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Sunday, 21 June 2009

L’Oréal/Bellure: who speaks for the European majority?

The IPKat has received this letter from his respected friend Professor Dirk Visser (Trademark Law Institute & Leiden University, not to mention leading Dutch IP practice Klos Morel Vos & Schaap), which discusses last week's ruling of the European Court of Justice in L’Oréal/Bellure (see IPKat note here). Professor Visser's letter reads as follows:

"Dear friends of the Trademark Law Institute (and some other learned and honorable Trademark friends and colleagues),

I just would like to share with you my thoughts on this landmark decision by the ECJ and maybe you can give your views to get an idea how this decision is received throughout Europe.

To me, the L’Oréal/Bellure decision by the ECJ is a breath of fresh air after the often ambivalent, unpractical or systematically incomprehensible recent decisions in trade mark cases by the ECJ.

In my opinion in L’Oréal/Bellure the ECJ clearly states what is probably the most important basic moral emotion of IP and unfair competition law: “Thou shall not (1) intentionally, (2) without investment of one’s own and (3) without paying any compensation, reap profit of another’s considerable (creative, innovative or commercial) effort, investment or goodwill”. (“Thou shall not reap where thou has not sown”).

(Evidence of) misrepresentation is not required, (evidence of/ risk of) confusion is not required, (evidence of) harm is not required (although there probably always is harm in such a case).

You can like this result or not, but at least and for once, it is clear what the ECJ says.

Lord Justice Jacob will probably not like it, many other ‘free competition’-minded people in (and outside) the UK will not like it. But it does in my opinion probably reflect what most IP judges, lawyers and laymen basically believe and feel, at least on the continent.

Intent is (and probably always has been) an important factor, lack of own investment is too and so is of course not paying any compensation.

The decision also give clear guidance as to how to decide the case at hand: smell-alikes, designed or marketed as cheap copies, are not allowed. Again, you can like it or not, but at least it is clear, and it is in my opinion a better basis than copyright in the fragrance.

I do look forward to your views!"
The IPKat wonders how representative Professor Visser's views are of non-UK thought. If you have any special message to share with the readers of this blog, please post them below. If you'd rather share them with Professor Visser alone, you can email him here. Merpel says, it doesn't matter whether people think the ruling is good or bad: the real issue is whether it is right in terms of applying the existing law to the facts on which the reference is based. Tufty says, I've set up a poll in the sidebar where which you can "vote" for the position that reflects your view.

8 comments:

Dr. Michael Factor said...

In Israel, scents cannot be trademarked, nor can bottle shapes unless ruled as having aquired distinction through use. They can be registered as designs though - but only for a limited period.

If pharmaceutical compositions that are novel and inventive have a 20 year from inception / 9 year from commercialization limited monopoly, why should a scent be protected from copying indefinately? trade-dress and passing off is one thing, but here we are talking about smell-alike clones that are sold as such.

I am inclined to favor cheaper generics sold as such in much the same way as I favor non-branded jeans and supermarket brands of instant coffee or generic colas.

Trademarks are indefinately renewable, and so I find the European Court of Justice's ruling lacks balance, and would be happy to see the Swedish Pirate Party trying to legislate a more balanced decision through the European Parliament.

Anonymous said...

This decision does indeed have a very strange smell and taste to it.

mcvooty said...

What's wrong with reaping profit from another's creative effort? I thought the received rule was that copying a product is permissible except when what's being copied is protected by patent or copyright.

Dr Wim Alberts said...

South African IP law is heavily influenced by English law, yet one area in which our Roman-Dutch foundation has prevailed, is the recognition of a general ground of liability for unlawful competition. The L’Oreal decision could thus be accommodated relatively easy within our theoretical common law framework. However, its application in our statutory structure is more uncertain. The reason is that, ironically our Constitutional Court, has delivered a judgment (in the Laugh It Off case), which has been interpreted to require economic harm for dilution cases. This was in a “detriment” case. Some commentators argued though that it applies to unfair advantage cases too. It is, however, trite that there will sometimes not be (immediate) harm in such instances. If the L’Oreal case is applied in our law, it could bring about a change in this position. More specifically, that our courts would be more willing to accept that unfair really means unfair, and that detriment is indeed a separate ground of liability. The decision must also be welcomed for putting the origin theory in its place.

devgangjee said...

While L'Oreal is a clear decision, its also clearly teriffying in its implications. I'm afraid that I must (predictably) disagree with Professor Visser as to whether its a good decision or not.
(a) Building on McVooty's comment above, what remains unexplained in L'Oreal is the reason why property rights should be granted in response to the creation of images or brands. There is certainly effort and investment but to what socially desirable end? (This decision would not even stand up on pure natural rights/Lockean labour justification attempts.) The early 'specific subject matter/essential function' ECJ case law identified a public benefit in preserving the information signalling ability of a trade mark. Both consumers and producers benefitted. Here it seems that only a few producers benefit - and would have invested in the brand anyway because its in their interest to do so. They sell more products so that's why they invest. With this decision, we move towards a free floating protection of brand/image with no articulated public benefit whatsoever. The consuming public is in fact actively harmed since competitors can compete less effectively in situations when they are otherwise not harming the TM at all (no confusion, no detriment to distinctiveness or repute).
(b) What is the meaning or content of the mysterious 'communication, investment or advertising' functions? What exactly are the contours of this image that TM owners seek to protect and who is responsible for creating this image? Only the TM owner or the general public as well? If so, why should the TM owner get all the benefits? In short, what sort of intangible object is being protected and to what extent?
(c) We also now have 'absolute protection' for ALL marks, not just the famous ones, under Art 5(1)(a), which now apparently protects more than just the essential function. Again no explanation for wny this is so.
(d) The comparative advertising defence has been effectively eviscerated. This was a clear situation of competitive signalling for a product where its otherwise very difficult to indicate that you are a more cheaply priced competitor. Do we need competition law to step in now, because EU trade mark law has clearly gone off the rails.
This ties in to the mess with defences generally in EU law. (i) Where the defendant infringes a right (ii) and only then accesses the defences (iii) she finds that 'honest practices' has been interpreted to suggest that a use which infringes is not honest and the defences are unavailable. The meaningful balancing of interests required by a genuine defences simply doesn't exist.
(e) As Ilanah has pointed out in the initial post, post-L'Oreal the focus will now shift to establishing a link and depending on the goods and services being compared, deploying artificial legal presumptions of when 'image transfer' may or may not occur. It's otherwise causally very difficult to establish that a surge in sales for the junior user is directly attributable to some sort of image transfer (and even if there is a causally related surge, so what?) In the language of economists, we can never predict or capture all positive externalities of an activity so regulating harmful negative externalities is a pretty good limiting principle.
(e) And we now have to wait till the aftershocks of this decision catch up with the search engine/keyword cases.

The effect of this decision is to create a new type of trade mark right in pure image (whatever that means) without any explanation of why this is in the public interest. The decision grates against free market and competition law principles at so many levels its truly incredible.

Anonymous said...

The good Professor is clearly what is known in some jurisdiction as a "wind-up merchant"!

Normally where I launch a product similar to an existing product I don't need to use the existing product's name to signal that similarly to consumers. They can see it, whether the product is a pair of jeans or of sunglasses. However, where the product is essentially one of smell then, due to the limitations of language, I need to do so because I can't describe the smell. That doesn't make the new product a "replica" and that's one area where the ECJ has really gone wrong. We'll now have a ridiculous situation where you can't use the original product's trade marks to say "smells like", but you can use a similar mark to do so (save where the original mark has a reputation). More fun for the lawyers, but chills the economy.

The second area, of course, is the ridiculous notion (at least from the UK perspective) that the (protected legal) functions of a trade mark should include "that of guaranteeing the quality of the goods or services in question and those of communication, investment or advertising". Where is the basis for that in the trade mark Directive? That's right, there is none. So this is ECJ harmonisation on the fly.

Let's consider the issues in turn
- is a trade mark supposed to guarantee the quality of the goods? no, it isn't. if the trade mark owner wants to drop the quality (or increase it) they are free to do so. I can't believe many trade mark owners would say that the function of its trade mark is to guarantee the quality of its services. would they want consumers suing them because the quality dropped and the trade mark in some way guaranteed the old quality?
- is a trade mark supposed to serve the function of communication? well, yes, up to a point. it is supposed to communicate something about product X. but how does a third party saying "my product is like product X" restrict that function?
- is a trade mark supposed to serve the function of investment? well, again, up to a point. it is supposed to encourage investment by giving certain protection to the trade mark owner. but it is entirely circular to say that the scope of a trade mark is determined by its function of investment (presumably the ECJ means the function of protecting investment).
- is a trade mark supposed to serve the function of advertising? well, yes. that's by far the clearest of these issues. but how does the use in question restrict or damage that function?

If a Member State wants to protect certain aspects of enterprise it is free to do so, subject to the restrictions of international treaties including the EC Treaty. If it wants to do so by extending its intellectual property rights then again it is free to do so subject to those restrictions. And the scope of protection to trade marks granted as a result of this decision most probably falls within the margin for discretion of Member States under Article 30 - i.e. it isn't a disguised restriction on trade. However, just because that wide a scope of trade mark law is permissible under the EC Treaty does NOT mean that it is the scope of the harmonised trade mark right agreed under the TM Directive. However, the ECJ has increasingly adopted the approach that, because essential function was useful to determine the limits of Article 30, it should also be used to determine the limits of the TM Directive. That doesn't follow.

So this is really a question of proper process. If a Member State wants ridiculously broad TM protection then it can adopt it, subject to the restrictions of Article 30 and any existing harmonisation measures. Indeed, if the EC as a whole wants such broad protection then it can adopt it, subject again to Article 30. But the EC has not done so in the TM Directive and it is not a healthy sign to see the ECJ forcing harmonisation of this sort on unwilling Member States (even if it is clearly great news for some brand owners).

Anonymous said...

Concerning ECJ´s ruling in L'Oréal v Bellure you may wonder if the judges has observed the economic consequences of their thinking. Compare that with Richard Posner´s and Frank Easterbrook´s findings in Ty Inc. v Ruth Perryman, No. 02-1771 (7th Cir. 2003) 4 p:

“Third, and most far-reaching in its implications for the scope of the concept of dilution, there is a possible concern with situations in which, though there is neither blurring nor tarnishment, someone is still taking a free ride on the investment of the trademark owner in the trademark. Suppose the “Tiffany” restaurant … is located in Kuala Lumpur and though the people who patronize it (it is upscale) have heard of the Tiffany jewelry store, none of them is ever going to buy anything there, so that the efficacy of the trademark as an identifier will not be impaired. If appropriation of Tiffany’s aura is nevertheless forbidden by an expansive concept of dilution, the benefits of the jewelry store’s investment in creating a famous name will be, as economists say, “internalized”—that is, Tiffany will realize the full benefits of the investment rather than sharing those benefits with others—and as a result the amount of investing in creating a prestigious name will rise. This rationale for antidilution law has not yet been articulated in or even implied by the case law, although a few cases suggest that the concept of dilution is not exhausted by blurring and tarnishment…The validity of the rationale may be doubted, however. The number of prestigious names is so vast (and, as important, would be even if there were no antidilution laws) that it is unlikely that the owner of a prestigious trademark could obtain substantial license fees if commercial use of the mark without his consent were forbidden despite the absence of consumer confusion, blurring, or tarnishment. Competition would drive the fee to zero since, if the name is being used in an unrelated market, virtually every prestigious name will be a substitute for every other in that market.”

What´s wrong with law and economics, professor Visser?

Mats Björkenfeldt
Advokat

Anonymous said...

Indeed one of the main questions arising from this decision is related to the functions of the trade mark.
Up until now we've heard about the essential function of the mark. Suddenly, we were told that the directive (??) protects other functions, namely the quality function. What implications does this have?

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