Liquidation saves infringer from paying damages

The Paris Court of Appeal has found that the use on t-shirts of the word 'escro' (a deliberate misspelling of the word 'escroc', which means 'swindle') in colours and script that imitate those of the ESSO logo constituted trademark infringement (Paris Court of Appeal, September 20 2006).

On a tip-off by French Customs, Esso sued French company Undergroove for infringement of its well-known Community device mark pursuant to Article 9 of the Community Trademark Regulation, as well as for defamation and unfair competition. The Paris Court of First Instance upheld Esso's claims for defamation and unfair competition only, but awarded Esso €8,000 in damages. Esso appealed.

The Paris Court of Appeal upheld all of Esso's claims, including the trademark infringement claim. However, it reduced the damages award to a token €1 because Undergroove had gone into liquidation.

The decision is interesting for several reasons. First, French courts rarely uphold claims of both trademark infringement and defamation because the rationales behind the claims appear incompatible. Infringement implies likelihood of confusion, whereas defamation of a mark involves a degree of differentiation between the mark and the use complained of. Thus, courts have found in previous cases in which Esso claimed both trademark infringement and defamation that the use of the ESSO mark and company name by an unauthorized third party was polemical at worst, but not infringing (see Free speech exception in trademark infringement actions confirmed and Esso court confirms that free speech can override trademark rights). Here, however, the court did not find the claims mutually exclusive. This is because (i) the action was based on a well-known mark, which removes the need to demonstrate any likelihood of confusion, and (ii) the t-shirts featuring the doctored logo were sold commercially.

However, the court reduced the damage award because (i) Esso could not justify anything other than token prejudice, and (ii) Undergroove had gone into liquidation. The finding on token prejudice may be open to criticism as one could argue that infringement implies prejudice, even if the sales of the goods at issue were limited. Moreover, the doctored logo tarnished Esso's image and the company incurred significant expenses to defend its rights. However, it seems clear that, in this case, the court also took into consideration the financial situation of Undergroove to reduce its damages.

Séverine Fitoussi, Inlex Conseil, Paris