanisms for dealing with it – for example a complaint to the UK’s Advertising Standards Agency or a defamation claim.
Also, the decision addresses only the relationship between article 5(1) of the TMD and CAD and therefore partially answers the first question referred by the Court of Appeal. However, one assumes that the ECJ would follow the same reasoning in relation to article 5(2) of the TMD, eg. a trade mark owner cannot prevent use of a similar mark in a comparative advert where the advert does not take unfair advantage of, or is not detrimental to, the distinctive character or the repute of the trade mark.
Tips
Although further guidance is needed from the Courts, particularly regarding what constitutes an ‘unfair advantage’ in this context, advertisers can take steps to minimize the risks associated with using third-party brands in their adverts.
When creating a comparative advert, it is imperative that the guidelines set out below are followed so that an advertiser can avail itself of the defence under CAD.
• The advert should be fair and not misleading.
• The advert should ensure that the goods/services that are compared are used for the same needs or intended purpose.
• The advert should objectively compare material, relevant, verifiable and representative features of the goods/services, for example price.
• Care must be taken to ensure that the advert is not confusing and that the advertiser and competitor and their trade marks, trade names and goods or services are clearly identifiable.
• The trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of the competitor should not be discredited or denigrated.
• The advert should not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products.
• The advert must not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name.
• In addition, don’t forget that the advert may infringe other third-party rights, such as copyright. Using a competitor’s logos, graphics and product packaging in the advert may constitute copyright infringement.
Jeremy Harris is an assistant in the IP Litigation Group at Kemp Little LLP: www.kemplittle.com.
