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Application of protection against unfair competition in the presence of the likelihood of confusion of trade marks and company names.

Competition is among the key factors determining economic growth. Competition is important at each level--among individuals, organisations, countries, regions and alliances (Mikulis et al., 2009). With businesses facing a fierce global competition, it is of crucial importance to ensure, alongside with appropriate management and organisation systems, the protection of economic entities against unfair competition. Complete laissez faire (government non-intervention) in the competition field could not ensure conformity of actions of individual market participants to public interests and long-term economic goals, hence legal regulation of economic and commercial activities is necessary to steer the activities in the direction of benefit to the economy. Protection against unfair competition in the cases of use of trade marks and company names is an important means of defending the interests of economic entities. However, little use has so far been made of it in Lithuania. A proper application of the legal norms stipulating this protection is a complicated task for courts which sometimes requires a systemic assessment of conflicting interests, theoretical grounds for and goals of protection against unfair competition and the relationship with laws on the protection of intellectual property. In hearing cases, courts still quite rarely rely on the case-law of the European Court of Justice (hereinafter--the "ECJ") concerning protection against unfair competition.

The main aim of the article is to analyse the conditions of application of protection of trade marks and company names against unfair competition in the presence of the likelihood of confusion, as well as evaluation criteria and circumstances.

Object of research--international and national principles of legal regulation, research literature, the case-law of the European Court of Justice and Lithuanian courts.

The article employs a number of research methods: the logical and analytical method has been utilised to carry out an analysis of regulatory enactments and the case-law of courts with a view to determining the peculiarities of legal regulation and potential problems of its implementation; the systemic method has been employed to examine the trade mark and competition legal norms relating to the use of these trade marks and company names, their protection against unfair competition and consumer protection against unfair commercial practices; the comparative method has been applied to analysis of international and national legal acts as well as legal acts of the European Union, the solutions offered by them; the linguistic method--to interpretation of the content of legal norms; the teleological method has been used for the purpose of determining the grounds giving rise to the need for legal protection of trade marks and company names against unfair competition.

The present article uses international and national legal acts as primary sources in analysing the peculiarities of legal regulation and relies on the case-law of the ECJ and national courts. Moreover, the paper also uses specialised literature of foreign and Lithuanian authors, research articles, non-normative literature.

1. Legal protection against confusion

Trade marks and company names perform the function of communication of information, just the object identified by them differs: trade marks are designated for distinguishing of goods and services of one undertaking from the goods and services of another, whereas company names identify the business entity itself. The commonness of their functions implies that the need for legal protection of trade marks and company names is based, as a matter of principle, on the same arguments. Some authors even claim that separation of the concepts of trade marks and company names is largely a matter of historical significance, hence it is not relevant in respect of evaluation of the economic functions of these objects (Martino et al., 1989). If properly performing their functions, these objects of industrial property allow to attain the main economic goals: firstly, the costs of consumer search are reduced and consumer choice is facilitated and, secondly, business entities maintain a stable quality of goods and services (Menell, 2000).

The first goal--reduction of the costs of consumer search--is considered to be the principal ground for legal protection of trade marks (Kamperman, 1997; Menell, 2000). According to the model of establishing of the consumer value of a trade mark, which is proposed for determination of both the individual value of a trade mark and the value of competing trade arms, the price of an item of goods is viewed as a factor having the least effect on the value of the trade mark: the higher the price, the more valuable is the trade mark as perceived by the consumer (Ruzeviciute et al., 2010). From the economic perspective, when paying for an item of goods a consumer pays not only for the item itself, but also the price which is accrued when searching for the purchased item. If wrong information is provided on the market about the origin of the item, a consumer is at risk of making a mistake, and as a result he may suffer additional expenses. Just the opposite, trade marks inform consumers of the origin of goods and services thus minimising the possibility of making a mistake. Consequently, the impact of trade marks reduces the costs of consumer search, especially in the cases when consumers purchase goods and services in other markets (Loughlan, 2005).

The legal protection of trade marks encourages business entities to maintain a high quality of goods and services--consumers will be interested in purchasing an item of goods which has a better reputation. Thus, the proprietor of goods and services with a better reputation recognised by the public will be encouraged to maintain the high quality of goods and services for the value of its distinctive sign not to decrease (Loughlan, 2005). It is clear that a trade mark guarantees a consistent and higher quality of goods and services, hence consumers are encouraged to repeatedly purchase the goods and services bearing an appropriate sign. Based on Martino's approach to the commonness of economic functions of trade marks and company names, the arguments can apply mutadis mutandis to company names.

Taking account of the discussed identification function of trade marks and company names, it is evident that unfair use of such elements would distort competition and would prevent from attaining the economic goals under analysis. This means that in order to ensure the function of these signs, it is necessary for their proprietor to enjoy the exclusive right of prohibiting other undertakings to use an identical or similar sign, because otherwise consumer can confuse these undertakings or the origin of their goods and services. Accordingly, the ECJ has repeatedly stressed that effective competition is possible only when all economic entities are in a position to attract and keep consumers by virtue of the quality of their goods and services, which necessitates the use of trade marks enabling consumers to distinguish the goods and services of one economic entity from the goods and services which have another origin (CNL-SUCAL v HAG GF (HAG II), 1990). The ECJ views the identification function of the guarantee of origin of goods and services as the essential function of a trade mark (Hoffmann-La Roche & Co. AG v Centrafarm, 1978; Philips v Remington, 2002). According to the theory of property rights, seeking to maximise his profits the proprietor of such exclusive rights will act in a manner most advantageous not only for itself, but also the economy (Lehmann, 1989).

To sum up, it may be concluded that most sources of research literature and the legal doctrine uphold the view that the need for legal protection of trade marks and company names against unfair competition in the presence of the likelihood of confusion is based on the economic benefit determined by the function of identification performed by them manifested by reduction of the costs of consumer search and encouraging business entities to maintain a consistent quality of goods and services.

2. Conditions of application of protection of trade marks

According to international and national principles of legal regulation, an act of unfair competition on the market of trade marks and company names is the unauthorised use of these signs which contravenes fair economic activities and good practice, if this causes the likelihood of confusion or aims at taking advantage of the reputation of another economic entity. Subparagraph 1 of paragraph 1 of Article 16 of the Law of the Republic of Lithuania on Competition also analyses an example of acts of unfair competition when trade marks and company names are used in a manner creating the likelihood of confusion. However, not all signs are granted protection against acts of unfair competition under this provision. The signs must meet certain requirements.

Firstly, a sign must have a distinctive character. In the case-law of courts, distinctiveness is analysed under the law of trade marks, according to which the need for the distinctive character of a sign arises from its function of identification in general and distinguishing specific goods and services in particular. The ECJ has argued that the capability of a mark to distinguish the goods and services of one undertaking from those of another generally must be recognised even in the cases when the possibility that the sign in question could perform this function cannot be ruled out (Libertel Groep BV v Benelux-Merkenbureau, 2003). On the basis of this interpretation, the range of the signs capable of performing the distinguishing function would significantly expand. In respect of distinguishing specific goods and services, the requirement for a mark to have a distinctive character is much stricter--the sign must serve to designate specific goods or services or an economic entity (Philips v Remington, 2002). In trade mark proceedings, each of these requirements is considered to be the component parts of the sign's distinctive character, meanwhile within the meaning of the Law of the Republic of Lithuania on Competition such component parts are not identified, hence it is possible to conclude that both the abstract capability of a sign to have a distinctive character and distinctiveness in respect of specific goods and services or an economic entity are viewed as distinctiveness of the sign. This conclusion is confirmed by the following interpretation given by the ECJ: in assessing a mark's distinctiveness, it is the overall perception of a consumer that matters most rather than various details (Mag Instrument Inc. v OHIM, 2004). Unfortunately, this principle is not always observed by Lithuanian courts, and distinctiveness is often arbitrarily linked with specific elements of a sign rather than the overall perception of a consumer. This approach is made clear by case UAB "Boslita ir Ko" v UAB "Itaina", heard by the Court of Appeal of Lithuania, in which the court argued that the compared signs of the applicant and the defendant are confusingly similar, because when applying for registration of such a similar sign as a trade mark, the defendant was aware of the existence of several or at least one distinctive character of the sign (UAB "Boslita ir Ko" v UAB "Itaina", 2005).

In addition to possession of the distinctive character, the signs claiming protection against unfair competition are required to have become sufficiently well-known in an appropriate business field as identifiers of a certain economic entity or of goods and services. This requirement is based on the reasoning that the likelihood of confusion will arise only in the cases when consumers will associate an earlier sign with the applicant or its goods and services. In the practice of Lithuanian courts, this condition is unanimously recognised as the sign's reputation. Possession of the sign's reputation is not a mandatory condition when the acts of unfair competition occur in the presence of the likelihood of confusion, hence in such cases the fact of the sign becoming sufficiently well-known in a relevant business field rather than the possession of a reputation would be a more acceptable condition.

Subparagraph 1 of paragraph 1 of Article 16 of the Law of the Republic of Lithuania on Competition additionally stipulates that the applicant's sign must be used by the right of priority. The concept of the right of priority covers two issues: the applicant's link with the sign which it uses and the relationship between the rights of the applicant and of the defendant to the sign in question. As regards the first issue, the condition of the use of the sign by the right of priority implies that the applicant must use the sign lawfully, whereas registration is not a mandatory condition for the use of the sign. In case UAB "Kilmine" v AB "Vilniausprekyba" et al., the Supreme Court of Lithuania (hereinafter--the "SCL") states that with a view to using an appropriate sign in economic and commercial activities, it is not necessary to register it as a trade mark in accordance with the procedure laid down by laws, that is, registration is not a mandatory condition of the lawful use of the sign (UAB "Kilmine" v. AB "Vilniaus prekyba" et al., 2004). The same opinion of the SCL is stated in case UAB "Rasa" et al. v R. Degutienes II " Kertupis" : the actual use of a sign (label), without its registration, is a valid ground for the rise of legal protection under the law of unfair competition (UAB "Rasa" et al. v R. Degutienes IJ "Kertupis", 2001). The Court of Appeal of Lithuania makes a reasoned observation that the Law on Trade Marks defends rights to the very sign of a product, meanwhile the Law of the Republic of Lithuania on Competition pursues the aim of protecting the freedom of fair competition. Within the meaning of the Law of the Republic of Lithuania on Competition, it is not the legal characteristic of the sign subject to defence itself, but the question whether the use of a confusingly similar sign may be treated as one of the acts likely to disturb fair competition that is most important (UAB "Boslita ir Ko" v UAB "Itaina", 2005). Moreover, the court notes in this case that no legal act contains any imperative clause according to which the freedom of fair competition may be defended only in the cases when an entity takes advantage of the reputation of a sign registered as a trade mark. Neither does any legal act stipulate the obligatory registration of a sign intended for the marking of goods as a trade mark. Secondly, when examining the relationship between the individual rights of the applicant and of the defendant to the sign at issue, it should be noted that the applicant must claim a right of priority to the sign in question. Priority in time should be established according to the entity whose sign was first to have acquired the necessary degree of reputation in the relevant business field or territory rather than according to the entity which commenced to use it earlier.

To sum up, a conclusion may be drawn that in compliance with subparagraph 1 of paragraph 1 of Article 16 of the Law of the Republic of Lithuania on Competition, an economic entity may defend its rights against unfair acts in the cases when its sign possesses a distinctive character, has acquire a certain reputation required for creation of the likelihood of confusion and it acquired the reputation earlier.

3. Acts of unfair competition creating the likelihood of confusion

One of the types of acts of unfair competition prohibited under subparagraph 1 of paragraph 1 of Article 16 of the Law of the Republic of Lithuania on Competition is the acts causing the likelihood of confusion, i.e., the unauthorised use of a sign which is identical with or similar to the name of another economic entity, a registered trade mark or unregistered well known trade mark or another sign with a distinctive character used by the right of priority, if this causes or is likely to cause confusion with this economic entity or its activities. According to this provision, the element determining unfair competition is not the use of the identical or confusingly similar sign itself, but the effect of these acts, that is, creation of the likelihood of confusion with another economic entity or its activities, when due to the sign used by the defendant consumers wrongly believe that they are dealing with the applicant's activities (UAB "Traidenis" v UAB "Freliksnavis", 2009).

Legal acts contain a mention of two types of confusion: confusion with another economic entity and confusion with the activities of another economic entity. In the first case, confusion arises if the offender uses a company name which is identical with or similar to the sign used by another entity by the right of priority, if this results in the likelihood of confusing the offender with that other entity. The second case--confusion with the activities of another economic entity arises when the defendant uses an identical or similar trade mark or another sign identifying the entity's economic or commercial activities.

In the legal doctrine (Kamperman, 1997; Protection ..., 1994), the analysis of subparagraph 1 of paragraph 3 of Article 10bis of the Paris Convention enables to identify three forms of confusion in respect of which protection against unfair competition may be granted:

1) confusion as to the origin--the economic origin of goods and services or the identity of an economic entity;

2) confusion as to affiliation--continuing economic relations between economic entities (Canon Kabushiki Kaisha v Metro-Goldwyn-Mayer Inc., 1998);

3) confusion as to authorisation, contribution--licensing links.

Confusion as regards the origin is a classical and most frequently recurring case of confusion, when a considerable share of consumers might be misled as to the identity of a certain undertaking or the origin of its goods (services). In the second case, consumers are confused when the defendant's goods bear a sign which is identical with or similar to the applicant's sign, with the applicant's being capable of controlling the quality of the defendant's goods and services, that is, the consumer wrongly believes that the applicant and the defendant belong to a group of economically-linked undertakings. The third form of confusion implies that consumers are aware of the different origin of goods and services, and economic entities are not economically-linked, though the consumer is wrongly convinced that the economic entities are linked by licensing contracts. The latter form of confusion in the case-law of Lithuanian courts is attributed to unfair use of the repute of the sign, causing detriment to the repute of another sign or weakening of the distinctive character of the sign.

Summing up the types and forms of confusion, it is possible to conclude that the likelihood of confusion should be described as the likelihood that the consumer will confuse the economic origin of goods and services or the identity of a business entity or will wrongly believe that business entities are closely economically-linked.

3.1. Assessing the likelihood of confusion

In practice, the acts which in fact cause the likelihood of confusion or, to be more precise, the fact of confusion is determined by applying the criterion of perception of an average consumer of respective goods or services. The case-law of courts supports the conclusion. In its case-law, the ECJ has repeatedly stressed that in deciding whether a trade mark is likely to cause confusion on the part of the public, the opinion of an average consumer is decisive, that is, it does not suffice to prove the fact of similar or another association between two trade marks, but it is also necessary to provide evidence that such an association or similarity has caused the likelihood of confusion on the part of the public. Interpretation of the concept of an average consumer itself has been provided in a number of cases heard by the ECJ (Gut Springenheide GmbH and Rudolf Tusky v Oberkreisdirector des Kreeises Steifurt-Amt fur Lebensmitteluberwachung, 1998; Lloyd Scuhfabrik Meyer & Co. GmbH v Klijsen Handel BV, 1999), according to which the average consumer is a well informed, reasonably observant and circumspect consumer. Such a provision concerning the concept of an average consumer is observed also by the SCL in its practice (UAB "AAA" v The State Patent Bureau of the Republic of Lithuania, 2002).

In order to prove the fact of misleading and assess its economic consequences, the circumstances of a specific case are of considerable significance in addition to the criterion of perception of an average consumer. Posner notes that, partly as a result of development of scientific cognition which has facilitated for courts the task of determining relevant factual circumstances and partly due to the fact that courts have become less tolerant towards the harsh consequences of their decisions which are not always justified, the law shows a long-term tendency to replace rules with standards, that is, with the legal tests which aim at evaluating the entirety of specific circumstances of a dispute, rather than provide one or several key facts with a decisive legal weight (Posner, 1998; Kamperman, 1997).

Therefore, when dealing with confusion, two elements are of importance: firstly, an average consumer, i.e., a consumer that is well informed, reasonably observant and circumspect and, secondly, account should be taken of the entirety of legally relevant factual circumstances of the case. The key circumstances which must be taken into consideration when determining the likelihood of confusion are analysed in specific cases.

One of the circumstances determining the unfair character of the defendant's acts is the identity or similarity of the signs used by the applicant and the defendant. In this respect, of particular importance is the interpretation of the ECJ in a number of cases (SABEL BV v Puma AG, Rudolf Dassler Sport, 1997; Lloyd Schuhfabrik Meyer & Co. GmbH v Klijsen Handel BV, 1999), according to which the largest weight in determining whether signs are confusingly similar must be put on the dominant components of the signs which consumers memorise the best. This position is referred to by other courts, for example, in case L'Oreal SA v Office for Harmonisation in the Internal Market (L'Oreal SA v OHIM, 2009) the applicant L'Oreal SA applied for registration of a Community trade mark SPALINE to cover products in Class 3 (cosmetics). The registration of the trade mark was opposed by the company SPA Monopole, which owns the earlier trade mark SPA registered to cover the products in the same class. The Court of First Instance dismissed the argument of L'Oreal SA that the word SPA is descriptive and general in respect of cosmetic products. Having stated that the marks are identical as regards the word element 'SPA', and the goods covered by the marks at issue are similar, the Court established that there exists a likelihood of confusion on the part of consumers. In another case of a similar nature, Kaul GmbH v OHIM and Atlantic Richfield Co, the Court of First Instance drew another important conclusion relating to the identity or similarity of the defendant's and the applicant's signs (Kaul GmbH v OHIM and Atlantic Richfield Co, 2009). The company Atlantic Richfield Co applied for registration of the Community trade mark ARCOL. Prior to this mark, as early as in 1998, the applicant Kaul GmbH filed an opposition based on its earlier Community trade mark CAPOL. The Office for Harmonisation in the Internal Market gave an interpretation that although the goods covered by the trade marks at issue were identical, the trade marks concerned were not recognised as confusingly similar for visual and phonetic differences. Having examined the appeal by the appellant Kaul GmbH and based on the earlier case-law of the ECJ, the Court of First Instance stated that the compared trade marks were not visually similar, regardless of the fact that they were made up of the same number of letters and the position of some letters in the words concerned coincide, so it dismissed the appeal. According to the Court, confusion of the consumer would be likely if the compared words had an identical beginning. The ECJ also concluded that the global appreciation of the likelihood of confusion depending on the visual, aural and conceptual similarity of the marks in question, must be based on the overall impression given by the marks, bearing in mind, in particular, their distinctive and dominant components (Sabel BV v Puma AG, Rudolf Dassler Sport, 1997; Lloyd Schuhfabrik Meyer & Co. GmbH v Klijsen Handel BV, 1999).

Thus, in deciding the issue of identity and similarity of signs, the general impression made on the average consumer of goods and services is not the only matter of importance, as it is necessary to evaluate the actual form of use of both signs, i.e., whether it is oral or figurative, whether the marks differ in colour, etc.

Another relevant circumstance is the similarity of categories of goods or activities covered by signs. A direct competition between parties to a dispute is not a prerequisite for protection against confusion by acts of unfair competition, hence the latter criterion, even though being an important element of the entirety of factual circumstances of the case, is not considered to be the necessary prerequisite for an infringement (Protection ..., 1994). On the other hand, based on the case-law of the ECJ, assessment of the likelihood of confusion on the part of consumers implies some interdependence between all factors relevant to establishment of the infringement: a lesser degree of similarity between goods and services may be offset for the purpose of establishing the infringement by a greater degree of similarity between the trade marks and vice versa (Canon Kabushiki Kaisha v Metro-Goldwyn-Mayer Inc., 1998). In light of this relationship, it is possible to claim that in the case when the signs of the applicant and of the defendant will not be viewed as confusingly similar, but will function in the same category of goods or activities, the latter criterion will be of considerable significance in evaluating unfair acts of the defendant.

In proceedings regarding unfair competition, a matter of importance is often the territory of the use and recognition of a sign, because a trade mark may be used and recognised not in all countries, but only within a certain clearly defined territory. In this case, protection against the unauthorised use of an identical or confusingly similar sign causing the likelihood of confusion will cover solely the defined territory.

The list of the circumstances affecting assessment of the likelihood of confusion is not finite and may differ in each case (UAB "Balionii salis" v UAB "Vilbalas", 2004). The practice of the SCL has permitted to establish another circumstance of considerable importance and much interest--in disputes over unfair competition arising from confusion of consumers it is sufficient for the use of the defendant's sign to have a commercial impact independent of the form in which or the purpose for which the defendant uses the applicant's trade mark. This principle was formulated when hearing a dispute over the use of the symbolic part of the name of the applicant's legal entity on the defendant's website, where it was used in a meaning other than the name. In case UAB "Balionn salis" v UAB "Vilbalas", the defendant was using the applicant's company name on the homepage of its website, hence the SCL, based on Article 3 of the 2001 Joint Recommendation Concerning the Protection of Marks, and Other Industrial Property Rights in Signs, on the Internet adopted by the Assembly of the Paris Union for the Protection of Industrial Property and the World Intellectual Property Organization, recognised the defendant's acts as unfair under the provision of subparagraph 1 of paragraph 1 of Article 16 of the Law of the Republic of Lithuania on Competition concerning the economic effect caused by such acts, regardless of the fact that the defendant's sign was used for another purpose and in another meaning. The same decision was adopted also in another case heard by the SCL UAB "Baldti centras" v UAB "Neiseris" (UAB "Baldii centras" v UAB "Neiseris", 2009). The court acknowledged that by using the symbolic part of the name of the applicant's legal entity, namely, the word combination 'Baldi centras' ('Furniture Centre') without other distinctive words as the identifier of its business, the defendant infringed the exclusive rights of the applicant, which is the proprietor of the name of the legal entity. The court also decided that the cases when a domain name which is identical with or similar to the name of a legal entity is used in the meaning of distinguishing the goods or services sold by another undertaking could also be recognised as an infringement of the entity's rights to the name of the legal entity.

Generalising the interpretations given in the cases heard by the ECJ and the SCL, a conclusion may be drawn that the likelihood of confusion in the context of protection against unfair competition is determined in light of the entirety of the circumstances of use of the defendant's sign, which must inter alia include:

1) the identity or similarity of signs as regards the form of use of both signs;

2) the similarity of the categories of goods or services or activities covered by the signs;

3) the territories of use of both signs;

4) the effect of a commercial nature.

3.2. Collision between trade marks and company names

A mention of the relationship between the use of company names and trade marks was made in the previous section when considering the circumstances of assessment of the likelihood of confusion in the SCL cases UAB "Balionn salis" v UAB "Vilbalas" and UAB "Baldu centras" v UAB "Neiseris ", but owing to the different application of provisions of the law of trade marks and competition law the collision of these signs calls for an in-depth analysis.

It is evident that the functions of a company name and a trade mark are different. The purpose of the company name is identification of a business entity, its distinguishing from among other business entities independently of its goods and services. The purpose of a trade mark is to distinguish the goods or services of one undertaking from the goods or services of another. In practice, this difference is determined according to the perception of appropriate signs by the public. The question arises, whether the use of a company name will not be perceived by consumers as a reference to the origin of the goods or services with which it is associated and whether the defendant, by using another company's name for other purposes, e.g. to mark its goods, will not infringe the applicant's interests and whether such acts of the defendant will not be viewed as unlawful and contravening fair economic activities and good practice? In the opinion of Advocate General Tizzano, the circumstances of the use of the name of a legal entity may determine that it will be viewed as a reference to the origin of the goods or services with which it is associated (UAB Restorani grupe "Fortas" v AB "Ragutis", 2008), that is, will be viewed as a trade mark and vice versa, hence such acts should be regarded as unfair. The practice of the SCL shows that although each of these objects must perform the function attributed to it, the functions performed by them need nonetheless harmoniously balanced, because legal entities (having certain names) usually use trade marks to designate the goods produced and the services produced by them, whereas the trade marks put on the market are the property of certain legal entities. According to the practice of the SCL, if this harmonious relationship is distorted, the likelihood of confusion on the part of the public will arise: certain trade marks will be arbitrarily associated with legal entities, just as, vice versa, legal entities will be attributed certain trade marks with which they are in fact not associated in any manner (Danish company "Kirkbi A/S" v UAB "Legosta", 2006; UAB "Baldii centras" v UAB "Neiseris", 2009). Moreover, the SCL notes that this rule concerning association between the names of legal entities and the trade marks belonging to different economic entities should also apply in the cases when the use of a sign by the defendant is not registered as a trade mark in accordance with the procedure laid down by legal acts, but is used for the purpose of distinguishing the mark--the goods sold or the services provided, i.e., as the identifier of the pursued economic and commercial activity (business).

A problematic issue when determining whether the name of a legal entity (company name) constitutes a violation of an earlier trade mark with a high likelihood of confusion on the part of the public is linked with definition of the scope of legal protection of a registered trade mark. In compliance with Article 5(1)(a) and (b) of 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 and subparagraphs 1 and 2 of paragraph 1 of Article 38 of the Law of the Republic of Lithuania on Trade Marks, the proprietor of the registered trade mark holds the exclusive right to prohibit the use of the signs for identical or similar goods or services. The practice of the ECJ indicates that this provision requires the offender to use the sign 'as a trade mark', i.e., use for the purpose of distinguishing the goods and services covered by the mark (BMW v Deenik, 1999; Celine SARL v Celine SA, 2007). Thus, based on trade mark law and having regard to the fact that the purpose of a company name is to identify a business entity rather than goods or services, the use of the company name in compliance with the provisions of the mentioned legal acts for its original purpose would not result in infringement of the trade mark proprietor's rights. On the other hand, if the latter name of the legal entity is not used as a trade mark, though there exists a likelihood of confusion as regards the activities of respective economic entities, such an act would be regarded as 'unfair' and protection of the registered trade mark against the name of the legal entity will be effected on the basis of competition law. Therefore, for the purpose of identification of goods and services and in compliance with Article 5(1) of 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 and subparagraphs 1 and 2 of paragraph 1 of Article 38 of the Law on Trade Marks, the use of a sign exclusively as the name of a legal entity, without using it additionally for the identification of goods and services, should not be viewed as a violation of rights to an identical or similar trade mark, however if there exists a likelihood of confusion as regards the origin of goods or services, the proprietor of such a trade mark could defend its rights on the basis of provisions of competition law.

Based on the provisions of trade mark and competition law, analysis of the practices of the ECJ and the SCL, a conclusion could be drawn that the use of a company name, where this makes a misleading impression on consumers as regards its association with the earlier trade mark, is recognised as its use as a trade mark and is considered to constitute an act of unfair competition.

Conclusions

The need for legal protection of trade marks and company names against unfair competition, if there exists a likelihood of confusion, is based on the economic benefit determined by their identification function, with this benefit expressed in terms of reduction of the costs of consumer search and encouraging business entities to maintain a consisted quality of goods and services.

Three main preconditions must be present to ensure protection of trade marks and company names against unfair competition: distinctiveness of a sign, sufficient reputation of the sign in the relevant business field, and use of the sign by the right of priority. The use of the sign by the right of priority should be associated not with the onset of the use of the sign, but with the moment in the course of this use, when a sign possessing or having acquired a distinctive character becomes sufficiently well-known in the relevant business field as the identifier of a specific economic entity or its activities.

The possibility of misleading (confusing) is interpreted as the likelihood of confusing, on part of the consumer, the economic origin of goods and services or the identity of a business entity or wrongly believing that business entities are connected by intensive economic ties. Based on the case-law of the ECJ and the SCL, acts of unfair competition in the presence of the likelihood of confusion are established according to the criterion of an average consumer and evaluating the body of factual circumstances, which must inter alia include: the identity or similarity of the signs used; the similarity of the categories of services or activities covered by the signs; the areas of use of both signs; the effect of a commercial nature. The use of the company name is considered to be its use as a trade mark if this results in a misleading impression as regards its association with the earlier trade mark.

doi: 10.2478/v10088-011-0010-8

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Ina LISINSKAITE

MA graduate of the International Business School of Vilnius University

Manager of the Intellectual Property Group

Thermo Fisher Scientific (formerly Fermentas)

V. A. Graiciuno str. 8, LT-02241 Vilnius, Lithuania

E-mail: ina.lisinskaite@thermofisher.com; Tel.:+370 6 757 1509

Received 10 January 2011; accepted 5 April 2011

Short biographical notes

Ina Lisinskaite is the author is an MA graduate of the International Business School of Vilnius University. She majors in intellectual property law and takes interest in new developments in the area of competition law.
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Author:Lisinskaite, Ina
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Date:Jan 1, 2011
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