Trade mark Dilution in Europe

January 22, 2009

The Intel Case

The European Court of Justice’s landmark ruling in Intel Corp v CPM (UK) Ltd on the 27 November may alter the landscape of European trademarks. This case clarified the European position on trade mark dilution and did not follow the US position.  The case stemmed from a dispute between Intel Corp who owns the mark INTEL versus Compumark who has the mark, INTELMARK. Intel is famous for its computer chips whereas INTELMARK was being used on marketing and telemarketing services. Intel Corp sought a declaration of invalidity against the INTELMARK registration, claiming that its use would take unfair advantage of, or be detrimental to, the distinctive character or the repute, essentially diluting the earlier INTEL trade mark. The application was dismissed by the UK IPO, and the High Court agreed with the UK IPO. Intel then appealed to the Court of Appeal, claiming that their mark would be harmed by the use of INTELMARK despite the fact it was being used on very different products. They argued that this was a form of trademark dilution. The ruling from the ECJ indicates that in Europe INTEL is going to have a difficult time proving that the INTELMARK does the kind of economic harm to their mark that would result in dilution.

 Trade mark dilution in the U.S.

Trade mark dilution has been a recognized form of trade mark infringement in the United States for several years. The theory behind trade mark dilution is that a famous mark can be harmed even if a similar mark (not identical) is being used on goods which do not even necessarily compete with the famous brand’s goods. Dilution can be described as the “lessening of the capacity of the famous mark to identify and distinguish goods or services regardless of whether consumers are confused about the source of the two brands.One way a mark is diluted is through blurring which has been described as “death by a thousand cuts.” An example of this can occur when a famous brand name becomes so famous that other companies begin describing their products using that trademark for example referring to a less famous brand as the “Rolls Royce of plumbing products.” Under this theory the mark is being harmed over time because the link in a consumer’s mind between a company’s mark and a company’s product will be lessened. Dilution can also occur through tarnishment. This can happen when a mark is being used on a product which could damage the reputation of the famous brand. For example in a US case, a sex shop was trading under the name Victoria”s Little Secret.  It was sued by the famous lingerie maker Victoria Secret who won by arguing that the shop tarnished their reputation.

The most recent case from the US on dilution was decided last year: Louis Vuitton v. Haute Diggity Dog, 507 F.3d 252 (4th Cir. 2007). In this case the famous luxury goods maker sued a company that was making dog chew toys in the shape of Louis Vuitton handbags with the LV trademark on them. The court ruled that this was not a case of dilution since the LV mark was not impaired by the chew toys and it was not being tarnished by its use on chew toys.

Changing law in Europe

In European law, trade mark dilution is covered under the Trade mark Directive Articles 4(4)(a) and (5)(2). Interestingly the word “dilution” is absent from the directive. In 2003, in the case of Adidas-Salomon v. Fitnessworld, (Case C-408/01), the Advocate General discussed the concept of dilution which had previously been avoided before the ECJ. He cited the US sources as inspiration for the decision.

In the case of Adidas Salomon, the famous sportswear company Adidas, with their three stripe logo, sued Fitnessworld for making clothing with two stripes. They argued that consumers would be confused that the sportswear with two stripes was made by Adidas. A court in the Netherlands initially found that the use of the two stripe motif did infringe Adidas three stripe mark. This decision, however, was overturned after receiving guidance from the ECJ that the two stripes were not infringing and were merely a decoration.

The question of dilution has arisen in other case including the “smell alike” perfume case from the UK: L’Oreal v. Bellure, [2006] EWHC 2355 (Ch). In this case the famous cosmetics and perfume maker sued a company that was producing perfumes which were packaged and smelled similar to its own more expensive versions. The English courts gave some guidance on whether this amounted to trademark dilution but also appealed several questions which are still pending with the ECJ.

Despite the ruling in Intel, the ECJ still has many questions to clarify. One of the most important ones is how famous brand owners can prove that their brand is being economically damaged by the activities of the other party. For example can a brand owner show damage through diminished sales figures? Hopefully, additional cases will soon clarify some of these points.