Last year, we brought you news of Interflora’s victory against Marks & Spencer (“M&S”) in a keyword advertising dispute where M&S were found liable for trade mark infringement by the UK High Court. In a dramatic turn of events, the Court of Appeal has overturned the original decision and ordered a retrial by the High Court on the basis that the trial judge made a number of core legal errors in reaching his decision.

Background

Interflora operates a flower delivery network with over 1,600 member florists. M&S has provided online flower delivery services since 2000 and has never been part of the Interflora network.

Google liberalised its AdWord policy for the UK in May 2008, allowing advertisers to bid on their competitors’ registered trade marks for the first time. Seizing the opportunity offered by the change, M&S bid on the keyword ‘interflora’ (and minor variants) on AdWords. Consequently, each time an internet user searched for ‘interflora’, an ad for M&S’ competing service appeared as a sponsored link on the search results page. Interflora sued M&S for trade mark infringement claiming that M&S was confusing consumers and making it appear as if M&S was part of the Interflora network.

The trial judge held that Interflora’s trade marks had been infringed on the basis that the M&S ads “did not enable the reasonably well-informed and reasonably attentive internet user, or enabled them only with difficulty, to ascertain whether the service referred to in the advertisements originated from the proprietor of the Trade Marks, or an undertaking economically connected with it, or originated from a third party”.

Court of Appeal

M&S appealed the High Court decision. The Court of Appeal allowed M&S’ appeal in part, offering guidance on a number of key issues.

The Court confirmed that the question of whether internet users would be confused about the origin of an advert should be considered from the perspective of the ‘average consumer’.  The average consumer, said the Court, was the hypothetical reasonably well-informed and reasonably observant internet user. The Court also confirmed that the ‘average consumer’ test is not a statistical test. In other words, the judge should simply step into the shoes of the average consumer (the reasonably well-informed and reasonably observant internet user) and determine whether that user would be confused about whether the ad originated from Interflora or M&S. It was not necessary for a statistically significant number of internet users to be confused – it was confusion by the hypothetical average consumer which counted. 

In addition, in reaching his decision at trial in the High Court, Mr Justice Arnold had, in effect, reversed the usual burden of proof in trade mark infringement cases. He held that M&S had to show that its ad would not confuse internet users as to its origin. Usually, in trade mark infringement actions, it is for the party bringing proceedings to demonstrate that confusion is resulting, or could result, from the defendant’s actions; in this case, Interflora. It is unclear why Mr Justice Arnold took this approach although it was, perhaps, an attempt to reconcile some confusing judgments on keyword advertising from the Court of Justice of the European Union (“CJEU”) with existing European trade mark law. Usually where a defendant is using a mark which, in the Court’s view, is identical to the claimant’s registered trade mark and for identical goods or services (‘double identicality’), trade mark infringement will be made out. However, in a number of rulings, the CJEU held that in cases of double identicality in the context of keyword advertising, it was also necessary to show confusion about the origin of the ad among internet users. The primary function of a trade mark is to act as a guarantee of origin and it is in pursuit of this principle that the CJEU seems to have formulated a test which places an additional gloss on the wording of the Trade Mark Regulation and the Trade Mark Directive. However, the CJEU’s rulings bind the national courts of EU member states, meaning that Arnold J had no choice but to follow what the CJEU had said. Accordingly, it seems that he decided to reverse the burden of proof on the issue of confusion between Interflora and M&S, taking the burden away from the claimant (Interflora) in order to match the fact that, generally, a claimant in a double identicality case would not have any such burden upon them. However, the Court of Appeal made it clear in its ruling that he should not have done this.

The Court of Appeal also rejected, in the context of keyword advertising, the application of the US doctrine of initial interest confusion calling it an “unnecessary and potentially misleading gloss” on the CJEU’s rulings on trade mark infringement in keyword advertising cases. Initial interest confusion is a term used to describe a variety of situations, most commonly where a consumer is initially confused as to the origin of an ad but that confusion is dispelled prior to making a purchase. The Court dismissed the use of the doctrine on the basis that it does not incorporate the appropriate checks and balances put in place by the CJEU. The Court stressed that online advertisers have no duty to avoid confusion and their activities and use of marks must always be assessed from the point of view of the notional average consumer. Initial interest confusion should therefore play no part in a national court’s analysis of keyword advertising claims.

Implications

All eyes will now be on the retrial (and there seems little appetite on either side to settle). Both the CJEU and UK national courts have always made it clear that keyword advertising is not inherently or inevitably objectionable and can promote fair competition, to the benefit of consumers. In this latest decision, the Court of Appeal has confirmed this principle.

It is worth noting that the Court’s assessment of the average consumer in this case suggests that this test may evolve over time. The concept of the notional ‘reasonably well-informed and reasonably observant internet user’ could be modified in the future as consumers become more internet savvy.