Use of keywords will depend on High Court's view of trade mark reputation

Out-Law News | 22 Sep 2011 | 1:40 pm | 5 min. read

The UK High Court will have to decide if Marks and Spencer (M&S) has interfered with the reputation of an Interflora trade mark in a case that could change the way keyword advertising operates.

The European Court of Justice (ECJ) has said that trade mark owners can stop companies using their brands as triggers for adverts for competing products if that use "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".

The Court has not defined exactly what would constitute an interference with that use, which it called the 'investment function' of a trade mark, but has said that it is for the High Court to rule on the specifics of the case.

"It will be for the referring court [the High Court] to determine whether the use, by M & S, of the sign identical with the 'Interflora' trade mark jeopardises the maintenance by Interflora of a reputation capable of attracting consumers and retaining their loyalty," it said.

The ECJ said that trade mark owners were unlikely to be able to show that keyword use is a 'dilution' of a trade mark unless the keyword user is offering imitating, rather than competing, products.

Trade marks operate by their distinctiveness and trade mark law allows owners to take action against companies that use their brands in a way that makes them less distinctive.

The ECJ said, though, that keyword use was not likely to turn a trade mark into a 'generic term' in cases where two companies competed over the sale of the same kinds of goods.

"The proprietor of a trade mark with a reputation is not entitled to prevent ... 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 ... an alternative to the goods or services of the proprietor of that mark," the ruling said.

The ECJ made its ruling after considering EU trade mark law and following a referral from the UK High Court. The High Court had asked the ECJ whether or not the use of a trade mark as a trigger for someone else's advertising is trade mark infringement in order to rule on a dispute between M&S and Interflora, the world's largest flower delivery firm.

Interflora sued Marks and Spencer at the High Court in 2008 for sponsoring the word 'Interflora', and various misspellings, as a search engine keyword.

The dispute centres on the biggest of the keyword systems, Google's AdWords. The AdWords system operates by allowing companies to buy the right for their ads to appear beside the natural results when certain terms are searched for.

M&S bought the right for its ads to be displayed when terms such as 'Interflora' and 'Interflora flowers' were searched for on the site. The adverts triggered by the keywords promoted M&S's own flower delivery service, though when the High Court checked Google, the M&S ads were displayed below Interflora's own.

Interflora has previously argued that the use of its marks enables M&S and Flowers Direct "to free-ride upon the fame of the trade marks, thus conferring upon themselves and/or their goods or services an unfair advantage over [Interflora] and/or other traders, and/or members of the public."

Pinsent Masons is acting for Interflora in the dispute.

Under the EU's Trade Mark Directive and Community Trade Mark Regulations, trade mark owners can prevent competitors from "using in the course of trade any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered" without their consent.

The Directive also permits EU member states to draw up national laws giving extra protection to trade mark owners who possess a reputation in that country if others' use of similar or identical signs for similar or identical purposes "without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark".

The ECJ examined whether or not the use of a trade mark in keywords affected three functions of a trade mark – those of indicating the origin of the goods; advertising and investment.

On the indication of origin function the Court ruled in line with previous ECJ rulings that this function is not undermined as long as the advert does not confuse internet users into thinking that the goods are being sold by the trade mark owner rather than the advertiser.

The Court said that keyword use was unlikely to undermine the advertising function because advertising is there to offer alternatives and increase competition.

The investment function could be undermined if the keyword use interferes with a company's ability to maintain a reputation in a trade mark, the ruling said. It was not enough to argue, though, that this is undermined just because keyword use by other companies increases the cost of keyword use for trade mark owners, it said.

The Court said that the trade mark was not 'diluted' and made more generic in nature unless the user could not tell that the advertiser and the trade mark owner were separate entities. It also said that the advertiser was not likely to be guilty of 'free riding' on the trade mark if it offered competing, rather than imitation, goods.

Interflora said it was "delighted" with the ECJ's ruling.

"This judgment goes much further than previous rulings by saying that the use by a competitor of a keyword identical to the trade mark in relation to identical goods or services has an adverse effect on the investment in the trade mark where that use substantially interferes with the brand's reputation and its ability to attract and retain consumers," an Interflora statement said.

"Further, a competitor may be construed as free-riding on a brand when that competitor uses the brand owner's trade mark as a paid for keyword to deliver sponsored advertising along side natural search results.  This is exactly what Interflora and other global brands have been arguing for many years," it said.

A spokesperson for M&S told Out-Law.com that the company was "encouraged" by the ruling.
"We are encouraged by today's judgment as we have always believed this is fair competition. However, as the case is still ongoing it would be inappropriate for us to comment any further at this stage," M&S said.

The High Court is expected to rule on the outcome of the case some time in 2012.

Earlier this year ECJ Advocate General Niilo Jääskinen published an opinion on the case and advised the ECJ that the owners of trade marks with a reputation have extra protection that applies when their brands are used as keywords and appear in the text of adverts.

If that reputation-carrying trade mark is used as a keyword by rival companies and appears in the advert it will break trade mark law if "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," he said in the opinion.  Advocate General opinions are not binding on the ECJ but are intended to advise judges. They are followed in the majority of cases.

Jääskinen said that the extra protection offered to trade marks with a reputation protects them against the blurring of that reputation; a tarnishment of it, or the free riding on it by competitors.

Jääskinen had said that Interflora would be unlikely to succeed in its case against M&S as the retailer used the term 'Interflora' to trigger its own ads but did not use the term in the text of the ad.