South Africa finally has its first Adwords decision. Judge Nicholls of the Gauteng Local Division handed down judgment in the case of Cochrane Steel Products Pty Ltd v M-Systems Group (Pty) Ltd on 29 October 2014.
An Adwords case is a case where the issue is this: is it lawful for company A to purchase the trade mark of company B as an Adword in order to ensure that when anyone searches company B’s trade mark they get to see company A’s adverts?
Cochrane is the owner of the trade mark ClearVu in respect of fencing. M-Systems is a competitor that sells a product under the trade mark M-Secure. M-Systems admitted that it bids on the Adwords ‘clearvu’, ‘clear vu’ and ‘clear-vu’, but denied that this is unlawful. Cochrane felt aggrieved by this, claiming that anyone who searches ClearVu is obviously looking for its product rather than the product of M-Systems. It felt particularly upset by the fact that, because the market for Adwords is an open one with the price being determined on a click-through basis, these actions were costing it money. The judge summarised Cochrane's frustration as follows: ‘To add insult to injury, to ensure that the applicant’s (Cochrane) advertisement has a higher ranking and appears in a preferable position to that of the respondent (M-Systems), the applicant has to raise the price-per-click for the use of its own brand name... the applicant is, it asserts, doubly prejudiced.’
What made this case slightly different from cases that have been decided elsewhere is that the trade mark ClearVu - although well-established and seemingly quite well known – is not registered. In fact Cochrane claimed that M-Systems had deliberately and maliciously opposed its trade mark application for ClearVu in order to make sure that Cochrane could not do anything about the Adwords usage. Cochrane had, however, decided to proceed with a passing off action.
But not just passing off! Cochrane threw in another cause of action, one that few will have heard of. Cochrane argued that the court should recognise and develop the common law action of ‘leaning on’. Leaning on has been described by two legal academics, Van Heerden and Neethling, as a cause of action that relies on reputation but does not require confusion or deception. It occurs, it was argued, when one company misappropriates the advertising value of a competitor’s trade mark. It therefore protects a company against the dilution of the advertising value of its trade marks.
All very interesting, but does it exist? No said the judge, pointing out that the courts have, in the past, made it very clear that if there’s no passing off there’s no action. In a famous case involving the Moroka Swallows football club the judge said this: ‘Provided that he does not commit the delicts of defamation or passing off or offend against any specific statutory prohibition, there is no reason why an entrepreneur should not take the benefit of such advantage as he may be able to gain in the marketing of his goods and services by associating them with names that may have become famous’. In the leading case of Payen v Bovic, the court warned that companies who cannot establish passing off should not add unlawful competition as a ‘ragbag and often forlorn alternative’. And in the case of Blue Lion v National Brands, the court - after warning against ‘the creation of impermissible monopolies’ - said that companies cannot use ‘some general notion of unlawful competition to create ersatz passing off with requirements less exacting than those required by the common law.’
So it was all down to passing off. An action that requires proof of reputation, confusion and harm. The judge focussed on the issue of confusion and this gave him the opportunity to look at foreign Adwords cases. For example, the European decisions of Google v Louis Vuitton, Interflora v Marks & Spencer and, most recently, Amazon v Lush. Cases that have made it clear that ‘keyword advertising is not inherently or inevitably objectionable from a trade mark perspective.’
The courts in Europe have been consistent in saying that using a competitor's trade mark as an Adword is fine provided that there’s no confusion. This approach is based on the recognition that most people are internet-savvy enough to know that when they search a trade mark they will see adverts for other products too. This is fine as long as those adverts don’t mislead them. The only case where the court felt that confusion was a possibility was the Interflora case, and this was down to the particular facts: it’s well known that Interflora operates a flower delivery service through independent florists, which meant that consumers seeing the name Marks & Spencer in conjunction with Interflora might well believe that Marks & Spencer was part of the Interflora network.
The judge summed it up as follows: ‘In this matter a consumer who searches for “ClearVu” is confronted with a multiplicity of suppliers. No reasonable consumer could possibly be under the impression that all of them relate directly to the applicant. The reaction to these might well be irritation or indifference but it is highly unlikely that the reasonably observant consumer would be confused and deceived into thinking they were all the advertisements of the applicant. To reiterate the sentiments in foreign jurisdictions, Adwords are a familiar feature of the internet and consumers are used to distinguishing them from natural search results.’
So Cochrane had failed to establish a likelihood of confusion, which meant that the other requirements of reputation and harm did not even need to be considered. The passing off claim had to fail.
A few final points. There was a suggestion that M-Systems also made use of the trade mark ClearVu in the ads itself, in other words visible use of the trade mark. This issue was, however, raised very late in the day and the judge didn’t allow it because there was no reasonable explanation as to why it hadn’t been included from the outset. There was also a suggestion that M-Systems had made some metatag use of Clearvu, but this issue wasn’t pursued by Cochrane.
Although this case dealt with passing off rather than trade mark infringement it is, I think, a good indicator that a South African Adwords case featuring a registered trade mark will follow the approach of the courts in Europe. Is this the right approach? Probably. But it’s perhaps a pity that the judge didn’t at least consider whether the foundation on which this approach rests – the experienced internet user who isn’t easily fooled - is as appropriate in a developing country as it is in a developed country. After all, there have been cases in South Africa - especially ones dealing with cheap consumer goods – where the courts have taken into account that many consumers are illiterate or semi-literate. If that’s the case, can we really assume that most of us know just how the internet works?