There is now a plethora of Directives intended to harmonize the national intellectual property legislation of the EU Member States. Significant differences in the traditions of interpretation and methods of drafting legislation have led to an uneasy relationship between the English courts and the European Court of Justice (ECJ). As the Trade Marks Directive in particular has required major changes to the pre-existing regime, this has led to a high number of references from the English courts under Article 234 EC.

The practice of the English lower courts is to refer an issue of interpretation of the Trade Marks Directive unless they are wholly confident of the answer. Generally they will refer if there is conflicting authority from the courts of other Member States. In this situation the issue cannot be regarded as 'acte clair' . The trade mark system of other Member States, particularly the Benelux states, is historically less fixated on the traditional role of trade marks. Conflicting authority on key issues can therefore often be cited by those seeking a reference. Accordingly the increasingly frequent dialogue between these institutions has revealed fault lines which appear to be widening.

Why can't you just answer the question?

When the national courts decide to refer questions to the ECJ under Article 234, the ECJ often rephrases them. To what extent is it empowered to do this?

The ECJ has repeatedly confirmed that it may provide guidance that was not strictly asked for by the national court. "According to consistent case-law, it is for the Court to provide the national court with all those elements for the interpretation of Community law which may be of assistance in adjudicating on the case pending before it, whether or not that court has specifically referred to them in its questions."

A significant example of this occurred in the Opel case where the ECJ felt compelled to provide the German court with an interpretation of Article 5(2) of the Trade Marks Directive. No question had been referred to it in respect of this article and the ECJ was not sure that this optional provision had even been implemented in Germany . The ECJ noted that "Having regard to the circumstances in this case, the referring court must also be given an interpretation of Article 5(2) of the directive". It concluded that if a sign was not perceived by consumers as a badge of origin (as it appeared the German court had found) it could not then affect the essential function and therefore could not be prevented by Article 5(1)(a). Significantly, however, the ECJ did not stop there – it went on to indicate that detriment to functions other than the essential function may lead to infringement.

"It is for the referring court to determine, by reference to the average consumer of toys in Germany, whether the use at issue in the main proceedings affects the functions of the Opel logo as a trade mark registered for toys. Moreover, Adam Opel does not appear to have claimed that that use affects functions of that trade mark other than its essential one."

The ECJ had already noted that use such as that complained of could be prevented by Article 5(2) if it is "without due cause…[and] takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark as a trade mark registered for motor vehicles". Many would therefore take this to be a heavy-handed hint to Opel that it should have based its claim on Article 5(2) and harm to or taking advantage of the image/reputation of their mark, rather than Article 5(1)(a) which requires an affect on the essential function. Had Opel taken the hint, this would have put the German court in a difficult position.

Closer to home, in the Dyson case , the ECJ chose not only to answer its own question but disregarded altogether those questions referred to it by the UK court. The UK Registrar had refused Dyson's clear collection bin trade mark application on two main grounds. It was said to be devoid of distinctive character (Article 3(1)(b)) and, in addition, it was held to be exclusively descriptive of a characteristic of the goods (Article 3(1)(c)). The Registrar had originally voiced objections on the issue of whether Dyson's application was for a sign capable of constituting a trade mark but those objections had been withdrawn. The Registrar's rejection of the application was upheld by a Hearing Officer on 23 July 2002. Dyson appealed that decision to the High Court and the judge (Patten J), acknowledging the large amount of recognition this feature of the Dyson products had obtained, referred the following questions to the ECJ:

1. In a situation where an applicant has used a sign (which is not a shape) which consists of a feature which has a function and which forms part of the appearance of a new kind of article, and the applicant has, until the date of application, had a de facto monopoly in such articles, is it sufficient, in order for the sign to have acquired a distinctive character within the meaning of Article 3(3) of [the Directive], that a significant proportion of the relevant public has by the date of application for registration come to associate the relevant goods bearing the sign with the applicant and no other manufacturer?
2. If that is not sufficient, what else is needed in order for the sign to have acquired a distinctive character and, in particular, is it necessary for the person who has used the sign to have promoted it as a trade mark?

It is worth seeing how the ECJ justified disregarding the above questions:

"24…even though, strictly speaking, a national court directs its reference to the interpretation of certain Community provisions which might come into consideration, the Court is not thereby precluded from providing the national court with all those elements for the interpretation of Community law which will be of assistance in adjudicating on the case pending before it, whether or not that court has specifically referred to them in its questions…

26… contrary to the contentions of Dyson and the United Kingdom Government, even though the wording of the questions from the national court relates solely to Article 3 of the Directive and that court did not, in the main proceedings, touch on the issue of whether the subject-matter of the application in question may be viewed as a sign of which a trade mark may consist within the meaning of Article 2 of that directive, it is necessary as a preliminary matter to consider that question (see, to that effect, Case C 104/01 Libertel [2003] ECR I 3793, paragraph 22)."

The ECJ then went on to give its only answer as, "Article 2 … is to be interpreted as meaning that the subject-matter of an application for trade mark registration, such as that lodged in the main proceedings...is not a 'sign' within the meaning of that provision and therefore is not capable of constituting a trade mark within the meaning thereof."

Note that the ECJ did not even mention Article 3 in its operative answer. Accordingly, it gave no guidance on the acquired distinctiveness proviso (Article 3(3)) which the referring court clearly regarded as the issue on which guidance was required. The ECJ did this because it felt its guidance on Article 2 was conclusive of the proceedings. In its view, the mark did not fall within the definition of a 'sign' and so was not registerable.

The ECJ's consideration of the Article 2 issue was therefore hardly "as a preliminary matter". It was treated as the beginning and the end. Hence, the question as to whether a visual feature mark can acquire distinctiveness during the period of a de facto monopoly was dodged.

Had the ECJ chosen to answer the question asked of it, even if alongside preliminary guidance on Article 2, this would have been more respectful to the national court and the parties involved. It would also have provided guidance on a thorny trade mark issue which will doubtless arise again.

Your answer was 'opaque'…

The tensions between the English courts and ECJ have led to open criticisms by the former of the latter which, whether justified or not, do little to inspire in English IP litigants confidence in the quality of justice they will eventually receive.

For instance, Jacob LJ did not hold back from expressing his concern about the guidance the ECJ gave in LTJ Diffusion SA v Sadas Vertbaudet SA as to how to determine whether a sign is identical to a mark. In his stated view, "This guidance is opaque. On the one hand the criterion of identity 'must be interpreted strictly'. On the other the court is to allow for the 'imperfect picture' of that notional construct 'the average consumer.'"

In the O2 comparative advertising case , Jacob LJ noted tersely, "European trade mark law is in danger of becoming a forest of case law where everyone loses their way."

When, in the Boehringer Ingelheim Kg & Another v Swingward Ltd case , he concluded a further reference was needed with regard to whether the 'necessity' requirement for the legitimate re-packaging of parallel imported goods referred to both the need to re-package and the style of re-packaging adopted, his frustration with the ECJ was apparent: "Despite years of repackaging cases in the ECJ, I am afraid it is necessary to refer the matter yet again. Both sides initially submitted that the position was clear (in their respective favours) but said if it was not, with great reluctance, that there should be a reference. That is the position." Repeated references by national courts within the same proceedings, such as here, are developing as a tool through which the national courts can express their discontent with the guidance they have received from the ECJ.

The Advocate General who dealt with the reference responded with weariness in kind: "… It seems to me that after 30 years of case-law on the repackaging of pharmaceutical products it should be possible to distil sufficient principles to enable national courts to apply the law to the constantly replayed litigation between manufacturers and parallel importers…"

The English judge had the last word. It turned out that despite those 30 years, the Advocate General himself was not able to distil sufficient principles wholly to predict the ECJ's answer. He said the conditions specified in the Bristol-Myers Squibb case for the legitimate re-packaging of parallel imports do not apply merely to over-stickered grey goods "where there is no risk that the guarantee of origin is impaired, as in the case of applying an additional external label to the original external packaging while retaining the original internal packaging, the BMS conditions do not apply." The ECJ said oh yes they do.

But didn't you mean…

One perplexing characteristic of the 'opaque' nature of the guidance from the ECJ is that it has proved to be open to diametrically opposed interpretations. Perhaps the clearest example of this can be seen in the English courts' attempts to determine whether 'use as a trade mark' is required for infringement under the Directive as it was under the previous national legislation (i.e. the Trade Marks Act 1938). In Arsenal Football Club plc v Reed the UK High Court asked the ECJ, where a sign identical to a validly registered mark was used on identical goods (and there was no defence under Article 6(1)) was there "a defence to infringement on the ground that the use complained of does not indicate trade origin (i.e. a connection in the course of trade between the goods and the trade mark proprietor)?

This question was asked because the High Court judge was of the view that the mark was operating as a 'badge of allegiance' as opposed to a 'badge of origin'. It was not therefore being used as a trade mark. A huge amount has already been written about this case concerning Arsenal Football Club's action for infringement against Mr Reed for selling unauthorised merchandise bearing the club's trade marks. Accordingly this paper will focus on the ECJ's 'answer' to the above question and how this guidance was received by the UK courts.

The ECJ's answer was, "In a situation which is not covered by Article 6(1)… where a third party uses in the course of trade a sign which is identical to a validly registered trade mark on goods which are identical to those for which it is registered, the trade mark proprietor of the mark is entitled, in circumstances such as those in the present case, to rely on Article 5(1)(a) of that directive to prevent that use. It is immaterial that, in the context of that use, the sign is perceived as a badge of support for or loyalty or affiliation to the trade mark proprietor."

So what has proved problematic about this? Firstly the ECJ again chose to consider a subtly different question to the one actually asked. The question the ECJ decided needed answering was "whether Article 5(1)(a) of the Directive entitles the trade mark proprietor to prohibit any use by a third party in the course of trade of a sign identical to the trade mark for goods identical to those for which the mark is registered, or whether that right of prohibition presupposes the existence of a specific interest of the proprietor as trade mark proprietor, in that use of the sign in question by a third party must affect or be liable to affect one of the functions of the mark".

It is only in the context of this re-phrased question that the ECJ's answer makes any sense. The 'circumstances' of this case, which led to the ECJ's ruling that the defendant's use could be prevented by Article 5(1)(a) despite that national court's reservations, were that in the ECJ's view the use made was liable to affect the functions of the marks.

In other words, uses of a similar/identical sign that do not affect the functions of the registered trade mark cannot infringe, while uses that do, may. However, the ECJ confused matters somewhat by also noting "that Article 5(5) of the Directive provides that Article 5(1) to (4) does not affect provisions in a Member State relating to protection against the use of a sign for purposes other than that of distinguishing goods or services".

This phrase could be read as suggesting that use of a sign for purposes other than that of distinguishing goods or services (the essential function) falls outside the Trade Marks Directive altogether. Such a use could therefore be prevented if, and only if, Member State's non-trade mark laws (such as unfair competition) covered it. Alternatively, this phrase could simply be a confirmation that it was only the protection of the essential function that was monopolised by the Trade Marks Directive. This would mean that the other functions of a trade mark (e.g. as carriers of positive messages/associations which are not related to the origin of the goods) are also protected by the Trade Marks Directive. The latter interpretation would have been more consistent with the ECJ's repeated use of the word functions (in the plural) in this judgment.

The Court of Appeal, when applying the ECJ's guidance, concluded that the ECJ had established that trade mark use was not relevant. The only relevant issue was whether the use was detrimental to any of the functions of the mark. Here, the Court of Appeal found that although "the trade marks, when applied to the goods, were purchased and worn as badges of support…that did not mean that the use by a third party would not be liable to jeopardise the functions of the trade marks, namely the ability to guarantee origin. To the contrary, the wider and more extensive the use, the less likely the trade marks would be able to perform their function". This is, in summary, a finding of harm to the essential function by dilution.

Problematically, the day after the Court of Appeal's judgment, the House of Lords in R v Johnstone (apparently without the benefit of reading the Court of Appeal's judgment) interpreted the ECJ's guidance as requiring traditional badge of origin use for infringement to be established, in the clearest terms. Lord Nichols noted that the ECJ "re-affirmed its characterisation of the purpose of a trade mark in terms which accord with the approach of English law – the essential function of a trade mark is to guarantee the identity of origin of the marked goods or services to the consumer or end user by enabling him, without any possibility of confusion, to distinguish the goods or services from others which have another origin". He then noted that the ECJ had held that the exclusive right under article 5(1)(a) was "co-terminous with the function of registered trade marks…".

Lord Walker was blunter. He seems to regard functions/purposes of trade marks other than the badge of origin function as somehow improper. "'Trade mark use' is a convenient shorthand expression for use of a registered trade mark for its proper purpose (that is, identifying and guaranteeing the trade origin of the goods to which it is applied) rather than for some other purpose."

In effect the Lords concluded that the use only "affects or is liable to affect the functions of the trade mark" as required by the ECJ if it is 'trade mark use' (as defined by Lord Walker above). This has left the lower courts in a quandary which, five years on, is still to be fully resolved.

In October 2004 in Koninklijke Philips Electronics N.V. v. Remington Consumer Products Limited, Rayovac Europe Limited, Rimer J made it clear that he felt the ECJ's guidance and the UK authorities which purportedly applied it had not cleared up the question of "whether use of a sign for section 10 purposes will only be an infringing use if it is 'trade mark use', or whether any use will do…". He noted, somewhat wryly, that "Mr Thorley submitted that they resolved the law on this point in Remington's favour and Mr Carr submitted that they did not and that the only way to resolve it is by way of a further reference to the ECJ… I agree with Mr Carr and do not, therefore, propose to take time in considering the authorities to which I was referred".

He was not the only one. Professor Ruth Annand, acting as the Appointed Person in Tesco Stores Ltd's Trade Mark Applications, noted that, "the Court of Appeal in Arsenal… and the House of Lords in R v Johnstone… appeared each to attribute different meanings to the decision of the ECJ in Case C-299/99".

But despite the uncertainty of his peers, in June 2004, Geoffrey Hobbs QC acting as a Deputy Judge in the Electrocoin Automatics Ltd v Coinworld Ltd & Ors [2004] EWHC 1498 (Ch) (29 June 2004) case felt confident that the authorities had established that trade mark use was required:

"The… thrust of the guidance provided by the judgments and decisions… is that the rights conferred by registration of a trade mark are 'not engaged' (and therefore not infringed) by use of a sign other than for the purposes of distinguishing goods or services."

Nearly two years later, Lewison J was still not convinced. "It seems to me that the ECJ is recognising that a trade mark may have functions beyond simply guaranteeing a trade origin. The position occupied by the mark within the relevant product market (for instance, as in Dior, by suggesting luxury or prestige) is a legitimate object of protection. As the ECJ recognised…the 'image' of a trade mark is something that the proprietor is entitled to protect."

We now have the ECJ's judgment in Opel (referred to already above) to complicate matters further. The Opel case is notable for recognising a type of identical mark on identical goods use which, although it did not fall within any of the defences of Article 6(1)(b), was held at least capable of not affecting the essential function of the mark (in contrast to Arsenal). It was left to the national court to make the final determination as to whether or not it did.

Most importantly in the context of this section, the ECJ made it clear that a finding that a sign was not perceived as a badge of origin (i.e. it was not seen to be acting 'as a trade mark' in the traditional sense) must inevitably lead to the conclusion that the essential function was not affected. This indicates that at least part of the reasoning in the Court of Appeal in the Arsenal case is faulty (i.e. that the essential function could be affected, by dilution, even where the sign was not perceived by consumers to be a badge of origin).

However, as already noted, the ECJ in Opel did not stop there. It went on to indicate that detriment to functions other than the essential function could lead to infringement.

Immediately post Opel it appeared that where harm only to the essential function is alleged, the sign must be perceived by consumers as acting as an indication of origin (if it is not, no such harm can occur). However, where harm to the other functions is alleged, does this mean that such a perception is not required?
The answer is apparently such a perception is required in this situation as well. The ECJ in the recent Celine case noted that "It is clear from the scheme of Article 5 of the directive that the use of a sign in relation to goods or services within the meaning of Article 5 (1) and (2) is use for the purpose of distinguishing the goods or services in question, whereas Article 5(5) is directed at 'the use which is made of a sign for purposes other than distinguishing the goods or serviced' (Case C-63/97 BMW [1999] ECR I-905, paragraph 38) [our emphasis]".

Article 38 of the BMW decision had said:

"… it is true that the scope of application of Article 5(1) and (2) of the directive, on the one hand, and Article 5(5), on the other, depends on whether the trade mark is used for the purpose of distinguishing the goods or services in question as originating from a particular undertaking, that is to say, as a trade mark as such, or whether it is used for other purposes… [our emphasis]".

So it would appear that unless the offending sign is being used to distinguish the goods/services by indicating they originate "from a particular undertaking", a trade mark owner cannot successfully make use of Article 5(1) or 5(2) to prevent use of the sign whether harm to the essential function or the other functions of a trade mark is alleged. Instead he must rely on relevant national provisions (if any), the application of which Article 5(5) permits.

However it is very difficult to reconcile this most recent statement of the ECJ with what it said in the Adidas and Opel cases. No wonder the UK national courts remain perplexed by the ECJ guidance they are supposed to be following.

That's not for you to say

On a reference under Article 234, the purpose and remit of the ECJ is only "to decide a question of law and that… ruling is binding on the national court as to the interpretation of the community provisions and acts in question". (See the Benedetti v Munari case ). On occasions the ECJ has however 'steered' the national court on the facts for the purpose of the unified application of the law. However, as the House of Lords made abundantly clear in the landmark R v Secretary of State for Transport ex parte Factortame (No. 5) case, the English court is not bound by that steer and therefore can legitimately conclude the case in a different way.

It is impossible to consider the issue of the extent to which the ECJ may be over-stretching its remit in this sense without turning once again to the Arsenal case. Indeed, this is one of the few cases in which the English High Court and Court of Appeal openly acknowledged that the ECJ made findings of fact beyond its remit, which could be freely ignored. "Paragraphs 56 and 57 [of the ECJ's judgment] appear to contain conclusions of fact reached by the ECJ. As such they cannot be binding on the national court."

In the end the Court of Appeal concluded that the ECJ's ruling was not based upon its ultra vires finding of fact (concerning post-sales perception of the mark as a badge of origin). Instead, it was based on the ability of the essential function of the mark to be damaged, irrespective of whether it is viewed as a badge of origin or not.

So far the UK courts have found ways around having to 'ignore' what are essentially ECJ findings of fact. However unless the ECJ restrains itself, the English courts may soon be put in the position where they feel the need to make findings in direct contradiction to the ECJ.

How can you say that!

The ECJ's approach to construction is far more 'teleological' than that of the English courts. As Lady Justice Arden pointed out at a seminar organized by the EU Commission Legal Revisers Group, "…the English courts tend to take a more literal approach than the European Court of Justice. This may be either the cause or the effect of the high standards of professional drafting by the Parliamentary Counsel…[For the UK court] the general rule [is] that words carry their natural and ordinary meaning."

In contrast Hans Kutscher (former President of the ECJ) explained that for the ECJ "the literal and historical methods of interpretation recede into the background. Schematic and teleological interpretation... is of primary importance".

This division of approaches can cause English judge's some discomfort, focussed, as the English tradition is, on providing legal certainty to its citizens. This discomfort is evident in the famous words of Lord Diplock, the ECJ "seeks to give effect to what it conceives to be the spirit rather than the letter of the Treaties; sometimes, indeed, to the exclusion of the letter".

Perhaps the most notorious example of the ECJ's tautological approach in an IP context occurred in the case of Davidoff & Cie SA, Zino Davidoff SA v Gofkid Ltd. Article 5(2) of the Directive states, "Any Member State may also provide that the proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical with, or similar to, the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark."

This case concerned whether the increased protection offered to marks with a reputation extended to use on goods and services which were similar despite the 'not similar' wording. Gofkid and the UK Government said only the answer 'no' was in line with the wording of the provisions and the intention of the Community legislature. In respect of the latter, sufficient protection for marks with a reputation was already ensured by Articles 4(1)(b) and 5(1)(b) since, according to the case-law, a likelihood of confusion is found more readily in the case of marks with a reputation.

However, the ECJ having observed "that Article 5(2) of the Directive must not be interpreted solely on the basis of its wording, but also in the light of the overall scheme and objectives of the system of which it is a part" decided that this "article cannot be given an interpretation which would lead to marks with a reputation having less protection where a sign is used for identical or similar goods or services than where a sign is used for non-similar goods or services".

It answered the core question by ruling that Article 5(2) of the Trade Marks Directive is "… to be interpreted as entitling the Member States to provide specific protection for registered trade marks with a reputation in cases where a later mark or sign, which is identical with or similar to the registered mark, is intended to be used or is used for goods or services identical with or similar to those covered by the registered mark." In other words "despite the intriguingly straightforward use of the words 'not similar'" the ECJ held that in this context 'not similar' means 'similar and not similar'!

This conclusion was bound to be tested by English lawyers and indeed in Electrocoin Automatics Ltd v Coinworld Ltd & Ors the Deputy Judge (Geoffrey Hobbs QC) had to deal with such a test. Coinworld attempted to argue that the ECJ had departed from the language of Article 5(2) to such a degree that its recent rulings as to the meaning and effect of that article could only be followed in the UK if the wording of Section 10(3) of the 1994 Act had been revised at the time of the alleged infringement (so as to delete the 'not similar' restriction).

The Deputy Judge was not impressed by this argument as it flew "in the face of the ruling in Adidas-Salomon to the effect that a Member State cannot transpose Article 5(2) of the Directive into national legislation without ensuring that the implementing provisions are thereafter interpreted and applied so as to provide protection equal to that which Article 5(2) has now been held to envisage. There is no material difference between the language of Article 5(2) and the language of Section 10(3) prior to amendment. Parliament clearly intended the latter provision to be given the same meaning and effect as the former…"

The Trade Marks Directive was implemented in the UK by a fully debated Act of Parliament. Article 5(2) is an optional provision which the UK could have chosen not to implement. In these circumstances it is difficult to share wholeheartedly the Deputy Judge's confidence that Parliament intended the national provision to mean whatever the ECJ said it meant in the future. Is it not equally possible that Parliament expected its scope to be limited by the natural meaning of its wording? If this judgment had been appealed, some interesting constitutional issues, concerning the relationship between the ECJ and the English courts, may have been more fully addressed. In the light of the growing tensions between these institutions, it can be predicted that another opportunity will soon arise.

---

For further information about this published aticle, contact Kathryn Hobbs on +44 (0)121 213 2397, Alexa Highfield on +44 (0)121 213 2396 or Amie Ryalls on +44 (0)121 213 2360

This published article may contain information of general interest about current legal issues, but does not give legal advice.