Say it with flowers – Interflora v M&S: Google AdWords and the investment function

In the English court case of Interflora v Marks and Spencer (M&S), the world’s largest florist, Interflora, brought trade mark infringement proceedings against M&S alleging infringement of Article 5(1)(a) and Article 5(2) of the Trade Marks Harmonisation Directive 89/104/EEC.  Interestingly Interflora did not allege any likelihood of confusion or passing off.

M&S had selected as keywords the term ‘Interflora’, as well as variants made up of that word with minor errors, and expressions containing the word ‘Interflora’, for example ‘Interflora Flowers’, ‘Interflora Delivery’, ‘Interflora.com’, ‘interflora.co.uk’.  As a consequence, when internet users entered the word ‘Interflora’ or one of those variants or expressions as a search term in the Google search engine, an M&S advertisement appeared.

The English High Court referred several questions to the Court of Justice of the European Union (ECJ) for clarification.  The ECJ has given its ruling in Case C-323/09.

Infringement

As expected, the ECJ reiterated its previous guidance in a series of several cases relating to keyword bidding, beginning with Google France (iPit post here).  

The test for trade mark infringement set out in Article 5 of the Harmonisation Directive and the case law interpreting that legislation entitles the owner of a trade mark registration in the European Union to prevent third parties not having his consent from using in the course of trade:

(1)(a) an identical sign in relation to goods or services which are identical to those for which the trade mark is registered, where the use of the sign affects, or is liable to affect, one of the functions of the trade mark, in particular its essential function to guarantee the origin of the goods or services but also the functions of communication, investment and advertising; 

(1)(b) an identical or similar sign in relation to goods or services which are identical or similar to those for which the trade mark is registered where there is a likelihood of confusion.

(2) an identical or similar sign in relation to identical, similar or dissimilar goods, where the trade mark has a reputation and the use of the sign without due cause takes advantage of, or is detrimental to, the distinctive character or repute of the trade mark.

The specific guidance sought in this case related to the circumstances in which a court should find that there has been ad adverse effect on the trade mark’s function of indicating origin, its advertising function and its ‘investment’ function.

Adverse effect on the origin function

The ECJ referred to its guidance in Google France and Portakabin and ruled that whether a trade mark’s origin function is adversely affected depends on the manner in which the advertisement is displayed. It said there will be infringement where:

…the advertisement does not enable reasonably well-informed and reasonably observant internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the advertisement originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party.

If an advertisement suggests an economic link between the proprietor of the trade mark and the advertiser, or is so vague that “reasonably well-informed and reasonably observant internet users” cannot distinguish whether the commercial message originates from the brand owner or a third party, then there must be an adverse effect on the function of the trade mark. In those circumstances, the advertisement will constitute trade mark infringement.

It is for the national court to determine in each case how the advertisement will be interpreted. However, the ECJ stated that the very fact that a keyword triggers the display of an advertisement is “liable to create the impression that there is a material link” between the brand owner and the third party. That indicates a presumption in favour of infringement which the advertiser must rebut.

Adverse effect on the advertising function

The ECJ reiterated its guidance in Google France and Die Bergspechte (iPit post here) that keyword bidding on competitors’ trade marks does not adversely effect the advertising function, even if that obliges the trade mark owner to spend more on its own advertising to maintain or enhance its profile.  The aim of internet advertising is to promote alternatives in the interests of competition.

Adverse effect on the investment function

The novel aspect in this case was consideration of the investment function of a trade mark.  The ECJ recognised that a trade mark may be used

to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty

and may arise not just from advertising but

various commercial techniques”.

The ECJ referred to its guidance in L’Oreal v eBay (iPit post here) and said that where a trade mark has a reputation, the investment function is adversely affected where the use by a third party of an identical sign affects that reputation and thereby jeopardises its maintenance.

However, the ECJ was very clear that a brand owner’s rights must not inhibit competition.  Any use of a mark by third parties which does not adversely affect the function of indicating origin is legitimate.  The mere fact that a brand owner has to adapt its efforts to acquire or preserve its reputation or that some consumers switch allegiance does not adversely affect the investment function.

Infringement under Article 5(2) – dilution and free-riding

The ECJ referred to its previous guidance in L’Oréal and eBay and noted that:

‘Dilution’ means causing detriment to the distinctive character of a mark with a reputation, namely where a mark’s ability to identify the goods or services for which it is registered is weakened.

‘Free-riding’ means taking an illegitimate advantage of a third party’s reputation in a trade mark.

Dilution

Dilution occurs when the use of one sign reduces the ability of another mark to distinguish the goods or services of its proprietor from those which have a different origin. At the end of the process of dilution, the trade mark is no longer capable of creating an immediate association, in the minds of consumers, with a specific commercial origin.  A trade mark owner does not need to wait until the end of the process before he can take action.

The ECJ said that where reasonably well-informed and reasonably observant internet users can distinguish whether the advertisement originates from the brand owner or a third party, then there can be no dilution.  In the alternative position, notwithstanding the fact that the origin function would be adversely effected and therefore a claim would lie under Article 5(1)(a), the national court would have to determine dilution.

Free-riding

The ECJ said that although M&S would be taking advantage of Interflora’s reputation, this was acceptable in the interests of competition.  However, this was only the case where the goods being offered were alternatives.  If the goods were imitations or if the advertisement adversely affected any of the functions of the trade mark or caused dilution or tarnishment, then there would be free-riding and infringement.

What now?

The High Court must apply all of the tests and decide whether M&S’s use affects any of Interflora’s trade mark’s functions. The trial is expected in April 2013.  The questions to be resolved are therefore:

Origin function – Do the facts show that M&S advertisements would lead normally informed and reasonably observant internet users to believe that the M&S flower delivery service is part of the Interflora network?

The ECJ noted that given Interflora’s commercial network and profile it will be difficult for the consumer to tell in the absence of an indication in the advert. That suggests an adverse effect and infringement.

Advertising function – Does the advertisement deny Interflora the opportunity to inform and win over consumers?

Investment function – Does the M&S advertisement substantially interfere with the reputation of the trade mark and Interflora’s ability to attract and retain customers?

All iPit posts on Google AdWords can be found here.

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