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02 Holdings Limited & 02 (UK) Limited v Hutchison 3G UK Limited C-533/06. 31 January 2008 The European Court of Justice issues an opinion on the use of a competitors trademark in comparitive advertising.
For a short time in August 2004, Hutchison 3G UK Ltd (H3G) ran television, press and radio advertisements comparing O2 Holdings Ltd (formerly O2 Ltd) and O2 (UK) Ltd (O2) mobile prices against those offered by its 3 network. H3G claimed that its Threepay telephone service was cheaper than the equivalent service offered by O2 on its Talkalot and Talkalotmore tariffs. The advertisements involved the use of various O2 registered trademarks UK and community trademarks (CTM) - and raised two issues: comparative advertising and trademark infringement. O2 quickly became aware of the advertisements and wasted no time in putting the legal wheels in motion to obtain an injunction to stop them. Unfortunately, O2 did not get the injunction and was forced to go to trial. It accepted the judges ruling in the interim application hearing that the advertisements were not misleading and only pursued H3G for trademark infringement. That pursuit took O2 all the way to the European Court of Justice (ECJ). More than a year after referral of the matter to the ECJ, Advocate General Mengozzi (AG) delivered his long-awaited opinion on 31 January 2008. He opined, in favour of H3G, that use of a competitors trademark in comparative advertising should be considered solely under the Comparative Advertising Directive1 (CAD) and not the Trademarks Directive2 (TMD). We now wait to see whether the AGs opinion will be followed. This article looks at the laws relating to comparative advertising and trademark infringement and discusses how this case progressed from the High Court to the ECJ. It also analyzes the effect the AGs opinion will have if it is followed. Comparative advertising The Control of Misleading Advertisements (Amendment) Regulations 2000 (CMA) amended the Control of Misleading Advertisements Regulations 1988 (which implemented the CAD) by adding provisions dealing with comparative advertisements to the existing regime governing misleading advertisements. An advertisement is comparative if in any way, either explicitly or by implication, it identifies a competitor or goods or services offered by a competitor3 and shall, so far as the comparison is concerned, only be permitted when the following conditions, among others, are met: it is not misleading; it compares goods or services meeting the same needs or intended for the same purpose; it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price; it does not create confusion in the market place between the advertiser and a competitor or between the advertisers trademarks, trade names, other distinguishing marks, goods or services and those of a competitor; it does not discredit or denigrate the trademarks, trade names, other distinguishing marks, goods, services, activities, or circumstances of a competitor; for products with designation of origin, it relates in each case to products with the same designation; it does not take unfair advantage of the reputation of a trademark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products; it does not present goods or services as imitations or replicas of goods or services bearing a protected trademark or trade name.4 While the TMD confers exclusive rights on the proprietor of a registered trademark, the CAD 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 trademark or trade name of which the latter is the proprietor and that therefore use of anothers trademark, trade name or other distinguishing marks does not breach [the] 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. Trademark infringement UK trademark As this case was a similar trademarks case, Sections 10(2) and 10(3) of the Trademarks Act 1994 (TMA) were at issue. Under these sections, a person infringes a registered trademark if he uses in the course of trade a sign which: because ... (b) the sign is similar to the trademark and is used in relation to goods or services identical with or similar to those for which the trademark is registered, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trademark; (a) is identical with or similar to the trademark, and (b) is used in relation to goods or services which are not similar to those for which the trademark is registered, where the trademark has a reputation in the United Kingdom and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trademark.
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The TMA provides that: Nothing in the preceding provisions of this section shall be construed as preventing the use of a registered trademark by any person for the purpose of identifying goods or services as those of the proprietor or a licensee. But any such use otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trademark if the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trademark. CTM Under the Community Trademark Regulation (CTMR), a trademark owner is entitled to prevent third parties from using in the course of trade: any sign where, because of its identity with or similarity to the [CTM] and the identity or similarity of the goods or services covered by the [CTM] and the sign, there exists a likelihood of confusion on the part of the public; the likelihood of confusion includes the likelihood of association between the sign and the trademark; any sign which is identical with or similar to the [CTM] in relation to goods or services which are not similar to those for which the [CTM] is registered, where the latter has a reputation in the Community 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 [CTM]. A CTM does not entitle the proprietor to prohibit a third party from using in the course of trade ... (b) indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of the production of the goods or of rendering of the
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service, or other characteristics of the goods or service, provided he uses them in accordance with honest practices in industrial or commercial matters. High Court to ECJ High Court - interim application O2s application for an interim injunction was to restrain H3G from continuing with its advertisements and using its UK and CTM trademarks - the O2 bubbles (Bubble Marks) and O2 sign (Word Mark). In simple terms, the 20-second television advertisement started in black and white with a shot of a circular field of bubbles, which then expands to fill the screen. A voice then said on 02 pay-as-yougo the first 3 minute peak rate call each day could cost you 75 pence. This was followed by an animated figure 3 and a voice saying or with ThreePay, that exact same call could cost you 15p. O2 argued: the first 3 minute peak rate call each day could cost you 75 pence versus that exact same call could cost you 15p was grossly misleading and an over simplification of any legitimate comparison which can be made; and there was infringement of its Bubble Marks and Word Mark. H3G said: the advertisements were accurate or, alternatively, fair; there was no possibility of trademark infringement of the Bubble Marks because the bubbles in the advertisement are insufficiently similar to the registered marks to be infringements and in any event its use was entitled to protection under Section 10(6) of the TMA; and there was no infringement of the Word Mark as H3Gs use was protected by Article 12(b) of the

CTMR. O2s application was dismissed by the judge and a trial ordered. The judge felt that: H3Gs price comparison was a true one - no evidence of dishonesty on the part of H3G had been put forward by O2; it was arguable that use of the Bubble Marks in the advertisement constituted trademark infringement, but he was not satisfied that the necessary elements for an interim injunction to be granted had been established as the disruption caused was not proportionate to the damage being caused to O2; and use of the Word Mark in the context of the price comparison did not constitute trademark infringement. While O2 accepted the judges position on the price comparison and use of the Word Mark, it decided to continue its trademark infringement allegations in respect of the Bubble Marks. Before the trial, O2 tried to refer 12 trademark questions to the ECJ (for a preliminary ruling under Article 234 of the EC Treaty) but the High Court refused to consider its request. O2 argued that the answers to its questions would/may have an impact on the main trial but H3G argued that: it could not be predicted at this stage that it would be necessary to enable [the court] to give judgment to have answers to these questions (as is required under Article 234); and there may be other questions to refer to the ECJ. High Court Trial At trial, the judge was asked to determine whether the Bubble Marks were valid. If they were valid, had H3G infringed them under the TMA and did H3G have a defence under the CAD or section 10(6) of the TMA? H3G

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counterclaimed that Bubble Marks lacked distinctiveness under section 3(1)(b) of the TMA. The judge held that: the Bubble Marks had both inherent and acquired distinctiveness; H3G had a defence under Regulation 4A of the CMA/Article 3(a)(1) of the CAD due to a prima facie case of infringement under section 10(2) of the TMA/Article 5(1)(b) of the TMD and so the conditions under Section 10(6) of the TMA/Article 6(1)(b) of the TMD were satisfied; and O2 had not established infringement under section 10(3) of the TMA/Article 5(2) of the TMD, to which H3G would in any event have had a defence under Regulation 4A of the CMA/Article 3(a)(1) of the CAD. O2s case and H3Gs counterclaim were dismissed. Both appealed. Court of Appeal In order to settle the dispute, the court concluded that an EU-wide answer was needed from the ECJ to the following questions: Where a defendant in the course of trade uses a sign in a context purely for the purpose of comparing the merits (including price) of his goods or services with those of the trademark owner and in such a way that it cannot be suggested that the essential function of the trademark to guarantee the trademark as an indication of origin is in any way jeopardised, can his use fall within either (a) or (b) of Article 5.1 of [the TMD]? Where a defendant uses, in a comparative advertisement, the registered trademark of another, in order to comply with Article 3a of [the CAD], must that use be indispensable and if so, what are the criteria by which indispensability is to be judged?

In particular, if there is a requirement of indispensability, does that requirement preclude any use of a sign so similar to the registered trade as to be confusingly similar to it? ECJ - AGs Opinion In response to the Court of Appeals questions, the AG opined that: Question 1 - The use of a sign identical or similar to the registered trademark of a competitor in an advertisement, which compares the characteristics of goods or services marketed by that competitor under that trademark with the characteristics of goods or services supplied by the advertiser, is covered exhaustively by Article 3a of the CAD and is not subject to the application of Article 5(1)(a) or (b) of the TMD. In coming to this conclusion, the AG acknowledged the different outcomes of other comparative advertising/trademark infringement cases such as BMW, Hlterhoft, Adam Opel and the Arsenal Football Club. Support for the AGs response came from the wording in recitals (14) and (15) and Article 3a of the CAD. Questions 2 and 3 - Article 3(a) of the CAD is not to be interpreted as permitting the use, in a comparative advertisement, of a sign identical or similar to the registered trademark of a competitor only when that use is indispensable for the purpose of identifying the competitor or the goods or services concerned. In coming to this conclusion, the AG found no language in Article 3(a) which could be interpreted to impose a requirement of indispensability and rejected O2s argument that a requirement of necessity could be deduced by implication of Article 3a(1)(g) or from previous ECJ decisions in Toshiba and Siemens.

If followed, what effect will this have on advertisements? While the AGs opinion does not favour trademark owners trying to protect the use of their trademarks in comparative advertising, he acknowledged that some form of necessity requirement should be considered to avoid unfair advantage being taken of a trademarks reputation. UK consumers are used to seeing advertisers comparing their products/services with those of a competitor. This is unlikely to go away as competition between companies for consumer buy-in is, and will continue to be, fierce. Mobile phone companies, supermarkets and banks are probably the most well-known industries which frequently compare the services they offer with those of their rivals. If followed, the AGs opinion is likely to be seen as a green light by companies to use their competitors trademarks in their advertisements. However, any advertisement must still stay within the parameters of the CMA/CAD to be acceptable. Companies should be prepared to review (and if necessary, amend) their advertising policies to ensure that they are consistent with the CAD, not the TMD.
Lisa Comber Associate Faegre & Benson LLP lcomber@faegre.com 1. 84/450/EEC (of 10 September 1994) as amended by Directive 97/55/EC (of 6 October 1997). The Misleading and Comparative Advertising Directive (2006/114/EC) came into force on 12 December 2007, and (from that date) repealed Directive 85/450/EEC and consolidated all the amendments to it in a single legal act. The UK implementing legislation, the Business Protection from Misleading Marketing Regulations 2007 is due to come into force on 26 May 2008. 2. 89/104/EEC of 21 December 1988. 3. Regulation 2(2) of the CMA. 4. Regulation 4A of the CMA, implementing Article 3(a)(1) of the CAD.

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