HomeInsightsInterflora comes up Smelling of Roses in Keyword Advertising Dispute

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Interflora Inc & Anor v Marks and Spencer Plc & Anor [2013] EWHC 1291 (Ch)

Summary

Follwing the trial in this long-running dispute, Mr Justice Arnold (the “Judge”), applying the principles set out by the Court of Justice of the European Union (“CJEU” ) in Google FRANCE (Joined Cases C-236/08, C-237/08 and C-238/08), has held that use by Mark & Spencer Plc (“M&S” ) of Interflora’s trade marks as keywords in the “Google AdWords” service amounted to trade mark infringement.

Background

Interflora operates a well-known flower delivery network.  It is the proprietor of UK and Community registered trade marks (“CTMs”) for and including INTERFLORA (the “Interflora Marks”) which are used by a network of otherwise independent retailers in relation to their flower delivery services. The INTERFLORA network is made up, predominantly, of independent florists. However, in recent years larger commercial partners, such as the supermarket chains Sainsbury’s, Tesco and the Co-Op, have also become part of the INTERFLORA network.

M&S, a well-known UK high street retailer, operates its own flower delivery service which is not part of the INTERFLORA network.  M&S promoted its service online via “Google AdWords” (a paid for advertising service on the Google search engine), which included using INTERFLORA as a keyword, so that advertisements for M&S’ flower delivery service would be displayed in response to a Google search for INTERFLORA (the “M&S Adverts”).

Interflora’s Claims

Interflora alleged that the M&S Adverts infringed the Interflora Marks in three ways: (1) by use of an identical mark for identical services (‘double identity’); (2) by taking unfair advantage of the repute and distinctive character of the Interflora Marks without due cause (‘free-riding’); and (3) by use of a sign which is detrimental to the distinctive character or the repute of the Interflora Marks (‘dilution’).  The relevant statutory provisions are to be found section 10(1) and (3) of the Trade Marks Act 1994 (the “Act”) and Articles 9(1)(a) and (c) of Council Regulation 40/94/EC[F/N1] (the “Regulation”) which are equivalent to Articles 5(1)(a) and 5(2) of Council Directive 89/104/EEC (the “Directive” ).

In Google FRANCE the CJEU set out a six conditions that must be satisfied to succeed under double identity type infringement: (i) there must be use of a sign by a third party within the relevant territory; (ii) the use must be in the course of trade; (iii) it must be without the consent of the proprietor of the trade mark; (iv) it must be of a sign which is identical to the trade mark; (v) it must be in relation to goods or services which are identical to those for which the trade mark is registered; and (vi) it must affect or be liable to affect the functions of the trade mark.  M&S did not dispute that the first five conditions had been satisfied and so Interflora’s claim turned on whether the M&S Adverts affected or were ‘liable to affect the function of the Interflora Marks’.  Interflora asserted that the M&S Adverts affected both the origin and the investment function of the Interflora Marks.

Interflora argued that M&S was free-riding because M&S had deliberately targeted Interflora and Interflora was unable to fight back by cross-bidding on ‘marks and spencer’ keywords in a cost effective manner. This is because flower delivery was only one aspect of M&S’ multi-faceted business, meaning that for Interflora to use ‘marks and spencer’ as keywords would be expensive and would not be tailored to people looking to buy flowers.  Furthermore, the use of ‘marks and spencer flowers’ would not be cost effective since there are not so many searches made on Google using those search terms.

In respect of dilution, Interflora alleged that the M&S Adverts were detrimental to the distinctive character of the Interflora Marks because they reduced the ability of those marks to distinguish the goods and services of Interflora.

Questions referred to the CJEU

In May 2009, the Judge referred several questions to the CJEU seeking guidance on the proper interpretation of the relevant legislation (the Regulation and the Directive).  In light of the CJEU’s intervening judgment in Google FRANCE, the CJEU delivered its responses (case number C-323/09) on 22 September 2011 in the form of the following general statements of principle:

Article 5(1)(a) of [the Directive] and Article 9(1)(a) [the Regulation] must be interpreted as meaning that the proprietor of a trade mark is entitled to prevent a competitor from advertising – on the basis of a keyword which is identical with the trade mark and which has been selected in an internet referencing service by the competitor without the proprietor’s consent – goods or services identical with those for which that mark is registered, where that use is liable to have an adverse effect on one of the functions of the trade mark. Such use:

–         adversely affects the trade mark’s function of indicating origin where the advertising displayed on the basis of that keyword does not enable reasonably well-informed and reasonably observant internet users, or enables them only with difficulty, to ascertain whether the goods or services concerned by the advertisement originate from the proprietor of the trade mark or an undertaking economically linked to that proprietor or, on the contrary, originate from a third party;

–         does not adversely affect, in the context of an internet referencing service having the characteristics of the service at issue in the main proceedings, the trade mark’s advertising function; and

–         adversely affects the trade mark’s investment function if it substantially interferes with the proprietor’s use of its trade mark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.

Article 5(2) of [the Directive] and Article 9(1)(c) [of the Regulation] must be interpreted as meaning that the proprietor of a trade mark with a reputation is entitled to prevent a competitor from advertising on the basis of a keyword corresponding to that trade mark, which the competitor has, without the proprietor’s consent, selected in an internet referencing service, where the competitor thereby takes unfair advantage of the distinctive character or repute of the trade mark (free-riding) or where the advertising is detrimental to that distinctive character (dilution) or to that repute (tarnishment). Advertising on the basis of such a keyword is detrimental to the distinctive character of a trade mark with a reputation (dilution) if, for example, it contributes to turning that trade mark into a generic term. By contrast, the proprietor of a trade mark with a reputation is not entitled to prevent, inter alia, advertisements displayed by competitors on the basis of keywords corresponding to that trade mark, which put forward – without offering a mere imitation of the goods or services of the proprietor of that trade mark, without causing dilution or tarnishment and without, moreover, adversely affecting the functions of the trade mark with a reputation – an alternative to the goods or services of the proprietor of that mark.

Interestingly and somewhat unusually for the CJEU (which generally limits its responses to the specific legal questions referred to it, leaving factual matters to the referring court to determine for itself), in providing these responses the CJEU noted that a specific factor that may need to be taken into account in this case was that Interflora’s commercial network was composed of a large number of retailers which vary greatly in terms of size and commercial profile. The CJEU thought that this might make it particularly difficult for the reasonably well-informed and reasonably observant internet user to determine, in the absence of any indication from M&S, whether or not M&S was a part of that network.

The High Court Judgment

The Judge found that the M&S Adverts had infringed the Interflora Marks under the equivalent provisions to Article 5(1)(a) of the Directive (double identity) because the M&S Adverts 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 M&S Adverts originated from Interflora (or a member of the Interflora network) or from a third party (i.e. M&S).  As such, following the CJEU’s guidance, the M&S Adverts affected or were liable to affect the origin function of the Interflora Marks.

Having found infringement under Article 5(1)(a) on the basis of an adverse effect on the origin function of the Interflora Marks, the Judge went on to analyse the remaining infringement claims on the assumption that there was no adverse effect on the origin function.

The Judge found that the evidence before him did not demonstrate that the M&S Adverts had any adverse effect on the reputation of the Interflora Marks which, in light of the CJEU’s guidance, was fatal to Interflora’s claim that they had an effect on the investment function for the purposes of Article 5(1)(a). The dilution claim under Article 5(2) would also fail in the absence of an effect on the origin function, following the CJEU’s guidance.

The Judge was not persuaded that the fact that it would be commercially difficult for Interflora to place its own adverts using M&S’ trade marks as keywords meant that M&S had taken unfair advantage of the reputation of the Interflora Marks without due cause. In his view, the fact that it would not be cost effective for Interflora to retaliate in this manner arose simply as a result of the different market position of the parties, Interflora being a specialist offering in contrast to the general offering of M&S. This was not sufficient to deprive M&S of a ‘due cause’ defence following the CJEU’s guidance.

Comment

For a case that took over four years to reach trial and involved a referral to the CJEU, this High Court judgment does not really cover quite as much ‘new ground’ as one might expect. This is largely due to the fact that judgments in other keyword advertising cases (particularly the Google France decisions) were handed down while Interflora’s claim was pending. That said, the Judge comprehensively summarises the current jurisprudence in this area as well as clarifying a few important points for both brand owners and keyword advertisers bidding on registered trade marks.

First, it is now clear that in the context of keyword advertising, the relevant legal construct from whose perspective the relevant legal questions are to be determined (known in trade mark law generally as the “average consumer”) is the reasonably well-informed and reasonably observant internet user. This confirms the position set out by the CJEU in Google FRANCE. The finding that the M&S Adverts affected or were liable to affect the origin function of the Interflora Marks suggests that, at least at present, the reasonably well-informed and reasonably observant internet user is deemed not to be overly familiar with the way in which keyword advertising services operate, although clearly this position may change over time as general awareness and understanding of methods of online advertising increases.

Second, in determining whether or not the origin function is affected, the Judge explained that the burden is on the alleged infringer to show that the relevant advertisement would enable the relevant legal construct to ascertain, without difficulty, whether the goods or services concerned by the advertisement originate from the proprietor of the trade mark. Resiling somewhat from his previous comments in DataCard Corp v Eagle Technologies Ltd [2011] EWHC 244 (Pat) that that this required the advertiser to show that there is “no possibility of confusion”, the Judge stated that in fact the test requires the advertiser to show that “there is no real risk of confusion” as to origin of the advertised goods or services. This ‘reverse’ burden of proof position will be welcomed by brand owners.

Third, the fact that Judge expressly noted that M&S made no attempt to adduce any direct evidence of consumer reaction to its keyword advertising, despite the fact it was well-placed to do so, is a stark warning to keyword advertisers as to the importance of adducing the correct sort of evidence in response to infringement allegations.

Finally, in reaching his decision, the Judge expressly rejected M&S’s submission that there is a “single meaning rule” in European trade mark law with the effect that the use of a sign in a particular context is deemed to convey a single meaning as a matter of law, regardless of whether or not it is understood by different people in different ways as a matter of fact. The Judge affirmed that the question of a ‘likelihood of confusion’ is not a binary question (i.e. is the average consumer confused or not?) nor a question of simple probabilities (i.e. is it more likely or not that the average consumer will be confused?). The question is whether it is likely that a significant proportion of the relevant class of persons (in this case, reasonably well-informed and reasonably observant internet users) will be confused, such as to warrant the court’s intervention. This position is likely to be welcomed by brand owners as it suggests that the test is more flexible than a pure ‘numbers game’.

Footnotes:

[F/N1] The Regulation has been replaced by Regulation 207/2009/EC. However, the relevant provisions remain unchanged.

Published with minor alterations in Intellectual Property Forum, Issue 96, February 2014