These are my notes for the recent seminar Trade Marks on The Web. The slides can be found here.
1. We explore one question:
“When can businesses use competitors’ brand names to appear more prominently in search engine results?”
3. Just to be clear, we’re talking about the paid for results which appear adjacent to the organic search results. These are the ones that advertisers pay Google to have their advertisement displayed when a search term is entered.
4. Here’s one I made earlier where we can see a search for the term INTERFLORA. The advertisements are above the organic search results.
Use of brand names as keywords
5. To an outsider, Google gains $38 billion per year from its advertising revenue. The brand owners whose terms are sold by Google get nothing. Is that fair? Understandably, brand owners are a bit miffed.
6. The touchpaper was lit in May 2008, when Google relaxed its own keyword bidding rules and said it would no longer investigate complaints over the use of trade marks as keywords.
7. In March 2010, the first case to reach the Court of Justice, was really a collection of three French disputes known as Google France. In these cases, three brand owners including – LVMH Louis Vuitton Moet Hennessey – brought proceedings against Google for trade mark infringement.
8. The parties alleged that Google used their trade marks in its advertising service, for example LOUIS VUITTON, in relation to luxury bags.
9. Just to rub salt into the wound, in the LVMH case Google also sold the keywords ‘imitation’, ‘replica’ and ‘copy’ along with the brand name. Some of the advertisements then led to websites where counterfeit goods were offered for sale.
Questions referred to the ECJ in Google France
10. The ECJ was asked to clarify when Google would be liable for trade mark infringement for advertisements displayed above search results.
11. The ECJ gave its ruling in March 2010. It started by reiterating the cumulative test for trade mark infringement of an identical sign taken from the Directive and its own case law:
[By application of Article 5(1)(a) of Directive 89/104 or, in the case of Community trade marks, of Article 9(1)(a) of Regulation No 40/94,]
…the proprietor of a trade mark is entitled to prohibit a third party from using, without the proprietor’s consent, a sign identical with that trade mark when that use is in the course of trade, is in relation to goods or services which are identical with, or similar to, those for which that trade mark is registered, and affects, or is liable to affect, the functions of the trade mark.
12. So we have the use of an identical trade mark LOUIS VUITTON in relation to identical goods, bags, without LVMH’s consent. At first glance, the only question seems to be therefore whether that use was liable to affect the functions of the trade mark. And given that a trade mark’s primary function is to guarantee the origin of the goods, the fact that counterfeit goods were being sold it seems obvious that the origin function would be affected.
13. However, the focus is on whether the marks are used in the course of trade. Yes, Google is trading using the marks but, said the ECJ, it is not using the marks in its own commercial communications.
14. Instead, Google allows its clients to use the trade marks without itself using those signs. The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign ‘in the course of trade’. That means the operation or use of Google’s AdWords service does not amount to trade mark infringement per se.
15. But what about the advertiser’s liability? They were using the mark in their own commercial communications. The ECJ said that there will be infringement if there was an adverse affect on one of the functions of the trade mark (in the preamble to Harmonisation Directive, Arsenal), including:
- the essential function of indicating origin
- the advertising function
- the communication function
- the investment function
16. We may not find out the full extent to which these functions are protected at law for several years.
The origin function
17. As for the origin function, the ECJ said that an advertisement will infringe if it does not:
“enable normally informed and reasonably attentive 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 on the contrary, originate from [an unconnected] third party”
18. If an advertisement suggests an economic link between the proprietor of the trade mark and the advertiser, or is so vague that “normally informed and reasonably attentive 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.
19. 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 to me a presumption in favour of infringement which the advertiser must rebut and any ambiguity will go against the advertiser.
20. Basically, if consumers will interpret the advertisement as indicating that there is an economic link between the owner of the trade mark and the advertiser, then it will infringe. This obviously depends on the nature of the goods or services, the manner in which the advertisement is displayed and will change over time.
21. Two days after the Google France decision, the ECJ confirmed in Die Bergspechte that the principles established in that case in relation to the use of an identical mark, also extended to the use of similar marks.
22. In July 2010 the ECJ ruled in the Dutch case of Portakabin v Primakabin. Here the goods were legitimate but the issue was whether second-hand sellers could use the mark.
23. The ECJ ruled that an advertisement which uses a trade mark in conjunction with the terms ‘used’ or ‘second-hand’ does not constitute infringement where the use is descriptive and honest. This follows the principle that once goods are placed on the market in the EU by the brand owner the rights are said to be exhausted.
24. A brand owner may only prevent further commercialisation of goods in which rights have been exhausted where there is a legitimate reason to do so, for example if brand would be damaged by virtue of the way the goods are sold, the way they are presented or if they are of poor quality – Article 7(2) 2008/95/EC.
Interflora v M&S
25. In Interflora v M&S, the world’s largest florist, Interflora, brought trade mark infringement proceedings against Marks & Spencer (M&S) alleging infringement under Article 5(1)(a) and Article 5(2) of the Directive. Interestingly Interflora was not alleging any likelihood of confusion or passing off.
26. M&S had selected as keywords the term ‘Interflora’, and variants so that an M&S advertisement appeared when INTERFLORA was used as a search term.
27. After weighing up the evidence, the court directed itself to determine the case based on the three particular factors
1. whether the reasonably well-informed and reasonably observant internet user is deemed to be aware, on the basis of their general knowledge of the market, that M & S’s flower delivery service is not part of the Interflora network, but is in competition with it.
Arnold J found that this was not generally known at the time of the complained infringing activities in May 2008 and nor that it is generally known now.
2. whether M & S’s advertisements enable the reasonably well-informed and reasonably observant internet user to tell that M & S’s flower delivery service is not part of the Interflora network.
Arnold J found that there was nothing in any of M & S’s advertisements to inform the reader that M & S’s flower delivery service is not part of the Interflora network.
3. the specific nature of the Interflora network
Arnold J found that it is a feature of the Interflora network that members trade under their own names and that Interflora has commercial tie-ups with several large retailers. This makes it all the more plausible that there should be a connection between M & S’s flower delivery service and the Interflora network.
28. Overall therefore, consumers appreciate that Interflora is a network of florists of which M&S could have been a member. M&S’s advertisements failed to clarify that it was not a member and a significant proportion of the relevant public would have believed that it was after seeing the advertisement. That undermined the distinctive character and reputation of the Interflora brand and hence M&S infringed.
29. Given the nature of Interflora’s business as part of a network which licenses its brand to third parties and the lack of any indication on the advertisements that there was no connection with Interflora, the judgment is entirely logical.
So where does that leave us?
Brand owners cannot prevent third parties from purchasing their trade marks as keywords. However, brand owners can bring proceedings for trade mark infringement where they can show the average internet user is unable to distinguish whether the advertisement is from the trade mark owner or a third party or where the advertiser is gaining an unfair advantage from the reputation of the brand.
What is perhaps more interesting is that when the parties were trying to agree on the form of injunction, Interflora sought an order to force M&S to negatively match the Interflora trade marks. M&S argued that it could not be liable where it did not “use” the trade marks. However, Arnold J recognised that this had the potential consequence that if M&S failed to negatively match then searches for Interflora could still appear because it matched other words such as “flower delivery”.
It was therefore held in a separate judgment that ( EWHC 1484 (Ch)):
11. I consider that M & S does “use” the sign “interflora”, albeit in a less direct way. What M & S is doing has the object and effect that a search by a consumer for “interflora” results in the display of M & S’s advertisement. Thus the SERP will contain both the sign “interflora” and M & S’s advertisement. In my judgment it is immaterial that this is achieved by a technical means which does not involve M & S selecting “interflora” itself as a keyword
The court took the view that M&S deliberately engaged in activity it knew was risky and Interflora was entitled to protection of its marks generally.
In summary, keyword advertisements as part of a targeted and focussed campaign can yield results and will not go away but bidding on competitors’ brands requires commercial judgment and liability for infringement will depend on the target demographic and goods as well as the content of the advertisement.