Court of Justice, Judgment of 22 September 2011, C-323/09, Interflora, Inc. v. Marks & Spencer Plc

The Court of Justice of the European Union (CJEU) held that the use of a sign identical to a third party's trademark as a keyword for identical goods and services within an internet referencing service infringed the trademark if it had an adverse effect on one of its functions. The court also considered that the enhanced scope of protection for trademarks with a reputation could not prevent the use of the trademark by a third party as a keyword if it was within the scope of fair competition.

Interflora, Inc. operates a worldwide flower-delivery network which enables customers to order flowers via the internet. It is the owner of the UK and Community trademark "INTERFLORA" with a substantial reputation for flower-delivery services. Marks & Spencer Plc (M&S) is a well-known retailer in the UK which offers, among other things, the sale and delivery of flowers through its network of shops via its website. Using Google's internet referencing service AdWords, M&S selected as keywords "Interflora" and variants of that word. Consequently, when internet users entered "Interflora" or one of the variants in Google's internet search engine, an M&S advertisement appeared under the heading "sponsored links". Interflora brought proceedings for trademark infringement against M&S before the High Court of Justice, Chancery Division (England & Wales).

The High Court referred several questions to the CJEU concerning whether the use by a competitor of keywords identical to a trademark for an internet referencing system amounted to trademark infringement if the trademark owner had not given its permission - even if the keyword was neither visible to the consumer in the hyperlink nor in the sponsored advertisement.

The CJEU held that in the present case where a third party used a sign identical to a trademark in relation to identical services, the main question was if this use had an adverse effect on one of the functions of the mark. If so - and only then - it was a trademark infringement which the owner was entitled to prevent. The court said that a trademark's function to guarantee to consumers the origin of the goods and services was its essential function, but not the only function giving protection against third party exploitation. In its decision the court examined (1) the function of indicating origin, (2) the advertising function, and (3) the so-called "investment" function.

The court said that the function of indicating origin was adversely affected if a third party's advertisement suggested to a well-informed and reasonably observant internet user that there was an economic link between the third party and the trademark owner or if the advertisement enabled the internet users only with difficulty to ascertain the origin of the goods or services. It was irrelevant that Google did not give Interflora the option to prevent M&S from selecting its trademark. Only in the opposite case where a trademark owner had been given the option but did not act to prevent the selection of its mark as a keyword, might this be seen as tacit consent to the third party's use of the keyword.

With regard to the advertising function, the CJEU held that the purpose of a trademark was not to protect its owner against unfair competition practices. As long as the selection of a keyword identical to a trademark did not adversely affect the owner in using his mark to inform or win over customers, it did not amount to a trademark infringement. It was not sufficient if the use merely constrained the trademark owner to intensify its advertising efforts to maintain or further develop its consumer visibility.

Finally, the court said that the investment function of a trademark was adversely affected if its use as a keyword substantially interfered with the owner's ability to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty, or if the trademark already enjoyed such reputation if it had an impact on the reputation and thereby jeopardised its maintenance. However, the fact that the owner had to adapt its efforts to acquire or preserve its reputation as a result of the third party's use was insufficient to adversely affect this function.

On the High Court's question about the enhanced protection for trademarks with a reputation, the CJEU held that the use of signs identical with or similar to a third party's trademark with a reputation as keywords might be construed as free-riding, i.e. taking unfair advantage of the distinctive character or the reputation of the trademark, if the offered goods imitated those of the trademark owner. However, a trademark with a reputation was not protected in situations where the internet advertiser merely put forward an alternative to the goods or services of the trademark owner within the ambit of fair competition.