On 21 May 2013, Mr Justice Arnold delivered a detailed judgement in the Interflora v Marks and Spencer case on trade mark infringement as it relates to keyword advertising.

Executive Summary

• Keyword advertising is not inherently or inevitably objectionable from a trade mark perspective. In fact, the Court of Justice of the European Union (CJEU) recognises that, as a general rule, keyword advertising can promote healthy competition.
• However, an infringement may occur where a “reasonably well-informed and reasonably observant internet user” believes that the advertiser is economically connected with, or its goods or services originate from, the trade mark owner.
• A significant proportion of internet users in the UK remain unaware of the existence of paid for search results notwithstanding that these may be listed in a golden box at the top of the search page labelled “Ads”. Accordingly, given this lack of awareness, care must be taken to ensure that paid search results generated by use of a competitor’s trade mark as a search term do not suggest that the advertiser is economically connected with, or its goods or services originate from, the trade mark owner.

Background

Google Adwords (Adwords) is the principal advertising service in the search engine. After a user carries out a Google search, a search engine results page (SERP) is generated. Each SERP contains three main elements: (i) search box; (ii) natural search results; and (iii) advertisement results that appear within a golden box at the top of the SERP or on the right hand side of the SERP.

Interflora operates as a network of members. In the UK, the network consists of 1,618 members with 1,879 stores. Members of the Interflora network retain their own business names and are allowed to use Interflora branding. Interflora also provides services through major high street retailers such as Tesco and the Co-Op.

Prior to May 2008, the AdWords policy allowed trade mark owners to prevent the use of their registered trade marks by third parties as keywords. Google reversed this policy on 5 May 2008. Following this policy change, M&S purchased a number of Interflora keywords including “interflora”, “interflora co uk” and “interflora delivery”.

In 2008, Interflora brought a claim against M&S for trade mark infringement. The case required that a number of complex issues of European trade mark law be referred to the CJEU.

Interflora alleged that M&S’s use of its keywords infringed Articles 5(1) and 5(2) Directive 89/104/EEC. Article 5(1)(a) confers on the trade mark owner the exclusive right to prevent third parties from using its identical trade mark in relation to goods and services that are identical with those for which the trademark is registered. Article 5(2) confers on the trade mark owner the exclusive right to prevent all third parties not having its consent from using in the course of trade any mark that is identical with, or similar to, the trade mark in relation to goods or services that are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.

Article 5(1)(a)

Article 5(1)(a) In order for the use of a trade mark to infringe Article 5(1)(a), six conditions must be satisfied: (i) there must be use of a trade mark by a third party within the relevant territory; (ii) the use must be in the course of trade; (iii) use must be without the consent of the owner of the trade mark; (iv) the mark used must be identical to those for which the trade mark is registered;and (vi) use must affect or be liable to affect the functions of the trade mark. CJEU case law establishes that the functions of a trade mark include its origin, advertising, investment and communication functions (Case C-487/07 L’Oréal SA v Bellure NV [2009] ECR I-5185). There was no argument about the first five conditions, but M&S disputed the claim that its use of the keywords affected the “functions” of Interflora’s trade mark.

Article 5(2)

Article 5(2) In order for the use of a trade mark to infringe Article (5)(2), four requirements must be satisfied: (i) the trade mark must have a reputation in the territory; (ii) the use of the mark complained of must give rise to a “link” between the sign and the trade mark in the mind of the average consumer and (iii) the trade mark owner must suffer one of three kinds of injury: (1) detriment to the distinctive character of the trade mark; (2) detriment to the repute of the trade mark; and (3) unfair advantage taken of the distinctive character or the repute of that trade mark also referred to as “parasitism” or “free riding”.

Decision

Mr Justice Arnold found that there was trade mark infringement in relation to Article 5(1)(a), but found no infringement in relation to Article 5(2). As regards Article 5(1)(a), Mr Justice Arnold’s view was influenced by the nature of the Interflora network; that some members trade under their own name and some are M&S’s supermarket competitors. Given the nature of the network, it would not have been unreasonable for a user, unaware that the top search results are paid for ads, to assume that M&S was part of such network when the search term presented the M&S search result high up in the SERP. Evidence was presented by Interflora that following use of an Interflora search term, a number of users clicked through to M&S only to then to move away from that site in order to click through to the Interflora site. The implicit submission accepted by the High Court was that users were initially confused, and when they realised that M&S was not part of the Interflora network (as there was no Interflora branding on the M&S site) they chose instead to visit the Interflora site.

As regards Article 5(2), there was significant debate about the meaning of an “average customer”. Mr Justice Arnold rejected M&S’s argument that there was a “single meaning rule” in European trade mark law; the issue requires an assessment of whether it is likely that there is, or will be, confusion “applying the standard of perspicacity of the average consumer”. However, the Court rejected Interflora’s argument that the use of its keywords by M&S had a detrimental effect on the character or took unfair advantage of its trademarks. It may be surprising that the High Court held that there had been no “free riding” by M&S’s use of its competitor’s keyword, but as the CJEU had already confirmed in previous cases—that keyword advertising is not inherently or inevitably objectionable from a trade mark perspective—it seems that a claim under this provision is not likely to succeed in relation to competitive advertising; it is more likely to be relevant in cases where the advertiser is using keywords in order to offer imitation goods.

Comparative Advertising

A major theme of M&S’s submission was that keyword advertising helps promote healthy competition. Mr Justice Arnold agreed that it could be used for this purpose and briefly considered whether Article 4 of the Misleading and Comparative Advertising Directive 2006/114/EC also offered a potential defence to keyword advertising claims. Unfortunately, he did not consider this in any detail, as the defence was not invoked by M&S.

Final Thoughts

It is clear from the judgment that nothing is inherently wrong with bidding on and purchasing keywords that are trade marks of third-party competitors. What this case does tell us is that if there is any room for confusion as to the origin of goods or services—in this case resulting from the manner in which Interflora operates (as a wide network) and it being plausible that M&S was a part of such network—advertisers will need to exercise some caution. This is the case even though Google labels paid for search terms as “Ads”.

Client Alert 2013-149