The UK High Court handed down its judgment in the long running Google AdWords case, Interflora v Marks and Spencer¹ on 21 May 2013. Mr Justice Arnold has found that Marks and Spencer's bidding on various INTERFLORA trade marks as Google AdWords amounts to infringement of Interflora's rights in such trade marks. Accordingly, Marks and Spencer will be prevented from bidding on such trade marks as Google AdWords – a practice that, according to the judgment, drove significant volumes of internet traffic to its online M&S Flowers business.

This High Court judgment comes after the Court of Justice of the European Union's (CJEU) September 2011 response to various questions concerning the interpretation of European trade mark law referred by Mr Justice Arnold after the original trial in 2009.

The Facts

Marks and Spencer purchased the advertising keyword “INTERFLORA” and a number of variations in connection with its flower delivery service. When internet users searched for “INTERFLORA” a sponsored link referring to Marks and Spencer’s flower delivery service appeared at the top or to the side of the natural search results. The sponsored link did not contain or reference the INTERFLORA mark in the advert text.

Interflora brought proceedings in the High Court, claiming that the acts of Marks and Spencer infringed Interflora’s trade mark rights. The High Court referred various questions on the interpretation of European trade mark law to the CJEU. These questions were answered by the CJEU in September 2011.

The CJEU Ruling

The questions referred to the CJEU concerned infringement under Article 5(1)(a) of Directive 89/104 EEC (the harmonisation directive, now codified under Directive 2008/98/EC, which is implemented in England through the Trade Marks Act 1994) (identical mark, identical goods) and Article 5(2) (use of a an identical or similar sign with a reputation where there is unfair advantage or detriment to distinctive character or repute of the trade mark).

Article 5(1)(a)

Article 5(1)(a) provides that a registered trade mark shall entitle the owner to prevent all third parties not having his consent 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” – so called "absolute" protection.

The CJEU reiterated that the so called "absolute" protection afforded by Article 5(1)(a) is only available to a trade mark proprietor where the third party's use of the sign adversely affects, or is liable to adversely affect, the functions of the trade mark. It was restated that the functions of a trade mark included not only its essential function of indicating the origin of the goods or services, but also the investment and advertising functions².

In the context of keyword advertising, the CJEU had already established in earlier cases that the origin function of a trade mark is adversely affected only if the advertisement displayed in the sponsored link does not enable reasonably well-informed and reasonably observant internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to originate from the proprietor of the trade mark (or from an undertaking economically connected to it) or, on the contrary, originate from a third party.

The CJEU stated that in applying this test it was relevant for the referring Court to consider whether the reasonably well informed and reasonably observant internet user was deemed to be aware that Marks and Spencer's flower delivery service was not part of the Interflora network and, if not, whether Marks and Spencer's advertisement allowed such internet users to deduce this.

Article 5(2)

Article 5(2) provides that a Member State may provide (and the UK has so provided) that the owner of a registered trade mark “shall be entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical with, or similar to, the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the mark”.

The most interesting element of the CJEU's ruling on Article 5(2) relates to the concept of unfair advantage. The CJEU readily acknowledged that the very reason why a competitor would bid on the trade mark of another in the context of keyword advertising is to take advantage of the reputation of that trade mark, and that when an internet user clicks on the competitor's advertisement and subsequently purchases the competitor's goods or services, such advantage is realised. However, it went on to hold that if the advertisement offers alternative goods, unless it causes tarnishment or dilution of the trade mark or adversely affects the functions of the trade mark, such use was not "without due cause" and therefore falls within the scope of fair competition and cannot be prohibited under Article 5(2)³.

Mr Justice Arnold's High Court Decision

Mr Justice Arnold's job was to apply to CJEU decision to the specific facts of the Interflora v Marks and Spencer case.

Article 5(1)(a)

Marks and Spencer was held to have infringed Interflora's trade marks on the ground that the adverts displayed by Marks and Spencer in response to searches against Interflora's trade marks did not enable the reasonably well-informed and reasonably observant internet user, or enabled him only with difficulty, to ascertain whether the goods or services referred to originated from Interflora (or from an undertaking economically connected to it) or, on the contrary, originate from a third party. Marks and Spencer's use of the INTERFLORA trade marks was found to adversely affect the origin function of the marks.

In reaching this decision, the Court was heavily influenced by the fact that the evidence showed that it was not generally known to internet users that M&S Flowers was not part of the Interflora network, and the advertisements did not contain any information to allow internet users to work out that M&S Flowers was not part of the Interflora network.

Article 5(2)

In theory, as Mr Justice Arnold had found in the context of Article 5(1)(a) that Marks and Spencer's use of the INTERFLORA trade marks adversely affected the origin function of such trade marks, it was open to him, applying the CJEU ruling, to also find that Marks and Spencer had taken unfair advantage of the trade marks under Article 5(2). However, Mr Justice Arnold decided the issue of unfair advantage under Article 5(2) on the basis (contrary to his findings) that there was no adverse effect on the origin function of Interflora's trade marks. Presumably this was because Interflora had already been successful under Article 5(1)(a) and so Article 5(2) only came into play if his ruling in relation to Article 5(1)(a) (meaning, his findings on adverse affect on the origin function) were wrong. Frustratingly, this does leave us with a High Court decision which does not deal with Article 5(2) infringement on the basis of the facts found to exist. However, we do have the CJEU ruling stating that where the origin function is affected, use will be "without due cause" and that accordingly, in the context of keyword advertising involving trade marks with a reputation, there will be unfair advantage within Article 5(2). This is largely academic in this specific context, as the majority of keyword advertising concerns use of an identical mark in relation to identical goods and if an adverse affect on the origin function of a trade mark is found, the trade mark owner will be able to restrain use on the basis of Article 5(1)(a) in any event.

Conclusion

The High Court's decision in relation to Article 5(1)(a) is very fact specific. Infringement was found primarily because of the nature of the Interflora network – a large number of member florists (independent florists as well as supermarkets) each trading under their own brands. As it was not generally known that the M&S Flowers service was not part of the Interflora network, and it was not implausible, because of the nature of the network, that it could have been, in order to have avoided infringement Marks and Spencer would have needed to make this clear to internet users in the advertisements displayed.

But what does that mean for other brand owner versus competitor keyword advertising disputes? Each case will turn on its own facts (as Interflora v Marks and Spencer did) but it is likely that the number of successful claims by brand owners will be small. Where it is generally known to the internet user that the competitor is a competitor, and the advertisement makes it clear that the goods and services concerned originate from such competitor, a finding of trade mark infringement is unlikely.

A further implication of this case, together with other recent cases from the CJEU, is that it has blurred the lines between infringement under Article 5(1)(a) (identical marks and goods) and Article 5(1)(b) (identical/similar marks and goods). The latter requires the claimant to prove a likelihood of confusion before a finding of infringement will be made, whereas the former does not. However, the clarification of the test for whether a particular use of a sign has an adverse affect on the origin function of a trade mark (a prerequisite for Article 5(1)(a) infringement) introduces a quasi-confusion test under this ground too. As a matter of logic, the two distinct tests must require different thresholds, and Mr Justice Arnold has indicated that he believes the distinction lies in the burden of proof: under Article 5(1)(a) it is for the defendant to show that the use complained of is sufficiently clear that there is no risk of confusion as to the origin of the goods or services, whereas under Article 5(1)(b) it is for the claimant to positively prove a likelihood of confusion.