Why all trade marks should be protected against dilution

Trade marks with a reputation is a special category that enjoys a broad scope of protection.

Even if those marks are used for products and services that are completely different from those of the trade-mark holder, excluding confusion over their origin, there will be trade mark infringement if the trade mark holder can show that the other sign’s use takes unfair advantage of or is detrimental to the distinctive character or the repute of the trade mark.

This special protection of trade marks with a reputation prevents sneaky traders from using, for example, the mark Puma for food products, McDonald’s for watches or Rolex for sports apparel. Trade mark owners who have invested huge amounts of money to create strong, well-known brands must not accept others taking unfair advantage of the repute of their trade marks.

The theory of protecting the distinctive character and the repute of trade marks has existed for at least a century. In 1924, the regional court Landesgericht Elberfeld in what is now Wuppertal, Germany annulled the registration of the mark ODOL for steel products because the plaintiff had already successfully used the mark ODOL for years as a mouthwash. The use of the mark ODOL for completely different goods would lead to dilution of the mark: the mark would lose its sales-promoting character if everyone could simply use it for other goods.

In the US, Frank I. Schechter observed in the Harvard Law Review of 1927 that arbitrary, invented, and fanciful signs (e.g. Kodak, Rolls-Royce, Mazda) should receive broader protection than common symbols, words, or phrases (e.g. Star, Anchor or Universal), even for goods other than those for which these special marks were used.

In current EU trade mark law, the owner of a trade mark with a reputation has the right to prevent others from using his mark or a similar sign that takes unfair advantage of or is detrimental to the distinctive character or the repute of the trade mark (art. 9.2.(c) of the EU Trade mark Regulation N° 2017/1001 and art. 10.2.(c) of the Trade mark Directive N° 2015/2436).

The disadvantage of this rule, however, is that there are scores of trade marks that do not have a reputation, that are not well-known, and are not protected when unfair advantage is taken. In other words, unfair advantage of a trade mark can be taken so long as that mark does not have a reputation. But why would something unfair be lawful?

To close the gap, the courts should accept more easily that a trade mark has a reputation, but that is easier said than done.

In the Chevy case (C-375/97), the Court of Justice of the EU ruled that the concept of ‘reputation’ assumes only a certain degree of knowledge among the relevant public and that the trade mark must not be known by a given percentage of the public. But the court also said that local courts must look at the market share held by the trade mark, the intensity, geographical extent and duration of its use, and the size of the investment made by the undertaking in promoting it, which is a burden of proof that is difficult for small undertakings to meet.

Almost ten years later, the Court of Justice ruled in Intel (C-252/07) that if a mark is unique, because only the trade mark owner is using it for his products and services, this can be helpful in proving the reputation of the mark, but it is not sufficient. Again, if an undertaking develops a nice and unique trade mark, it will not be protected against a sneaky trader who uses a similar mark for different products and services, unless the undertaking can show that its mark has a reputation and is thus well-known among the relevant public.

The Benelux Trade Mark Office applied these rules strictly when it allowed the registration of the mark Charlie & the Chocolate Factory of chocolate, cake and sweets. The Office rejected the opposition by the movie company that owned the earlier, identical trade mark for media services because Charlie & the Chocolate Factory is not a well-known media trade mark (case N° 2015593).

In a third important case about trade marks with a reputation (C-487/07), the Court of Justice ruled on smell-a-like perfumes that were offered for sale by Bellure, which imitated the perfumes of L’Oréal and referred to its well-known trade marks. In addition to trade mark law, this case also dealt with comparative advertising since Bellure compared its perfumes with those of its competitor L’Oréal.

Under the EU Advertising Directive 2006/114/EC, comparative advertising is allowed if several criteria are met, including that comparative advertising does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor (art. 4.(f)) and that it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name (art. 4.(g)).

For the Court of Justice, the requirement of not taking unfair advantage of the reputation of a trade mark (art. 4.(f) of the Advertising Directive) is the same as in trade mark law, and it first requires that the trade mark have a reputation. A reputation, however, is not required for article 4.(g). As a result, in comparative advertising disputes, little-known trade marks are protected against imitations, but not against taking unfair advantage of them. This distinction is not justified because both forms of unfairness are the same.

We propose different solutions for the owners of little-known trade marks confronted with sneaky traders using their marks for non-similar products or services.

First, the threshold for the reputation of the marks should be low. The Court of Justice has always refused to link the reputation to a particular market share or recognisability by a percentage of the public. The national courts have room to conclude that the plaintiffs’ trade marks are sufficiently known among the relevant public and therefore have a reputation. As a result, those marks will be protected against third parties taking unfair advantage of or being detrimental to the distinctive character or the repute of the trade marks.

Second, the assessment of the reputation of the trade mark should no longer be made as a separate first step, before proceeding with the second step: the assessment whether an unfair advantage is being taken of or whether being detrimental to the distinctive character or the repute of the trade mark. As is currently the case for the assessment of a likelihood of confusion, there can be “some interdependence between the relevant factors” (cf. CJEU 4 March 2020, C-328/18, Equivalenza), which in this case means interdependence between the reputation of the trade mark and between the unfair advantage or the detriment. In short, a low degree of reputation may be offset by a high degree of unfair advantage ore detriment, and vice versa.

For more information on trade mark law in the EU and internationally, contact your CMS client partner or these CMS experts:

Tom Heremans, CMS (Brussels)