The French beauty company had accused the seven defendants in the case of infringing its trade marks and passing off by selling scents with names such as La Valeur and Pink Wonder.

It also objected to the way that the defendants used the trade marked names of its own perfumes Trésor, Anaïs Anaïs, Miracle and Noa in comparison tables.

In October last year, the High Court backed L’Oréal’s trade mark infringement claims, in what the company’s lawyers claimed was the first successful trial under section 10(3) of the Trade Marks Act. But the French company failed in its passing off argument after the judge said that the scent of its perfumes was not protected under trade mark law.

Both L’Oréal and three of the defendants appealed the decision.

On Wednesday, the Court of Appeal dismissed L’Oréal’s appeal in respect of the packaging of the products and said it would stay the defendants’ appeals pending a reference to Europe’s highest court – the European Court of Justice (ECJ).

In the Court’s ruling, Lord Justice Jacob said the Court should ask the ECJ five questions.

The first deals with the same issues that the Court referred to the ECJ in the O2 case: "Where a trader, in an advertisement for his own goods or services uses a registered trade mark owned by a competitor for the purpose of comparing the characteristics (and in particular the smell) of goods marketed by him with the characteristics (and in particular the smell) of the goods marketed by the competitor under that mark in such a way that it does not cause confusion or otherwise jeopardise the essential function of the trade mark as an indication of origin, does his use fall within either (a) or (b) of Art 5 of Directive 89/104?".

Jacob explained that he was repeating the question to ensure that the ECJ answers the question even if the O2 dispute settles before the European Court consider the issue.

The second question is: "Where a trader in the course of trade uses (particularly in a comparison list) a well-known registered trade mark for the purpose of indicating a characteristic (particularly a smell of a fragrance product) of his own product (particularly its smell) in such a way that: it does not cause any likelihood of confusion of any sort; and it does not affect the sale of the products under the well-known registered mark; and it does not jeopardize the essential function of the registered trade mark as a guarantee of origin and does not harm the reputation of that mark whether by tarnishment of its image, or dilution or in any other way; and it plays a significant role in the promotion of the defendant's product, does that use fall within Art. 5(1)(a) of Directive 89/104?"

In the third question, the Court seeks clarification of the meaning of "take unfair advantage of" in Article 3a(g) of the misleading advertising directive (as amended by the comparative advertising directive). In particular, where a trader in a comparison list compares his product with a product under a well-known trade mark, does he thereby take unfair advantage of the reputation of the well-known mark?

The ECJ is also asked to clarify the meaning of "presenting goods or services as imitations or replicas" in that directive. In particular, the Court asks whether this expression covers a case where, without in any way causing confusion or deception, a party truthfully says that his product has a major characteristic (smell) like that of a well-known product which is protected by a trade mark.

Finally, the Court of Appeal asks the ECJ to consider whether a trader who uses a sign that is similar to a registered trade mark is taking "an unfair advantage" within the meaning of Article 5(2) of the trade mark directive, even if there is no tarnishing or blurring of the registered mark, the trade mark owner’s sales are not impaired and the trade mark owner is not deprived of any of the reward for promoting, maintaining or enhancing the trade mark.

Paul Rawlinson, a partner at Baker & McKenzie who advised L’Oréal, said that the view of the ECJ on the meaning of "unfair advantage" will be a key development of this area of law in the UK and other EU member states.

He added: "The dismissal of the passing off and unfair competition claims continues the debate on the need for our common law of passing off to evolve and catch up with unfair competition regimes in the rest of Europe."

Hamish Porter, a partner at Field Fisher Waterhouse who represented the defendants, said that the case raises important questions about how competitive the law allows European industry to be.

"Over protectiveness towards trade mark owners can stifle competition," Porter added. "The continental system of unfair competition, where taking advantage of the investment made in a famous trade mark can be unlawful even where no damage is caused, runs counter to the English approach of free competition, particularly in comparative advertising."

Despite referring the question to the ECJ, comments made by Jacob in the ruling suggest that he supports this position. He said that his own view was that comparison lists, "even where there is a degree of what can be called ‘free riding’", should be lawful. He added: "European trade mark law should not be over protective."

But Lord Justice Blackburne said that he was unable to go "quite as far" as his fellow judge on the issue of lists: "I am yet to be persuaded that comparative lists of the kind used here and in the circumstances in which they were used should be lawful," he said.

Baker & McKenzie represented L'Oréal with barristers Henry Carr QC and Jacqueline Reid. Three of the defendants were advised by Hamish Porter, formerly with Addleshaw Goddard and now a partner at Field Fisher Waterhouse and barristers Roger Wyand QC and Thomas Moody-Stuart. The other four were not represented and did not appear.