In the long running dispute between Interflora Inc (Interflora) and Marks & Spencer (M&S) in the United Kingdom, the English Court of Appeal has overturned the decision of the English High Court and has remitted the matter back to the High Court for a retrial.1  This case concerns M&S' use of the Google AdWord service and the purchase and use of the word "Interflora" (a registered trade mark of Interflora) to direct internet traffic to M&S' website and its flower delivery services.  We review below the background of this matter and the decision of the English Court of Appeal.

Background

Interflora operates the Interflora flower delivery network in the UK which has over 1,600 members.  Customers of Interflora place orders via the internet using Interflora's website.  Orders can also be placed by telephone.  Orders are then fulfilled by the member florist closest to the place where the flowers are to be delivered.  Interflora is the owner of a number of registered trade marks for the word "Interflora".

M&S is one of the best known retailers in the UK.  It trades under the brand names "Marks & Spencer" and "M&S".  M&S has sold flowers in its stores since 1986 and has provided an online flower delivery service since 2000.  M&S has never been a member of the Interflora network. M&S advertises flowers on the internet and makes use of the Google AdWords service.

In 2008, M&S successfully bid on the word "interflora" through Google AdWords in order to advertise M&S' flowers.  M&S did not however display the word "Interflora" on its website or internet search results.

On 3 December 2008, Interflora commenced proceedings against M&S for infringement of its registered trade marks (Proceedings).

How does Google AdWords work?

In broad terms, a user of the Google search engine will search a particular term which will return results.  The search results returned will be a combination of "natural" or "organic" results and these will be displayed in order of relevance.

Google will also return "sponsored links" to websites because the operators of those websites have paid for those links to appear.  The sponsored links are in effect advertisements.  A sponsored link will appear in search results when key words have been searched by a Google user for which the operator of the sponsored link has purchased the key word, otherwise known as an "AdWord".

Decision of the High Court

On 21 May 2013, the High Court of England & Wales handed down its long awaited judgment2 in the Proceedings.  One of the key issues which the High Court considered was whether or not a "reasonably well informed and reasonably observant internet user" was aware that M&S' flower delivery service was not part of the Interflora network but was in competition with it.

The High Court found that M&S' use of the Interflora AdWord might lead the average reasonably well informed and reasonably attentive internet user to believe that M&S was part of Interflora's network of florists, when it was not.  The High Court found that M&S' use of the Google AdWord "Interflora" infringed the trade marks of Interflora.  However, the High Court was not satisfied that there had been any damage to Interflora's image and consequently, was not persuaded that there had been any adverse effect upon the reputation attaching to the Interflora  trade marks.

M&S was ordered to pay Interflora's costs and an injunction was granted in favour of Interflora and M&S was restrained from using the Interflora AdWord in advertising material across the European Union.

Decision of the Court of Appeal

M&S appealed the decision of the High Court on the basis that the Judge had:

  1. Misinterpreted and misapplied the test of "the reasonably well informed and reasonably observant internet user".  M&S argued that the correct application of the law is on the basis of a "hypothetical person with an objectively defined standard of knowledge …. into a population of individuals with varying degrees of knowledge and perspicacity";
  2. Wrongly held it was for M&S to disprove infringement by showing that the use of the sign "Interflora" was a sufficiently clear meaning that there was no real risk of confusion as to the origin of its goods and services.  Instead, M&S said that Interflora should bear the onus of proving that confusion would arise as a result of the advertisement; and
  3. Wrongly decided that initial interest confusion was sufficient to establish liability.  The doctrine of initial interest confusion is where the consumer's confusion may be removed prior to completion of the sale and the consumer proceeds with the purchase no longer under any confusion about the origin of the goods.

M&S also alleged a series of procedural irregularities and errors, including that the injunction granted was too broad applying across the European Union.

The Court of Appeal allowed the appeal and remitted the case back to the High Court for retrial in respect of the claims for infringement, given that it had not analysed all the relevant documents or seen the witnesses giving evidence.  The Court of Appeal indicated that the High Court should consider on the one hand, the need to protect the rights of trade mark owners and on the other hand, the rights of advertisers to utilise keyword advertisements to create competition in the market place.

The Court of Appeal said that it did not make a difference to the end result as to which test was applied, that is, whether the Judge had applied the test of the reasonably well informed and reasonably observant internet user or a hypothetical person representing the broad population.  The Judge was entitled to consider the effect of the advertisement on a broad section of the relevant class of consumers.

It also considered that the Judge had wrongly applied the onus of proof.  The onus lies on the trade mark owner to establish that the advertisement complained of does not enable normally informed and reasonably attentive internet users to ascertain whether or not the goods or services referred to by the advertisement originates from the trade mark owner or a third party.  The third party advertiser did not have the onus to show that the use of the trade mark presented no real risk of confusion to the average consumer.

Further, the Court of Appeal said that the Judge had wrongly applied the doctrine of initial interest confusion.  The initial interest confusion test was considered a potentially misleading test which should form no part of the Court's analysis of whether any trade mark infringement had occurred in the context of Google AdWord cases.

Conclusion

The parties will now await a further decision on the matter from the High Court.  The determination of the High Court (when it revisits this matter), will add to the emerging principles in this area of law.  In particular, as noted in our Focus Paper dated 31 January 2014 regarding use of other trader's brands online Australia's Evolving Legal Position on Use of Other Traders Brands in Online Advertising in Australia, use of another brand as a Google AdWord behind the scenes (so not visible to consumers) has not been considered an infringement of the other brand owner's rights.  The original decision of the High Court found differently however and confirmed that in the UK, use of a trade mark as a Google AdWord (hidden from consumers) may be infringing of another's trade mark.  We will watch with interest whether the High Court's position on this issue changes and provide an update in due course.