Whilst this decision by the Court of Appeal has not brought an end to the long running trade mark battle about M&S’s use of Interflora based keywords on Google’s Adwords facility, it is a significant outcome and it does provide some pointers as to the likely end result. Moreover, in an extremely rare move, the Court has ordered that the case be sent back for a re-trial.
This dispute relates to the purchase by M&S of keywords linked to Interflora via Google's Adwords facility.
M&S began operating an online flower delivery service in 2000. As part of its advertising strategy, M&S used Google's Adwords service. This service allows advertisers to purchase "keywords", which, when entered into Google as a search term, will generate a sponsored advertisement which may or may not include the keyword used.
The service also has some more sophisticated functions. For example, "advanced brand matching" which causes a sponsored advertisement to appear if the search engine deems the keyword relevant to the search term (e.g. the search term “flowers” might be deemed to match the keyword “florist”). In addition, “negative brand matching” allows advertisers to specify search terms which will not generate one of their sponsored advertisements (e.g. an advertiser may use "florist" as a keyword but negatively match "Interflora").
In May 2008, Google changed its policy, allowing third party traders to bid for keywords identical to third party’s registered trade marks. At this time, M&S did not have a strong reputation for online flower delivery, as compared with Interflora and began bidding on the keyword INTERFLORA and a number of variants, triggering sponsored advertisements for M&S's online delivery service. It seems that M&S's activities has yielded substantial sales revenues.
The High Court Decision
The proceedings began as far back as 2008 with Interflora alleging infringement of its trade marks under Articles 5(1)(a) and 5(2) of Directive 89/104 EEC (the Trade Mark Directive) and Article 9(1)(a) and 9(1)(c) of the Community Trade Mark Regulation 40/94 (the Regulation).
After a referral to the European Court, the full hearing of the action came before Arnold J in the High Court in April 2012. In his judgment, he found that M&S's sponsored advertisements did not allow a 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 Interflora, or an undertaking economically linked with it, or originated from a third party. He held that M&S's use of Interflora's trade marks as keywords had an adverse effect on the main function of a trade mark - it's origin function. Therefore, M&S had infringed Interflora's trade mark under Article 5(1)(a) of the Trade Mark Directive and 9(1)(a) of the Regulation and an EU wide injunction was granted. In a separate judgment which followed, Arnold J clarified that he also considered that M&S's purchase of flower related keywords, without negatively matching Interflora amounted to use of the INTERFLORA trade marks and was therefore an infringement.
M&S appealed this decision.
On November 5 2014, Kitchin LJ, delivering judgment for the Court of Appeal, took the opportunity to set out the key legal principles to be considered in a case such as this. In particular he re-emphasised that it was a necessary element of infringement that the use of the mark must affect or be liable to affect one of the functions of the trade mark. In particular, the relevant question to ask is:
Does the advertisement enable reasonably well informed and reasonably observant internet users (the Average Internet User), or enable them only with difficulty, to ascertain whether the goods or services referred to in the advertisement originate from the proprietor of the trade mark or an undertaking economically connected to it, or, on the contrary, originate from a third party.
(the Infringement Question)
It follows that a trade mark proprietor is entitled to prevent the display of third party advertisements which the Average Internet User may erroneously perceive as emanating from the trade mark proprietor, or, which suggest that there is a material link in the course of trade between the goods or services in question and the trade mark proprietor. Further, if an advertisement, though not suggesting an economic link, is vague as to the origin of the goods or services in question so that Average Internet Users are unable to determine, on the basis of the advertising link and the commercial message attaching to it, whether the advertiser is a third party or, on the contrary, is economically linked to the trade mark proprietor, then this will have an adverse effect of the origin function of the trade mark.
Addressing the grounds of appeal by M&S, the Court’s response can be summarised as follows:
The Average Internet User
This ground related to the judge's interpretation of a "reasonably well-informed and reasonably observant internet user". M&S argued that Arnold J wrongly applied the test for how this hypothetical internet user should be interpreted, taking it to be a population of individuals with varying degrees of knowledge, rather than an objectively defined hypothetical person. M&S also argued that Arnold J wrongly set the bar for this population of individuals too low, only excluding those who were ill-informed or unobservant.
Kitchin LJ held, however, that the judge had not erred on this point. Kitchin LJ made clear that this test is not a statistical one i.e. a mathematical average, and that it makes no difference whether the question is asked and answered from the perspective of the single hypothetical well-informed and reasonably observant internet user, or whether that hypothetical person provides a benchmark or threshold for the purpose of identifying the population of internet users whose views are material. Therefore, in answering the Infringement Question, the court was entitled to have regard to the effect of such advertisements upon a significant section of the relevant class of consumers, and was not barred from finding infringement by a determination that the majority of consumers were not confused.
The Onus of Proof
Arnold J had said that it was M&S's responsibility to ensure that their advertisements made it clear that they were not linked to Interflora and for M&S to disprove infringement by showing that their use of the Interflora trade mark created no real risk of infringement. Interflora disagreed that this was the test for liability arguing that the onus of proof should in fact be on Interflora to prove that the functions of their trade mark had been affected.
Kitchin LJ agreed with M&S on this point. In a marked reverse from the position which the High Court had previously espoused, Kitchin LJ held that it was the responsibility of the trade mark owner to prove that one of the functions of its trade mark have been affected, not upon the advertiser to show that the advertisement is not infringing. Kitchin LJ added that the purpose of trade mark law is "…not to protect the proprietor of a trade mark against fair competition... the aim of internet advertising using keywords corresponding to trade marks is, in general, to offer to internet users alternatives to goods or services of those trade mark proprietors, and so it is not inherently objectionable..."
Initial Interest Confusion
M&S contended that Arnold. J had erred by deciding that initial interest confusion was sufficient to establish liability.
Again, Kitchin LJ agreed with M&S on this point. Initial interest confusion was defined in the case of Och-Ziff Management Europe Limited v OCH Capital Limited as confusion on the part of the public as to the trade origin of the goods or services in relation to which the impugned sign has been used arising from use of the sign prior to purchase of those goods or services, and in particular confusion arising from use of the sign in promotional or advertising materials. Kitchin LJ did not find it helpful to import the doctrine of initial interest confusion, usually associated with US law, into EU trade mark law in this context. The test was already carefully set out in the Infringement Question and the concept of initial interest confusion was an unnecessary gloss to that test.
Procedural irregularities and errors
M&S argued that there had also been a number of procedural errors, including that, Arnold J (1) wrongly allowed Interflora to rely upon a series of academic articles which Interflora claimed would assist with the assessment of the attributes of the Average Internet User; (2) wrongly relied upon the evidence of a Mr Rose which Arnold J had previously ruled he would not rely upon, on the basis that it was opinion evidence; and (3) wrongly relied upon the evidence of Mr Pandya to infer confusion in the mind of Average Internet Users, when it was clear, M&S argued, that Mr Pandya’s evidence showed that there was in fact no basis for such an inference.
Kitchin LJ did not take issue with Arnold J's admission of the academic articles since he said the judge was entitled to exercise his discretion and was conscious of the potential danger of becoming his own expert but, nonetheless, decided that he could understand them and they should be admitted and, he was entitled to do so. Kitchin LJ agreed, however, that Arnold J had fallen into error in taking into account Mr Rose's evidence and in drawing the conclusions which he did from Mr Pandya's evidence.
Kitchin LJ summarised that the Court of Appeal was not confident that the High Court would have come to the same decision it did, if it had not made the errors set out and, in an unusual move, it decided that the only fair course would be to order a re-trail. He commented, however, that Arnold J was entitled to find that use of generic keywords without negatively matching could amount to use of a trade mark, and, the question of whether this use amounts to an infringement in the particular circumstances is a question for the trial judge when the trial is re-heard.
Whilst the circumstances meant that it was not necessary for the judge to consider the objections which M&S had with the scope of the injunction granted by Arnold J, Kitchin LJ did note that an injunction may only prohibit uses which are liable to affect the functions of the trade mark, meaning that the injunction can in theory be limited in geographical scope, if the functions of the trade mark are not liable to be affected in those excluded territories.
Whilst the main finding on the issue of trade mark infringement has still to be established, the Court of Appeal’s judgment deals with some key matters of principle. The meaning of the Average Internet User has been clarified, the principle of initial interest confusion has been firmly drawn into question, at least in the context of internet keywords disputes, and it is now clear that the burden of proof in relation to the Infringement Question sits squarely with the trade mark owner bringing the claim – not with the alleged infringer. This puts more pressure on trade mark owners to prove their position that the functions of their trade mark have been affected. This judgment emphasises the court’s view that trade mark law should not be used to restrain fair competition. The judgment in the re-trial will be eagerly awaited.