ECJ denies absolute trademark protection for superbrands

European Union

In Intel Corporation Inc v CPM United Kingdom Ltd (Case C-252/07, November 27 2008), the European Court of Justice (ECJ) has ruled that despite its reputation in respect of computer products, Intel Corporation Inc may not automatically prevent third parties from applying identical or similar trademarks to dissimilar goods on the grounds that such use inevitably takes unfair advantage of, or causes detriment to, the distinctive character or repute of the INTEL mark.

Intel, the world-famous computer chipset manufacturer, owns UK and Community trademark registrations for INTEL and related marks in respect of computer and computer-linked products. Intel sought the revocation of the trademark INTELMARK, which is owned by CPM United Kingdom Ltd, a marketing services company. Intel argued that CPM's mark was so similar to Intel's mark that CPM's use took unfair advantage of, or caused detriment to, the distinctive character or the repute of Intel's mark without due cause. 
 
Intel relied on the grounds for invalidity under Section 5(3) of the Trademarks Act 1994 (implementing Article 4(4)(a) of the First Trademarks Directive (89/104/EEC)), which corresponds to provisions on infringement under the act and the directive. 
 
Having failed to have CPM's mark invalidated in the lower courts, the case came to the Court of Appeal of England and Wales.
 
Intel satisfied the pre-condition for relying on Article 4(4)(a) of the directive of having a trademark with a reputation (the lower courts having found that Intel's mark had a "huge" reputation). The Court of Appeal also held that INTEL was unique in the sense that it had not been used by anyone for any goods or services other than those of Intel. 
 
With no suggestion that CPM's use took unfair advantage of the distinctive character or repute of Intel's mark (known as ‘unfair free-riding’) or was detrimental to the repute of the mark (often referred to as ‘tarnishment’), it fell to be determined whether CPM's use was detrimental to the distinctive character of Intel's mark. This cause of action is often referred to as ‘blurring’ or ‘dilution’.
 
Intel took the position that where a mark has a "huge" reputation and is unique, a court should accept that use by third parties on virtually any goods or services would cause detriment to the mark. If Intel were right, this would have led to an effective monopoly by Intel over the use of the mark INTEL and similar marks - the Court of Appeal noting that Intel's arguments would apply as much to "nuclear power stations or bananas" as they did to marketing services. It followed that similar arguments could be made by other 'superbrand' owners and unique household names.
 
In May 2007 the court referred a number of questions to the ECJ for clarification (for further details please see “Questions on dilution protection referred to ECJ”).
 
The ECJ has previously ruledthat in order to take action for infringement under Article 5(2) of the directive (worded the same as Article 4(4)(a)), consumer confusion, or a likelihood of it, was not required (see Adidas-Salomon AG v Fitnessworld (Case C-408/01)). Instead, the offending sign must be sufficiently similar to the mark with a reputation so as to cause a "link" to be created in the mind of the consumer between the two. Intel argued that the link requirement was satisfied by a mere "bringing to mind" of the earlier mark.
 
Although the ECJ agreed with Intel that the "bringing to mind" of the mark with a reputation was "tantamount" to establishing the required link, it did not agree that once that link is established, a proprietor will automatically succeed in its claim. Instead, in order to benefit from the extended protection provided by Article 4(4)(a), the proprietor of the earlier mark must adduce proof that the use of the later mark or sign would take unfair advantage of, or be detrimental to, the distinctive character or the repute of the earlier mark. It would not be necessary to demonstrate actual or present injury, but the proprietor must at least prove that there is a serious risk that such an injury will occur in the near future.
 
The result of this decision is that a right holder cannot automatically use its mark, no matter how famous or well known, to prevent use of a similar mark by third parties on dissimilar goods or services. The mark owner must instead provide evidence of injury to the trademark or a serious risk of such injury occurring. 
 
The ECJ stressed that there must be a global assessment by the court, taking into account all the relevant facts when assessing injury (unfair free-riding, dilution or tarnishment), much as there must be a global appreciation of all the facts when determining whether or not there is a link.
 
Despite broad questions referred by the Court of Appeal, the ECJ provided no guidance on tarnishment and very little on unfair advantage, describing it as the "drawing of benefit from [the] mark".  Brand owners hoping to obtain a greater understanding of what constitutes unfair advantage will have to wait for the forthcoming decision of the ECJ in L'Oréal v Bellure (Case C-487/07).
 
The most significant part of the ECJ's judgment relates to dilution, also described by the ECJ as "whittling away" or "blurring". While the court held that the stronger or more “unique” a mark is, the easier it will be to show dilution, it stated that what must be shown to succeed is evidence of a change (or a serious likelihood of such a change) in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered. Therefore, in order for Intel to show that CPM's use of INTELMARK diluted or was seriously likely to dilute its mark, it would have to prove that its consumers are buying less of its goods. This is because, as the ECJ puts it, dilution of a mark requires the "dispersion of the identity and hold upon the public mind" of the mark. The ECJ's view appears to be that if customers keep buying Intel as much as they did before, there is no dilution.
 
This is perhaps the most controversial aspect of the judgment, as it may make dilution very hard to prove in practice. Intel argued that dilution should be actionable on the first use of a relevant later mark, rather than once the impact is clear months or years later, to avoid a "death by a thousand cuts". The ECJ agreed that a first use may be enough, but it is likely to be difficult to provide convincing evidence of a change or serious likelihood of a change in the economic behaviour of the average consumer until dilution has already taken place, in which case it is arguably too late. In practice, evidence from consumer opinion surveys may help - although they are found by the UK courts to be notoriously unreliable.
 
The outcome is a blow for brand owners hoping to secure extended protection for famous brands.
 
Joel Smith and Darren Meale, Herbert Smith LLP, London

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