In Interflora v Marks & Spencer, the Court of Justice ("CJEU") has provided some clarification on the scope of trade mark protection where a competitor uses a registered mark as a keyword. The decision highlights the need to balance fair competition with the rights of a trade mark owner.

The CJEU's decision broadly follows the opinion of the Attorney General, reported in our newsflash of 24 March.

Summary

The proprietor of a trade mark is entitled to object to the use of a trade mark as a keyword where:

  • A reasonably well-informed and reasonably observant user cannot tell if the goods originate from the trade mark proprietor or a third party.
  • Advertising on the basis of a keyword contributes to turning the trade mark into a generic term.

It is however legitimate for advertisers to present themselves as commercial alternatives to the trade mark proprietor.

Business Impact

On the face of it, the willingness of the Court to recognise the potential impact of keywords upon a number of the functions of a trade mark is positive for brand owners. However, the reality is that the Court's recognition that most internet users are reasonably savvy, means that it may be difficult for brand owners to demonstrate infringement of their rights unless there is confusion as to origin or a risk of the trade mark becoming generic.

We will know more when this case returns to the High Court, although Interflora's business model may yet prove, in this case, to be the factor that tips the balance in their favour.

Background

Interflora, the well-known company running a network of flower delivery services, objected to Marks & Spencer's use of their name 'Interflora' as a 'keyword' for M&S's own flower delivery services.

Mr Justice Arnold referred a number of questions to the CJEU in 2009 relating to whether the proprietor of a trade mark is entitled to prevent a competitor from using a keyword identical to a trade mark. The UK Court also asked if the answer is affected by the fact that some members of the public might be lead to believe that the competitor is a member of the trade mark proprietor's commercial network.

The Functions of a Mark

Considering first Article 5(1) of Directive 89/104 and Article 9(1)(a) of Regulation No 40/94 (now 207/2009), following the CJEU's decision in Google France, it is settled law that trade marks are only infringed by the use of keywords where use adversely affects one of the functions of the trade mark. In this case, as well as considering the essential function as an indicator of origin, the CJEU also considered the impact upon the 'investment' function and the 'advertising' function.

i)    Marks as an Indicator of Origin (the essential function)

Whether a trade mark's function as an indicator of origin is affected by the use of a keyword depends on the way in which the advertisement is presented.

The function is adversely affected if the advertisement does not enable a reasonably well-informed and reasonably observant user, or enables them only with difficulty, to ascertain whether the goods or services referred to in the advertisement originate from the trade mark proprietor or a third party.

In this case, the Court noted that the network of a large number of retailers employed by Interflora might contribute to confusion on the part of consumers.

ii)    Advertising Function

The Court accepted that use of a keyword might result in the proprietor having to expend more money on, or increase the intensity of, its advertising. However, the purpose of a trade mark is not to protect a proprietor against practices inherent to free competition. Considering that the aim of internet advertising via keywords is to offer internet users alternative goods or services, the CJEU was of the opinion that the use of a keyword does not impact upon the advertising function of a trade mark.

iii)    Investment Function

A trade mark may also have an 'investment function', if it is used to acquire or preserve a reputation capable of attracting consumers and retaining loyalty. However, the Court observed that it is not enough that the consequence of the competitor's use is that the trade mark proprietor needs to adapt its efforts to acquire or preserve its reputation of being capable of attracting consumers and retaining their loyalty. Similarly, the trade mark proprietor cannot rely on the fact that some consumers switch to the competitor's goods.

Trade Marks with a Reputation

It was accepted that the Interflora trade mark had a reputation. The Court considered the circumstances in which an advertising link can cause detriment to a trade mark by dilution, or take unfair advantage of the distinctive character of the mark (both relevant where a trade mark has a reputation under Article 5(2) of the Trade Mark Directive).

i)    Detriment

The CJEU agreed with the AG's opinion that detriment is caused when the use reduces the ability of the mark to distinguish the origin of goods or services. This is the case where the use contributes to turning the mark into a generic term.

Where the use merely draws the customer's attention to the existence of an alternative product or service than that of the proprietor, detriment cannot automatically be assumed.

ii)    Free Riding

The CJEU agreed with the AG that a competitor who buys sponsored listings on search engines is purposefully taking advantage of the distinctive character or repute of the mark. Furthermore, that person derives a real advantage from diverting customers away from the trade mark proprietor to their own goods and services. However, this use generally falls within the ambit of fair competition and, as such, is not "free riding" so as to amount to trade mark infringement.