The Court of Justice of the European Union has clarified the circumstances in which a sponsored link advertiser will be liable for trade mark infringement when they use a keyword that has been registered as a trade mark by a third party.
In a Judgment handed down today (22 September 2011, Case C-323/09) the Court has answered the questions referred to it by the UK High Court relating to keywords and trade mark infringement. The Court reiterated the need for balance between the protection afforded to trade marks with a reputation and fair competition in the sector for the goods and services for which such marks are registered.
The decision broadly follows the Advocate General’s decision (24 March 2011) reported earlier here with the background and facts of the case. Please click here to view the Interflora AG's decision IP News Bulletin
This case concerned ‘double-identity’, that is use by M&S of an identical sign (Interflora) to the trade mark (INTERFLORA) in relation to identical services, namely for flower-delivery services.
Applying Google France (Joined Cases C-236/08 to C-238/08) and BergSpechte (Case C-278/08), the Court noted that use of a sign by an advertiser as a keyword to trigger a sponsored link is use in the course of trade in relation to the advertiser’s goods or services even where the sign selected as a keyword does not appear in the advertisement. Such use can only be prevented by the trade mark owner if it is liable to have an adverse effect on one of the functions of a trade mark.
Adverse effect on the origin-indicating function
The Court followed its decision in Google France and noted that whether there had been an adverse effect on the origin-indicating function in this case was a matter for the UK Court to decide on the facts.
Interflora had argued that INTERFLORA had acquired a secondary meaning such that it denoted a commercial network of florists. In this context the Court noted that if internet users were led to believe, incorrectly, that the flower-delivery service offered by M&S was part of Interflora’s commercial network, then this would adversely affect the origin-indicating function. However, the fact that some internet users may have had difficulty grasping that M&S’ services were independent from Interflora was not a sufficient basis for a finding that the origin-indicating function had been adversely affected. The test is whether a reasonably well-informed and reasonably observant internet user is deemed to be aware, on the basis of general knowledge of the market, that M&S’ flower-delivery service is not part of the Interflora network but is, in fact, in competition with it. If this is not generally known, then it was a question of fact whether M&S’ advertisement enabled the internet user to know that M&S was not part of the Interflora network. The Court noted that in this case, the Interflora network is composed of a large number of retailers of varying size and commercial profile and it may be particularly difficult for the internet user to determine this in the absence of any indication from an advertiser as to whether it is or is not part of the Interflora network.
Adverse effect on the advertising function
In terms of the advertising function of the trade mark, the fact that a competitor selects the trade mark as a keyword and thereby increases the cost-per-click for the trade mark owner is not sufficient basis in every case for concluding that the advertising function is adversely affected. Although the trade mark is an essential element in the system of undistorted competition, its purpose is not to protect owners against practices inherent in competition. Internet advertising on the basis of keywords that are identical to trade marks allows competitors to offer consumers alternatives to the trade mark owners’ goods or services but does not prevent the owner from using their own mark to win customers.
Adverse effect on the investment function
Trade marks may also have an investment function whereby the owner uses the mark to acquire or preserve a reputation capable of attracting customers and retaining their loyalty. This is a distinct function but overlaps with the advertising function. Where the trade mark already enjoys a reputation, the investment function is adversely affected where the third party’s use affects that reputation and jeopardises its maintenance. However, if the competitor’s use of an identical sign is used fairly and respects the trade mark’s origin-indicating function, then the trade mark owner cannot prevent such use even if the trade mark owner has to adapt its efforts to acquire or preserve its reputation. The fact that as a result of such use some consumers may switch to a competitor cannot be relied upon by the proprietor of the trade mark as adversely affecting the investment function.
Extended Protection for Trade Marks with a Reputation
In this case it was accepted that the INTERFLORA trade mark had a reputation. The UK Court had referred questions asking whether in the circumstances the use complained of could be regarded as causing detriment to the distinctive character of the mark under the heading of dilution or taking unfair advantage of the distinctive character or repute of the trade mark.
The Court held that use of a trade mark as a keyword does not necessarily contribute to turning the trade mark into a generic term. The test was whether a reasonably well-informed and reasonably observant internet user who had typed in the keyword and triggered the display of an advertisement would be able to tell that the competitor’s goods or services offered did not originate from the trade mark owner but from a competitor. If this was the case then the trade mark’s distinctiveness has not been diluted by such use. The use had merely drawn the internet user’s attention to alternative goods or services offered by the competitor.
It was a matter for the UK Court to determine on the facts whether M&S’s advertising enabled the reasonably well-informed and observant internet user to determine that M&S was independent from Interflora. If this was not the case, and the origin-indicating function had been adversely affected, then the UK Court would also need to determine whether the use of ‘Interflora’ as keywords on the internet has had such an impact on the market for flower-delivery services that it has come to designate in the consumer’s mind any flower-delivery service.
The Court noted that where a mark enjoys a reputation, it is likely that the purpose behind a competitor selecting a sign identical to the trade mark is to take advantage of the distinctive character or repute of the trade mark. This is because internet users searching for goods and services covered by the trade mark will trigger the competitor’s advertisements alongside the natural results. The question is whether such use can be construed as being without ‘due cause’. Where the advertisement displayed on the internet on the basis of a keyword search provides the internet user an alternative to the trade mark owner’s goods or services and does not offer imitations or adversely affect the functions of the trade mark or cause dilution or tarnishment, then such use will generally fall within the ambit of fair competition in the sector for the goods or services. As such, the use is not without due cause.
The Court’s judgment clarifies how keyword advertising by a competitor may affect some of the functions of a trade mark in the cases of double-identity and also for marks with a reputation. The Court’s judgment is interesting as guidance as to how the Courts should approach the balance between protection afforded to trade mark owners against legitimate competition in an online environment.
It will be interesting to see how the UK Court applies the guidance from the Court, particularly in relation to the secondary meaning of Interflora as denoting a commercial network.
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