EUROPEAN PERSPECTIVES

A Shave Too Close for Gillette “Intended Purpose of Goods” Defence Examined

Gillette’s legal campaign against a Finnish competitor marketing razor handles has given rise to an ECJ judgment that cuts both ways.

In The Gillette Company, Gillette Group Finland Oy v LA Laboratories Ltd Oy (Case C-228/03), the ECJ gave guidance on the meaning of the “intended purpose of the goods” defence which will probably hurt Gillette in its legal battle, but may help other companies to stay on the right side of the line when promoting the compatibility of their products with the market leaders.

 

Gillette’s Case

The Finnish reference to the ECJ was made in the context of trade mark infringement proceedings brought by Gillette and its Finnish licensee against LA Laboratories.

Gillette was the owner of Finnish trade mark registrations for GILLETTE and SENSOR in respect of razors in Class 8. LA Laboratories had begun marketing its rival handles and replacement blades with stickers affixed to the packaging which read, “All Parason Flexor and Gillette Sensor handles are compatible with this blade.”

In its defence, LA Laboratories argued that its use was necessary to denote the intended purpose of the goods, in particular as accessories or spare parts, and that its use was in accordance with honest practices in industrial or commercial matters. If the court agreed, then under the Finnish equivalent of Article 6 (1) of the Trade Marks Directive LA Laboratories would have a defence to the infringement claim.

Gillette won at first instance and lost on appeal. On its further appeal, the Finnish court referred to the ECJ questions which can be summarised as follows:

• What criteria should be used to assess whether a third party’s use of a trade mark is “necessary in order to indicate the intended purpose of a product,” within the meaning of Article 6 (1)?

• What does “use in accordance with honest practices in industrial or commercial matters,” which is required under Article 6 (1), mean?

 

Spare Parts or Accessories?

The ECJ started from the premise that Article 6 (1) was a restriction on the exclusive rights of trade mark owners. That restriction was based on the need to reconcile the interests of brand owners with the principle of free movement of goods and the maintenance of a system of undistorted competition within the E.U.

The ECJ confirmed, first, that Article 6 (1) cited spare parts and accessories by way of example only. The defence was not limited to them. They were the most common products in respect of which third-party trade marks had to be used to indicate the intended purpose of the goods. However, if use of a third-party mark in respect of other types of products was shown necessary to denote intended purpose, then that use could fall within the scope of the defence, also.

Hence, any argument by Gillette that LA Laboratories’ handles and blades were not spare parts or accessories would have little effect if the use of Gillette’s mark could still be shown to have been necessary to denote the intended purpose of the goods.

 

Necessary to Indicate “Intended Purpose”

The ECJ went on to consider the criteria for determining whether use was indeed necessary to denote the intended purpose of goods.

It cited its earlier decision in BMW (Case C-63/97 [1999] ECR I-905, paras. 54 and 58), that the use of a third-party trade mark to inform the public that the advertiser sold, repaired or maintained goods bearing the mark was necessary to indicate intended purpose. The use of the mark was necessary in order to preserve the system of undistorted competition, as there was in practice no other way to communicate to the public the nature of the services offered by the advertiser.

In the Court’s view, use will be “necessary” to indicate intended purpose if the use is being made in order to provide the public with “comprehensible and complete” information on the intended purpose of the product or service being provided by the user, and there is no other practical way to communicate that information, taking account of the existence of any widely recognized technical standards or norms which might otherwise be used, and the nature of the relevant public.

 

Use in Accordance with Honest Practices

Even where use is necessary to denote intended purpose, that use will not fall within the scope of the Article 6 (1) defence if it is not use in accordance with honest practices in industrial or commercial matters.

The Court noted that “honest use” implied “a duty to act fairly in relation to the legitimate expectations of the trade mark owner” (BMW, para. 61). It sought to breathe life into this two-dimensional concept through examples of conduct which would compromise a trade mark owner’s legitimate interests, such as:

• use that wrongly implies a commercial connection with the trade mark owner;
• use that takes unfair advantage of the distinctive character or repute of the trade mark and thus affects its value;
• use that discredits or denigrates the mark;
• use that presents the product as an imitation or replica of the branded product.

 

Examples of dishonest conduct are helpful, but the ECJ recognised that no such list could be exhaustive and it therefore ruled that a national court should consider a range of factors in assessing honesty of use. These include the overall presentation of the mark, what if any connection it suggests with the brand owner, what if any distinctions are made between the “borrowed” brand and any trade mark(s) of the user, and the efforts (if any) by the user to ensure that consumers distinguish his products from those of the brand owner.

The Court cautioned that if the user presents his product as being of equivalent quality or having equivalent properties as the branded product, national courts must also take that into account in determining whether the use is in accordance with honest practices. However, this ominous warning was not accompanied by any guidance on what such conduct ought to signal.

 

 

Comment

 

For Gillette, this decision is probably a shave too close.

LA Laboratories’ stickers were probably the only practical way to communicate to the consumer that its blades were compatible with the market leading razor handle. In the case of an ordinary consumer product whose consumers are not necessarily sophisticated or technically aware, it is difficult to imagine any other way to communicate such information without identifying the leading brand with which the product was compatible.

Moreover, the reference to GILLETTE SENSOR was in small, standard lettering on modestly-sized stickers which the first Finnish appeal court found were unlikely to suggest any trade connection with Gillette.

Nevertheless, the defence in question is a mandatory provision of the Trade Marks Directive which exists in the national law of all the E.U. Member States and in the CTM Regulation. Other companies may therefore profit from the ECJ’s guidance, particularly on how to determine whether the use of another’s brand to indicate product compatibility is necessary within the meaning of the defence.

On this point, it is clear that the perspective of the target consumer is critical: if the target public would understand the compatibility information without the use of the mark, then it must not be used. This might apply, for example, where a product is compatible with all other brands on the market, as opposed to just one or a few.

Honesty of use, too, requires an assessment from the consumer’s point of view. How the target public would read the message sent by the use is key: any evidence that the user is trying to gain a commercial advantage by fostering the impression of a link with the trade mark owner, in particular, will probably result in loss of the defence. Such an impression can be made indirectly, such as by the use of stylised scripts, overly prominent positioning of the “borrowed” brand, or the use of an equivalent or greater size for the “borrowed” brand than for the user’s own.

In the above example, where a product is in fact compatible with all other brands on the market, singling out the leading brand may suggest that the user is unfairly attempting to align himself with the market leader for his own commercial advantage, which may also lead to a finding of dishonesty.

The availability of an “intended purpose” defence must be considered on the facts of each case. However, following this ruling, businesses who advertise product compatibility by reference to others’ brands would be wise to seek advice on their packaging or copy before going live. Applying the ECJ’s guidance may help to avoid a close shave.