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BANNING's Brand protection in the Netherlands: victory for Chanel and Coty against smell-alikes

Monday, 19 December 2016

Lessons from Chanel and Coty’s smell-alike victory. A Netherlands court has held that use of perfume comparison lists constitutes trademark infringement when it crosses the boundaries of comparative advertising.

Across Europe, the flourishing trade in smell-alikes is a thorn in the side of proprietors of well-known perfume trademarks. However, their position in the Netherlands has been strengthened by a judgment from the District Court of The Hague.

Various companies trading under the name Bargello offered and sold perfumes which were marketed as imitations of perfume brands owned by Chanel or licensed to Coty. Bargello offered its smell-alike perfumes by using comparison lists, making a comparative link between each numbered Bargello perfume and a well-known perfume brand:
• 134 – Chance, Chanel;
• 135 – NO 5, Chanel;
• 141 – Love Chloe, Chloe;
• 166 – Escape, Calvin Klein; and
• 736 – Adventure, Davidoff.

According to Bargello’s advertisement, it sold more than 400 high-quality perfumes which were comparable to well-known branded perfumes – the ad claimed that the only difference that consumers would notice would be to their wallets. Bargello sold its perfumes in basic packaging, which did not resemble the trade dress of Chanel or Coty perfumes. It argued that its actions were not infringing any trademark rights, because customers would not confuse Bargello’s perfumes with those of Coty or Chanel.

Coty and Chanel initiated legal proceedings against Bargello in order to protect their trademarks against infringement. Building and maintaining an internationally well-known brand requires a great deal of creativity, longstanding marketing investment and trademark protection on a global scale. Chanel and Coty argued that Bargello was taking unfair advantage of the distinctive character and reputation of their marks. By presenting its perfumes as imitations of those of Chanel and Coty, Bargello was benefiting from the power of attraction and the prestige of their trademarks without paying any financial compensation.

L’Oréal all over again?
The facts at hand might sound familiar. In L’Oréal v Bellure, the European Court of Justice (ECJ) rendered a landmark decision in European trademark law which also dealt with the use of perfume comparison lists.

It follows from the ECJ’s judgment that using perfume comparison lists should be regarded as comparative advertising and a trademark owner is entitled to prevent the use of its mark in an ad that does not satisfy all legal conditions for permitted comparative advertising.

This is the case even if such use does not jeopardise the trademark’s essential function, which is to indicate the origin of the goods, provided that such use affects one of the mark’s other functions.

These include guaranteeing the quality of the goods and those of communication, investment or advertising. If such functions are affected, the trademark owner may act against this free riding. However, when doing so, it is unnecessary to establish a likelihood of confusion or even a likelihood of detriment to the distinctive character or reputation of the trademark or its owner.

For this reason, Bargello’s statement that no likelihood of confusion was established did not succeed, as none was required. Further, the district court did not uphold Bargello’s statement that Chanel and Coty suffered no damages. As explained by the ECJ in L’Oréal, taking advantage of the distinctive character or reputation of a trademark may be judged unfair, even if it is not detrimental to either.

How to assess free riding
The ECJ paved the way for the district court’s decision. This applied the same criteria as the ECJ for determining whether use of a sign takes unfair advantage of a trademark’s distinctive character or reputation. The court required a global assessment, taking into account all factors relevant to the circumstances of the case. These included:
• the strength of the trademark’s reputation;
• the degree of its distinctive character; and
• the degree of similarity between the marks at issue and the degree of proximity of the goods.

The stronger a trademark’s distinctive character and reputation, the easier it will be to accept that harm has been caused to it. Moreover, the more immediately and strongly the trademark is called to mind by the sign, the greater the likelihood that the sign is taking unfair advantage of the trademark’s distinctive character and reputation, or is detrimental to them.

The District Court of The Hague established that Coty’s and Chanel’s trademarks were well known due to continuing investments and efforts in advertising and protection. The court ruled that the use of these marks in comparative ads is permitted only if it meets the cumulative requirements of the EU Comparative Advertising Directive (84/450/EEC), as implemented in Dutch law. As with any comparative ad, Bargello’s ads should not present goods or services as imitations or replicas of goods or services bearing a protected trademark or trade name – this condition applies not only to counterfeit goods, but also to any imitation or replica.

According to the court, Bargello’s ads crossed these boundaries. They created the impression that Bargello’s perfumes were imitations or replicas of Coty’s and Chanel’s, explicitly stating: “400 brand perfumes, you won’t notice any difference, except for in your wallet!”. The court found that the comparison lists – which comprised a number, directly followed by a well-known perfume trademark belonging to (among others) Chanel and Coty – also presented Bargello’s perfumes as imitations of Chanel’s and Coty’s.

Moreover, the court noted that Chanel’s and Coty’s trademarks played a larger role in Bargello’s sales strategy than necessary for a comparative ad. In light of the distinctive character and reputation of Chanel’s and Coty’s marks, it concluded that Bargello was taking unfair advantage of the distinctive character and reputation of those trademarks.

Internal use of comparison lists
What if the comparison lists were used only internally by Bargello’s employees? The court considered that, even if this were the case, Chanel’s and Coty’s trademarks would still have played the same crucial role in the communication process of Bargello with its customers. Therefore, in the Netherlands, hiding perfume comparison lists behind the counter might be insufficient to prevent trademark infringement from taking place.

Conclusion
This judgment has strengthened the legal position of owners of well-known perfume trademarks in the Netherlands. When the boundaries of comparative ads are crossed, the use of perfume comparison lists constitutes trademark infringement – even if such lists are used internally only. If the well-known perfume trademarks play a crucial role in the communication process by presenting the smell-alikes as imitations of the trademark perfumes, the business might get stinky.

Published in magazine World Trademark Review 19 December 2016