Comparative advertising - the ECJ fizzes it up
In a ruling that could have a noticeable impact on advertising in the UK and across Europe, the European Court of Justice (ECJ) last month ruled that businesses can use the distinctive trademarks of their competitors when comparing their goods and services.
Comparative advertising is advertising in which there is specific mention of a competitor, usually with a claim that your goods and services are better, bigger, faster or cheaper than theirs. Historically, there was a sharp contrast in the approach taken towards comparative advertising on either side of the Atlantic. In the US, not only is comparative advertising permitted, but you can use your competitor’s trademarks to be distinctly rude about them. In an old advertisement for Intel, for example, an actor favourably compared the power of Intel’s machines with those of Apple, and then thumped home his point by snatching up an apple (a real one, but with an obvious reference to the famous Apple trademark) and taking a large bite out of it.
In contrast the UK used to shrink from such beastliness. Since most businesses’ names are themselves trademarks, and since the use of a third party trademark in the course of trade was not allowed, companies could not easily refer to one another in advertisements. This effectively ruled out comparative advertising in the UK.
This all changed with a series of directives from the European Commission, which saw comparative advertising as a means for improving competition and consumer choice. Directive 84/450 (OJ 1984 L 250 p17) provided that comparative advertising would be permitted when certain conditions were met. In brief, a comparative advertisement is permitted in Europe, so long as it is:
- not misleading;
- does not create confusion;
- does not discredit or denigrate the third party trademarks;
- does not take unfair advantage of the reputation of a trademark; and
- does not present goods or services as imitations or replicas of goods or services bearing a protected trademark or trade name.
Directive 97/55 (OJ 1997 L 290 p18) furthermore emphasised that using a third party trademark in this context would not infringe that mark. The directive provided that ‘it may… be indispensable, in order to make comparative advertising effective, to identify the goods and services of a competitor, making reference to a trademark or trade name of which the latter is proprietor… Such use… does not breach [the trademark owner’s rights]’.
Note the word ‘indispensable’. Does it limit the use that can be made of a third party trademark? If, for example, Ryanair is comparing its prices with those of British Airways, is it only allowed to use BA’s trademarks to the extent that such use is ‘indispensable’ for the comparison (for example, just referring to BA by name), or can it go further and use BA’s logos?
That was the issue before the ECJ in 02 (UK) Ltd v Hutchison 3G UK Ltd (case-533/06 12 June 2008). O2 is the proprietor of a trademark to a well-known image of a bubble in water. Hutchison ran a television advertisement comparing the price of its mobile telephone services with those of O2. The advertisement used the name ‘O2’ and a black-and-white image of bubbles which, although not identical to O2’s bubble trademark, was a clear reference to it. The image of O2 and bubbles was followed by Hutchison-related imagery and the message that certain Hutchison services were cheaper than O2’s.
O2 did not dispute the accuracy of the price comparison, but it took great umbrage at Hutchison using bubbles similar to its trademark to make the comparison. It argued that it was not ‘indispensable’ for Hutchison to use the bubbles mark to do this – Hutchison could have made the comparison perfectly well by using the O2 name alone.
The ECJ’s response favours Hutchison. It held that, so long as a comparative advertisement satisfies all the conditions laid out in directive 84/450, and if there is no likelihood of confusion on the part of the public in this use, a trademark proprietor cannot prevent the use of a sign identical with or similar to the trademark. The case was referred back to the English courts for determination on the facts, but in light of the position taken by the ECJ it is hard to see how O2 can salvage it.
To some degree, this judgment is a green light. Subject to the directive 84/450 requirements that the comparison is not misleading, denigrates the third party trademark and so on, it allows the use of any trademark in comparative advertising. Hutchison could legitimately have gone much further and used exact reproductions of O2’s typeface or O2’s bubbles with a graduated blue background, or even O2’s jingle in making its comparison.
But the requirements of directive 84/450 mean that we are still a long way from the knockabout world of US-style comparative advertising. For example, the Intel advertisement described above might not meet the requirements, since the actor’s bite of the apple might be said to denigrate Apple’s trademark.
Third party problems
It also remains to be seen how far advertisers will push this. Take another ECJ decision on the use of third party trademarks, Gillette Co v LA Laboratories Oy case C/228/03, referred by the Finnish Courts.
LA Laboratories sold replacement razor blades that fit Gillette razor handles. It is perfectly legal to sell compatible parts like these, but Gillette’s complaint was about the use of its Gillette and Sensor trademarks on a red sticker on the packaging, which read ‘these blades fit… all Gillette Sensor handles’.
A business may use a third party trademark where it is necessary to indicate the intended purpose of a product, in particular as accessories or spare parts, provided it uses them ‘in accordance with honest practices in industrial or commercial matters’ (article 6(1)(c) of directive 89/104). Gillette claimed that it was not ‘necessary’ for LA Laboratories to display its trademarks in this way and that the sticker created a link in the minds of consumers between the two companies’ products, or else wrongfully gave the impression that LA Laboratories was authorised to use the marks. LA Laboratories won. The ECJ held that the use of another company’s trademark was lawful where such use was the only means of providing the public with comprehensible and complete information on the intended purpose of the goods in question.
Whether such use was ‘in accordance with honest practices’ would depend on whether, for example, it gave the impression of a commercial connection with the trademark owner, or took unfair advantage of the trademark, or discredited or denigrated the trademark, or presented the product as an imitation or replica of the product with the trademark. Having set out these guiding principles, the ECJ referred the case back to Finland for determination, where the Finnish courts found that LA Laboratories’ sticker was acceptable. However, in practice, businesses have approached the judgment cautiously. You can see this the next time you are in Boots. Boots’ own-brand razor blades give no indication on the face of their packaging that they can be used with Gillette razor handles. Instead, the names of the compatible Gillette products are tucked away, logo-free and in small lettering on the reverse of the packs.
The judgment in O2 is far less subject to qualification than the judgment in Gillette. Nevertheless, it remains to be seen how far advertisers will take up the opportunity that the ECJ has given them.