Confused in the dotcom: how to ensure lawful use of competitor brands as keywords

If online retail shopping is the new high street, then search engine results are as important to brands as adverts for attracting customers, as they direct consumers who type in the relevant search words to their online shop fronts. And in the latest instalment of the battle between in Interflora and M&S, the High Court has sent a clear warning to online keyword advertisers. If the keyword they use is the registered trademark of another party, they will infringe that trademark if it is not clear that their advert does not originate from the trademark owner, the court ruled in Interflora Inc & Interflora British Unit v Marks & Spencer PLC & Flowers Direct Online Limited [2013] EWHC 1291 (Ch).

In the online world, "prime location" is the highest advert on the search result page and companies bid competitively to secure that prime pitch by paying search engine companies like Google for use of the keywords (which Google calls AdWords) which will put their advert in that position.

The commercial power of keyword advertising is demonstrated by the fact that in 2012 Interflora, which operates one of the UK's best known flower delivery networks, generated £29.2m's worth of revenue from £2.2m's worth of keyword advertising spend. This helps explain why Interflora has fought a five-year court battle against Marks & Spencer's use of "Interflora" as a search engine keyword to advertise its own competing online florist service. It also explains the industry-wide legal interest in the outcome of the claim that the use of such keywords infringed their 'Interflora' UK and Community trademarks.

Adverse effect

The Court of Justice of the European Union (CJEU) ruled in September 2011 (Case C-323/09) on four reference questions from the High Court about the extent to which use of a keyword comprises trade mark infringement under articles 5(1) (a) and 5(2) of the Trade Marks Directive and the parallel provisions in the Community Trade Mark Regulation (articles 9(1) and (2)).

The Luxembourg judges held that keywords can infringe an identical registered trademark under article 5(1)(a) if that use has an "adverse effect" on one of its functions, which include its origin, advertising, investment and communication functions. It can also infringe article 5(2) where the competitor takes unfair advantage of the distinctive character of the mark or the advertisement is detrimental to its distinctive character or repute, though it cannot prevent fair competition.

Based on those answers, Arnold J in the High Court said that six conditions must be satisfied to establish trademark infringement under article 5(1) (a) and article 9(1)(a) (see box). The first five conditions were not in dispute, so the case hinged around the sixth condition - whether if affected or was likely to affect the function of the trademark.

 

Six conditions Arnold J identified six conditions to establish trademark infringement: (i)   there must be use of a sign by a third party within the relevant territory;  (ii)   the use must be in the course of trade;  (iii)  it must be without the consent of the trade mark proprietor; (iv)  it must be of a sign which is identical to the trade mark;  (v)   it must be used in relation to goods  or services which are identical to those for which the trade mark is registered; and  (vi)  it must affect or be liable to affect the functions of the trade mark.

 

The judge held that the origin function of a registered trademark is adversely affected by keyword advertising triggered by use of that mark if the advertisement does not enable "reasonably well-informed and reasonably observant internet users" to ascertain without difficulty whether the advertised goods or services originate from the trademark owner or another unconnected party.

Such a consumer was said to be "not particularly technically literate, does not know precisely how AdWords operate, and is not aware of the issues". If a significant section of the relevant users wrongly believe that the advertised goods are connected to the trademark owner that establishes an adverse effect on the origin function of the trademark.

The onus was held to be on the advertiser to ensure that their advertisement is presented in a manner which enables such users to ascertain without difficulty the origin of the advertised goods or services and avoid the risk of confusion.

Plausible connection

The judge found that it was not generally known that M&S's flower delivery service was not part of the Interflora network. Network members trade under their own names and Interflora had commercial tie-ups with several large retailers. This made it plausible that there could be a connection between M&S and Interflora in the absence of something clear to the contrary.

There was also evidence which showed that consumers who searched for 'Interflora' and then clicked on the M&S advert were more likely subsequently to visit Interflora's website than the average visitor to the flowers section of the M&S site. Although such consumers generally ceased to be confused after clicking through to M&S's website, Arnold J held that such initial interest confusion was sufficient to show adverse effect on the origin of the trademark under article 5(1)(a).

In contrast, Arnold J noted that M&S did not adduce any evidence to prove that it was generally known by consumers that M&S's flower delivery service was not a member of the Interflora network.

In relation to other trademark functions, the CJEU had held that keyword advertising does not adversely affect the advertising function, but might affect the investment function. Although Arnold J said it was not easy to understand the difference between the advertising and investment functions, he thought that if the keyword advertising adversely affects the reputation of the trademark, for example by damaging its image, there is an adverse effect on the investment function. However, such damage was not established on the facts.

Having found that the origin function was affected, the judge chose not to decide whether the trademark was diluted under article 5(2), though he did state that he did not think that M&S took unfair advantage of the trademark without due cause.

Comparative advertising defence

Arnold J asked M&S's counsel why ?they did not argue that the advert was permitted comparative advertising under ?the Misleading and Comparative Advertising Directive 2006/114/EC. They said that ?they did not think it was comparative advertising, no doubt because the M&S website did not specifically compare their and Interflora's products.

The judge questioned whether this was correct on the basis of the breadth of the definition of comparative advertising in? the directive and the way in which it has been interpreted by the CJEU.

He also referred to the fact that the Dutch Court of the Hague has found keyword advertising to be comparative advertising in Tempur v Energy+[2010] and Tempur v Medicomfort [2011].

However, Energy+'s advert was found to be unlawful for not making a clear enough distinction between Tempur's and Energy+'s products while Medicomfort specifically made reference to their products being cheaper than other top quality brands, so made an express comparison on price.

Therefore if the keyword advertiser does not clearly distinguish their products from the competitor and make some comparison between the products this defence might fail.

It should also be noted that the European Commission intends to revise this directive, which might include further clarification on the use of a competitor's trademark in comparative advertising (Commission Communication COM(2012) 702 final, 27 November 2012). The timing and precise content of this are yet to be determined.

 

Avoiding trade mark infringement when using a competitor’s name as a keyword To avoid potential liability for trade mark infringement, Interflora shows that advertisers who use keywords which are the registered trademarks of their competitors need to be confident that most online users will be able to tell from reading the link and before they click into the advertisement that it is not connected with the trade mark proprietor.  Arnold J’s decision was influenced by the particular nature of the Interflora network which led him to conclude that M&S’s adverts failed to inform readers that their service was in fact not part of the Interflora network.  Where it is common knowledge that the parties are competitors and are wholly independent of each other (e.g. McDonalds and Burger King or Coca Cola and Pepsi) it is unlikely that the origin function will be adversely affected. However, if there is any material  doubt that consumers will not be clear  that a keyword advertiser and the competitor are not connected, the keyword advertiser needs to consider whether some sort of prominent clarification notice should be used.  To be safe on initial interest confusion this notice would need to be in the link heading so it is seen before the consumer clicks into the link. In the Interflora case, this might be a notice such as “Marks & Spencer has no connection with Interflora”.  Employing such a notice might be commercially unattractive, but in cases where the reasonably well-informed and observant internet user may think that the advert is connected with the trademark owner this may be necessary to reduce liability risks.  An alternative would be to try to take advantage of the developing law on comparative advertising, though again to be safe this currently involves ensuring that there is no confusion between the keyword advertiser and the trademark owner by making it clear the products or services of separate competitors are being compared. This would, however, avoid the need for any notice in the link heading.