PARIS, France — The global fragrance market, valued at $28 billion in 2012, is forecast to reach approximately $45.6 billion by 2018, according to market research firm Global Industry Analysts. Demand comes from consumers spread across the world, but key industry players like LVMH and Chanel tend to create their scents in a single market: France. The small French town of Grasse, about 20 kilometres north of Cannes, is known as “the perfume capital of the world” and currently produces more than two-thirds of the country’s natural aromas, worth $800 million a year.
Competition amongst fragrance brands is fierce. Companies invest, on average, between 7 and 12 percent of their perfume revenues in research and development. Yet the average lifespan of a fragrance is only three to four years. And one out of every three new perfume launches fails (each costing up to $70 million). A top selling fragrance can be highly lucrative, however, generating more than one billion dollars per year in sales. It is estimated that a bottle of Chanel No. 5 is sold somewhere in the world every 55 seconds. But, shockingly, the world’s most famous perfume does not enjoy intellectual property (IP) protection, even in Chanel’s home country of France.
According to French legal precedent, perfumes are not entitled to IP protection. On June 13, 2006, the French Supreme Court, Cour de Cassation, handed down its ruling in Bsiri-Barbir v Haarmann & Reimer, stating that “the scent of a perfume created through combinations of essences is not a creation per se. Hence, perfumes are not a form of expression as given under French copyright law.” The recent case of Lancôme v Modefine/Prestige (December 10, 2013) confirmed the above ruling by stating that “copyright is meant to protect creations which holds a (i) concrete form which (ii) is identifiable and (iii) has sufficient distinctive character which can be communicated. The scent of a perfume is not to assume such a form or function and may therefore not be protected by copyright law.”
But the French Supreme Court’s ruling has been widely criticised by both lower courts and legal practitioners. The Court of Appeal of Aix en Provence went so far as to claim that the creation of perfumes — each with original identities — was akin to the work of an artist and, hence, covered by copyright law.
Beyond France, in the case of Lancôme v. Kecofa (2006), Holland’s High Court held that Lancôme’s Tresor perfume was indeed protected by copyright, which was infringed upon by a competiting product’s use of 24 of Tresor’s 26 ingredients. And in L’Oréal v. Bellure (2010), England’s Court of Appeal held, after a decision by the European Court of Justice (C-487/07), that Bellure’s use of lists in its advertising that compared its perfumes’ scents to those of well-known L’Oréal perfumes constituted trademark infringement.
Nonetheless, IP protection for perfumes and scents remains weak, a status quo that will have detrimental consequences for innovation and originality at a time when protection is needed more urgently than ever. That’s because today’s fragrance industry — dominated by large companies completely unlike the small, family-owned fragrance businesses of yesteryear — is characterised by a highly interdependent network of relationships among suppliers, fragrance houses, perfumers and consumer brands. Hence, know-how is widely shared. What’s more, there is no shortage of imitators aiming to copy industry bestsellers.
In this environment, without appropriate protection for their investments, capital will leave the industry and we risk a dramatic reduction in innovation, leading to a sector less focused on creativity and more focused on delivering 'me-too' products at lower costs. As a consequence, this would push production away from the European Union to markets with lower labour costs.
But change is afoot. European legislators have set about reforming the European Union’s Trade Marks Directive, replacing language specific to “graphical representation” with “representative character,” thereby allowing trademark registrations of non-visual forms, including the scents that companies like Abercrombie & Fitch and Massimo Dutti use to brand themselves. What effect this specific reform will have on the sector remains to be seen. But it’s clearly time for legislators to wake up to the growing need for IP protection.
For decades, the fragrance industry has created economic value in Europe and enhanced the lives of billions of consumers throughout the world. Innovation has been the key factor to the development of the fragrances we see today, but now it’s at risk of abuse. To deny the sector IP protection would cause losses, not only for the fragrance industry, but also for nations who benefit from being at the forefront of innovation, but cannot compete on cost alone.
Kimiya Shams is an IP lawyer and writer working in Paris.
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