According to Lord Justice Jacob, the issue in L’Oréal SA and Others v Bellure NV and Others  EWCA Civ 535 (21 May 2010) was: “Does trade mark law prevent the defendants from telling the truth?”
The “truth” in this case was that a range of cheap scents manufactured in Dubai and imported into the UK by a Belgian company for distribution in discount shops and market stalls smelt something like luxury fragrances developed and marketed at a cost of €60 to €120 million. Here is how these “smell alike” products were advertised over the internet:
“FROM CREATION LAMIS BRAND NEW BOXED AND SEALED 100ML (3.3. FL. OZ.) SWEET PEARLS (“NOA” BY CACHEREL) SPRAY EAU DE PARFUM A DESIGNER FRAGRANCE FOR A FRACTION OF THE PRICE OF THE ORIGINAL” (e.bay)
“COFFRET D’OR Compares to TRESOR®” (jnsales.com)
“ALTERNATIVE TO TRESOR BY LANCOME COFFRET D’OR” (perfumes.com)
“ONLY YOUR WALLET SMELLS THE DIFFERENCE” (theunissen-trading.nl)
“The only difference is the price!
Tracey-Ann will personally guarantee you will not be able to distinguish the original” (makeup4brides.co.uk)
“Fragrances 4 Less
Compares to the designers” (auctions.overstock.com)”
It is hardly surprising that L’Oréal (and no doubt consumers who had paid good money for a premium product) found this sort of marketing somewhat galling even though nobody could point to any loss of sales or tarnishing of reputation.
L’Oréal sued the Belgian importer and its British distributors for trade mark infringement and passing off. At trial L’Oréal SA and Others v Bellure NV and Others  EWHC 2355 (Ch) (4 Oct 2006), Mt Justice Lewison held that the reference to the L’Oréal marks constituted infringement under s.10 (1) of the Trade Marks Act 1994 though he dismissed most of the rest of the claim. On appeal by the distributors L’Oreal SA and Others v Bellure NV and Others  EWCA Civ 968 (10 Oct 2007) the Court of Appeal referred the following questions to the European Court of Justice:
“(1) Where a trader, in an advertisement for his own goods or services, uses a registered trade mark owned by a competitor for the purpose of comparing the characteristics (and in particular the smell) of goods marketed by him with the characteristics (and in particular the smell) of the goods marketed by the competitor under that mark in such a way that it does not cause confusion or otherwise jeopardise the essential function of the trade mark as an indication of origin, does his use fall within either (a) or (b) of Article 5(1) of Directive 89/104?
(2) Where a trader in the course of trade uses (particularly in a comparison list) a well-known registered trade mark for the purpose of indicating a characteristic of his own product (particularly its smell) in such a way that:
(a) it does not cause any likelihood of confusion of any sort; and
(b) it does not affect the sale of the products under the well-known registered mark; and
(c) it does not jeopardise the essential function of the registered trade mark as a guarantee of origin and does not harm the reputation of that mark, whether by tarnishment of its image or dilution or in any other way; and
(d) it plays a significant role in the promotion of the trader’s product,
does that use fall within Article 5 (1) (a) of Directive 89/104?
(3) In the context of Article 3a  (g) of [Directive 84/450], what is the meaning of
- take unfair advantage of
- and in particular, where a trader in a comparison list compares his product with a product under a well-known trade mark, does he thereby take unfair advantage of the reputation of the well-known mark?
(4) In the context of Article 3a(h) of the said directive, what is the meaning of
- presenting goods or services as imitations or replicas
- and in particular does this expression cover the case where, without in any way causing confusion or deception, a party merely truthfully says that his product has a major characteristic (smell) like that of a well-known product which is protected by a trade mark?
(5) Where a trader uses a sign which is similar to a registered trade mark which has a reputation, and that sign is not confusingly similar to the trade mark, in such a way that:
(a) the essential function of the registered trade mark of providing a guarantee of origin is not impaired or put at risk;
(b) there is no tarnishing or blurring of the registered trade mark or its reputation or any risk of either of these;
(c) the trade mark owner’s sales are not impaired; and
(d) the trade mark owner is not deprived of any of the reward for promotion, maintenance or enhancement of his trade mark;
(e) but the trader gets a commercial advantage from the use of his sign by reason of its similarity to the registered mark,
does that use amount to the taking of an
- unfair advantage
- of the reputation of the registered mark within the meaning of Article 5(2) of [Directive 89/104]?”
In C-487/07 the Court replied:
“1. Article 5(2) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks must be interpreted as meaning that the taking of unfair advantage of the distinctive character or the repute of a mark, within the meaning of that provision, does not require that there be a likelihood of confusion or a likelihood of detriment to the distinctive character or the repute of the mark or, more generally, to its proprietor. The advantage arising from the use by a third party of a sign similar to a mark with a reputation is an advantage taken unfairly by that third party of the distinctive character or the repute of that mark where that party seeks by that use to ride on the coat-tails of the mark with a reputation in order to benefit from the power of attraction, the reputation and the prestige of that mark and to exploit, without paying any financial compensation, the marketing effort expended by the proprietor of the mark in order to create and maintain the mark’s image.
2. Article 5(1)(a) of Directive 89/104 must be interpreted as meaning that the proprietor of a registered trade mark is entitled to prevent the use by a third party, in a comparative advertisement which does not satisfy all the conditions, laid down in Article 3a(1) of Council Directive 84/450/EEC of 10 September 1984 concerning misleading and comparative advertising, as amended by Directive 97/55/EC of the European Parliament and of the Council of 6 October 1997, under which comparative advertising is permitted, of a sign identical with that mark in relation to goods or services which are identical with those for which that mark was registered, even where such use is not capable of jeopardising the essential function of the mark, which is to indicate the origin of the goods or services, provided that such use affects or is liable to affect one of the other functions of the mark.
3. Article 3a(1) of Directive 84/450, as amended by Directive 97/55, must be interpreted as meaning that an advertiser who states explicitly or implicitly in comparative advertising that the product marketed by him is an imitation of a product bearing a well-known trade mark presents ‘goods or services as imitations or replicas’ within the meaning of Article 3a(1)(h). The advantage gained by the advertiser as a result of such unlawful comparative advertising must be considered to be an advantage taken unfairly of the reputation of that mark within the meaning of Article 3 (a) (1) (g(.”
Now this is a very long answer to a not particularly short question but its meaning seems clear enough. If a luxury goods manufacturer spends a lot of time and money developing and promoting a premium brand it is not possible to free load on that investment by suggesting that a cheap alternative is more or less the same thing. Yet Lord Justice Jacob complained at paragraph  that these answers were somehow Delphic:
“Not for the first time in intellectual property cases (e.g. British Horseracing Board v William Hill  EWCA (Civ) 863,  RPC 883, Arsenal v Reed  RPC 696,  EWCA Civ 696 and Boehringer Ingelheim v Swingward  EWCA Civ 129,  ETMR 90) the Court’s judgment has left enough room for the parties to disagree about what it means. It is such a disagreement which comes before us now.”
In answer to his question “does trade mark law prevent the defendants from telling the truth he concluded that the Court of Justice’s ruling was that the defendants are indeed muzzled. Making clear that his own predilection free from the opinion of the Court would have been to hold that trade mark law did not prevent traders from making honest statements about their products where those products were themselves lawful.
The learned Lord Justice’s reasons for taking that view were surprising.
First, he lamented that it hindered free speech. He contrasted the Court of Justice’s decision with that of the Constitutional Court of South Africa in Laugh It Off Promotions CC v South African Breweries International (Finance) BV t/a Sabmark International and Another (CCT42/04)  ZACC 7; 2006 (1) SA 144 (CC); 2005 (8) BCLR 743 (CC) (27 May 2005) where the Court refused to injunct a “Black Labour” logo complaining of exploitation of African workers on the ground that it infringed the brewery’s Carling Black Label trade mark. With due respect to Lord Justice Jacob legitimate political dissent is altogether very different from promoting cheap imitations of luxury brands.
Secondly, he complained that the decision somehow harmed the poor:
“Only the poor would dream of buying the defendants’ products. The real thing is beyond their wildest dreams. Yet they are denied their right to receive information which would give them a little bit of pleasure; the ability to buy a product for a euro or so which they know smells like a famous perfume.”
“The poor” can still buy the Dubai imports if they really want to do so. No doubt consumers (who may not necessarily be all that poor) can still try testers and samples even in discount outlets and buy the stuff if they like it. If it really is as good as L’Oréal word will soon get around. It is not just students and benefit claimants who shop at Primark and New Look. Lady members of the patent bar have been known to poke around such establishments or even the odd charity shop or buy the odd top online. I would venture to add that consumers like a bit of exclusivity. When we scrimp and save for something special we don’t want to be made to feel foolish by the reminder that there is a cheap and nearly as good alternative.
Thirdly, he argued that the ruling was anti-competitive. He said at paragraph :
“ If a trader cannot (when it is truly the case) say: “my goods are the same as Brand X (a famous registered mark) but half the price”, I think there is a real danger that important areas of trade will not be open to proper competition.”
I would agree but I would place the emphasis on the words in parenthesis “when it is truly the case”. It has to be remembered that comparative advertising was not permitted at all under the Trade Marks Act 1938 (see Bismag Ltd. V Amblins (Chemists) Ltd  Ch 667, (1940) 57 RPC 209). The modern Act implementing the Trade Marks Directive (now Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks) made it possible for the first time. Unrestricted comparative advertising is still not allowed. It has to be “in accordance with honest practices in industrial or commercial matters” and there is now Directive 2006/114/EC of the European Parliament and of The Council of 12 December 2006 concerning misleading and comparative advertising to provide guidance to courts and indeed businesses.
Applying the guidance of the Court of Justice of the European Union the issues for the Court of Appeal were quite simple. Lord Justice Jacob listed them at paragraph :
“(a) Does the use of the registered marks on and in relation to the comparison lists fall within Art. 5(1)(a)?
(b) If so does that use comply with the Comparative Advertising Directive?
(c) Should L’Oréal be permitted to include a claim under Art. 5(2) (and its equivalent Art 9(1)(c) of the Regulation?)
(d) If so, does that use infringe those Arts.?”
The answers to those questions were all one way, namely that the defendants had infringed. The Court of Appeal berated what Lord Justice Jacob berated as a “pointless monopoly” but that seems to be the law. As he acknowledged at paragraph  of his judgment the Max Planck Institute is reviewing European trade mark law. Maybe a consensus will arise on changing it.