"Aura of luxury" as Dior squeezes Copad in corset clash

Fashionista is pleased to say that, with her hourglass figure and svelte lines, she has never yet required the use of a corset. If she did have such a need, she is sure she'd add the upmarket Christian Dior product to her "must-try" list -- but where would she go to buy it? Her choice may now be a little more limited, following the European Court of Justice's ruling this week that Dior can -- at least in theory -- use its trade mark rights to stop the resale of fashion goods by pile-them-high-and-sell-them-cheap retailers who acquire them from legitimate distributors.

The case in question is Case C‑59/08 Copad SA v Christian Dior couture SA and others, and it all happened like this: Dior licensed SIL to sell "luxury corset goods" under its CHRISTIAN DIOR mark. The licence prevented SIL selling the products to discount stores without prior written consent. When business got tough, SIL asked if it could sell the corsets outside Dior's selective distribution network; Dior said "non!". However, SIL still sold the goods anyway to Copad discount stores. Dior sued and the top French court sought a ruling on three preliminary issues.

According to the ruling, (i) Dior could sue SIL for trade mark infringement for being in breach of a licence that bans, on grounds of the trade mark’s prestige, sales to discount stores, so long as -- on the facts -- that contravention "damages the allure and prestigious image which bestows on those goods an aura of luxury"; (ii) it was plain that, if SIL breached a "don't sell to the cheapo stores" obligation, no-one could say that the sale of those goods by SIL or indeed by Copad was with Dior's consent; (iii) even if Dior had let SIL sell the corsets to Copad, Dior could still
oppose their resale if it could prove that, on the facts, such resale would damage the reputation of the trade mark.

Fashionista sees this as a victory for fashion houses that run selective distribution schemes to stop their upmarket goods going on sale in the wrong sort of places. But this is not the end of the story. For one thing, it's still necessary to show that the resale will damage the brand's aura of luxury -- and the courts in Europe have yet to tell us what this means. Secondly the European Commission, which loves pro-competitive markets, sided with Copad in this case and might yet move to curb brand enforcement in similar cases through legislation.