Many companies are aware of value of their brands, which is often shown on their balance sheet and thus the importance of maintaining the distinctiveness of their brands for long term success. Failing to do so may result in consumers mistaking a competitor's product or service for one of the company’s, and reduced sales for the company. This situation may be exacerbated if the competitor’s product is inferior to the company’s product, resulting in damage to the brand, loss of goodwill and the reputation of the company by association.
In the context of supermarkets, customers are used to “own brand” products that look very similar to branded items and are probably only rarely confused. The get-up of the own brand mostly only shows the branded item for which it is intended to be an alternative. In a climate of rapidly developing technology and seemingly unlimited means of communication, on-line consumers are faced with a plethora of products, none of which is new for long, and distinguishing between products, and producers on-line may be more difficult than in the super market. Therefore, consumers look to brands for product reassurance, by way of features such as origin, quality, price or novelty and often use brand names for their internet searches.
As “brand wars” have moved from the super market shelves into cyberspace the existing “rules of engagement” have to be redefined. The recent case of Interflora v Marks and Spencer Plc highlighted this very issue and shows that when advertising a product companies must not take unfair advantage of, or tarnish, other brands.
The Marks & Spencer case
Interflora, the flower delivery network, sued Marks and Spencer Plc (“M&S”) for trade mark infringement, relying on various trade mark registrations for INTERFLORA covering flower delivery and other services.
M&S purchased a number of Google Adwords for Interflora, a number of combinations of INTERFLORA, Interflora’s domain names, URLs and close variants thereof. When an internet user typed INTERFLORA or variants into the Google search engine, a sponsored link to an advert for M&S’ flower delivery service appeared. M&S’ adverts however, did not feature the INTERFLORA name.
The High Court referred questions to the European Court of Justice (“ECJ”) on a number of matters concerning the use by a competitor, within an internet referencing service, of keywords identical to a trade mark, where permission to use the trade mark had not been given by the trade mark proprietor.
As to infringement under Article 5(1)(a) and Article 9(1)(a) of the Trade Marks Directive (89/104/EEC, now replaced by consolidated directive 2008/95/EC) by the use of trade marks as advertising keywords, the ECJ made the following points:
Adverse effect on origin function
The ECJ stated that the test was whether a reasonably well-informed and reasonably observant internet user would be deemed to be aware, on the basis of general knowledge of the market, that the M&S flower delivery service was not part of the Interflora network but was in fact in competition with it. If this could not be established then it was a question of fact whether M&S’ advertisement enabled the internet user to know that M&S was not part of the Interflora network. The ECJ stated that since the Interflora network was made up of numerous retailers of different sizes and commercial profiles, it may have been difficult for an internet user to conclude, without any assistance from advertising, whether M&S was part of the Interflora network or not.
Adverse effect on the advertising function
In relation to the advertising function of the trade mark, M&S had clearly selected the INTERFLORA keyword to take advantage of Interflora’s trade mark. However, the ECJ did not find this to be sufficient basis for claiming that the advertising function of the trade mark had been adversely affected. The ECJ held that although a trade mark is an essential element in preventing undistorted competition, its purpose is not to protect owners against inherent and genuine competition practices in the market. Internet advertising on the basis of keywords that are identical to trade marks allows competitors to offer consumers alternatives to the trade mark owners’ goods or services, but does not prevent the owner from using their own mark to win customers.
Adverse effect on the investment function
The ECJ held that the investment function, which is applicable where a trade mark enjoys a reputation capable of attracting customers and retaining their loyalty, is adversely affected where a third party’s use of an identical sign affects that reputation. However, if a competitor’s use of an identical sign is fair and respects the trade mark’s origin-indicating function, then the trade mark owner cannot prevent such use even if the trade mark owner has to adapt its efforts to acquire or preserve its reputation. The fact that as a result of such use some consumers may switch to a competitor could not be assumed by Interflora as adversely affecting the investment function.
Extended protection for trade marks with a reputation
The ECJ accepted that the INTERFLORA trade mark had a reputation and considered whether the use of the trade mark by M&S could be regarded as detrimental to the distinctive character of the INTERFLORA trade mark, by diluting or taking unfair advantage of the distinctive character or reputation of the trade mark.
The ECJ held that in establishing whether the trade mark had been diluted, the test was whether a reasonably well-informed and reasonably observant internet user who had typed in the keyword and triggered the display of an advertisement would be able to tell that the competitor’s goods or services offered did not originate from the trade mark owner but from a competitor. If so, then the distinctiveness of the trade mark would not have been diluted by such use, as the use would have simply shown the internet user that there were alternative goods or services on offer by a competitor.
The ECJ held that it was a matter for the High Court to determine on the facts whether M&S’ advertising enabled the reasonably well-informed and observant internet user to determine that M&S was independent from Interflora. If this was not the case, and the origin-indicating function had been adversely affected, then the High Court would also need to determine whether the use of ‘Interflora’ as a keyword on the internet has had such an impact on the market for flower-delivery services that it has come to designate in the consumer’s mind any flower-delivery service.
The ECJ held that where a trade mark enjoys a reputation, it is likely that the purpose behind a competitor selecting a sign identical to the trade mark is to take advantage of the distinctive character or reputation of the trade mark. The reasoning behind this is that internet users searching for goods and services covered by the trade mark will trigger the competitor’s advertisements alongside the natural results. The question is whether such use can be construed as being without ‘due cause’. Where the advertisement displayed on the internet on the basis of a keyword search provides the internet user with an alternative to the trade mark owner’s goods or services and does not offer imitations or adversely affect the functions of the trade mark or cause dilution or tarnishment, then such use will generally fall within the ambit of fair competition in the sector for the goods or services. As such, the use is not without due cause.
The case sends a clear message to businesses that fair competition and consumer choice over the internet is to be encouraged.
The ECJ’s judgment clarifies how keyword advertising by a competitor may affect some of the functions of a trade mark in the cases of double-identity and also for marks with a reputation. The judgment provides interesting guidance as to how the English courts should approach the balance between the protection afforded to trade mark owners against legitimate competition in an online environment.
It will be interesting to see how the English courts will apply the guidance from the ECJ, particularly in relation to the secondary meaning of Interflora as denoting a commercial network.
Maintaining control over the use of trade marks in electronic marketing is critical to brand owners. The internet has increased trade mark owners’ exposure to potential trade mark infringements. These can range from "traditional" type infringements, such as the unauthorised use of a trade mark on a third party’s website, to internet-specific issues, such as the use of trade marks as keywords and metatags (which enable search engines to identify the site from key words and domain names).
Ultimately, a reputable brand does not want to be mistaken for its competitors. The internet has expanded the competition for many companies and in order to make brands more prominent, companies may, intentionally or accidentally, cross the acceptable threshold of fair competition and infringe trademarks. This could happen not only through intended or unintended association with competitors but also with high profile events such as the Olympics.
Businesses that advertise on-line should take a number of measures to ensure that their actions do not result in their being held liable for trade mark infringement. These measures could include:
- ensuring that their adverts are not misleading and do not weaken or tarnish a competitor’s trade mark,
- considering the effects that the keywords would have on consumers and whether they would mislead them.
Likewise, brand owners should monitor competitor activity and take action if their valuable trademarks are being infringed by such behaviour.