TRADE MARK LAW

Answer

Critical Evaluation of the statement: The judgment of the European Court of Justice in the case of L'Oreal v Bellure has imported a tort of unfair competition into UK law

Introduction

Trade mark laws all over the world are aimed at protecting individuals and organisations from unfair competition. Such a goal is achieved by protecting the usage of copyrighted works, symbols, logos, domain names, designs and logos.^[1] In contemporary commerce, the law on trademarks guards consumers by prohibiting unfair competition where some companies may use trademarks substantially similar to those of their competitors. The ultimate aim of trade mark law in business is to ensure brand equity and promote customer loyalty.^[2] With trademark law, consumers are prevented from confusion, whereas companies avoid diluting the marks of other firms. Notably, dilution in trademark arises where a company uses a similar mark or symbol that affects the reputation of a distinctive registered mark of another company. The increased importance of branding and brand equity in today's business environment makes trademark law even more important.^[3] Distinctive trademarks are a point of differentiation and offer competitive advantages to businesses. The law of trademark and the law of unfair competition are both used in the protection of the uniqueness of registered trademarks. Countries over the world have adopted laws and policies which govern the use of trademarks.^[4] However, for over a century, the United Kingdom (UK) did not have a specific law focused on unfair competition.

The UK has traditionally relied on the international instruments it has signed and the EU trademark laws in the prevention of unfair competition within its borders. Ideally, the UK has an international obligation to ensure that it provides effective protection of individual and businesses against unfair competition.^[5] For instance, the Convention for the Protection of Industrial Property 1883, which the UK is a signatory to, provides that the countries of the EU are obligated to guarantee its nationals of measures towards the effective protection against unfair competition.^[6] Apart from the EU laws, which are operative in the UK, the European Court of Justice (ECJ) has come up with various decisions which have practically imported the law of the tort of unfair competition into UK law. Although there have been many cases decided by the ECJ in the recent past, abut unfair competition, the most influential one was the L'Oreal v Bellure^[7] decided in 2007 by the ECJ. In this case, the ECJ ruled that it was not mandatory to establish a detriment or a likelihood of confusion with a registered trademark for a third party to be considered to be taking an unfair advantage under the provisions of the EU Trademarks Directive (89/104/EEC).^[8] As long as there is a connection between conflicting marks, then it should be established that the third party is taking advantage of unfair and the mark in question should be considered unfair.^[9] This ECJ judgement slightly imported a tort of unfair competition into the UK because it informed various changes to the UK trademark.

The Tort of Unfair Competition

The UK is one of the countries around the world that had, for a long time, failed to develop a law that effectively addressed the tort of unfair competition. However, the law governing this tort was contained in the Paris Convention for the Protection of Industrial Property. Article 10 of this law provides that countries of the European Union (EU) should assure their nationals that effective protection against unfair competition is guaranteed. However, the tort of unfair competition, based on this law, has a broad and uncertain scope. Article 10(2) provides the defines unfair competition as to any form of competition that is contrary to the honest practices of industrial or commercial matters.^[10] Also, article 10(3) provides the various examples of the different forms of conduct that are deemed to contrary to honest business or commercial matters.^[11] One of these matters is any acts that by their very nature cause confusion by whatever means with the establishment, the goods or the business and industrial activities of a competitor. Additionally, false allegations in the course of the trade such as those that seek to discredit the establishment, their goods, or the commercial and industrial activities of the competitor.^[12] Finally, allegations that when used in the course of trade may mislead the public as to the nature, character, and suitability of the goods' purpose or quantity are deemed to be contrary to honest industrial or commercial practices, thus, forms of unfair competition.^[13]

One of the underlying aspects in the descriptions of unfair competition based on the Paris Convention is that it involves business organisations involved in commerce taking advantage over their competitors by means of a malpresentation or other conduct deemed dishonest. However, the ECJ has also been instrumental in the definition of the tort of unfair competition. In its expression about Article 6(1) of the Trade Marks Directive (TMD)^[14], the ECJ made its pronouncement. In this particular section, a defence to trade mark infringement is provided for specific types of trademark, especially where the use is in accordance with honest practices in industrial and commercial matters. The meaning of the tort of unfair competition was recently considered in the Gillette Co^[15], where the ECJ held that the in the realm of trade marks, unfair competition means that traders have offended their duty to act in a fair manner, in relation to the legitimate interests of trade, and in the best interests of the trade mark owner. However, borrowing from other courts in the EU, such as the German courts, a list of items that constitute unfair business practices deemed to contribute to the torn of unfair competition can be made.

One of the primary provisions of the new German Act is that it prohibits certain activities which are deemed to fall under the unfair competition category. Unfair influence of purchase decisions of consumers is considered conduct likely to lead to unfair competition.^[16] Additionally, denigrating a competitor's business in the course of trade is a form of unfair competition. Moreover, the competition of commercial traders is considered unfair if any of the actors make false allegations about their competitors, that ultimately lead to the discrediting of their business. Organisations that offer goods and services that imitate those of competitors are deemed to have engaged in conduct deemed unfair. Examples of the behaviour of imitation of competitors' goods include avoidably deceiving the customers as to the trade-origin of such goods, taking undue advantage to the detriment of the reputation of the imitated product, and illegitimately obtaining knowledge or documents that are useful in imitating a registered trademark.^[17] Also, the unfair competition also includes obstruction of a competitor's participation in the commercial activities and the breach of statutory provisions aimed at regulating market behaviour. Other defined practices deemed unfair are intrusive, misleading, and unfair comparative advertising.

Although UK law does not have specific provisions on unfair competition, it does not imply that it does not have adequate protections for the practice. The Trade Marks Act^[18] in the UK is one of the laws used to prevent the harmful exploitation of the regulation of registered trademarks. Also, the misuse of illegally and illegitimately obtained information due to breach of confidence and systematic obstruction in the industrial and commercial marketplace through means such as conspiracist and intentional infliction of economic harm is considered unfair and prohibited. However, upon an examination of the English law, there are three key areas where it does not provide effective protection to traders from unfair competition. One of those is it does not protect businesses from denigratory statements made in the context of advertising.^[19] Also, English law only serves to protect businesses against commercial falsehoods that are considered utterly malicious. Moreover, the law in the UK only protects traders against exploitation deemed to be detrimental to the reputation of a registered trademark. However, the decision in L'Oreal V Bellure was a turning point because of how it imported the tort of unfair competition in UK law.

Decision in L’Oreal V Bellure

            In L'Oreal V Bellure, the petitioner and others had brought a case before the High Court alleging trademark infringement against the defendants. The contention of L'Oreal and others was that the defendants' use of comparison lists was an infringement of their registered trade mark and contrary to section 10(1) of the Trademarks Act.^[20] Also, the petitioner argued that the defendants' sale of products in packaging that imitated those of the petitioners was an infringement of their rights under the law. The defendant was involved in the business of producing, distributing, and marketing imitation of colognes produced and marketed in registered trademarks of the petitioners. Some of the imitations were for perfumes sold under the L'Oreal registered trademark whereas others were in packaging similar to those of L'Oreal.^[21] The High Court agreed with the petitioner that the use of perfumes registered under their trademark was an infringement of their marks. However, the defendant was dissatisfied with the decision of the High Court and appealed.^[22] The petitioner also cross-appealed the High Court's decision. Some of the aspects required to be determined in the appeal include clarification by the ECJ on the exact meaning of taking unfair advantage and the meaning of presenting goods or services as imitations.

            On appeal to the ECJ, a ground-breaking judgement was made, which sought to import the tort of unfair competition into the UK law. The Court determined that it was not necessary for the petitioners to establish that the infringement of trademark was detrimental to them or was likely to cause confusion with the registered trademark for the defendants to be considered to be taking unfair advantage in accordance with the provisions of the EU Trademarks Directive. The petitioners only need to show a link between the conflicting marks and how the defendants are seeking to unfairly benefit from the registered mark.^[23] Even if the essential function of the trademark is not harmed, trademark infringement and unfair advantage will be inferred if the use of the registered trademarks in price and product comparison lists is deemed to constitute an infringement on those trademarks. Also, it is not necessary that the advertisers have to state explicitly or implicitly that the goods they are advertising are imitations or replicas for them to be found to be taking an unfair advantage.^[24] The fact that the goods are deemed replicas makes their conduct an infringement of trade mark. Also, the ECJ argued that taking unfair advantage of the reputation of another's registered trademark contrary to the Comparative Advertising Directive should be interpreted the same as taking an unfair advantage as stipulated under the Trademarks Directive.

The primary premise of the L'Oreal decision is that any form of behaviour deemed to provide a commercial advantage to a third party generated via the use of another's registered trademark is, prima facie, not tolerated and its deemed to be an act of unfair competition. This decision largely introduced the law of unfair competition into the ECJ case law and by extension into UK law. Although the ECJ decision related to registered trademarks, the matter had a huge influence on the law of unfair competition and the various actions taken later. In making its judgement, the ECJ relied on a former case it had ruled on; the Arsenal^[25] Case. In this previous case, the Court had held that exclusive rights conferred to the trademark owner by article 5(1) are applicable to cases where the function of the registered trademark owner's use is affected or will likely be affected. The primary function of the trademark should be to guarantee the origin and distinctiveness of the goods and services offered by a party to their consumers. However, the other functions of the trademark law are to guarantee consumers about the quality of such goods and services. Moreover, other functions include communication, advertisement, and investment.  However, in the previous decisions, the ECJ had held that unfair competition could not be inferred if the detriment is not caused to the normal functions of the registered trademark.^[26] However, in L'Oreal, the ECJ was broad on the grounds that must be met for an unfair advantage to be inferred. The decision, in this case, affected trade mark law in the UK, especially because of the recent developments that have been made to give effect to the L'Oreal decision.

Although the English courts are the ones bequeathed with the mandate to provide the final say on the application of the law, the decision of the ECJ left the courts with no decision to manoeuvre. Notably, the ECJ made it clear that well-known and reputable brands should be given wider protection from the European trademark law even in a context where consumers are not confused or misled by the infringement of someone else's trademark. Lord Justice Jacob, a leading intellectual property judge in the L'Oreal case, criticised the European court by arguing that the decision made in the case makes the poor consumers the losers because it denies them the right to receive information which should make them feel pleasure and make them able to purchase products that they know smell like a famous L'Oreal perfume.^[27] The UK judges held that their hand was tied by European law despite seeing the ECJ decision as an affront to their freedoms and free trade. The decision, in this case, seemed to be a wakeup call for the UK about the need to ensure better protection of traders against those who want to benefit from the registered trademarks of others. This case became a battle of philosophies between the UK courts, which were previously hellbent on safeguarding a free market, and now the more protectionist stance that had been taken by the ECJ to ensure the protection of intellectual property rights in Europe. Being bound by the ECJ decision, the UK had to reflect and adopt new laws and measured, which could ensure alignment with the Court's decision.

Trade Mark Law Revisited

Trademarks generally serve the role of identifying a product and its origin and guaranteeing a product's unchanged quality. Additionally, in commerce, organisations have used trademark to advertise their products. As such, when companies use the trademark of their rivals without permission, they are labelled as having occasioned a trademark infringement.  Infringement of trademark may be injurious to the registered owner.^[28] As such, the role of trade mark law is to provide for ways in which the registered trademark is protected while also promoting fair competition in trade. A court may be called upon to interpret a trademark law and ensure the protection of trade mark. One of the reasons for the protection of a trade mark is to ensure compliance with the law, especially based on the trademark statute in which it is registered.^[29] Additionally, a trade mark is a practice based on the theory and tort of unfair competition. When the claimant and the defendant are competitors, the court may deem the presence of unfair competition and proceed to make a ruling which protects the registered trademark. Also, where litigants are not actually in competition, trade mark law is critical in protecting the registered marks because of the theory of unfair dealing.^[30] Trademark law is vital in making sure that the intellectual property rights (IPRs) of individuals and companies are protected from the breach and any other unauthorised violations.

Trade mark law in the UK started with the enaction of the Trademarks Act 1938. The aim of such a law was to ensure that proprietors of registered trademarks can legally defend their mark against any unauthorised infringements by third parties. However, the law that implemented the EU directive No. 89/104/EEC^[31] was the Trade Marks Act 1994. This UK law provides that an infringement of trademark arises if a third party uses a registered mark in the course of trade and the mark is identical with another registered one. In business, individuals commit an infringement of trademark if their signs are similar or label their goods and services similar to those of competitors.^[32] The similarity must be shown to have resulted in a likelihood of confusion on the public. However, for individuals to claim the ownership of trademarks, they must first register their marks or signs with the UK Intellectual Property Office (UKIPO). Upon registrations, individuals and organisations are bestowed with exclusive rights upon their mark, and such rights allow them to prevent unauthorised use of the mark by competitors.^[33] Some of the aspects surrounding trademark include distinctiveness, which means that the registered mark must have no prior meaning.^[34] Also, if trademarks have acquired distinctiveness, they can be registered based on the existing UK law. Recently, the Trade Marks Act 1994, has been amended by Trade Marks Regulation 2018 (SI 2018/825).

In January 2018, the UK Parliament adopted the Trade Marks Regulations 2018 (SI 2018/825), which automatically amended the then-existing Trade Marks Rules 2008. The aim of such amendments was to ensure the implementation of EU Trade mark Directive 2015/2436.^[35]  One of the key changes in these new regulations Regulation 3, which removes the requirement that trademarks must be capable of graphical representation. On the contrary, they made it clear that a trade mark could be registered in various digital formats such as sounds, shapes, figurative, multimedia and holograms, among others. The bottom line is that the mark needs to be presented in a way that enables the registrar and the public to make an accurate and precise determination of the distinctiveness of the mark, thus, afford adequate protection to the proprietor. Such an aspect was determined in the Sieckmann case (Case C-273/00). Also, Regulation 4 in the new law extends registration of things which has been excluded in the previous laws. For instance, all types of signs are allowed to be registered with the new regulations. The other changes in the 2018 regulations include the requirement by UKIPO to continue notifying the proprietor of early rights on the register of conflicting trademark applications. Moreover, the changes aimed at ensuring a more liberation definition of unfair advantage.

Evaluation of The Effects of L'Oreal Decision

The L'Oreal decision sought to import the tort of unfair competition to the UK law because subsequent actions have been taken to ensure compliance with the ruling. The ECJ decision provided clarity as to the conditions that must be met to impute the tort of unfair advantage. Notably, in its earlier ruling (C-252/07)^[36], the ECJ had indicated, controversially, that for a petitioner to prove the tort, he/she has to prove a detriment to the distinctive character of the mark. Additionally, the proprietor was required to demonstrate a change in the economic behaviour of the consumer because of the use of the imitated trademark. However, in the L'Oreal, this position was deserted because the ECJ was adamant that companies and business organisation should not hide behind the Comparative Advertising Directive to promote their imitations. The most interesting part of the decision was that even if there was no actual harm caused to the proprietor of the registered trademark, an infringement and unfair competition would be inferred where their marks are imitated and used by third parties without authorisation. This was a new position that opened the pandora's box in trademark law in the UK. The ECJ's decision was further an import of the tort of unfair competition to the UK law because it went against the other judgements that had been made by the courts in the UK regarding the matter. For instance, the commentary that it was irrelevant whether the advertisements in question are descriptive or otherwise, unfair competition arises, is not a concept that was in existence in the UK before the decision.

            The ECJ decision triggered the UK legislature to come up with amends to its trademark law to ensure that it reflects the new aspects introduced in the ruling. For instance, Trade Marks Act 1994 was amended to implement the Trade Marks Directive 2015/2436 while also set out the law on matters to do with the registration of trademark, their validity, and infringement based on the L'Oreal ruling. Since UK courts are bound by the decision of ECJ, then it was important and mandatory to take actions to align the trademark law in the country with the trend-changing landmark decision. The English law of unfair competition was forced to come out clearly on where the line should be drawn between what would be considered to be free trade and what the courts have to adjudge as an infringement of registered trademark, hence, against intellectual property rights of the proprietor. The two laws which were previously seen to have been closer to addressing the tort of unfair competition were those prohibiting misrepresentation and the equitable doctrine of the breach of confidence.^[37] Also, misappropriation was one of those aspects addressed in law in the UK. These parts of the law remain distinctively English, and remedies are provided as to how they should be addressed.^[38] However, the liberal view of UK law, which held that unfair competition could be inferred if there is evidence of detriment to the proprietor or benefit to a third-party imitator, was not abandoned.

            Despite the various ways in which the L'Oreal case brought the tort of unfair competition into the UK law, there is still a conflict between the ECJ's decision and the UK law. English law on unfair competition is yet to dictate the point at which a line should be drawn between protecting the IPR of the traders and ensuring that consumers are exposed to a wide variety of goods in a free market. The treatment of slavish and parasitic copying in the UK is still not well settled. According to English law, the absence of consumer confusion and applicable intellectual property right makes it hard to infer that a competitor's conduct is unfair or unlawful.^[39] On the contrary, English law argues that the consumers' confusion should be used to judge whether the actions of a third party made them gain an unfair advantage over the proprietor of a registered trademark.^[40] The UK Intellectual Property Office was; after the L'Oreal decision, forced to commission a study at the domestic level to determine the extent of parasitic copying of registered trademark and provide recommendations which when adopted would ensure the tightening of any loopholes that encourage the infringement of registered trademarks.^[41] However, still, no concrete actions have been taken to harmonise the UK law with that of EU. The contrasting positions taken by the two are still not reconciled despite the landmark ruling in L'Oreal. However, now there is hope that the UK law is moving towards adoption of specific trademark law to combat the torn of unfair competition.

Conclusion

In summary, the statement that the ECJ judgement on the L'Oreal v Bellure imported a tort of unfair competition into the UK law is true because of the various changes that such a decision brought into trademark law. It has been historically recognised that the UK does not have a specific law that deals with unfair competition. However, the L'Oreal decision changed such a position because it held a contrary position to the UK courts' legal position with regard to what constitutes an unfair advantage. According to the ECJ, in this case, there is no need to prove a detriment to the proprietor of copyright or benefit to the unauthorised imitator. Additionally, for unfair competition to be found, it is not mandatory that the products or services imitated must confuse the consumer. On the contrary, a petitioner must only demonstrate a violation of trade mark through unauthorised use, for an unfair advantage to be found. This ECJ decision was found in the UK to be against the traditionally held position that an infringement of trademark only occurs if consumers are confused, and the third party infringer benefits from the violation. As such, the UK trademark law has significantly changed to reflect the more liberal view established in the L'Oreal case. Yet, there are still areas where the UK trademark law is not completely aligned to the EU law about infringement of registered trademarks.

[1] Alison, Jones, and Sufrin Brenda. EU competition law: text, cases, and materials. oxford university Press, 2016: 45

[2] Ibid.

[3] Nari, Lee, Guido Westkamp, Annette Kur, and Ansgar Ohly, eds. Intellectual property, unfair competition and publicity: convergences and development. Edward Elgar Publishing, 2014: 5.

[4] Ibid.

[5] Richard, Arnold. "English Unfair Competition Law." IIC-International Review of Intellectual Property and Competition Law 44, no. 1 (2013): 63.

[6] Ibid.

[7] L’Oreal v Bellure [2007] EWCA Civ 968.

[8] First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks.

[9] Paris Convention for the Protection of Industrial Property, 1883.

[10] Ibid.

[11] Ibid.

[12] Tom, Alkin. "Should there be a tort of ‘unfair competition’in English law?." Journal of Intellectual Property Law & Practice 3, no. 1 (2008): 49.

[13] Ibid.

[14] Directive (EU) 2015/2436.

[15] Gillette Company and Gillette Group Finland Oy v LA-Laboratories Ltd Oy. [2005] FSR 37, Case C-228/03 (ECJ).

[16] Tom, Alkin. "Should there be a tort of ‘unfair competition’in English law?." Journal of Intellectual Property Law & Practice 3, no. 1 (2008): 50.

[17] Ibid, 51.

[18] The Trade Marks Act, 1994.

[19] Rogier, De Vrey. Towards a European unfair competition law: A clash between legal families. BRILL, 2005.

[20] The Trade Marks Act, 1994.

[21] L’Oreal v Bellure [2007] EWCA Civ 968.

[22] Ibid.

[23] Ibid.

[24] R. W., Alberts. "" I love the smell of perfume in the morning"-the L'Oréal case and trade mark infringement." Tydskrif vir die Suid-Afrikaanse Reg 2013, no. 1 (2013): 74.

[25] Arsenal Football Club Plc v Reed | [2003] EWCA Civ 696.

[26] Ansgar, Ohly. "“Buy me because I’m cool”: the “marketing approach” and the overlap between design, trade mark and unfair competition law." In The EU Design Approach. Edward Elgar Publishing, 2018: 5.

[27] R. W., Alberts. "" I love the smell of perfume in the morning"-the L'Oréal case and trade mark infringement." Tydskrif vir die Suid-Afrikaanse Reg 2013, no. 1 (2013): 74.

[28] Reto, Hilty, and Frauke Henning-Bodewig, eds. Law against unfair competition: towards a new paradigm in Europe?. Vol. 1. Springer Science & Business Media, 2007: 20.

[29] Jennifer, Davis. "Unfair competition law in the United Kingdom." In Law Against Unfair Competition, pp. 183. Springer, Berlin, Heidelberg, 2007.

[30] Ibid.

[31] First Council Directive 89/104/EEC of 21 December 1988.

[32] Dinwoodie, Graeme B. "Dilution as unfair competition: European echoes." Intellectual Property at the Edge: The Contested Contours of IP, Rochelle Cooper Dreyfuss and Jane C. Ginsburg, eds., Cambridge University Press, 2014: 43.

[33] Darren, Meale, and Smith, Joel. "Enforcing a trade mark when nobody's confused: where the law stands after L'Oréal and Intel." Journal of Intellectual Property Law & Practice 5, no. 2., 2010: 96.

[34] Barton, Beebe, Thomas Cotter, Mark Lemley, and Peter Menell. Trademarks, unfair competition, and business torts. Wolters Kluwer Law & Business, 2014.

[35] Directive (EU) 2015/2436 of the European Parliament and of the Council of 16 December 2015.

[36] Intel Corporation Inc. v CPM United Kingdom Ltd [2007] EWCA Civ 431.

[37] Mats, Björkenfeldt. "The genie is out of the bottle: the ECJ's decision in L'Oréal v Bellure." Journal of Intellectual Property Law & Practice 5, no. 2, 2010: 105.

[38] Wadlow, Christopher. The law of passing-off: Unfair competition by misrepresentation. Sweet & Maxwell, 2011: 10.

[39] Seán Mc, Guinness. "Observations on free riding after L'Oréal v Bellure." Journal of Intellectual Property Law & Practice 7, no. 12, 2012: 891.

[40] Sanders, Anselm Kamperman. "Unfair competition: complementary or alternative to intellectual property in the EU?." In Constructing European Intellectual Property. Edward Elgar Publishing, 2013:12.

[41] Ansgar, Ohly. "“Buy me because I’m cool”: the “marketing approach” and the overlap between design, trade mark and unfair competition law." In The EU Design Approach. Edward Elgar Publishing, 2018: 12.