Trademark

Infringement - Advertisement - Reference to Court of Justice of European Communities

Interflora Inc and another v Marks and Spencer plc and another: Court of First Instance of the European Communities (First Chamber) (Judges Tizzano (President), Kasel, Ilesic (Rapporteur), Levits and Safjan): 22 September 2011

First Council Directive (EEC) 89/104 (to approximate the laws of the member states relating to trademarks), article 5(1)(a); Council Regulation (EC) 40/94 (on the Community trademark), article 9(1)(c).

Article 5 of First Council Directive (EEC) 89/104 (to approximate the laws of the member states relating to trademarks), so far as material, provides: ‘1. The registered trademark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade: (a) any sign which is identical with the trademark in relation to goods or services which are identical with those for which the trademark is registered.

'2. Any member state may also provide that the proprietor 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 trademark in relation to goods or services which are not similar to those for which the trademark 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 trademark.'

Article 9 of Council Regulation (EC) 40/94 (on the Community trademark), so far as material, provides: '1. A Community trademark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade: ... (c) any sign which is identical with or similar to the Community trade mark in relation to goods or services which are not similar to those for which the Community trademark is registered, where the latter has a reputation in the Community 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 Community trademark.’

The first claimant company was incorporated in the US. It operated a worldwide flower delivery network. The second claimant was a licensee of the first claimant. The claimants' network was made up of florists with whom customers might place orders in person or by telephone. The first claimant also had websites that enabled orders to be placed via the internet, those orders being fulfilled by the network member closest to the place where the flowers were to be delivered. The address of the main website was its name then .com, which redirected to country-specific websites such as its name then .co.uk. INTERFLORA was a national trademark in the United Kingdom and also a Community trademark.

It was common ground that, so far as the flower delivery service was concerned, those marks had a substantial reputation both in the UK and in the other member states of the European Union. The first defendant company was one of the main retailers in the UK. It retailed a range of goods and supplied services through its network of shops and via its website. One of those services was the sale and delivery of flowers, which was in competition with that of the first claimant. It was common ground that the first defendant was not part of the claimants' network.

The parties both advertised through a third-party search engine, G. When an internet user performed a search on the basis of one or more words on G's search engine, that search engine would display the sites which appeared best to correspond to those words, in decreasing order of relevance. Those were referred to as the ‘natural’ results of the search. In addition, G's paid referencing service - ‘AdWords’ - enabled any economic operator, by means of the selection of one or more keywords, to obtain the placing, in the event of a correspondence between one or more of those words and that/those entered as a request in the search engine by an internet user, of an advertising link to its website.

That advertising link appeared under the heading ‘sponsored links’, which was displayed either on the right-hand side of the screen, to the right of the natural results, or on the upper part of the screen, above the natural results. That advertising link was accompanied by a short commercial message. Together, that link and that message constituted the advertisement displayed under the above mentioned heading. A fee for the referencing service was payable by the advertiser for each click on the advertising link.

The advertiser could at any time improve its ranking in the display by fixing a higher ‘maximum price per click’ or by trying to improve the quality of its advertisement. Using the 'AdWords' referencing service, the first defendant selected as keywords the word 'Interflora', as well as variants made up of that word with minor errors and expressions containing the word 'Interflora'. Consequently, when internet users entered the word 'Interflora' or one of those variants or expressions as a search term in G's search engine, one of the first defendant's advertisements would appear under the heading 'sponsored links'.

Following discovery of those facts, the claimants brought proceedings for trademark infringement before the High Court, which decided to stay the proceedings and referred ten questions to the Court of Justice of the European Communities (ECJ) for a preliminary ruling. Following a request for clarification from the ECJ, the referring court, by decision of 29 April 2010 (see [2010] All ER (D) 216 (Apr), withdrew its fifth to ten questions, maintaining solely four questions.

By questions 1, 2, and 3(a), the referring court asked, in essence, whether, on a proper construction of article 5(1)(a) of Council Directive (EEC) 89/104 (to approximate the laws of the member states relating to trademarks) (the directive) and Council Regulation (EC) 40/94 (on the Community trademark) (the regulation) the proprietor of a trademark was entitled to prevent a competitor from displaying - on the basis of a keyword which was identical to that trademark and which had been selected in an internet referencing service by the competitor without the proprietor’s consent - an advertisement for goods or services identical to those for which that mark was registered.

By question 4, the referring court sought to ascertain whether, in those circumstances, it was relevant (i) that the advertisement concerned was liable to lead some members of the relevant public to believe, incorrectly, that the advertiser was a member of the trademark proprietor’s commercial network; and (ii) that the provider of the internet referencing service did not permit trademark proprietors to prevent signs identical to their trade marks being selected as keywords. By point (b) of question 3, read in conjunction with questions 1 and 2, the referring court asked, in essence, whether article 5(2) of the Directive and article 9(1)(c) of the regulation should be interpreted as meaning that the proprietor of a trademark with a reputation was entitled to prevent a competitor from basing its advertising on a keyword corresponding to that trademark which the competitor had, without the proprietor’s consent, selected in an internet referencing service.

The claimants submitted that, in accordance with an already established body of caselaw, article 5 1(a) of the directive and article 9 of the regulation protected the trademark proprietor against any adverse effect on any of the functions of the mark. According to the first defendant, however, such an interpretation did not follow unambiguously from the case-law and risked creating an imbalance as between the interest in protecting intellectual property and the interest in free competition. The European Commission, for its part, submitted that paragraph 1(a) protected the trademark proprietor solely against acts affecting the mark’s function of providing an indication of origin.

In its submission, the trademark’s other functions could, at most, play a role in the interpretation of article 5(2) of the directive and article 9(1)(c) of the regulation, which concerned the rights conferred by trademarks with a reputation.

The court ruled: It followed from the wording of article 5(1) of the directive and the tenth recital in the preamble thereto that the laws of the member states had been harmonised inasmuch as the exclusive right conferred by a trademark afforded the proprietor of the mark ‘absolute’ protection against the use by third parties of signs which were identical with that mark in relation to identical goods or services, whilst, where there was not identity on two counts, only the existence of a likelihood of confusion enabled the proprietor to rely successfully on its exclusive right.

Although the European Union legislature described as ‘absolute’ the protection against the unauthorised use of signs identical with a trademark in relation to goods or services identical with those for which the mark was registered, the Court had put that description into perspective by stating that, as extensive as it might be, the protection conferred by article 5(1)(a) of the directive was intended solely to enable the trademark proprietor to protect its specific interests as proprietor of the mark, namely, to ensure that the trademark could fulfil its functions.

Admittedly, a trademark was always supposed to fulfil its function of indicating origin, whereas it performed its other functions only in so far as its proprietor used it to that end, in particular for the purposes of advertising or investment. However, that difference between the essential function of the trademark and its other functions could in no way justify - when a trademark fulfilled one or more of those other functions - excluding from the scope of article 5(1)(a) of the directive and article 9(1)(a) of the regulation, acts adversely affecting those functions.

Likewise, there were no grounds for holding that only trademarks with a reputation were capable of having functions other than that of indicating origin. In those circumstances, it would be for the referring court to consider whether the condition of an adverse effect on one of the functions of the trade mark was met (see [36], [37], [40], [41] of the judgment).

In the instant case, the answer to questions 1, 2, 3(a) and (4) was therefore that the use made of the claimants' trademarks adversely affected the trademark’s function of indicating origin where the advertising displayed on the basis of that keyword did not enable reasonably well-informed and reasonably observant internet users, or enabled them only with difficulty, to ascertain whether the goods or services concerned by the advertisement originate from the proprietor of the trademark or an undertaking economically linked to that proprietor or, on the contrary, originated from a third party.

However, it did not adversely affect, in the context of an internet referencing service having the characteristics of the service at issue in the main proceedings, the trademark’s advertising function, although it adversely affected the trademark’s investment function if it substantially interfered with the proprietor’s use of its trademark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty (see [66] of the judgment).

(2) Article 5(2) of the Directive and article 9(1)(c) of the regulation should be interpreted as meaning that the proprietor of a trademark with a reputation was entitled to prevent a competitor from advertising on the basis of a keyword corresponding to that trademark, which the competitor had, without the proprietor’s consent, selected in an internet referencing service, where the competitor thereby took unfair advantage of the distinctive character or repute of the trademark (free-riding) or where the advertising was detrimental to that distinctive character (dilution) or to that repute (tarnishment).

Advertising on the basis of such a keyword was detrimental to the distinctive character of a trademark with a reputation (dilution) if, for example, it contributed to turning that trademark into a generic term. By contrast, the proprietor of a trademark with a reputation was not entitled to prevent, inter alia, advertisements displayed by competitors on the basis of keywords corresponding to that trademark, which put forward - without offering a mere imitation of the goods or services of the proprietor of that trademark, without causing dilution or tarnishment and without, moreover, adversely affecting the functions of the trademark with a reputation - an alternative to the goods or services of the proprietor of that mark (see [93]-[95] of the judgment).

Arsenal Football Club plc v Reed: C-206/01 [2002] All ER (D) 169 (Nov) applied; L'Oreal SA v Bellure NV: C-487/07 [2009] All ER (D) 225 (Jun) applied; Google France SARL v Louis Vuitton Malletier SA; same v Viaticum SA; same v Centre National de Recherche en Relations Humaines (CNRRH) SARL: C-236/08, C-237/08 and C-238/08 [2010] All ER (D) 23 (Apr) applied; O2 Holdings Ltd v Hutchison 3G UK Ltd: C-533/06 [2008] All ER (D) 155 (Jun) considered.