On the last day of January 2008 Advocate General Mengozzi delivered his opinion in the O2 Holdings Limited & O2 (UK) Limited v Hutchinson 3G UK Limited litigation . This is an English action by O2 against 3G for infringement of its trade marks by 3G's use of bubble imagery (similar to O2's registered bubble trade marks) in television advertisements alongside use of the O2 name.

The background

The English High Court had essentially held that 3G's use of the bubbles had caused a likelihood of confusion and hence would have fallen within Article 5(1)(b) of the Trade Marks Directive (EC/89/04) had 3G not had a defence under Article 6(1)(b). This defence was, in the judge's view, available to 3G because it complied with Article 3(a)(1) of Directive EC/84/450 (as amended). Directive EC/84/450 concerns the regulation of misleading and comparative advertising (the "Comparative Advertising Directive"). O2 appealed against the non-infringement finding and 3G appealed against the finding that its use fell within the scope of Article 5(1)(b) at all.

The Court of Appeal referred three questions to the European Court of Justice (ECJ), namely:

1. Where a trader, in an advertisement for his own goods or services uses a registered trade mark owned by a competitor for the purpose of comparing the characteristics (and in particular the price) of goods or services marketed by him with the characteristics (and in particular the price) of the goods or services marketed by the competitor under that mark in such a way that it does not cause confusion or otherwise jeopardise the essential function of the trade mark as an indication of origin, does his use fall within either (a) or (b) of Article 5(1) of Directive 89/104?
2. Where a trader uses, in a comparative advertisement, the registered trade mark of a competitor, in order to comply with Article 3a of Directive 84/450 as amended must that use be "indispensable" and if so what are the criteria by which indispensability is to be judged?
3. In particular, if there is a requirement of indispensability, does the requirement preclude any use of a sign which is not identical to the registered trade mark but is closely similar to it?

The relevant legislation

Article 5 of the Trade Marks Directive reads as follows:

"1. The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:

1. any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;
2. any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark."

Article 6(1) (b) of that Directive establishes that: "The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade: …indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services."

Article 3a(1) of Directive 84/450 provides as follows:

"Comparative advertising shall, as far as the comparison is concerned, be permitted when the following conditions are met:

1. it is not misleading according to Articles 2(2), 3 and 7(1);
2. it compares goods or services meeting the same needs or intended for the same purpose;
3. it objectively compares one or more material, relevant, verifiable and representative feature of those goods and services, which may include price;
4. it does not create confusion in the market place between the advertiser and a competitor or between the advertiser's trade marks, trade names, other distinguishing marks, goods or services and those of a competitor;
5. it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of a competitor;
6. for products with designation of origin, it relates in each case to products with the same designation;
7. it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products;
8. it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name."

The Advocate General's suggested answers

The Advocate General suggested that these questions be answered as follows:

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 Council Directive 84/450/EEC of 10 September 1984 concerning misleading and comparative advertising, as amended by Directive 97/55/EC of the European Parliament and of the Council of 6 October 1997, and is not subject to the application of Article 5(1)(a) or (b) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks.
2. Article 3a of Directive 84/450 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.

Why it matters

Why are such answers and the Advocate General's explanation for them likely to be controversial? It is clear from his first answer that the Advocate General's view is that if an unauthorised use of a trade mark or similar sign falls within the definition of comparative advertising under the Comparative Advertising Directive, then the only legislation to have any application is that Directive – it is truly "exhaustive". The Trade Mark Directive (and indeed it appears all other legislation) is not even to be "considered". This is true whether or not it is established that the criteria for legitimate comparative advertising under that Directive are fulfilled. The key paragraphs of the Advocate General's opinion in this respect are 34 and 35:

"The use of a competitor's trade mark in an advertisement which compares the characteristics of goods or services marketed by him under that mark with those of the advertiser is… specifically and exhaustively covered by Article 3a of Directive 84/450. It is prohibited only if it does not comply with the conditions laid down in that article. In that case, it is prohibited under that article and not under Article 5(1)(a) or (b) of Directive 89/104. Conversely, if it complies with those conditions, it cannot be held to be prohibited under the provisions contained in Article 5(1)(a) or (b) of Directive 89/104.

Those provisions, like the provisions contained in Article 6(1) of Directive 89/104, do not, therefore, come into consideration for the purpose of determining whether that use is lawful... There is little point in wondering … whether …it follows from the introduction, with the addition of Article 3a to Directive 84/450 by Directive 97/55, of a system which, being presented as a lex specialis in cases where another's trade mark is used in a comparative advertisement, therefore derogates from the system contained in Article 5(1)(a) and (b) of Directive 89/104."

Accordingly, if a trade mark use is found to be unlawful under the Comparative Advertising Directive, the owner's only redress is under that Directive. He cannot then additionally fall back on a trade mark infringement claim. This is particularly problematic for UK trade mark owners because unlawfulness under the Comparative Advertising Directive does not give rise to a private cause of action for which the usual remedies of damages and injunctions are available.

Instead all such a trade mark owner can do, however seriously unfair and damaging the unlawful advertisement was, is complain to the relevant regulatory body who will then decide whether or not to proceed. In practice, in the UK such complaints are usually dealt with by the Advertising Standards Authority (to which OFCOM has contracted out its broadcast advertising responsibilities and to which the Office of Fair Trading delegates the majority of advertising issues. Both the ASA and the OFT, like all government funded bodies, have limited budgets and somewhat different priorities than the trade mark owner. They are usually only persuaded to take an interest where there is a clear public interest at stake.

It also means that damages may be denied the targeted business even where the legislation which implemented the Comparative Advertising Directive does provide a private cause of action, because damages are not a remedy available under it, although they would be for trade mark infringement . This is the position in Ireland.

Furthermore, it may mean that the implementing legislation of some Member States does not properly implement the Comparative Advertising Directive. For example in Italy the implementing legislation - Section 8 (Administrative and judicial protection), paragraph 15 of Legislative Decree No. 145 of 2 August 2007 - states:

"The ordinary courts of law retain jurisdiction to take cognisance of acts of unfair competition provided by Article 2598 of the civil code and, with regard to comparative advertising, of acts infringing copyright law provided by Law No 633 of 22 April 1941, as subsequently amended, and trademark protection provided by Legislative Decree No 30 of 10 February 2005, as subsequently amended, and denominations of origin recognised and protected in Italy and other distinctive signs of competing companies, goods and services."

In other words, it expressly reserves the option of commencing legal proceedings before the ordinary courts for trade mark and other IP infringements in addition to a comparative advertising complaint. The Advocate General has now ruled out this dual pronged approach.

Although the reference and the Advocate General's answers strictly only relate to the trade mark rights, when one follows his reasoning it is very difficult to justify why a different approach should be adopted when considering any other rights or causes of action that would otherwise be available to the business the unlawful advert targeted. Hence it would appear that copyright legislation, design right legislation, passing off rights and indeed unfair competition legislation should all be trumped by the Comparative Advertising Directive and therefore not even considered if the identifier/logo protected by such rights is used within such a context.

It is somewhat doubtful that this was intended by the EU legislators, especially as only trade mark rights are even mentioned within the Comparative Advertising Directive. Note also that the definition of "comparative advertising" under Article 2 of the Comparative Advertising Directive is very wide indeed:

• 'advertising' means the making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services, including immovable property, rights and obligations
• 'comparative advertising' means any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor

Accordingly it would appear, for example, that packaging printed with the wording/representation "bags of identical design but stronger and cheaper than Supervac model XY bags" alongside the Supervac logo would be regarded as a comparative advert subject only to the Comparative Advertising Directive. However, packaging marked "bags suitable for use with Supervac model XY" (again alongside the Supervac logo) is perhaps unlikely to be regarded as a comparative advertisement and may well amount to infringement unless it falls within the Article 6(1)(c) defence (see below)

The fact that the wording appears on the packaging of goods does not seem to disqualify it from being a comparative "advertisement" within the definition above. Indeed, as Laddie J once noted, there would be substantial difficulties in "drawing a sensible boundary where advertising ends and use on packaging begins".

The Article 6(1)(c) defence states: "The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade – (c) the trade mark where it is necessary to indicate the intended purpose of as product or service, in particular as accessories or spare parts."

Note the crucial and illogical difference here is the criteria of justification (necessity). In the light of this it is not surprising that O2 asserted and the English High Court originally accepted that Article 3a of the Comparative Advertising Directive required that use of the mark was "indispensable" for the purpose of identifying the competitor or the goods or services concerned in order for the advertisement to be regarded as not taking unfair advantage of the reputation of the mark. Recital states that "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… such use of another's trade mark, trade name or other distinguishing marks does not breach this exclusive right in cases where it complies with the conditions laid down by this Directive, the intended target being solely to distinguish between them and thus to highlight differences objectively " (emphasis added).

The purpose of the Comparative Advertising Directive is, in the Advocate General's words, to act "as an instrument to inform consumers and a stimulus to competition between suppliers of goods and services". If this purpose has already been wholly fulfilled by use of the relevant brand name what is the real justification for also using the targeted business' other valuable intellectual property – in this case the bubbles?

The Advocate General accepted that contrary to the interpretation placed on it by some, the ECJ's Pippig case did not establish that use of such additional indicia was necessarily legitimate nor did it rule out an indispensability requirement. It simply held that inclusion of the shop front in the advert etc did not "of itself" denigrate etc the mark so as to make the advert fall foul of Article 3a(1)(e). However the Advocate General's opinion was that as such a requirement was not expressly included within Article 3a, and as the ECJ's case law established "the conditions required of comparative advertising must be interpreted in the sense most favourable to it", indispensability could not be a condition of compliance. Hence the Advocate Generals' second answer above.

If the Advocate General's opinion is correct in this respect, the absence of any kind of necessity restraint in such advertisements is likely to lead to extremely aggressive free for all and tit-for-tat advertising between rival businesses which goes well beyond what is needed to enable consumers readily to make the comparisons that will assist them with their buying choices. This sort of advertising is currently quite foreign to many Member States.

Of course, such advertising will need to comply with Article 3a, in particular it must not "discredit or denigrate the trade marks" or take "unfair advantage of the reputation of a trade mark". However the court's judgment in respect of the deliberately distorted bubbles used by 3G has shown that, in the UK at least, it is going to be extremely difficult to obtain a finding that an advertisement is denigrating. Furthermore the Advocate General's view of what amounts to taking unfair advantage of a trade mark appears to be extremely restrictive. In his view it would seem that Article 3 (a)(1)(g) would only prohibit:

"…reference to another's distinguishing marks where it is clear that comparative advertising is in reality merely a pretext to exploit the reputation of that mark in a parasitical manner, quite apart from creating the aforesaid association."

By the "aforesaid association" the Advocate General is here apparently referring to the inevitable mental "link with the competitor's reputation or the reputation of the distinguishing marks concerned…" a consumer makes when a company's comparative advertisement identifies its competitor by its competitor's trade mark

When, if an advert falls within the definition of a comparative advertisement and fulfils condition 3(a)(1)(c) in that it actually compares something verifiable, will this ever occur?

Of course, the ECJ does not always follow its Advocate General's opinions. Indeed it disregards them in trade mark cases relatively frequently. One wonders whether the ECJ will take kindly to the Advocate General's criticism of its case law in respect of Article 5 (1)(a) and (b) as "not…at least at first sight,…at all consistent" and "bristling with difficulties" and "I shall not omit to mention the ambiguity and vagueness of the [European] Court's ruling" in Pippig.

However, if the ECJ should chose to be guided by its Advocate General in this case, the fall out for trade mark owners may be particularly significant.

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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.