Fame, Flowers and Internet Advertising: CJEU Rules in Interflora

Fame, Flowers and Internet Advertising: CJEU Rules in Interflora

By Darren Meale, Associate and Anthony Trenton, Partner

SNR Denton UK LLP

The Court of Justice of the European Union (the CJ) has broadly approved the use by advertisers of their competitors' famous trade marks to trigger the display of sponsored listings on search engines

Background

In Interflora Inc v Marks & Spencer Case-C323/09, 22 September 2011, the CJ heard a reference from Mr Justice Arnold in the English High Court. Interflora, the well-known network of independent florists operating under the INTERFLORA brand, brought trade mark infringement proceedings against Mark & Spencer (M&S), one of the UK's leading High Street retailers. M&S had been "bidding" on the INTERFLORA brand on Google. When users searched for INTERFLORA on Google, they would see sponsored search listings for M&S's online flower delivery service.

The lawfulness of this practice, referred to herein simply as "keyword advertising", has been tested in a number of recent CJ decisions, most notably in Joined Cases C-236/08 to C-238/08 Google France [2010] ECR I-2417, 23 March 2010. This, and several decisions which followed it have established that keyword advertising is essentially lawful, provided that it does not confuse consumers. The advert displayed must not make it difficult for consumers to work out whether the advert originates from the trade mark proprietor or a person economically linked to it, as opposed to some unconnected party. If it does make this difficult, the advert will affect the "essential function" of the trade mark used and there will be trade mark infringement.

In Interflora, the CJ repeated the above guidance from Google France but also addressed several new, and important, points. These were whether keyword advertising involves an infringement because it: (a) affects the "advertising" or "investment" function of a trade mark (as opposed to the essential function); or (b) takes unfair advantage of or causes detriment to the distinctive character or repute of the trade mark used, without due cause.

Functions: essential, advertising and investment

It is the case law of the CJ that a trade mark identical to another's can be used in respect of the identical goods or services provided that use does not affect the functions of the trade mark. In particular the essential function of the trade mark as a badge of origin. More recently, in L'Oréal Case C-487/07 [2009] ECR I-5185, 18 June 2009, the CJ confirmed that trade marks have other functions. So long as one of them is affected by a trade mark use, there is an infringement. While several other functions of trade marks have been proposed, there is little guidance on the meaning of any of them. Two functions in addition to the essential function were discussed by the CJ in Interflora, the advertising and investment functions.

Essential function

Applying the decision in Google France on the essential function to the facts in the Interflora case raised an interesting question. Because Interflora is a network of independent traders, rather than a single trader, Interflora argued that consumers would be confused into thinking that M&S was part of the Interflora network. The CJ was sympathetic to this argument, suggesting that because Interflora's network was so large and diverse, users might find it particularly difficult to ascertain whether M&S was in or out of it. Ultimately this a factual question for the English High Court to decide, but the CJ's indications are very positive for Interflora.

Advertising function

The more advertisers that "bid" on a particular keyword, the higher its cost. Therefore, if a competitor bids on a mark, it will cost the trade mark proprietor more to do the same. The trade mark owner will either need to spend more to do the same amount of advertising, or will need to advertise less. It was therefore argued that keyword advertising is adverse to the largely undefined "advertising" function of a trade mark.

But this argument was dismissed by the CJ in Google France, and dismissed again in Interflora. The CJ held that trade mark law's purpose was not to protect brand owners against "practices inherent in competition".  Keyword advertising did not affect the advertising function because it did not have the effect of "denying the proprietor of...the opportunity of using its mark effectively to inform and win over consumers".

Investment function

The CJ has now stated that "investment" is the use of a mark to "acquire or preserve a reputation capable of attracting consumers and retaining their loyalty", rather like the concept of goodwill which is protected by the English law of passing off. The CJ considers that any "substantial interference" with this goal will amount to an infringement. However, it would not be enough to establish an infringement if the interference only requires the brand owner "to adapt its efforts to acquire or preserve" its reputation. The guidance here is anything but clear. The authors suggest that the most that can be taken from it is that the CJ has recognised the function but has indicated that it cannot be used to defeat fair competition.

Marks with reputation: unfair advantage and dilution

The earlier CJ cases, including Google France, all concerned keyword advertising involving 'everyday' trade marks. They did not involve more well known marks, such as Interflora, having a reputation within the meaning of Article 5(2) of the Trade Marks Directive and Article 9(1)(c) of the Community Trade Mark Regulation.

In Interflora, the CJ considered whether keyword advertising could cause one of two injuries prohibited by Article 5(2) and Article 9(1)(c), in each case "without due cause": (1) detriment to the distinctive character of a mark with reputation (called "dilution"); and (b) the taking of unfair advantage of the distinctive character or repute of the mark.

Detriment

Dilution is often described as the "whittling away" of the distinctiveness of a brand so that it loses its ability to distinguish one trader from another. Interflora argued that if M&S was able to use the mark INTERFLORA to trigger the display of adverts for flower delivery services, INTERFLORA would soon become a term that merely describes any flower delivery service.

The CJ did not agree. It held that unless a keyword advert is liable to confuse consumers, it will not have the potential to cause dilution. This means that a dilution argument is unlikely to ever add anything in relation to an infringement case involving keyword advertising. If a brand owner can shown confusion, it will succeed on other grounds (as above).

Unfair advantage

The CJ's decision in L'Oreal suggested that the "unfair advantage" limb of Article 5(2)/9(1)(c) was a powerful weapon for brand owners. Arguably, applying the L'Oreal decision to keyword advertising which uses a well known trade mark so as to provide advertisers with a "real advantage" would lead to a finding that the practice was unlawful. The CJ did not hold this in Interflora. It noted that the essence of keyword advertising was the offering by the advertiser of an alternative to the product or brand the user had searched for. That was something that the CJ implicitly acknowledged was a good thing and in the interests of fair competition. The CJ held that it involves a use which is with "due cause". This allowed keyword advertising to avoid infringement under Article 5(2)/9(1)(c).

Comment

This case will now revert to the English High Court. The indications are that M&S will prevail on the issues which turn on the advertising function and on unfair advantage. Where things will end up on the investment function is uncertain. Dilution has been rather sidelined. This leaves, as Interflora's best point, confusion and impairment of the essential function. Do users know if M&S is in or out of the Interflora network? This is a factual question.

It should be remembered that most keyword advertising does not feature a networks of traders. So the "network" argument will not arise often. In the more common scenario, where an advertiser bids on a brand representing a single trader, the practice will generally be lawful.

Once this case concludes, keyword advertising will have been examined from all of the significant trade mark angles. But while it continues to both threaten brand owners and benefit advertisers, in the context of a constantly changing internet landscape, further disputes are all but guaranteed.

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