Use of third party trademarks not subject to "indispensability"

Fabio Angelini

Today the Advocate General Mengozzi delivedered his opinion on the case C‑533/06, O2 Holdings Limited & O2 (UK) Limited v. Hutchison 3G UK Limited. The main issue was whether, under EU law, reference to earlier third parties’ trademarks not in a distinctive manner, but descriptive (as in the context of comparative ads) must (more or less like in the US) be subject to the criterion of “indispensability” (so that the reference to the earlier trademark must be as little as possible suggestive, i.e. no logos) or not.

In a quite thoroughly researched opinion, in which the AG punctiliously analyzed the earlier case law on the issue, and concluded that the use, in a comparative advertisement, of a sign identical or similar to the registered trade mark of a competitor is allowed even if that use is not indispensable for the purpose of identifying the competitor or the goods or services concerned.

Of course, the AG’s opinion is just an opinion, but since it is solidly built upon and consistent with the recent case law I would bet that the ECJ will follow it….

The facts of the case are the following. O2 ( a UK Telecom provider) uses images of bubbles in various ways. It is the proprietor, inter alia, of trade marks consisting of the combination of the letter O and the number 2 (‘the O2 trade marks’) and also of two pictorial trade marks, both consisting of static pictures of bubbles). It is apparent from the order for reference that it is established that consumers associate images of bubbles in water (particularly against a graduated blue background) in the context of mobile phones exclusively with O2. O2 brought an action against H3G (another UK mobile phone provider which had started a comparative advertising campaign on tv) for infringement of the O2 trade marks and the bubbles trade marks in respect of a TV advertisement put out by H3G, in which the term ‘O2’ and moving pictures of bubbles were used, together with a stylised animated picture of a 3, and which implied that H3G was cheaper than O2.

The action for infringement, (subsequently) directed only against the use of the bubbles images in the advertisement at issue, was dismissed because the court held that:

1. even though the use of the bubbles images in the advertisement fell within Article 5(1)(b) of Directive 89/104 (i.e. there was a use of a third party TM which could create a likelihood of confusion) ,

2. the ads nonetheless complied with Article 3a(1) of Directive 84/450 (i.e. under the standard of the Comparative Ads. Directive) and thus

3. the conditions for application of the defence referred to in Article 6(1)(b) of Directive 89/104 (which says that the owner of a trademark cannot prohibit a third party from using, in the course of trade indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services), were satisfied.

O2 brought an appeal against that judgment before the Court of Appeal, contending that the defence referred to did not apply. The Court of Appeal, thus referred the following questions to the Court for a preliminary ruling:

(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 (and in particular the price) of goods or services marketed by him with the characteristics (and in particular the price) of the goods or services marketed by the competitor under that mark in such a way that it does not cause confusion or otherwise jeopardise the essential function of the trade mark as an indication of origin, does his use fall within either (a) or (b) of Article 5[(1)] of Directive 89/104?

(2) Where a trader uses, in a comparative advertisement, the registered trade mark of a competitor, in order to comply with Article 3a of Directive 84/450 as amended 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?’

The first question: whether or not the use of the registered trade mark in a descriptive way falls within Article 5(1)(a) or (b) of Directive 89/104 where that use does not cause confusion.

The AG tackled the first question by reviewing the earlier body of ECJ decisions issued on this issue and found that in the light of the provisions of Directive 84/450 concerning comparative advertising, the question formulated by the referring court may easily be answered in the negative and that there is no need to pursue the examination, bristling with difficulties, of the conditions on which Article 5(1)(a) and (b) of Directive 89/104 apply.

The AG noted that Directive 84/450 carried out an exhaustive harmonisation of the conditions under which comparative advertising in Member States might be lawful’, and that ‘[s]uch harmonisation implies by its nature that the lawfulness of comparative advertising throughout the Community is to be assessed solely in the light of the criteria laid down by the Community legislature’. Since art. 3a of Directive 84/450 lists the cumulative conditions that must be met, as far as the comparison is concerned, for comparative advertising to be permitted, “where the comparison does not have the intention or effect of giving rise to …situations of unfair competition, the use of a competitor’s brand name is permitted in Community law”. It follows from these principles that the use of a competitor’s trade mark in an advertisement which compares the characteristics of goods or services marketed by him under that mark is prohibited only if does not comply with the conditions laid down in that article. and not under Article 5(1)(a) or (b) of Directive 89/104. Conversely, if it complies with those conditions, it cannot be held to be prohibited under the provisions contained in Article 5(1)(a) or (b) of Directive 89/104.

The AG noted that the first question as formulated in the order for reference turns on the use by an advertiser of another’s trade mark (or, to be more precise, a sign identical to another’s trade mark) whereas, the subject of the dispute pending before the referring court is now the use by an advertiser (H3G) not of another’s trade marks (O2 or the bubbles trade marks) but of signs (pictures of bubbles) which are closely similar to another’s trade marks (the bubbles trade marks), but in the AG’s opinion such a difference did not substantially alter the terms of the problem examined above.

The second question: whether or not the use of a competitor’s trade mark in a comparative advertisement must be ‘indispensable’ in order to be permitted, and if yes, which are the criteria by which such indispensability is to be judged

Answering this second question required the AG to dwell into a more complicated legal issue, since O2 claimed that the advertiser’s use of a competitor’s trade mark in a comparative advertisement, if it is not indispensable in order to identify the competitor or the goods or services concerned, takes unfair advantage of the reputation of the trade mark in breach of Article 3a(1)(g) of Directive 84/450. O2 also argued that since, for the purposes of the comparative advertisement in question, H3G made use of the O2 trade mark which is perfectly suitable for identifying the advertiser’s competitor, there was no need for it to use also the pictures of bubbles, especially as they were a distorted version of O2’s bubbles trade mark.

The AG did not buy O2’s arguments and agreed with the view taken by H3G and the Commission that Article 3a of Directive 84/450 does not demand that the use of another’s trade mark for the purpose of identifying the competitor or the products or services concerned should meet a requirement of indispensability.

However, the road to get to this conclusion is slightly more complicated, since the AG recognized that the earlier case law (in particular Case C‑44/01 Pippig Augenoptik)did not exactly address the same issue since in that case the conclusion reached by the Court could only mean, objectively, that the reproduction in an advertising message of the competitor’s logo and a picture of its shop front, in addition to the competitor’s name, – i.e. of elements which are probably not indispensable for the purpose of identifying a competitor who has already been mentioned by name – does not in itself discredit or denigrate that competitor. The AG therefore had to acknowledge that such a holding does not eliminate the possibility that a requirement of indispensability with respect to the use of another’s trade mark or distinguishing marks in comparative advertising may be deduced from other provisions of Article 3a.

Thus, for the purpose of determining whether Article 3a of Directive 84/450 prescribes a requirement of indispensability with respect to the use of another’s trade mark in comparative advertising, the AG used another way.

First he noted that Article 3a effects an exhaustive harmonisation of the conditions under which such advertising might be lawful and that none of its provisions expressly lays down a requirement of indispensability with respect to the use of another’s trade mark or other distinguishing marks.

Second, and contrarily to O2’s arguments, such a requirement cannot be deduced by implication from Article 3a(1)(g) of that directive, a provision which prohibits taking unfair advantage of the reputation of a trade mark or other distinguishing marks of a competitor or of the designation of origin of competing products.

Third and more important, also in light of the ECJ decisions in Toshiba (Case C‑112/99) and Siemens (Case C‑59/05 ), since the subject-matter of comparative advertising is in most cases a comparison with a more established competitor and therefore involves the establishment of a certain ‘link’ with the competitor’s reputation or the reputation of the distinguishing marks concerned, the advantage gained by the establishment of such a link would be unfair only if it results, in the minds of the persons to whom it is addressed, in an association between the advertiser and his competitor that might cause the public to associate the reputation of the former’s products with the latter’s. This is, according to those judgments, a matter that must be determined in each specific case, a process that clearly excludes considerations relating to the indispensability of a reference to the competitor’s distinguishing marks.

Since the criteria chosen by the Court in Toshiba and Siemens tend to favor the advertiser (i.e. the user of third parties’ trademarks) by permitting a reference to another’s distinguishing marks (even where it does not appear to serve any legitimate requirement connected with the advertisement and even if it may actually create in the minds of the public that association with the transfer of reputation mentioned in those judgments), the AG concludes that these decisions must be interpreted as not admitting, but on the contrary excluding by implication, the criterion of indispensability (or necessity) with regard to the use of a competitor’s trade mark or other distinguishing mark in comparative advertising.

That is to say, it cannot be maintained, as O2 argues, that when such use is not indispensable for the purpose of identifying the competitor or the goods or services concerned, the comparative advertising is ipso facto such as to enable the advertiser to take unfair advantage of the reputation of that trade mark or distinguishing mark, but on the contrary, it would instead have to be established whether or not such unfair advantage had been taken, which cannot be assumed to follow from the fact that the reference to that trade mark or distinguishing mark in the comparative advertising is not indispensable.