The limits of fair competition on the internet

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					                                                                                                          Legal Decision: Europe

 The limits of fair competition on
            the internet
Interflora Inc & Anor v Marks and Spencer Plc & Anor
Court of Justice of the European Union (CJEU)
22 September 2011

Interflora v Marks & Spencer is the most recent in a series of decisions in which the CJEU has explored
  the extent to which an advertiser can make use of a competitor’s trademark in keyword advertising.
                       Neville Cordell and Astrid Arnold consider its impact

Not only is the purchase of goods and              on Google, an advertisement for Marks &               more per click than others to maintain its
services online growing, but recent                Spencer’s competing flower delivery service           position at the top of the page. Interflora
surveys have shown that a large                    would appear as a sponsored link at the top           argued that this damaged the “advertising
proportion of customers search the                 or at the side of the screen. Marks & Spencer’s       function” of its trademark.
internet before embarking on a “bricks             advert was as follows:                              • Interflora argued that keyword use of
and mortar” shopping trip. By buying                                                                     Interflora “gradually persuades” internet
the name of a leading brand as an                      M&S Flowers Online                                users that the word is generic for any flower
AdWord in the Google service, a less                            delivery service. Like all leading brand owners,
well-known competitor – or one which                   Gorgeous fresh flowers and plants                 Interflora must constantly guard against its
is establishing itself in a new area – can             Order by 5pm for next day delivery                brand name becoming the generic name for
achieve instant visibility in the relevant                                                               goods or services of that type in the market;
market online by means of a “sponsored             Why was Interflora concerned?                         not only because of the potential danger
link”. These links which appear at the             The Interflora name is instantly recognisable         to the validity of the registered trademark
top or side of the “natural results” on a          to consumers worldwide – it is probably the           itself, but most importantly to maintain its
search engine screen, are now familiar to          UK’s leading brand for flower delivery services       distinctive marketing message.
all; and consumers may search on a well            which of course means that it is the brand with     • As a brand owner, Interflora had an interest
known brand name not only to find the              which third parties most want to associate            in the trademark owner’s rights being
branded goods or services themselves,              themselves with. Both this and the nature with        defined broadly.
but precisely in order to see a selection          Interflora’s business meant that it had serious
of competing goods and services via the            concerns about keyword advertising based on         The court’s response:
sponsored links.                                   the Interflora name:                                the wording of the advert
     Using a (generally more successful)           • The Interflora network is made up of              The CJEU’s decision in the Google AdWords
competitor’s trademark as an entry point in          florists worldwide. Orders placed through         decision established that if the resulting
this way is, in principle, fair game and cannot      its websites are fulfilled by the network         sponsored link does not enable a reasonably
be objected to by the trademark owner. This          member closest to the place where the             well-informed and observant internet user, or
is clear from a series of CJEU cases beginning       flowers are to be delivered. Interflora was       enables him only with difficulty, to ascertain
with the Google AdWords case.1 In its                concerned that customers might believe that       whether or not the goods or services
Interflora decision, the CJEU re-emphasises its      Marks & Spencer had joined its network.           originated from the trademark owner, then
view that the use of trademarks as AdWords is      • Purchase of its trademark as a keyword by         the use of the trademark as an AdWord will
pro-competitive. As in earlier cases, it focuses     Marks & Spencer and others, effectively           infringe. This means that the advert must not
on the need for the advert, which appears            obliged Interflora to intensify its advertising   suggest an economic connection between
with the sponsored link, to be clear as to           to maintain or enhance its profile in the         trademark owner and advertiser (here
who is providing the goods or services. A lack       search results. Although Interflora may           Interflora/Marks & Spencer), and must also
of clarity in this respect leads to trademark        appear at the top of the natural results,         not leave a doubt in the user’s mind as to
infringement. The court also explores some           some sponsored links appear above these           whether there may be a connection.
wider issues relating to trademarks and              results. If it wants to maintain its position          The practical question for an advertiser
keyword advertising in some detail.                  at the top of the search results page, it         such as Marks & Spencer is how the court
                                                     must therefore buy its own trademark as           will approach this test in practice, how
The advert                                           an AdWord. If multiple parties buy the            explicit does the advert need to be? This is
Marks & Spencer bought the keyword                   keyword – something that is most likely to        a question of fact for the national court to
“Interflora” as an AdWord with the intention         happen with the leading brand – a bidding         decide, so that it will be the UK High Court
that whenever a user searched for “Interflora”       war ensues, and Interflora may need to pay        which decides on the facts of this particular                             November 2011                                 Intellectual Property magazine 75
case when it is referred back for judgment.        danger of dilution. The effect of the advert         How has the Interflora decision
However, the CJEU gave some pointers as            will merely have been to draw the user’s             developed the law?
to the approach that might be taken:               attention to the existence of an alternative         The court’s clearest message is a reassertion
• It emphasised that showing that some             product or service. Effectively, this means          of the already established principle that using
  users would be confused or unsure is not         that provided the advertiser complies with           trademarks as keywords is to be encouraged
  enough, as the test relates to a reasonably      the Google AdWords test, it should not run           as pro-competitive because it allows traders
  well informed and observant internet user.       the risk of infringement by dilution.                to offer alternative products. The fact that
  Trademark owners are therefore likely                                                                 the practice of keyword advertising may
  to need to show substantial evidence of          The court’s response:                                inconvenience or make life more expensive
  consumer confusion.                              a broader approach to                                for the trademark owner is merely an
• The court acknowledges that general              trademark infringement for                           aspect of fair competition. The key point
  knowledge of the market may be taken             keyword advertising?                                 for advertisers – again as already established
  into account so that if in practice, users are   The court made two important points:                 – is that the advert accompanying the
  likely to know that there is no connection       • It acknowledged that in principle keyword          sponsored link must be clear as to origin. The
  between Interflora and Marks & Spencer,            advertising may infringe any of the                court develops its thinking on this in some
  then this would count in Marks & Spencer’s         “functions” of the trademark recognised            practical ways; for example, by emphasising
  favour – it does not all come down to the          by European trademark law, not just the            that in deciding whether the advert is clear a
  wording of the advertisement.                      “essential” function which is to indicate          user’s market knowledge may be taken into
• The court accepts that it may be                   origin. This clearly indicates that there may      account and, in some cases, a disclaimer may
  particularly difficult in a case such as           be trademark infringement even where the           be necessary to indicate that.
  Interflora for the user to determine, in           sponsored links are clear about the origin of           It also firmly establishes that trademark
  the absence of an indication from the              the goods or services being advertised (eg,        infringement may in principle arise even
  advertiser, whether the advertiser is part         where the Google AdWords test above is             where the advert is clear as to the origin. In
  of the Interflora network. This might              satisfied).                                        legal theory, all the different “functions” of
  suggest that advertisers should consider         • The court focused for the first time on            trademarks are recognised in this context
  including disclaimers in borderline cases          the “investment” function, and held                as they are offline, and the extended
  – for example, a specific statement that           that infringement may arise if use of the          protection afforded to trademarks with
  there is no association between the                trademark “jeopardises the maintenance             a reputation is also in principle available.
  advertiser and the trademark owner.                by Interflora of a reputation capable of           However, the only really concrete example of
• If users are unlikely to have general              attracting consumers and retaining their           where infringement may arise is where the
  knowledge of the relationship (if any), then       loyalty”. Unfortunately, little indication is      advert offers imitation goods. Beyond this it
  the focus will be on the effect of the wording     given about how such infringement is likely        remains unclear in what practical situations
  such as “M&S Flowers” – is this enough to          to arise, but it would appear to constitute a      a trademark owner may oppose keyword
  indicate that it is a Marks & Spencer service      high hurdle. Merely the fact that customers        advertising when the sponsored link is clear
  and not connected to Interflora?                   may change their allegiance or that the            as to the origin of the goods. In practice, this
                                                     trademark owner is forced to change                decision has added little.
The court’s response: increased                      its commercial strategy is not enough.
costs of advertising                                 Trademark owners will welcome the general          Footnote
As it had already done in Google AdWords,            principle, but how useful it will be in practice   1. Joined cases C-236,237 and 238/08.
the CJEU rejected the argument that                  is unclear.
increased costs in countering the effect of        • In the case of trademarks which have a
the keyword would damage the “advertising            reputation (as in this case), trademark
function” of the trademark. Such increased           infringement may also arise if an advertiser
costs were merely an aspect of competition           takes “unfair advantage” of the trademark.
and the purpose of a trademark “is not…              The court agreed that use of a trademark
to protect against practices inherent in             as a keyword inevitably took advantage of                                            Authors
competition”.                                        the reputation built up by the brand owner
                                                     simply because it is users’ knowledge of the
The court’s response: there is a                     brand name that triggers the competing
danger that the mark will                            advert. The question was (broadly) whether
become generic                                       this advantage is to be regarded as unfair.
The court acknowledged that, where the               The court held that as a rule, advertisements
trademark has a reputation, use in a way             offering imitation goods would be unfair –
which tends to make it generic may reduce            for example, it is likely that an advert which
the distinctive nature of the mark and               offers a smell-alike perfume by reference
may amount to trademark infringement                 to searches on a famous perfume brand               Neville Cordell is a partner in Allen &
by “dilution”. It took the view, however,            would involve trademark infringement.               Overy’s international IP group. Neville is
that provided the advertisement displayed            By contrast advertisements which merely             acting in the L’Oreal v eBay trademark
with the sponsored link makes it clear that          offer alternative goods are an aspect of fair       litigation.
the goods or services are not provided by            competition and fair game provided that the
                                                                                                         Astrid Arnold is IP practice manager in
the trademark owner but by a competitor              advert itself does not infringe the mark in
                                                                                                         Allen & Overy’s international IP group.
(generally, the advertiser), there will be no        some other way.

76 Intellectual Property magazine                                 November 2011               

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