Abstract
The concept of "unfair advantage" under Article 5(3)(a) of the EU Trademark Directive (2015/2436) has emerged as a critical doctrinal tool for the protection of trademarks with a reputation against free-riding in digital markets. This article examines the legal framework governing unfair advantage claims, analysing the CJEU's foundational jurisprudence in L'Oréal v Bellure, Intel v CPM, Interflora v Marks and Spencer, and Skentel v Sky, and assessing the adequacy of the current doctrinal framework in addressing the challenges posed by digital commerce, algorithmic advertising, and AI-driven counterfeiting. It argues that the exponential growth of e-commerce platforms, keyword advertising, social media marketing, and AI-generated counterfeit goods has created forms of trademark exploitation that the existing case law did not anticipate. The article examines three categories of digital unfair advantage: keyword advertising and search engine optimisation practices that divert consumers from established brands to competitors or counterfeiters; social media influencer marketing that exploits brand reputation without authorisation; and AI-driven counterfeiting operations that use generative AI to produce convincing imitations of branded goods at industrial scale. It proposes strengthened legal protections, including a rebuttable presumption of unfair advantage in cases of deliberate digital brand exploitation, enhanced platform liability for hosting algorithmic brand exploitation, and the extension of the Trademark Directive's enforcement framework to address AI-generated counterfeiting.
Keywords: trademark; unfair advantage; EU Trademark Directive; digital markets; counterfeiting; keyword advertising; L'Oréal v Bellure; Intel v CPM; brand dilution; AI counterfeiting
1. Introduction
The protection of trademarks with a reputation against dilution and free-riding has been a central concern of EU trademark law since the adoption of the First Trademark Directive in 1988. Article 5(3)(a) of the recast Trademark Directive (2015/2436) provides that the proprietor of a registered trademark with a reputation in the Member State shall be entitled to prevent all third parties from using in the course of trade, in relation to goods or services, a sign which is identical with, or similar to, the trademark, where the use of the sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trademark.
The concept of "unfair advantage" within this provision captures a form of trademark harm that is distinct from both confusion (the consumer's mistaken belief that the defendant's goods originate from the trademark proprietor) and detriment to distinctive character (blurring) or repute (tarnishment). Unfair advantage addresses the situation in which a third party, by using a sign similar or identical to a trademark with a reputation, derives a commercial benefit from the trademark's attractiveness, reputation, or prestige, without paying any financial compensation and without making any effort of its own to create goodwill.
This article examines the doctrinal framework governing unfair advantage claims and assesses its adequacy in addressing the challenges of digital markets. Section 2 analyses the CJEU's foundational jurisprudence. Section 3 examines the specific challenges posed by digital commerce. Section 4 proposes reforms. Section 5 concludes.
2. The Doctrinal Framework
2.1 Intel v CPM: The Global Assessment
In Intel Corporation Inc v CPM United Kingdom Ltd, the CJEU established the analytical framework for claims under what is now Article 5(3)(a). The Court held that the existence of a link between the earlier mark and the later mark in the mind of the relevant public is a necessary but not sufficient condition for a finding of unfair advantage, detriment to distinctive character, or detriment to repute. The existence of such a link must be assessed globally, taking into account all relevant factors, including: the degree of similarity between the conflicting marks; the nature of the goods or services for which the marks are registered; the strength of the earlier mark's reputation; the degree of the earlier mark's distinctive character; and the existence of a likelihood of confusion on the part of the public.
The Court further held that unfair advantage, detriment to distinctive character, and detriment to repute are alternative, not cumulative, conditions. The trademark proprietor need only establish one of the three forms of harm, though the proprietor bears the burden of proving that the use of the later mark would take unfair advantage of, or be detrimental to, the distinctive character or repute of the earlier mark.
2.2 L'Oréal v Bellure: The Free-Riding Paradigm
The CJEU's decision in L'Oréal SA v Bellure NV is the leading authority on unfair advantage. The case concerned the marketing by Bellure of cheap imitation perfumes using comparison lists that referenced L'Oréal's well-known fragrance brands. The Court held that unfair advantage is established where a third party attempts, through the use of a sign similar to a mark with a reputation, to ride on the coat-tails of that mark in order to benefit from its power of attraction, its reputation, and its prestige, and to exploit, without paying any financial compensation and without being required to make efforts of its own, the marketing effort expended by the proprietor of the mark in order to create and maintain the mark's image.
The Court emphasised that the concept of unfair advantage does not require a finding of detriment to the trademark or its proprietor. It is sufficient that the third party derives a benefit from the association with the mark. This formulation significantly expanded the scope of protection available to proprietors of trademarks with a reputation, as it removed the requirement to demonstrate harm and focused instead on the appropriation of the mark's commercial magnetism.
2.3 Interflora v Marks and Spencer: Keyword Advertising
In Interflora Inc v Marks and Spencer plc, the CJEU addressed the application of the unfair advantage doctrine to keyword advertising, the practice by which a competitor purchases a trademark as a keyword in a search engine's advertising system so that its own advertisements appear when a consumer searches for the trademark.
The Court held that the use of a sign identical to a trademark with a reputation as a keyword in an internet referencing service may constitute unfair advantage if the advertiser thereby takes advantage of the distinctive character or repute of the trademark without offering a legitimate alternative, and without making efforts of its own to build goodwill. However, the Court recognised that keyword advertising may also serve legitimate competitive functions, such as enabling the consumer to compare goods and services. The determination of unfair advantage therefore requires a contextual assessment of the purpose and effect of the keyword use.
2.4 The Due Cause Defence
The Trademark Directive provides that the proprietor may prevent use of the sign only where the use is "without due cause". The CJEU addressed the due cause defence in Leidseplein Beheer BV v Red Bull GmbH, holding that the concept of due cause encompasses not merely objectively overriding reasons but also the subjective interests of the third party using the sign, including the right to freedom of expression and the freedom to conduct a business. The Court held that "due cause" may exist where the third party has its own legitimate interest in using the sign, provided that the use is not made with the primary purpose of benefiting from the reputation of the earlier mark.
3. Challenges in Digital Markets
3.1 Keyword Advertising and Search Engine Optimisation
The Interflora decision addressed keyword advertising in its most straightforward form: one brand purchasing another brand's name as a search engine keyword. However, digital marketing practices have evolved significantly since that decision. Search engine optimisation (SEO) techniques enable competitors to associate their content with a brand's reputation without purchasing the trademark as a keyword, by embedding trademark terms in metadata, alt-text, and structured data. These practices exploit the trademark's reputation to divert consumer attention without using the trademark in a manner that would be visible to the consumer, creating an enforcement gap that the current doctrine does not adequately address.
3.2 Social Media and Influencer Marketing
Social media platforms have created new forms of brand exploitation that challenge the traditional boundaries of trademark law. Influencer marketing, in which social media personalities promote products to their followers, may involve the use of trademarked terms, brand imagery, and brand associations in ways that blur the line between legitimate comparative advertising and unfair advantage. Where an influencer promotes a competitor's product using a comparison with a well-known brand, or uses brand hashtags to increase the visibility of competing products, the question arises whether such use takes unfair advantage of the brand's reputation within the meaning of Article 5(3)(a).
3.3 AI-Driven Counterfeiting
The most significant emerging threat to major brand holders in digital markets is the deployment of generative AI for the production and distribution of counterfeit goods. AI systems capable of generating photorealistic product images, realistic brand logos, and convincing packaging designs enable counterfeiters to produce imitations of branded goods at industrial scale and with a degree of verisimilitude that exceeds the capacity of traditional counterfeiting operations. These AI-generated counterfeits are distributed through e-commerce platforms, social media marketplaces, and direct-to-consumer websites, exploiting the reputation and consumer trust associated with established brands.
The existing trademark enforcement framework was not designed to address counterfeiting at this scale or level of sophistication. Content recognition technologies deployed by platforms can identify some counterfeit listings, but AI-generated counterfeits may evade detection by varying the visual characteristics of the counterfeit products and by using linguistic variations of the trademark terms.
3.4 Algorithmic Exploitation on E-Commerce Platforms
E-commerce platforms use algorithmic recommendation systems that may inadvertently facilitate unfair advantage by directing consumers searching for branded products towards unbranded or competing products. Where a platform's algorithm recommends a cheaper alternative when a consumer searches for a specific brand, the algorithm is effectively exploiting the brand's reputation to generate revenue for the platform and the competing seller. The question of whether such algorithmic behaviour constitutes "use" of the trademark by the platform, and whether it takes "unfair advantage" of the trademark's reputation, has not been addressed by the CJEU.
4. Proposals for Reform
4.1 Rebuttable Presumption of Unfair Advantage
The article proposes the introduction of a rebuttable presumption of unfair advantage in cases where a third party deliberately uses a sign identical or similar to a trademark with a reputation in digital marketing, keyword advertising, or e-commerce contexts, and where the use has the effect of diverting consumers from the trademark proprietor's offerings. The presumption would shift the burden to the defendant to demonstrate due cause, reducing the evidentiary burden on brand holders in the digital context where the exploitation of brand reputation is often deliberate and commercially motivated.
4.2 Enhanced Platform Liability
Article 17 of the Digital Single Market Directive imposes obligations on online content-sharing service providers to obtain authorisations from rightsholders and to implement content recognition technologies to prevent the availability of unauthorised content. The article proposes that analogous obligations should be extended to e-commerce platforms in respect of trademark-infringing listings, particularly those generated by AI systems. Platforms should be required to implement proactive monitoring for AI-generated counterfeit listings, to respond promptly to takedown requests from trademark proprietors, and to disclose information about repeat infringers.
4.3 Addressing AI-Generated Counterfeiting
The EU should extend the Trademark Directive's enforcement framework to address AI-generated counterfeiting specifically, including: the imposition of liability on providers of AI systems used for the creation of counterfeit goods or marketing materials; the requirement for AI system providers to implement technical measures to prevent the generation of content that infringes registered trademarks; and the development of AI-assisted trademark monitoring tools that can detect AI-generated counterfeits with greater accuracy than current content recognition technologies.
5. Conclusion
The doctrine of unfair advantage under Article 5(3)(a) of the EU Trademark Directive provides a powerful tool for the protection of trademarks with a reputation against free-riding. However, the digital transformation of commerce has created forms of brand exploitation that the doctrine's foundational case law did not anticipate. Keyword advertising, SEO manipulation, social media influencer marketing, AI-driven counterfeiting, and algorithmic brand exploitation on e-commerce platforms pose challenges that require both doctrinal development and legislative reform. The proposals advanced in this article, a rebuttable presumption of unfair advantage in digital brand exploitation, enhanced platform liability, and specific provisions addressing AI-generated counterfeiting, would strengthen the protection available to major brand holders without unduly restricting legitimate competition or freedom of expression in digital markets.
Bibliography
Fhima IS, Trademark Dilution in Europe and the United States (OUP 2011)
Kur A and Senftleben M, European Trademark Law: A Commentary (OUP 2017)
Ohly A, 'Keyword Advertising and EU Trademark Law' in Dinwoodie GB and Janis MD (eds), Trademark Law and Theory (Edward Elgar 2018)
Rosati E, 'The Legal Challenges of Influencer Marketing in EU Trademark Law' (2022) 17 JIPLP 456
European Union Intellectual Property Office, Intellectual Property Crime Threat Assessment 2022 (EUIPO 2022)
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