ECJ sets aside General Court's decision for failure to follow Intel

European Union

Trademark law generally protects the consumer from confusion. However, for marks which are distinctive and have a strong reputation amongst relevant consumers, the law also extends to protecting the trademark owner’s investment in building and maintaining the trademark’s reputation. Alongside protection from “free riding” and “tarnishment”, a trademark can be protected from “dilution”. For some of the world’s most widely recognised and distinctive brands, for example Coca-Cola, the extensive reputation of the trademark is such that the consumer will automatically recognise the name even without seeing the mark applied to goods or services. However, if the name Coca-Cola were to be used by a number of third-party businesses for goods or services unrelated to beverages, it is possible that, over time, consumers would no longer think only of Coca-Cola beverages when they hear the name Coca-Cola: the COCA-COLA mark would be diluted.

Dilution cases are generally difficult to establish. In Intel Corporation Inc v CPM United Kingdom Ltd (Case C-252/07), the Court of Justice of the European Union (ECJ) found that to succeed in a dilution claim, the trademark owner needed to establish that (a) the relevant consumer makes a mental association between the newer sign and the earlier trademark, and that (b) this association has to impact on the economic behaviour of that consumer. 

In Environmental Manufacturing LLP v Office for Harmonisation in the Internal Market (OHIM) (Case C-383/12 P, November 14 2013), the Fifth Chamber of the ECJ has set aside an earlier judgment of the General Court in opposition proceedings on the grounds that the General Court had dismissed the assessment of the risk of dilution set out in the Intel judgment and consequently erred in law. 

In March 2006 the predecessor of the UK company Environmental Manufacturing LLP applied for the registration of a figurative mark representing a wolf’s head (depicted below) in Class 7 of the Nice Classification:

The application was opposed by the French company Société Elmar Wolf on the basis of a number of French and international word and figurative trademarks, including the French mark depicted below:

The Opposition Division of OHIM dismissed the opposition on January 25 2010 on the ground that:

  • there was no likelihood of confusion under Article 8(1)(b) of the Community Trademark Regulation (207/2009); and
  • Elmar Wolf had not adduced evidence of any detriment to the repute of the earlier marks or any unfair advantage gained from them under Article 8(5) of that regulation.  

Elmar Wolf appealed the decision to the Second Board of Appeal, which concluded that:

  • the earlier marks had reputation;
  • the relevant public might establish a link between the marks; and
  • the mark applied for might dilute the unique image of the earlier marks and take unfair advantage of their distinctive character or their reputation under Article 8(5).

Environmental Manufacturing appealed the Board of Appeal’s decision to the General Court, claiming that the board had omitted to assess whether the use of the mark applied for would have an impact on the behaviour of the relevant consumers (following Intel). 

The General Court rejected Environmental’s argument that it was necessary to show the economic impact of the association made by consumers between the two marks. The General Court consequently dismissed the appeal. The court stated that, according to the Intel judgment, the change in the economic behaviour of the consumer is established if the proprietor of the earlier mark has shown a weakening of the earlier mark’s ability to identify the proprietor’s goods or services.

Environmental appealed the decision to the ECJ, submitting that the General Court’s assessment of dilution did not take account of the Intel judgment and that the General Court ought to have dismissed the argument that there had been a dilution under Article 8(5). 

OHIM accepted that the risk of dilution under Article 8(5) requires evidence of an actual or potential change in the economic behaviour; however, it submitted that such change in the economic behaviour of the average consumer and the dispersion of the identity of the earlier mark are in reality part of a single requirement. It also submitted that the perception of the public and its ‘economic behaviour’ are two sides of the same coin. 

The ECJ followed Environmental’s argument and stated as follows:

  • The wording of the Intel judgment is explicit: to establish dilution it is necessary to adduce evidence of a change in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered, consequent on the use of the later mark, or a serious likelihood that such a change will occur in the future, in order to establish risk of dilution within the meaning of Article 8(5).
  • The concept of ‘change in the economic behaviour of the average consumer’ lays down an objective condition, thus such change cannot be deduced solely from subjective elements such as consumers’ perceptions.
  • The General Court dismissed the assessment of the condition laid down by the Intel judgment and, consequently, erred in law.
  • The Intel judgment requires a higher standard of proof than the one used by the General Court in order to find the detriment or risk of detriment under Article 8(5). Accepting the criterion put forward by the General Court could lead to anticompetitive situations in which economic operators improperly appropriate certain signs.
  • It is possible to use logical deductions in order to establish the risk of dilution under Article 8(5); however such deductions must not be the result of mere suppositions and must be founded on an analysis of probabilities and by taking account of the normal practice in the relevant commercial sector as well as all the other circumstances of the case. The General Court ought to criticise the board’s failure to conduct that analysis.
  • The conditions laid down in the Intel judgment must be applied irrespective of whether the goods or services at issue are similar or dissimilar to the goods or services covered by a later mark.

The ECJ’s judgment clarifies that the conditions set out in its earlier Intel judgment with regard to the detriment or risk of detriment under Article 8(5) must be interpreted strictly.  

Interestingly, the ECJ criticised the General Court’s attempt to reduce the (significant) burden of proof which lies on a trademark proprietor to show dilution under Article 8(5). Consequently, in order to establish such detriment or risk of detriment, the proprietor of an earlier mark must adduce evidence of a change in the economic behaviour of the average consumer of the goods or services for which the earlier mark was registered consequent on the use of the later mark, or a serious likelihood that such a change will occur in the future.  

It is therefore clear that dilution cases will remain difficult and evidence-heavy for the trademark owner. As a dilution claim can enable a trademark owner to extend significantly the monopoly granted by a trademark, it is perhaps not surprising that the ECJ has taken this position. 

Paolo Andreottola and Nick Bolter, Edwards Wildman Palmer UK LLP, London

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