Court of Appeal follows EU trade mark ruling despite disagreeing with it

The Court said today that it has no choice but to follow a CJEU decision that a maker of cheap perfume must not produce comparison lists outlining which famous fragrances its products smell like.

Lord Justice Jacobs said that the CJEU ruling posed a risk to companies' free speech rights, undermined competition in Europe and made the EU a less attractive place to do business than other jurisdictions, such as the US.

The CJEU ruled, and the Court of Appeal also had to rule, in favour of L'Oréal, which argued that the comparison list breached its trade mark rights.

Lord Justice Jacob, though, said that Bellure should have been able to say that its products smelled like some of L'Oréal's if that was true.

"The problem, stated at its most general, is simple. Does trade mark law prevent the defendants from telling the truth?" he said in his ruling. "Even though their perfumes are lawful and do smell like the corresponding famous brands, does trade mark law nonetheless muzzle the defendants so that they cannot say so?"

"I am in favour of free speech – and most particularly where someone wishes to tell the truth.  There is no good reason to dilute the predilection in cases where the speaker’s motive for telling the truth is his own commercial gain," he said. "Of course the right of free expression … cannot be and is not unqualified. But any suggested rule of law which stands in the way of people telling the truth, whether the context be political, commercial or otherwise, ought to be scrutinised with care and justified only on the grounds of strict necessity."

"My own strong predilection, free from the opinion of the ECJ, would be to hold that trade mark law did not prevent traders from making honest statements about their products where those products are themselves lawful," he ruled.

The case involved the packaging of Bellure's products as well as the comparison lists. After the CJEU ruled that older versions of Bellure's packaging did infringe the trade mark rights of L'Oréal the company accepted that infringement.

That left only the comparison lists to be ruled on by the Court of Appeal. Lord Justice Jacob said that the CJEU ruling would prevent an activity which barely harmed L'Oréal but which could benefit the less well-off.

"The ECJ’s decision in this case means that poor consumers are the losers," he said. "Only the poor would dream of buying [Bellure's] products. The real thing is beyond their wildest dreams.  Yet they are denied their right to receive information which would give them a little bit of pleasure; the ability to buy a product for a euro or so which they know smells like a famous perfume."

"Moreover there is no harm to the trade mark owner – other than possibly a 'harm' which, to be fair, L’Oréal has never asserted," he said. "That 'harm' would be letting the truth out – that it is possible to produce cheap perfumes which smell somewhat like a famous original. I can understand that a purveyor of a product sold at a very high price as an exclusive luxury item would not like the public to know that it can be imitated, albeit not to the same quality, cheaply – there is a bit of a message that the price of the real thing may be excessive and that the 'luxury image' may be a bit of a delusion. But an uncomfortable (from the point of view of the trade mark owner) truth is still the truth: it surely needs a strong reason to suppress it."

Lord Justice Jacob said that the ruling which he had to give also risked undermining the competitiveness of European markets.

"[A problem] is about freedom to trade – indeed, potentially in other cases, to compete honestly," he ruled. "If a trader cannot (when it is truly the case) say: 'my goods are the same as Brand X (a famous registered mark) but half the price', I think there is a real danger that important areas of trade will not be open to proper competition."

"I believe the consequence of the [CJEU] decision is that the EU has a more 'protective' approach to trade mark law than other major trading areas or blocs," he said. "I have not of course studied in detail the laws of other countries, but my general understanding is, for instance, that countries with a healthy attitude to competition law, such as the US, would not keep a perfectly lawful product off the market by the use of trade mark law to suppress truthful advertising."

The ruling confirmed the CJEU's view that Bellure used L'Oréal's trade marks in a way which infringed its trade mark rights even though the use did not jeopardise the "essential function of the trade mark", which was to indicate the origin of the goods.

The use was not one that was permitted by comparative advertising rules, which say that advertising is not permitted if it presents "goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name", as the Bellure comparison list did.

Lord Justice Jacob had to uphold the ruling while disagreeing with it. "I can actually see no rational basis for such a rule," he said. "Indeed I can see no rational commercial or economic basis for [it] at all – on any construction. If a man trades in lawful replicas or in lawful copies, why should he not be able to inform the public what they are? And why should the truth be kept from the public?"

Lord Justice Wall and Lord Justice Rimer agreed with Lord Justice Jacob's ruling.

Intellectual property law specialist Rebecca Mitton of Pinsent Masons, the law firm behind OUT-LAW.COM, said that the ruling could affect all kinds of businesses.

"The ruling has wide implications for manufacturers, distributors and sellers of lawful copy-cat goods, not just perfumes, who will now need to reassess their use of market leading brands in literature promoting their own goods," she said. "Manufacturers, distributors and sellers of generic drugs, spare parts and own brand products could be amongst those affected by the ruling."