InterCity Group (NZ) Ltd v Nakedbus NZ Ltd [2013] NZHC 379

Intercity Group NZ and Nakedbus are fierce competitors in the long distance bus services industry in New Zealand. They recently completed round two in a trade mark war in New Zealand, regarding the term "inter city".  Intercity Group had registered INTERCITY as a trade mark covering "road transportation services", and is well known for providing those services under that trade mark in New Zealand for many years.

In October 2012, Nakedbus purchased 87 different variations of the keyword "inter city" from Google Adwords and subsequently launched online advertisements featuring the term "inter city" in its headings and description fields with slogans, including as shown below:

Click here to view image.

Intercity Group NZ claim Nakedbus' Google Adword advertisements infringe its registered trade mark

These online advertisements resulted in searches conducted on the Google search engine for the term "inter city" displaying references to both Intercity Group and NakedBus.

Intercity Group claimed that this conduct  infringed its registered INTERCITY trade mark, was actionable under the tort of passing off and was misleading and deceptive conduct in breach of the Fair Trading Act 1986.  This was heard before the New Zealand High Court in February 2014.

Following an interlocutory hearing of this dispute before Justice Hansen in March 2013, Justice Asher was required to consider whether the allegedly infringing use was indeed use of the term "inter city" in the course of trade as a trade mark - i.e. to identify the commercial origin of the services.

Summary conclusion of the interlocutory hearing between Nakedbus and Intercity Group NZ of March 2013

Justice Hansen concluded in the interlocutory hearing that:

  1. Nakedbus’s use of "inter city" as a keyword and in internet advertisements would not lead to a risk of consumer confusion or deception as to the origin of Nakedbus’s services on offer, and therefore Nakedbus did not infringe InterCity Group's registered mark;
  2. Nakedbus was not using the term “inter city” and related terms as trade marks, as they were not shown to have been used to indicate the origin of Nakedbus’s services; and
  3. InterCity Group did not establish that there was a serious issue to be tried as to whether Nakedbus’s use of “intercity” did not constitute passing off or contravention of the Fair Trading Act 1986, as it had not been shown that Nakedbus had made representations to the public that would be likely to lead the public to believe that its services were those of InterCity Group.

We have discussed this decision previously here

The full trial  between Nakedbus and Intercity Group NZ before the High Court

The latest decision departs from Justice Hansen's conclusions at the interlocutory hearing regarding trade mark infringement by use of the mark on the Google results page and on the website.

  1. The purchase of Google Adwords is not trade mark use

Justice Asher concluded that the purchase of Google Adwords for the purpose of triggering a sponsored listing is not, per se, trade mark use;  it is a private transaction between the purchasing party and Google, which is invisible to third parties and is therefore  not to be taken as being use as a trade mark, and therefore is not infringing use.

  1. The use of a competitor's trade mark in advertising is an infringement,  even though the word or phrase is otherwise descriptive

Nakedbus argued that its use of the word "inter city" in advertising was descriptive and that the term "inter city" was a common reference for long-distance domestic bus services.

Whilst the judge recognised that the word "intercity" could be used either to mean "travelling between cities" or as a trade mark identifying the Intercity Group's brand, he concluded that people would be likely to consider Nakedbus' use of "inter city" to be use as a trade mark, because:

  • "inter city" would appear in bold (as a result of Google's algorithm) following a Google search for "inter city", reinforcing the impression that the words were not being used descriptively;
  • The INTERCITY brand is very well known in New Zealand and is associated with Intercity Group;
  • Nakedbus made no effort to differentiate its advertisement from Intercity Group; 
  • Nakedbus had previously deliberately used the "INTERCITY" trade mark on its advertisements in an effort to divert traffic from Intercity Group.

Final decision: Nakedbus found to infringe Intercity through use of Google Adwords

Justice Asher held that Nakedbus had infringed Intercity Group's trade mark.  In addition, Justice Asher found that Nakedbus had passed off its bus services as those of Intercity Group and that its purchase of "inter city" keywords and the inclusion of "inter city" in its advertisements would deliberately suggest an association or affiliation between its network and Intercity Group, in breach of the Fair Trading Act.

In the decision, an order was made prohibiting Nakedbus from using the words INTERCITY, INTER CITY or INTER-CITY in advertisement displayed in response to an internet search or on any webpage corresponding to the click-through advertisementunless the advertisement is coupled with words or other signs sufficient to distinguish its services from those of Intercity Group. 

Nakedbus has appealed this decision.

Points to note when advertising businesses online through Google Adwords

Use of a competitor's mark in advertising could amount to an infringement of their trade mark unless it is clearly for descriptive or comparative purposes only e.g. if the advertisement includes sufficient text to differentiate the product or service that of the competitor.  Where a trade mark is a descriptive word or phrase and its use is intended to be purely descriptive, care should be taken to ensure that its presentation is such that it is not emphasised or made to stand out from the body of the text.

It is arguable whether a similar conclusion would have been reached if INTERCITY and the Intercity Group were not so well known in New Zealand.  It seems that the judge reached the conclusion that Nakedbus was using the term "inter city" as a trade mark partly due to InterCity Group's fame and reputation in the term, which had transformed the otherwise descriptive term into a well known trade mark.  A similar result may therefore not have been reached if a trader was using a similarly descriptive trade mark that did not have such significant recognition amongst New Zealand consumers.  Note that in a similar case in Australia Lift Shop Pty Ltd v. Easy Living Pty Ltd [2013] FCA 900, the Federal Court of Australia found there was not trade mark use of the less well known mark, LIFT SHOP.