L'Oreal had claimed that Bellure enjoyed an "unfair advantage" by distributing replica products which achieved sales on the back of L'Oreal's reputation.
Bellure had been producing cheap replica perfumes that were intended to smell like famous L'Oreal ones.
Bellure's replica perfumes were sold under different names, however Bellure used the names of the L'Oreal perfumes in comparison price lists to indicate which famous perfume each of its cheaper products was supposed to replicate.
The packaging of the replica perfumes also featured a sign that was similar to the L'Oreal trademark, but not so similar that it would cause confusion.
In reference to the Trade Mark Act 1994, the ECJ ruled that the confusion between the origin of two products does not need to be demonstrated in order for there to be "unfair advantage".
It said that if a third party uses a sign which is similar to a mark with a reputation "where that third party seeks by that use to ride on the coat-tails of the mark of reputation in order to benefit from the power of attraction, the reputation and the prestige of the mark, and to exploit, without paying any financial compensation, the marketing efforts expended by the proprietor of the mark" then the advantage resulting from such use must be considered to be an advantage that has been unfairly taken.
Therefore, even though L'Oreal may not have suffered detriment (such as a drop in sales or damage to its reputation) as a result of Bellure selling the replica products, Bellure was guilty of "unfair advantage" and trade mark infringement because it used a sign similar to L'Oreal's in order to achieve sales on the back of L'Oreal's prestige.
The ruling provides greater clarity over the extent to which brand owners have recourse to trade mark law when challenging cheaper rivals in their use of comparative advertising.
Until today, the concept of "unfair advantage" had remained vague, with case law giving little to no guidance as to the extent to which it could be applied by brand owners in the course of claiming infringement.
Previous cases had focused on confusion of origin as well as dilution of the brand owner's mark.
Geoff Steward, IP partner at city law firm Macfarlanes, said: "The L'Oreal decision should sound the death knell on look-alike and own-label products.
"Even without any economic harm to the trade mark owner or confusion caused by the look-alike, where the only purpose of the use of the look-alike is to ride on the coat-tails of the market leader's reputation and to exploit the marketing efforts expended by it in order to promote the sale of the look-alike, that will confer an unfair advantage and amount to trade mark infringement."
The dispute between L'Oreal and Bellure had gone to the UK's Court of Appeal. The Advocate General referred a number of questions to the European Court of Justice, asking whether use of a mark may constitute trade mark infringement in cases where there was no likelihood of confusion and no damage done to the brand owner in question.
The High Court had previously ruled that the comparative list nonetheless constituted infringement by allowing Bellure to take "unfair advantage" of L'Oreal's marks.
The case has now been referred back to the UK's Court of Appeal.
Kirsten Gilbert, solicitor at intellectual property firm Marks & Clerk, said: "Today's judgment opens the door for brand owners to attack a commercial advantage enjoyed by rivals, providing better guidance as to when and how this may apply.
"Quite clearly, the court takes the view that imitation is not the sincerest form of flattery, even when there is no confusion in the marketplace between two products.
"In particular, it makes clear that rivals cannot use comparative advertising as a safe-harbour, short-circuiting their own commercial endeavour by implicitly or explicitly presenting their goods as imitating or replicating a well-known product."
"This decision provides welcome clarification of the relationship between trade mark law and comparative advertising, which should allow for greater harmony across European courts."