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When does referring to others result in an act of unfair competition? We explore the concept of “appropriation of merit”, illustrating the phenomenon with case law examples and analyzing the relevant Italian legislation.
To explain the concept of “appropriation of merits“, or unfair competition by reference, I find particularly clear and significant an order from more than a decade ago by the Court of Bologna. A Bologna-based company, operating in the cosmetics sector, had been accused of deliberately imitating famous fragrances, offering consumers products similar to those of others, at reduced prices, and exploiting their notoriety.
As a matter of fact, in 2007 L’Oréal had decided to take action against the Bologna-based company, which, in the multinational company’s view, had gone far too far. At the heart of the dispute was the Italian company’s use of the words “similar to” next to the original perfume brands, a clear attempt to latch onto the brands’ notoriety in order to attract customers. Also, designations such as “Aqua di Bella“, “Oà“, and “Promesse“, evoked the original products, creating strong suggestion in consumers.
The Court of Bologna, in a now-old order dated 01/03/2008, took a clear position on the issue. Although the Bologna-based company had attempted to defend itself by pointing out the differences between the trademarks used and the original ones, the Judge had found that exploiting the fame of famous trademarks through misleading wording constitutes an act of unfair competition because, for the company that exploits them, it results in cost savings in terms of marketing and an undue advantage. At the same time, an obvious harm is done to the original trademarks that are tarnished, with their value being diminished.
Here are the exact words of the Court of Bologna: “Where a competing company has boasted the similarity of its products (in this case: perfumes) with those of well-known manufacturers, thus taking advantage of the renown of the relative trademarks of the most famous houses, unfair competition for appropriation of merits, provided for in Article 2598, no. 2, Italian Civil Code, is integrated. In the case of widely known trademarks, the third party’s advantage may in fact consist either in the savings that said use enables the user to obtain for the affirmation of his product, or, more specifically, in the parasitic attachment that occurs by exploiting the fame achieved by the owner of the well-known trademark; the prejudice, on the other hand, may result either from the tarnishing of the image of the well-known trademark as a result of the adoption of products that are unrelated or of a vile nature or of poor quality, or from the weakening of the distinctive character of the trademark due to the loss of its uniqueness on the market; advantage and prejudice that are all the greater as the products are closer to each other.” (Court of Bologna, Sec. spec. propr. industr. ed intell., Order, 01/03/2008).
But let’s see exactly what Italian law says about the appropriation of merits.
Article 2598 No. 2 of the Italian Civil Code is one of the “centerpieces” of unfair competition as we insiders know it. The tort covers not only those who spread news and evaluations that can discredit a competitor, but also those who “appropriate merits” of a competitor’s products or enterprise.
In my experience as a lawyer active in the field of industrial property, I can say that this type of tort is particularly widespread and odious. The reason lies in its apparent simplicity: for many companies, it is easier to sell by illicitly latching onto the good reputation built up by others than by investing directly in innovation and quality.
Article 2598 on acts of unfair competition is located within Book Five of the Italian Civil Code (“Of Employment”) and specifically within Title X, Section II on the discipline of competition: “Without prejudice to the provisions concerning the protection of distinctive signs and patent rights, acts of unfair competition are committed by anyone [. …] 2) spreads news and appreciations about the products and business of a competitor, suitable to bring it into disrepute, or appropriates merits of the products or business of a competitor.”
The rule is clear in condemning those who, in a competitive environment, take unfair advantage of the virtues or notoriety of another entrepreneur’s products or activities. This takes the form of attempting to usurp the prestige and trust gained by other businesses, without having contributed time, resources or creativity to achieving such standards. The Bologna court ruling cited in the previous paragraph makes the point very well, but there are many other examples of appropriation of merit that we can cite. Here are a few.
The case dealt with in Cass. civ., Sec. I, Ord. 13/07/2021, No. 19954 (rv. 661820-01) offers a peculiar but very common scenario. If an advertising agency improperly boasts – through its website – the client roster of another company, suggesting that it has itself curated advertising campaigns curated by others, this could be appropriation of merits within the meaning of 2598, no. 2 Civil Code.
Clients, especially prestigious ones, can be a source of pride for an advertising agency (a merit, in fact). Therefore, if another agency falsely claims them as its own and without merit, this could be unfair competition by appropriation of merits (we discussed this here: “unfair competition for false attribution of clients“).
Another rather common type of hooking was dealt with by the judgment of the Court of Milan, Secz. spec. in matters of enterprises, 14/06/2017. An enterprise had imitated a work of industrial design of others, albeit with some differences, taking up the individualizing external characteristics of the original work. The tort, in such cases, can take the form of copyright infringement, but also as an act of unfair competition for appropriation of others’ merits. The advertising of the product, moreover, presented as an “author’s” product, but without a license, further intensified the undue grabbing.
Finally, the Italian Civil Cassation, Sec. VI, Ordinance 07/01/2016, No. 100 (rv. 638572) outlines the different, but still very common case in which an entrepreneur brags about merits, such as medals, awards, indications of quality, requirements, virtues, not possessed by his products, but belonging to the products or enterprise of a competitor. As a rule, in such cases, one ends up citing said awards without reason, giving rise to doubt in the observer that he or she is in front of the awarded company. This behavior disrupts consumers’ free choice, crediting their products with customers without significant investment efforts.
These cases are only meant to highlight the variety and complexity of forms of unfair competition by appropriation of merit, and underscore the importance of always taking an informed and very careful approach to industrial property rights and competition. So, how to move in case of questionable conduct?
The assessment of the tort of appropriation of merits (outlined in Art. 2598, no. 2, Italian Civil Code) requires a careful analysis of the facts and evidence, as the underlying issue is wide-ranging, affecting not only the relationship between companies, but ranging as far as the image and reputation of related personalities as, for example, in cases of ambush marketing.
The ruling of the Court of Bologna cited in the first paragraph, although quite old, emphasizes emphatically the importance of safeguarding reputation and the investments that companies make to achieve it. The question that arises, however, is whether the unauthorized use of someone else’s image always constitutes a depletion of the value of the brand, or whether, at certain junctures, it may rather contribute to enhancing its aura and value.
As attorneys, it is our duty to proceed with rigorous analysis of case law decisions and interpretive developments, moving with precision and strategic responsibility, weighing the benefits and risks of each action.
Businesses are often faced with the “temptation” of reference marketing, a practice that, while bringing potential savings on promotional investments, is generally illicit and fraught with pitfalls.
For the rightful owner of the illicitly referenced trademark, the wrongdoing results in a dilution of its value and a decline in customer trust, and it is therefore imperative for companies to operate with due diligence to avoid damaging repercussions.
In this complex reality, the Canella Camaiora Law Firm always prefers to adopt a careful and fully shared approach with the client. Being specialized in trademarks, patents, copyrights, but also in image law, the Firm – strong of a team of experienced professionals – faces the most articulated challenges striving to foresee the repercussions of the legal action also in commercial and reputational terms.