In a decision of 22 September 2011, the Court of Justice of the European Union has confirmed its decision from Google France that an advertiser who selects a competitor’s trade mark as an Adword can be liable for "double identity" trade mark infringement if consumers are unable to determine whether the advertiser is economically linked to the trade mark owner.  It has also held that, in this case, the prospects of such confusion were greater because of the nature of Interflora’s business, being a network of separate and widely varying retailers.  In addition, the CJEU has held, for the first time, that the use of a competitor mark as an Adword can also infringe by taking unfair advantage of the mark.

Background

In addition to its natural search results, Google also offers a paid-for referencing service, known as “Adwords”.  Advertisers can bid on words, and if a user of Google searches for those words, then in addition to the “natural” search results, advertisers’ sponsored links may be displayed in a separate box.  The frequency with which an advertiser’s sponsored link appears, and its position in the list of sponsored links, depends on the amount the advertiser bids for the Adword and the quality of the link.  In this case, Marks & Spencer selected “Interflora” as an Adword, such that a sponsored link to M&S Flowers Online appeared prominently when users of Google searched for “Interflora”.  Interflora brought trade mark infringement proceedings, alleging that M&S’s use as an Adword of their registered mark INTERFLORA, and similar words, constituted both “double identity” (identical mark, identical goods) infringement and also that M&S’s acts took unfair advantage or, or were detrimental to, the distinctive character or repute of the INTERFLORA mark.

Questions referred to the ECJ

The High Court initially referred ten questions to the ECJ (as it then was).  Following correspondence between the High Court and the ECJ, and the ECJ decision in the joined Google France cases (cases C-236/08, C-237/08 and C-238/08), six of these were withdrawn.  The questions on which the CJEU has now ruled were:

  1. Where a trader which is a competitor of the proprietor of a registered trade mark and which sells goods and provides services identical to those covered by the trade mark via its website:
  • selects a sign which is identical … with the trade mark as a keyword for a search engine operator's sponsored link service,
  • nominates the sign as a keyword,
  • associates the sign with the URL of its website,
  • sets the cost per click that it will pay in relation to that keyword,
  • schedules the timing of the display of the sponsored link; and
  • uses the sign in business correspondence relating to the invoicing and payment of fees or the management of its account with the search engine operator,

but the sponsored link does not itself include the sign or any similar sign, do any or all of these acts constitute "use" of the sign by the competitor within the meaning of Article 5(1)(a) of the Trade Marks Directive and Article 9(1)(a) of the CTM Regulation?

  1. Is any such use "in relation to" goods and services identical to those for which the trade mark is registered within the meaning of Article 5(1)(a) of the Directive and Article 9(1)(a) of the CTM Regulation?
  2. Does any such use fall within the scope of either or both of:

(a) Article 5(1)(a) of the Trade Marks Directive and Article 9(1)(a) of the CTM Regulation; and

(b) Article 5(2) of the Trade Marks Directive and Article 9(1)(c) of the CTM Regulation?

  1. Does it make any difference to the answer to question 3 above if:

(a) the presentation of the competitor's sponsored link in response to a search by a user by means of the sign in question is liable to lead some members of the public to believe that the competitor is a member of the trade mark proprietor's commercial network contrary to the fact; or

(b) the search engine operator does not permit trade mark proprietors in the relevant member state … to block the selection of signs identical to their trade marks as keywords by other parties?

Google France

In Google France, the ECJ held that advertisers’ use, in Adwords, of competitors’ trade marks constituted actionable trade mark use (in contrast with Google, whose offer of the mark as an Adword did not constitute trade mark use).  The ECJ further held that the use of competitor marks in Adwords would constitute trade mark infringement if such use had an adverse effect on the essential functions of the trade mark.  These include not only the function of indicating origin but also other functions including the guarantee of quality, the communication function and the advertising function.  In particular, if the advertiser’s ad suggested that there was an economic link between the advertiser and the proprietor of the trade mark, or was at least so vague that the average consumer had difficulty in determining whether the goods or services were those of the trade mark owner, there would be an adverse effect on the origin function, and the use of the mark in the Adword would be infringing.

Google France did not, however, address the question of whether the advertiser using a competitor mark as an Adword thereby takes unfair advantage of or causes detriment to the distinctive character or repute of the mark.

CJEU Decision – double identity infringement

As is its habit, the ECJ distilled the questions referred, holding that the High Court was essentially asking:

  • whether the proprietor of a trade mark is entitled to prevent a competitor from displaying, on the basis of an identical keyword, an advertisement for goods or services identical to those for which that mark is registered; and
  • whether, in those circumstances, it is relevant (i) that the advertisement concerned is liable to lead some members of the relevant public to believe, incorrectly, that the advertiser is a member of the trade mark proprietor’s commercial network and (ii) that the provider of the internet referencing service does not permit trade mark proprietors to prevent signs identical to their trade marks being selected as keywords.

The CJEU confirmed its decision in Google France that the use by an advertiser of a competitor’s trade mark as an Adword constituted potentially actionable use in the course of trade, and in relation to goods or services, even if the trade mark does not appear in the ad.  It also confirmed that, for the use to be infringing, one of the essential functions of the mark must be affected.  It then went on to consider the origin function, advertising function and investment function separately.

Origin function

The CJEU again confirmed the Google France point that where an advertiser’s ad suggested that there was an economic link between the advertiser and the proprietor of the trade mark used as an Adword, or the average consumer had difficulty in determining whether the goods or services were those of the trade mark owner, the function would be adversely affected.  On the facts of this case, the CJEU said that the referring court may take into account the nature of Interflora’s business, being a commercial network composed of a large number of widely varying retailers.  Ominously for M&S, the CJEU considered that in such circumstances it may be particularly difficult for the average consumer to determine whether M&S is part of Interflora’s network.

Advertising function

The CJEU acknowledged that the use of a trade mark by its owner’s competitors may increase the costs to the trade mark owner if it wishes to ensure that its sponsored links appear above its competitors’.  However, this does not on its own adversely affect the trade mark’s advertising function, and the trade mark owner is not denied the opportunity to use its mark to inform and win over customers.  Accordingly the advertising function is unaffected.

Investment function

The CJEU defined the investment function of a trade mark as the use of the mark by its proprietor to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty, and held that the investment function of a mark is affected where a competitor’s use of the mark substantially interferes with this.  On the other hand, the investment function will not be affected if the only consequence of the competitor’s use of the mark is to oblige the trade mark owner to adapt its efforts to acquire or preserve its reputation – provided that such use respects the trade mark’s origin function.

CJEU Decision – detriment to distinctive character / unfair advantage infringement

The CJEU again reformulated the questions asked by the High Court, holding that the question referred was, essentially, whether the proprietor of a trade mark with a reputation is entitled to prevent a competitor from basing its advertising on a keyword corresponding to that trade mark which the competitor has, without the proprietor’s consent, selected in an internet referencing service.

Detriment to distinctive character

The CJEU held that the use in the course of trade of a sign identical or similar to a registered mark is detrimental to the distinctive character of the mark if it contributes to turning the trade mark into a generic term.  However, the use of a competitor trade mark as an Adword does not necessarily contribute to that development.

It went on to say that if the internet user can tell that the goods or services offered in the ad triggered by the Adword originate not from the proprietor of the trade mark but from its competitor, the trade mark’s distinctiveness would not be reduced by that use.  It would have merely drawn the consumer’s attention to an alternative product or service.

Unfair advantage

The CJEU held that, where a competitor of the proprietor of a trade mark with a reputation selects that trade mark as an Adword, the purpose of that use is to take advantage of the distinctive character and repute of the trade mark, and that if the consumer buys the competitor product as a result, real advantage accrues to the advertiser.  If done without due cause, the advantage is unfair, especially where the goods offered by the advertiser are imitations of the goods of the trade mark owner.  However, where the ad does not offer a mere imitation of the trade mark owner’s goods, does not cause dilution or tarnishment and does not adversely affect the functions of the trade mark, such use will generally be fair competition and thus not without due cause.

Comment

When it returns to the High Court this case appears likely to be determined on its particular facts.  In particular, it is ominous for M&S that, given the nature of Interflora’s business, there seems a real possibility that the average consumer might think that M&S were within Interflora’s network and would thus only be able to determine with difficulty whether M&S’s goods and services were also being offered under the Interflora mark.  If so, the origin function of the INTERFLORA mark will be adversely affected and M&S will be liable for double identity infringement.

While this part of the decision suggests that M&S will be liable, the rest of the decision is unhelpful.  The CJEU frequently does no more than restate established principles without providing further guidance on them.  Moreover, such guidance as it does provide often blurs together separate concepts.  For example:

  • The CJEU holds that there will be no dilution provided that consumers can distinguish the advertiser’s goods from those of the trade mark owner. This makes confusion a necessary element of the test for dilution, despite the well established principle that confusion is not required to succeed in a dilution claim. 
  • In its discussion of unfair advantage, the CJEU holds that an advantage will not be unfair provided, among other things, that there is no dilution or tarnishment.  However, unfair advantage is a separate concept from dilution (detriment to distinctive character) and tarnishment (detriment to repute).  By making the absence of dilution and tarnishment a condition of a finding that there is no unfair advantage, the CJEU imports these concepts into the consideration of unfair advantage.  
  • In its explanation of the investment function the CJEU stipulates that a trade mark owner may not prevent the use of an identical sign in relation to identical goods or services just because the trade mark owner will have to adapt its efforts to acquire or preserve a reputation, on the proviso that the use of the sign respects the trade mark’s origin function.  However, if the use being made does not respect the origin function, there is no need to consider the investment function in the first place, as the necessary adverse effect on one of the essential functions of the mark would be made out.  On this basis, the investment function is redundant, and the CJEU gives no guidance or examples as to when the investment function will be adversely affected in the absence of an effect on the origin function.

There is therefore ample scope for further CJEU references on the subject of keywords.  In the meantime, advertisers using competitor marks as keywords should take care to avoid any possibility of the consumer being unsure whether the goods they see when they click on the link originate from the advertiser or from the owner of the trade mark, particularly in cases where the trade mark owner operates a network of affiliated organisations of which the advertiser could reasonably be a member.  The prominent use of an appropriate disclaimer should achieve this.  Once this is achieved, and subject to the uncertainties noted above, then providing the goods are not imitations of the trade mark owner’s goods (as in L’Oréal v Bellure) there appears considerable freedom to use keywords without being found liable for infringement by way of double identity, detriment to distinctive character or unfair advantage.