By Darren Meale, Associate and Anthony Trenton, Partner
SNR Denton UK LLP
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
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.
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  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
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.
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
 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.
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
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.
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".
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
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
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.
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).
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).
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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