On 31 January 2008, Advocate General Mengozzi delivered his opinion in O2 Holdings Limited & O2 (UK) Limited v Hutchison 3G UK Limited (Case C 533/06).

If the European Court of Justice (ECJ) follows this opinion businesses will be unable to sue for infringement of their intellectual property rights when those rights are used in a comparative advertisement. The only cause of action will be under the Misleading & Comparative Advertising Directive EEC/84/450 (as amended) (CAD) or, soon, its replacement, Directive 2006/114/EC, which codifies amendments made to CAD but does not alter the law (MCAD).

This opinion should concern all businesses who value their brands, not least because it is not a breach of CAD to dilute a targeted trade mark - only to discredit/denigrate it, create confusion in the market place between it and the advertiser's trade marks or take unfair advantage of its reputation. The Advocate General is of the view that unfair advantage can only be taken where it results 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".

Additionally, the Advocate General is adamant there is no requirement that use of another's IP rights be indispensable or even necessary in order to make the intended comparison. If correct there would be nothing to stop the advertiser from using every element of its rival's brand identity (name, logo, get up, imagery etc.).

In some EU Member States (e.g. the UK) enforcement of CAD has been handed over to regulatory bodies, which often cannot be persuaded to act. Where there is a private cause of action enforceable via the national courts, damages are not always available for a breach, whereas they would be for a breach of the Trade Mark Directive (e.g. the Republic of Ireland).

Is it now open season on brands in the field of comparative advertising?

The background

The dispute from which this worrying opinion has arisen concerns use by Hutchinson 3G of bubble imagery similar to O2's trade marks in TV advertisements in addition to O2's name. O2 commenced proceedings for trade mark infringement and the dispute reached the UK Court of Appeal which referred 3 questions to the ECJ.

The first question concerned whether a comparative advertisement which used a competitor's trade mark but did "not cause confusion or otherwise jeopardise the essential function of the trade mark as an indication of origin" fell within the scope of the main infringement provisions of the Trade Marks Directive. The remaining questions related to whether, in order to comply with CAD, the use of the mark within such an advert must be "indispensable" and if so "what are the criteria by which indispensability is to be judged?"

The Advocate General, who acts as the ECJ's adviser, has suggested the following answers:

1. The use of a sign identical or similar to the registered trade mark of a competitor in an advertisement which compares the characteristics of goods or services marketed by that competitor under that trade mark with the characteristics of goods or services supplied by the advertiser is covered exhaustively by Article 3a of [CAD] and is not subject to the application of [the main infringement provisions of the Trade Marks Directive].
2. Article 3a of [CAD] is not to be interpreted as permitting the use, in a comparative advertisement, of a sign identical or similar to the registered trade mark of a competitor only when that use is indispensable for the purpose of identifying the competitor or the goods or services concerned.
   The Advocate General's view is that only CAD applied to this dispute, and the only redress was under CAD if its conditions were not fulfilled. However this is difficult to reconcile with recitals 13 and 15 of CAD itself.

Recital 13 specifically acknowledges the "exclusive right" granted to trade mark owners by the Trade Marks Directive. Recital 15 makes it clear that this right is not breached by use in a comparative advertisement "where it complies with the conditions laid down by this Directive".

Recital 15 also states "…it may, however, be indispensable, in order to make comparative advertising effective, to identify the goods or services of a competitor, making reference to a trade mark or trade name of which the latter is the proprietor". O2 argues that because use of bubbles similar to its trade marks in addition to its name cannot be regarded as "indispensable" to making the comparison between the services, it was taking unfair advantage of the reputation of its trade mark.

The Advocate General's view is that by recital 15 the EU legislature merely "…wished to make it clear that, in general, for comparative advertising to be effective reference will inevitably be made to a competitor's trade mark or trade name, but has not prescribed a condition subject to which such a reference might be lawful". No justification for the extent of use appears to be required.

Finally if CAD is truly this "exhaustive", then presumably it will not be possible to differentiate between trade mark rights and any other cause of action associated with protecting a business's brand.

UK brand owners may be hardest hit

In the UK the only action a targeted business can usually take against a comparative advertisement that does not fulfil the criteria of the CAD is to make a complaint to the Advertising Standards Authority (ASA). OFCOM has contracted out its broadcast advertising responsibilities to ASA and the Office of Fair Trading delegates most advertising issues to it.

ASA has limited resources and prioritises complaints which have a clear public interest. If the ECJ follows the Advocate General, UK trade mark owners will in effect have been robbed of their private rights and will no longer have any opportunity to claim damages for the loss they have suffered, however serious the damage done to their brand by the unlawful advertisement.

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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.