On 4 April 2008 Google notified its advertiser customers of a change of policy regarding keywords corresponding to trade marks. Google had previously operated a policy in response to notifications by trade mark owners of blocking trade marks from being purchased as a keyword. Henceforth, for the UK and Ireland, third parties would be free to bid for keywords registered as a trade mark without restriction.

Google’s email provoked considerable interest at M&S, an important competitor of Interflora in the flower delivery market. As an M&S internal email sent on the same day put it: “we are reading this thinking how we can nick traffic from the opposition cheaply, admit it. (Interflora, Interflora!)”.

On 6 May 2008 M&S started bidding on “interflora”. Interflora (“FTD” in the USA, “Fleurop” in parts of Europe) sent a letter alleging trade mark infringement and passing off on 7 May 2008, followed by legal proceedings on 3 December 2008. After a brief pause, M&S recommenced bidding on “interflora” on 16 December 2008.

The Interflora keywords bought by M&S triggered the display in Google search results of ads in the following format:  

M&S Flowers Online

Beautiful Fresh Flowers & Plants.

Order by 5pm for Next Day Delivery.

www.marksandspencer.com/flowers

M&S’s use of the Interflora keywords was highly successful. During the period from 6 May 2008 to August 2010, for example, M&S gained 6,050,112 impressions and 434,338 clicks (a click through rate of 7.2%) at a cost per click of £0.36 from the keyword “interflora” on all match types, yielding revenue of £1,809,501 (an ROI of 11.7). The litigation, which has so far lasted four and a half years and has been up to both the Court of Appeal and the CJEU on different points, concerns a sizeable portion of the UK flower delivery market.

Interflora alleged trade mark infringement under Article 5(1)(a) of the Trade Mark Directive which concerns the use of an identical sign in relation to identical goods or services (a “double identity” claim). The case law of the CJEU has established that in order for there to be infringement the defendant’s use of the trade mark must affect or be liable to affect the functions of the claimant’s trade mark.

Mr Justice Arnold in the High Court referred various questions to the CJEU which in 2011 came back with the following concerning adverse effects on a trade mark’s functions through the use of advertising keywords:

  • The origin function of the trade mark would be adversely affected if the advertisement did not enable the user to ascertain whether the advertised goods or services originated from the trade mark proprietor, from an undertaking economically linked to it or from an entirely unconnected third party (or if the advertisement made it difficult for them to do so).
  • The CJEU had already ruled in the Google France case that use of a third party trade mark as an advertising keyword does not affect the advertising function of the mark.
  • The CJEU identified as another function of a trade mark the investment function, its use by the proprietor “to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty". Mr Justice Arnold said he thought what the CJEU meant by this was that if the third party’s keyword advertising adversely affects the reputation of the trade mark, as for example where the image the trade mark conveys is damaged, then there is an adverse effect on the investment function. However, the CJEU said the fact that keyword use prompted some consumers to switch to a competitor’s goods or services was not itself a basis for finding that the investment function was adversely affected.
Armed with the CJEU’s ruling on the relevant principles to apply, Mr Justice Arnold decided that M&S had indeed infringed the Interflora trade mark. CJEU case law recognises that, as a general rule, keyword advertising promotes competition and is not inherently or inevitably objectionable from a trade mark perspective. However, the judge found that the M&S Google ads did not enable reasonably well-informed and reasonably attentive internet users, or enabled them only with difficulty, to ascertain whether the service referred to in the ads originated from Interflora, or an undertaking economically connected with Interflora, or originated from a third party. A significant proportion of the consumers who searched for “interflora” and other signs, and then clicked on M&S’s ads displayed in response, were led to believe, incorrectly, that M&S’s flower delivery service was part of the Interflora network. Thus M&S’s use of “interflora” had an adverse effect on the origin function of the trade marks.
 
M&S did not invoke a defence based on arguing that its advertising was comparative advertising. The judge felt that it might be comparative advertising, but it wasn’t necessary for him to reach any conclusion on this.
 
Immediate reaction to the judgment, now the leading UK case in this area, has been mixed. It will be interesting to see whether more advertisers take the view that competitive brand keyword bidding is not only ungentlemanly, but now also more dangerous. On the other hand, the detailed analysis in the judgment of M&S’s highly successful strategy may inspire others to imitate it – with suitable legal advice on staying within EU trade mark and comparative advertising laws.