ECJ rules on use of trademarks as company and shop names

The European Court of Justice (ECJ) has ruled (C-17/06) on a reference from the Nancy Court of Appeal in a dispute over whether the owner of the CÉLINE trademark is entitled to prevent the use of the name Céline as a company name or a shop name offering goods identical to those for which the mark is registered.

The claimant, Céline SA, was incorporated in France under that name in 1928. Its main activity is the creation and marketing of articles of clothing and fashion accessories. It is the proprietor of the word mark CÉLINE, which has been registered since 1948 for, among other things, clothes and shoes. The predecessors in business of the defendant, Céline SARL, had operated as a retailer of clothing and accessories since 1950. They had registered their business in the local trade register that year. The defendant company was itself registered on the companies register in 1992.

Céline SA commenced trademark infringement and unfair competition proceedings against Céline SARl seeking an injunction and damages. At first instance, the regional court found in the claimant's favour in all respects. The defendant appealed and the appellate court referred the following question to the ECJ for a preliminary ruling:

"Must Article 5(1) of the [First Trademarks] directive be interpreted as meaning that the adoption, by a third party without authorization, of a registered word mark, as a company, trade or shop name in connection with the marketing of identical goods, amounts to use of that mark in the course of trade which the proprietor is entitled to stop by reason of [its] exclusive rights?"

In answering this question, the ECJ (citing its decisions in Arsenal (C-206/01) and Adam Opel (C-48/05)) held that to succeed in a claim under Article 5(1)(a) of the First Trademarks Directive, the following conditions must be satisfied:

• the use of the defendant's sign must be in the course of trade;
  
  
• it must be without the consent of the trademark owner;
  
  
• it must be in respect of goods or services which are identical to those for which the mark is registered; and
  
  
• it must affect, or be liable to affect, the functions of the trademark, in particular its essential function of guaranteeing to consumers the origin of the goods or services in question.

It was not in dispute that the defendant's use was in the course of trade and without the claimant's consent. The case, therefore, turned on the third and fourth requirements - namely:

• whether the defendant's use was in relation to the goods or services for which the claimant's mark was registered; and
  
  
• whether such use affected (or was liable to affect) the essential functions of the mark.

In relation to the third requirement, the ECJ held that the purpose of a company, trade or shop name is not, of itself, to distinguish goods or services. The purpose of a company name is to identify a company, while trade names and shop names designate the business being carried on. Unless, therefore, the name in question is being affixed to goods or is being used in some other way that establishes a link between the name and the goods (a matter for the national court to determine), the mere adoption of a mark as a company name or the name of a shop offering goods does not constitute use of the mark in relation to those goods.

As for the fourth requirement, the court indicated that this would be satisfied where the name in question is used in relation to goods or services in such a way that consumers are liable to interpret it as indicating the origin of those goods or services. Again, this is for the national court to determine.

While the French appellate court did not specifically refer any questions concerning the own name defence under Article 6(1)(a) of the directive, both the advocate general and the ECJ provided some guidance on its scope. Citing its decision in Anheuser-Busch (C-245/02), the ECJ found that the defence is available only in respect of use that is in accordance with honest practices in industrial or commercial matters. This meant that the defendant must have acted fairly in relation to the legitimate interests of the trademark owner.

The ECJ found that the following factors were relevant in this respect:

• the extent to which the relevant public understands the use of the defendant's name as indicating a link between the defendant and the trademark owner;
  
  
• the extent to which the defendant ought to have been aware of this; and
  
  
• whether the claimant's mark has a reputation in the member state concerned from which the defendant might profit in marketing its goods or services.

Once again, the ECJ left this issue for the national court to determine.

As in the Arsenal and Adam Opel decisions, the ECJ declined to lay down general principles as to the circumstances in which particular types of use will infringe a registered trademark. Instead, the ECJ has again left it to national courts to determine whether the essential functions of the trademark have been affected on a case by case basis. This decision is potentially significant to trademark owners and, in particular, to retailers. It remains to be seen where national courts will in the future draw the line in deciding whether the use of a company name, trading name or a shop name in any particular case affects the essential function of a claimant's mark.

Garry Mills, Clifford Chance LLP, London