The Court of Justice of the European Union (CJEU) has given its ruling in the long-running Interflora v Marks & Spencer Adwords case. The CJEU has followed the Advocate General’s opinion on this case and its own ruling in Google France by stating that trade mark owners can prohibit the purchase of their trade marks as keywords on web search engines, if the advertisements triggered do not allow users to ascertain the origin of the goods or services referred to in such advertisements. The ruling will be of particular significance to brand owners which – like Interflora – operate through a network of independent commercial enterprises. While the decision is largely beneficial to such brand owners, the Court’s new guidance on the ‘investment function’ of a trade mark leaves open the possibility that some businesses will be able to continue to reserve competitors’ trade marks as Adwords without being liable. The Court has left much of the application of its guidance to the case for the national court. The case will now go back to the English High Court for its final determination based on the judgment.
The reference comes from a UK case which involved Interflora’s objection to Marks & Spencer purchasing the keyword ‘Interflora’ (and similar variations) on Google’s Adword service. Internet users searching for ‘Interflora’ on Google were presented with a ‘sponsored link’ to Marks & Spencer’s website, though this advertisement did not contain any references to Interflora’s trade mark. Several questions were referred by the English High Court to the CJEU, and the Advocate General issued his Opinion in March 2011; read the summary.
Identical mark, identical goods infringement
The Court set out how Article 5(1)(a) of the Trade Marks Directive (89/104/EEC) (and its equivalent provision of Regulation No 40/94, Article 9(1)(c)) which deals with infringement by using an identical mark for identical goods or services – should be interpreted. The Court held that this “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.”
Much of the judgment re-states existing case-law in the various CJEU decisions dating back to the Google France case in March 2010. However, for the first time the Court has set out guidance on the ‘investment function’ of a trade mark. This, the Court said, is the ability “to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty”. The Court said: “Although that function of a trade mark … may overlap with the advertising function, it is none the less distinct from the latter. Indeed, when the trade mark is used to acquire or preserve a reputation, not only [is] advertising … employed, but also various commercial techniques. In a situation in which the trade mark already enjoys such a reputation, the investment function is adversely affected where use by a third party of a sign identical with that mark in relation to identical goods or services affects that reputation and thereby jeopardises its maintenance. The trade mark owner must be able to prevent such use.”
However, the Court stated that it cannot be accepted that the trade mark owner may – in conditions of fair competition that respect the trade mark’s function as an indication of origin – prevent a competitor from using an identical sign for identical goods or services, if the only consequence of that use is to oblige the trade mark owner to adapt its efforts to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty. Likewise, the fact that that use may prompt some consumers to switch from goods or services bearing that trade mark cannot be successfully relied on by the trade mark owner.
Infringement of reputed mark through unfair advantage or detriment
The Court then addressed Article 5(2) of the Trade Marks Directive (and Article 9(1)(c) of Regulation No 40/94) which deals with when an identical or similar mark is used which without due cause takes unfair advantage of or is detrimental to a registered mark with a reputation. The Court held that this 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.”
The ruling appears to bring mixed news for brand owners. The decision will be of particular significance to brand owners which – like Interflora – operate through a network of independent commercial enterprises. In such circumstances, consumers might reasonably think that M&S is part of such a network.
However, the Court’s comments on the investment function of a trade mark suggest that to some extent the brand owner’s position may be left exposed. The Court appears to envisage situations of ‘free competition’ where Adword bidding on competitors’ brands will not constitute trade mark infringement. Whether this is a real concern for brand owners in practice will depend on how national courts interpret the judgment; until then businesses are still advised to be mindful of the potential for liability when bidding on their rivals’ marks.