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Court Strives Toward Consistency on Unfair Advantage in LA PERLA

In a recent decision, the General Court has handed down some important guidance on the meaning of "unfair advantage" in the context of trademark disputes. The growing body of CTM decisions on this principle have not always created a consistent approach, and given its importance in branding disputes the matter is crying out for better and clearer guidance. The recent ruling in LA PERLA will hopefully nudge the law in this area yet further toward greater clarity, consistency and predictability, to the benefit of brand owners and advisors alike.


The dispute had its roots in a December 1997 CTM application by Worldgem Brands Srl under no. 713446 for the word mark NIMEI LA PERLA MODERN CLASSIC covering "Jewellery, gold articles, watches; precious metals; pearls; precious stones" in Class 14. The application was registered without opposition in July 1999. In April 2002, however, Nute Partecipazioni SpA (formerly Gruppo La Perla Spa) applied to have it declared invalid under Article 8(1)(b) and 8(5) CTMR.

Nute relied, inter alia, on the earlier Italian registrations below, asserting a likelihood of confusion and claiming that its earlier marks had a reputation in Italy and that the use of Worldgem's mark without due cause would take unfair advantage of their distinctiveness or repute:

A Long and Winding Road

Probably neither party realised at the outset what a long road it had to travel before the case would be resolved. The matter unfolded like this:

1.    At first instance, the Cancellation Division declared CTM 713446 invalid on the ground that Worldgem's use would take unfair advantage of Nute's figurative mark LA PERLA (IT 769526) within the meaning of Article 8(5).

2.    Worldgem successfully appealed to the First Board of Appeal. The Board held that in fact NIMEI LA PERLA MODERN CLASSIC was not sufficiently similar to the LA PERLA figurative mark covered by IT 769526, nor to any of the other earlier marks pleaded by Nute, to give rise to a likelihood of confusion under Article 8(1)(b) or to a link between the marks under Article 8(5).

3.    Nute then appealed to the ECJ, who reversed the Board of Appeal. The ECJ held that a) Nute's earlier LA PERLA figurative mark (IT 769526) did indeed have a reputation and b) the Board of Appeal had erred in finding that the marks were not sufficiently similar that the relevant public would mentally link them.

4.    The case was then remitted to the Second Board of Appeal, who rejected the case for invalidity under Article 8(5) was concerned, finding no evidence that the use of Worldgem's later mark would take unfair advantage of or be detrimental to the distinctive character or repute of IT 769526 for LA PERLA (figurative). The Board, however, partially upheld Nute's challenge based on a likelihood of confusion under Act 8 (1)(b) and ultimately confirmed the validity of Worldgem's registration for "pearls" only.

One More Try

Nothing if not persistent, Nute appealed again to the General Court arguing that Worldgem's registration should have been invalidated in its entirety.

In this regard, the General Court noted that the ECJ had found a reputation for IT 769526 LA PERLA (figurative) in respect of lingerie and swimwear and that, in so far as the goods covered by the LA PERLA mark and those covered by Worldgem's later mark belonged to adjacent market sectors, namely women's clothing and jewellery, a certain degree of similarity between the marks was sufficient to allow the Italian public to make a connection between the marks. It was therefore necessary to look at the risk that the use without due cause of NIMEI LA PERLA MODERN CLASSIC would take unfair advantage of, or be detrimental to, the distinctive character or reputation of the LA PERLA mark. Nute had proved several instances of actual confusion resulting from Worldgem's creation and advertisement of a NIMEI LA PERLA bikini adorned with pearls and a NIMEI LA PERLA jewel sweater. It was therefore for the General Court to consider whether this evidence was sufficient to prove the existence of unfair advantage of the distinctive character or repute of the LA PERLA mark.


The General Court stated that the concept of "taking unfair advantage" relates to the advantage taken by a third party of an earlier mark as a result of its use of an identical or similar later mark, rather than the detriment caused to the earlier mark. 
It confirmed that, in particular, unfair advantage occurs in cases where, by transferring the image of the earlier mark or the characteristics which it projects to the goods identified by the later mark, there is clear exploitation and "riding on the coat-tails" of the mark with the reputation. The advantage taken by a third party may be "unfair" even if it is not "detrimental" to the distinctive character or repute of the earlier mark.

In order to establish unfair advantage, it was necessary to undertake a global assessment, taking into account all the relevant factors involved, including the:
a)    strength of the earlier mark's reputation;
b)    degree of its distinctive character;
c)    degree of similarity between the marks in question: and
d)    the nature and degree of proximity of the goods or services concerned.

In the view of the Court, the stronger the distinctive character and reputation of the earlier mark, the easier it would be to find that detriment had been caused to it. Further, the greater the similarity between the marks, the greater the likelihood that unfair advantage would be taken of the distinctive character or repute of the earlier mark. The global assessment may also take into account the fact that there is a likelihood of dilution or tarnishment of the earlier mark.

The General Court concluded that "where a third party seeks to ride on the coat tails of a 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 earlier mark in order to create and maintain the mark's image", that third party effectively takes unfair advantage of the distinctive character or repute of the earlier mark.

The General Court noted that there was clear evidence that the specialised press and professionals of the relevant sector had actually connected Worldgem's NIMEI LA PERLA goods with those of Nute, thus assuming a commercial relationship between the two companies. Furthermore, Worldgem's advertising seemed to give the impression that there was some sort of connection or relationship between the marks in question. Therefore, an injury or likelihood of injury could not be ruled out.

The General Court rejected Worldgem's argument that its use of the term "la perla" had been with due cause because it referred to the common name with which its jewellery had been made, namely "pearls", and Worldgem had advanced no further justification.
Based on the above findings, the General Court ruled that the Second Board of Appeal had erred in its application of Article 8(5) and therefore annulled the Board's decision.


This lengthy battle shows that it sometimes pays to be persistent. Certainly in Nute's case it did.

However, it must have cost a great deal to reach the eventual finding upholding Nute's case for invalidity. Many others might have abandoned the fight much earlier due to the lack of financial resources to continue mounting legal challenges.

The General Court's decision reinforces earlier decisions relating to Article 8(5) in so far as it gives specific guidance on the requirements for and analysis of unfair advantage. One has to hope that decisions like this one, and a continuing supply of further decisions confirming and expanding on this guidance, will make it easier for the relevant divisions within OHIM to reach the right conclusion in the first instance.

Indeed, perhaps even more important than the specific legal guidance from this decision is the message that OHIM and its appeal boards need to strive ever harder to get decisions right at first instance. The responsibility is a heavy one, because in the current financial climate brand owners simply do not always have the resources to fight the same battle over and over again at different levels.

Given the more limited financial resources of many brand owners, predictability of outcome has never been more important. To cash-strapped companies, the mere availability of an appeal route is often but a cold and impractical comfort.