The Court of Justice of the European Union has provided further guidance on circumstances in which use of a registered trademark as a keyword in internet advertising by a third party advertiser may constitute trademark infringement.  (1) Interflora Inc. (2) Interflora British Unit v. (1) Marks & Spencer plc (2) Flowers Direct Online Ltd, Case C-323/09 (CJEU September 22, 2011).

Marks & Spencer (M&S), a major UK retailer that provides a flower delivery service in competition with Interflora, selected as keywords the word “Interflora” and variants thereof.   When internet users entered the word “Interflora” or one of those variants in the Google internet search engine, an M&S advertisement appeared in the form of a sponsored link.  Interflora issued UK proceedings against M&S for trademark infringement.  The UK court referred a number of questions to the CJEU for a preliminary ruling concerning the scope of Community Trademark Regulation No. 40/94/EEC (now replaced by 207/2009/EC) and the Community Trademark Directive No 89/104/EEC (now replaced by 2008/95/EC).

Referring to the CJEU’s previous decision in Google France and Google (Joined Cases C-236/08 to C-238/08 [2010], ECR I-2417), the CJEU found that a trademark owner was entitled to prevent a competitor from using a keyword identical to a trademark to advertise goods or services that are identical to those for which the trademark is registered without the trademark owner’s consent if such use is liable to have an adverse effect on one of the functions of the trademark.  Such use would adversely affect the trademark’s function of indicating origin if the advertising triggered by the keyword did not enable reasonably well-informed and reasonably observant internet users to ascertain whether the goods or services advertised originate from the trademark owner or an undertaking economically linked to that owner or if internet users could determine as such only with great difficulty.

The CJEU further found that such use would not adversely affect the trademark’s advertising function in the context of an internet referencing service having the same characteristics as the service at issue in the proceedings and that such use adversely affected the trademark’s investment function if it substantially interfered with the trademark owner’s use of its trademark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.  However, the mere fact that keyword use would lead some consumers to switch to a competitor’s goods was not itself a basis for finding that the investment function of a trademark was adversely affected.  It was for the national court to determine whether M&S’s use of a sign identical to the INTERFLORA trademark jeopardized the maintenance by Interflora of a reputation capable of attracting consumers and retaining their loyalty.

Concerning the question of extended protection, the CJEU confirmed that a trademark owner could prevent third-party use of a trademark as a keyword if the use complained of could be regarded as taking unfair advantage of the distinctive character or repute of the trademark (free-riding) or where the advertising was detrimental to that distinctive character (dilution) or repute (tarnishment).  By way of example, the CJEU found that keyword advertising would be detrimental to the distinctive character of a trademark with a reputation where it contributed to turning the trademark into a generic term.  It was for the national court to determine whether the selection of signs corresponding to the trademark INTERFLORA as keywords had such an impact on the market for flower-delivery services that the word “Interflora” had come to designate, in the consumer's mind, any flower-delivery service.

Concerning taking unfair advantage, the CJEU found that a trademark owner could not prevent third parties from using trademarks in keyword advertising if they were merely putting forward alternative goods or services, were not offering a mere imitation of the trademark owner’s goods and services and were not causing dilution or tarnishment, or adversely affecting the functions of the trademark, as this fell within the scope of free competition.

Practice Note:   The judgment confirms previous principles expounded by the CJEU while adding an extra dimension by stating that keyword use may be prevented by a trademark owner if it substantially interferes with the owner’s use of its trademark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.  Ultimately, the outcome of the case will depend on the application of these principles to very specific facts when it is remitted to the UK court.