Use of Competitors? Trade Marks and Comparative Advertising in the United Kingdom and Europe

Introduction

Comparative advertising takes place when one trader’s business is compared to another trader’s business with reference to their trade mark or trade name. The advertisement usually presents comparisons of price and particular qualities of goods, intended to inform consumers that the second trader’s goods or services are somehow superior. The comparisons are most frequently made to the products or services of a leader in the market.

There are various ways in which a trader can undertake comparative advertising, including:

referring to a competitor by name;
referring to a competitor’s trade mark;
not referring specifically to the competitor by name, but referring to ‘the leading brand’ where consumers will know what that leading brand is; or
stating which products are compatible with those of a competitor and issuing a table listing the serial numbers of each party.

For years there have been a number of questions raised in relation to the legality of comparative advertising and whether it should be permitted. Fair and honest Advertisements did not cause any harm were therefore lawful. This position stemmed from the introduction of Comparative Advertising Directive (EEC) (Council Directive 97/55 amending The Misleading and Comparative Advertising Directive (Council Directive 84/450) (the ‘Directive’) provides guidance as to the boundaries of comparative advertising and provide strict criteria that an advert must meet in order to be lawful.

Comparative advertising and the Directive on Comparative Advertising

Comparative advertising is defined by Article 2 of Directive 84/450 as:

“… any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor.”

Furthermore, Article 3 provides a list of criteria where comparative advertising will be allowed:

“ …

(1) it is not misleading … ;

(2) it compares goods or services meeting the same needs or intended for the same purpose;

(3) it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price;

(4) it does not create confusion in the market place between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor;

(5) it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services activities or circumstances of a competitor;

(6) for products with designation of origin, it relates in each case to products with the same designation;

(7) it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products;

(8) it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade names.”

This list of permitted use is, in comparison, more prescriptive than the provisions laid down in the TMA which simply requires comparative advertising to be in accordance with “honest practices”.

The European Court of Justice (‘ECJ’) considered the issue of comparative advertising in the case of Pippig Augenoptik GmbH & Co KG v Hartlauer Handelsgesellschaft mbH [2003] ECR I-3095. The ECJ considered the impact of comparative advertising and the purpose it served, stating that it was important in assisting consumers in making informed choices. Following the approach taken in Toshiba v Katun [2003] ETMR 296, the court concluded that “ … the conditions required of comparative advertising must be interpreted in the sense most favourable to it.”

Comparative advertising and the Trade Marks Act 1994

Section 10(6) of the TMA states:

“Nothing in the preceding provisions of this section shall be construed as preventing the used of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor or licensee.

But any such use otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark if the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.”

Protection against comparative advertising is provided as long as the registered trade mark is used in relation to the genuine goods or services of the proprietor and that such use accords with honest practice, that is to say is fair and accurate. Where this is not the case, any comparative advertising will be treated as an infringement if it is use which takes advantage of or is detrimental to the distinctive nature or reputation of the registered trade mark.

So how is ‘honesty’ to be judged? The test is an objective one and it is for the trade mark owner to establish on the facts that the advertisement making the comparison was considered dishonest by “members of a reasonable audience” (Barclays Bank plc v RBS Advanta [1996] RPC 307).

In the case of Emaco Ltd and Aktienbolaget Electrolux v Dyson Appliances Ltd [1999] ETMR 903, both manufacturers of vacuum cleaners engaged in advertising campaigns which stated that having undergone independent tests, each product was superior to the other. They then proceeded to sue each other for malicious falsehood and trade mark infringement. The Court dismissed the claims for malicious falsehood but upheld the claims for trade mark infringement upon the basis that the tests conducted were unfair in that they were not done under normal circumstances and both parties had been involved in unfair comparative advertising.

This can be contrasted with the case of British Airways plc v Ryanair Ltd [2001] ETMR 235 where British Airways claimed that Ryanair’s advertisements comparing their prices was misleading as it had stated they were 5 times more expensive. However, the Court dismissed the action stating that even if Ryanair’s advertisement was misleading, it was not materially misleading given that the point they were trying to make, namely that flying with British Airways was a lot more expensive than flying with Ryanair, was still the same. This decision illustrates the permissive approach of the UK courts in dealing with comparative advertising. Although the approach has been criticised, it is in keeping with pro-competition stance the Court has adopted it has had for so many years.

Directive 97/55 has been incorporated into UK law by The Control of Misleading Advertisements (Amendment) Regulations 2000 which inserts a new regulation into the 1998 Regulations. On the face of it, the Directive may appear more restrictive, but the High Court in British Airways plc v Ryanair Ltd held that the Directive does not affect the interpretation of the TMA. However, it is fair to say that the TMA and the Directive are to be read in conjunction with one another and while adhering to “honest practice” under the TMA, an advertisement must also comply with the Directive.

Conclusion

The use of competitors’ trade marks no longer represents a “no-go zone” for businesses competing in the same industry. Provided that the criterion set out in the legislation is adhered to, businesses are able to use other company’s trade marks and trade names to identity the relative merits of their own products and services over those of their competitors.