AG's opinion in Interflora v Marks & Spencer advertising keywords reference

Practical Law UK Legal Update 0-505-3998 (Approx. 7 pages)

AG's opinion in Interflora v Marks & Spencer advertising keywords reference

by PLC IPIT & Communications

Background

The Trade Marks Directive (89/104/EEC, now replaced by consolidated directive 2008/95/EC) provides, among other things, that the proprietor of a registered trade mark may prevent third parties from using in the course of trade any sign which is identical to his mark in respect of goods or services which are identical to those for which the mark is registered (Article 5(1)(a)).

Article 9(1)(a) of the Community Trade Mark (CTM) Regulation (40/94/EEC) and section 10(1) of the Trade Marks Act 1994 (TMA) provide such rights to the owners of CTMs and UK-registered trade marks.

Member states can also provide in their national law that the owner of a trade mark which has a reputation in that member state can prevent third parties from using, in the course of trade, a sign which is identical with, or similar to, the trade mark in relation to dissimilar goods or services to those for which it is registered, where the use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark (Article 5(2), Trade Marks Directive).

Article 9(1)(c) of the CTM Regulation and section 10(3) of the TMA provide such rights to the owners of CTMs and UK-registered trade marks .

Facts

The claimants (Interflora) operate the world's largest flower delivery network under CTM and UK trade mark registrations of INTERFLORA. The defendant, Marks & Spencer plc (M&S) is a large UK retailer who sold flowers online and delivered them, in competition with Interflora.

Google Inc. and its subsidiaries (Google) operated an internet search engine and generated some of its revenue through a service known as Google AdWords, which consisted of the display of a list of sponsored advertising links in a particular part of the search results page. Specific advertisements would appear in response to the user typing in particular words (keywords). If more than one person purchased a particular keyword, Google auctioned the order of the display for the relevant sponsored link and the highest bidder would achieve the highest position in the sponsored link section of the results page. The advertiser would pay on a "cost-per-click" basis each time a user clicked on the hyperlink in its sponsored link and was directed to the advertiser's website.

M&S bought several keywords containing the mark INTERFLORA and close variations on it. Searching against these keywords generated a sponsored link to M&S's online flower-delivery service. Interflora brought proceedings against M&S alleging infringement under Article 5(1)(a) and Article 5(2) of the Directive. (There was also a second defendant, Flowers Direct Online Limited, who settled the claim in March 2009.)

The High Court adjourned the proceedings in May 2009 pending a reference to the ECJ on ten questions of law. Six of these were later eliminated because the ECJ had answered them in its judgment in the Google France reference in March 2010 (see Legal update, ECJ ruling in Google France AdWords case and Legal update, High Court withdraws some of the questions referred to ECJ in Interflora Google AdWords dispute). The remaining questions were:

Question 1: Where a trader which is a competitor of the proprietor of a registered trade mark and which sells goods and provides services identical to those covered by the trade mark via its website:

selects a sign which is identical … with the trade mark as a keyword for a search engine operator's sponsored link service,
nominates the sign as a keyword,
associates the sign with the URL of its website,
sets the cost per click that it will pay in relation to that keyword,
schedules the timing of the display of the sponsored link; and
uses the sign in business correspondence relating to the invoicing and payment of fees or the management of its account with the search engine operator,

but the sponsored link does not itself include the sign or any similar sign, do any or all of these acts constitute "use" of the sign by the competitor within the meaning of Article 5(1)(a) of the Trade Marks Directive and Article 9(1)(a) of the CTM Regulation?

Question 2: Is any such use "in relation to" goods and services identical to those for which the trade mark is registered within the meaning of Article 5(1)(a) of the Directive and Article 9(1)(a) of the CTM Regulation?

Question 3: Does any such use fall within the scope of either or both of:

(a) Article 5(1)(a) of the Trade Marks Directive and Article 9(1)(a) of the CTM Regulation; and

(b) Article 5(2) of the Trade Marks Directive and Article 9(1)(c) of the CTM Regulation?

Question 4: Does it make any difference to the answer to question 3 above if:

(a) the presentation of the competitor's sponsored link in response to a search by a user by means of the sign in question is liable to lead some members of the public to believe that the competitor is a member of the trade mark proprietor's commercial network contrary to the fact; or

(b) the search engine operator does not permit trade mark proprietors in the relevant member state … to block the selection of signs identical to their trade marks as keywords by other parties?

Decision

The Advocate General's (AG's) opinion does not strictly follow the pattern of the referred questions. His recommendations were as follows:

Article 5(1)(a) of the Directive and Article 9(1)(a) of the CTM Regulation must be interpreted as follows:
- A sign identical with a trade mark is used "in relation to goods or services" within the meaning of these provisions when it has been selected as a keyword in connection with an internet referencing service without the consent of the trade mark proprietor, and the display of ads is organised on the basis of the keyword.
- The proprietor of a trade mark is entitled to prohibit such conduct under the above-mentioned circumstances, where that ad does not enable an average internet user, or enables the said user only with difficulty, to ascertain whether the goods or services referred to in the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or from a third party.
- An error concerning the origin of goods or services arises when the competitor's sponsored link is liable to lead some members of the public to believe that the competitor is a member of the trade mark proprietor's commercial network when it is not. As a result of this the trade mark proprietor has the right to prohibit the use of the keyword in advertising by the competitor in question.
Article 5(2) of the Directive and Article 9(1)(c) of the CTM regulation must be interpreted as meaning that the use of a sign as a keyword in an internet referencing service in relation to goods or services identical to those covered by an identical trade mark with a reputation also falls within the scope of application of those provisions and it can be forbidden by the trade mark owner when:
- the ad shown as a result of the internet user having typed as a search term the keyword identical with a trade mark with a reputation mentions or displays that trade mark; AND
- the trade mark is EITHER used therein as a generic term covering a class or category of goods or services OR the advertiser attempts thereby to benefit from its power of attraction, its reputation or its prestige, and to exploit the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark.
The fact that the internet search engine operator does not permit trade mark proprietors in the relevant geographical area to block the selection of signs identical to their trade marks as keywords by other parties is as such immaterial in so far as the liability of the advertiser using of the keywords is concerned.

The AG's detailed reasoning is set out below.

Infringement under Article 5(1)(a)

He noted the principle (established in Google France) that the purchase and use of a keyword constituted a type of use that could infringe under Article 5(1)(a), and that it would infringe if the sponsored link did not make it sufficiently clear that it did not originate from the trade mark proprietor.

In the present case, the trade mark INTERFLORA was not included in the sponsored link itself. However, the fact that INTERFLORA was a very well-known mark and that it represented a commercial network of different businesses all providing services under that mark made it more likely that consumers would make an association between Interflora and the identical service promoted by the M&S sponsored link. They might well think that M&S formed part of the Interflora sales and delivery network.

Infringement under Article 5(2)

As a preliminary question, the AG then considered whether it was possible for Article 5(2) to apply even if Article 5(1)(a) infringement had already been found to have occurred. He concluded that it could, particularly in light of the ECJ's comment to that effect in L'Oreal v Bellure (Case C‑487/07; see Legal update, ECJ ruling in L'Oréal smell-alike perfume trade mark case). He considered that all trade mark functions other than the origin function could have a role to play in the application of Article 5(2), even if they had already been applied when considering infringement under Article 5(1)(a).

Types of dilution

The AG listed three types of trade mark dilution which could fall within Article 5(2): blurring, tarnishment and free-riding. Tarnishment was not alleged in the present case, but blurring and free-riding were.

Establishing an association between the keyword and the trade mark

The next step was to consider the nature of the link between the INTERFLORA mark and the identical keyword purchased and used by M&S. Technically speaking, the keyword was a string of letters which had no meaning within the referencing systems. The algorithms of the search engine would pick up identical strings of signs regardless of their meanings in any language. Hence, keywords as such were semantically empty, and had meaning only in the minds of internet users who typed them into search fields. Advertisers such as M&S relied on the associations, in the minds of users, between keywords and particular products or services.

As far as trade mark law was concerned this "invisible operation" caused problems in relation to less distinctive marks. For example, the word "apple" could describe a piece of fruit, or a brand of computer. Equally, a relatively distinctive mark could be in simultaneous use by several traders for different products or services, and/or could denote a geographical place or a personal name. It therefore followed that identity between a keyword and a trade mark could only be assumed with certainty in cases involving truly unique trade marks that were inherently highly distinctive.

Similarly, a business that bought a keyword could be assumed to be targeting an identical trade mark only if it was such a unique mark AND the purchaser was a competitor. In all other cases, the court would have to consider another factor that was external to the "invisible" use of the mark to bring up the sponsored link: that is, the content of the sponsored link itself. It could be inferred from the Google France case that, even though the selection and use of the keyword did constitute "use in relation to goods or services", whether it was infringing use or not would depend on the content of the advertisement which appeared within the sponsored link.

Blurring and degeneration

Interflora had alleged that M&S's use of the keywords was liable to blur the INTERFLORA mark. The AG noted that blurring occurred when a well-known mark was exposed to third-party use of an identical or similar sign so as to weaken that mark's distinctiveness, making it incapable of associating goods or services with a specific commercial source. It usually occurred when identical or similar signs were used to denote different types of goods or services than those for which the mark was registered, so that the mark became a banal term. Since M&S were using the keyword for identical goods and services, the present case was not one of blurring, but more one of degeneration: the mark risked becoming a generic term for the sale and delivery of flowers. Degeneration was, in the AG's opinion, within the remit of Article 5(2) because it involved a gradual loss of distinctiveness.

Following the decision in Google France, it was not open to the ECJ to find that the use of the keywords per se constituted infringement under Article 5(2); however, it might amount to dilution depending on the content of the sponsored link. In the present case, M&S's sponsored link did not contain the INTERFLORA mark or any sign similar to it. It might be possible in some circumstances for there to be an adverse effect on the origin function of a mark used as a keyword, even if that mark was not included in the resulting sponsored link, but there could not be dilution unless the trade mark was actually included in the link. This was because blurring required that the consumer should perceive the mark as having an alternative meaning other than denoting that the goods or services emanated from the trade mark proprietor (for example, that the goods or services emanated from someone else, were a different type of product or service than that offered by the trade mark proprietor or that they were a generic category of goods or services).

The AG concluded from this analysis that blurring could only occur if the mark was included in the sponsored link, and was used in a generic sense to refer to a category of goods or services.

Free-riding

The AG first referred to the ECJ's definition of free-riding, set out in L'Oreal, and its ruling in that judgment that the existence of unfair advantage was not dependent on the use being detrimental to the trade mark proprietor. The present case was distinguishable from L'Oreal in that the goods involved were not replicas of luxury goods, but just normal items. The purpose of M&S's use of the keywords was to present consumers with a commercial alternative to Interflora. It was beyond doubt that such use took advantage of the repute of the INTERFLORA mark, so the only remaining question was whether that use was unfair and without due cause.

It was established in L'Oreal that the first step was to establish whether the defendant had due cause to use the sign and then, only if it did, to proceed to examine whether the use was fair.

The AG was of the opinion that, in the context of modern marketing that relied heavily on keyword advertising, there was due cause to present commercial alternatives via the use of third-party trade marks as keywords. Such use promoted competition by enabling consumers to make informed choices. The fact that competitive bidding for its own trade mark as a keyword would increase the price per click charged by Google for traffic via the sponsored links did not make competitors' purchase and use of such keywords unfair, as it had no effect on the advertising function of the trade mark itself. (In support of this, the AG referred to the ECJ's comments on the matter in Google France.)

The ECJ had approved keyword advertising in principle in Google France, so the question of free-riding had to be determined on the basis of what was in the link itself. In the present case, the link did not contain the mark or anything similar to it, so there could not be free-riding. (In cases where the link did contain a sign similar or identical to the mark in question, the court would have to consider whether it constituted legitimate comparative advertising.)

Comment

The ECJ's ruling on this reference, when it is handed down, will be a welcome addition to the growing body of European case law on the subject of internet search keywords, which have assumed great commercial importance in an increasingly online world. A large proportion of many advertisers' budgets is spent on internet-search keywords, so the knock-on effect of competitors bidding for high rankings in lists of sponsored links can be significant.

Apart from the effect on its advertising budget, many internet users might struggle to see why Interflora objected so strongly to the use of its trade mark as a keyword, in view of the fact that the M&S sponsored link was very clearly branded as such: as the AG points out in this opinion, online shoppers are very used to seeing alternative brands alongside each other. However, the nature of the INTERFLORA mark is unusual in that it represents a service delivered by a large number of separate businesses and, as such, bears some similarity to a collective mark. As the AG pointed out, it might be natural for consumers to assume that M&S had joined the Interflora network or (even worse, from Interflora's point of view) that "Interflora" was a generic term for flower delivery services.

If followed, this opinion will stand as a warning to be extremely cautious about any inclusion of a competitor's mark in the sponsored link itself by way of comparative advertising. (For more information about the law on comparative advertising, see Practice note, Comparative advertising.)

Case

Opinion of AG Jääskinen, Case C 323/09, 24 March 2011.

AG's opinion in Interflora v Marks & Spencer advertising keywords reference | Practical Law