ECJ rules on the purchase of a competitor’s trademark as an AdWord

On 22 September 2011 the ECJ issued its long awaited decision in Case C-323/09 Interflora v. Marks & Spencer.

In this case, Marks & Spencer bought the word ”Interflora” as an AdWord, the keyword advertising service offered by Google, to advertise its own flower delivery service. As a result, when Internet users entered the word “interflora” in their Google search engines, a Marks & Spencer advertisement appeared under the “sponsored links” heading. In response, Interflora sued Marks & Spenser for infringement, dilution and free riding of its trademark before the High Court of Justice of England. The High Court subsequently referred the case to the ECJ.

Essentially, the case considered whether the purchase by a trader of a competitor’s trademark as a keyword to trigger an advertisement for its own benefit could constitute:

  1. use in the course of trade amounting to trademark infringement (as defined by article 5(1) of the trademark Directive) and/or
  2. dilution and/or taking an unfair advantage of the distinctiveness of well-known marks (as defined by article 5(2) of the trademark Directive.)

The ECJ decision broadly follows the opinion of the Advocate General (see Newsletter 2/2011 p. 5-6).

Trademark infringement

On the first point, the court affirmed its well-established case law that use of a competitor’s trademark as a keyword in a referencing service is “use in the course of trade” and use “in relation to the advertiser’s goods and services”. The courts added that such use will, therefore, be prohibited where it “adversely affect(s) one of the function(s) of the trademark” (see ECJ joint Case C-236/08 and C-238/08 Google France and Google, reported in Newsletter 2/2009 p. 7, and ECJ Case C-278/08 BergSpechte).

The court then identified three different functions of the trademark, namely: (1) the indicating origin, (2) the advertisement, and (3) the investment functions. The court then assessed whether the purchase of a competitor’ trademark as an AdWord may adversely affect any of these functions.

With respect to the indicating origin function, the court held, in line with its Google and Google France decision, that this function may be adversely affected when the advertisement “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 by the advertisement originate from the proprietor of the trademark or an undertaking economically connected to it or from a third party.”

With respect to the advertisement function, the court also affirmed its position in Google France and Google that the use of a competitor’s trademark in a referencing service does not have an adverse effect on this function of the trademark; it merely enables competitors to offer consumers alternatives to the goods or services offered under the trademark.

WIth respect to the investment function, the ECJ finally held that this function may be adversely affected when a competitor, by using a word or symbol identical to a trademark that already enjoys a reputation in relation to the same goods or services, interferes with the capacity of the trademark owner to “acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.”

Dilution or free riding of a well-known trademark

On the second point, the court held that the proprietor of a trademark is entitled to prevent a competitor from using its mark in an internet referencing service, where: (1) the advertising is detrimental to the distinctive character (dilution) or the repution (tarnishment) of the trademark, and/or (2) the competitor takes unfair advantage of this distinctive character or repution (free-riding).

With regard to dilution, the court held that the mere use of the trademark as a keyword in the Google AdWords program does not necessarily contribute to dilution. The key consideration is whether the advertisement enables a reasonably well-informed user (referred to above) to assess the origin of the goods or services covered by the mark. Moreover, the court added that such use would also constitute dilution if one could provide evidence that it contributed to transforming the trademark into a generic term.

With regard to free riding, the court held that the mere use of a competitor’s trademark as an AdWord, although unquestionably taking advantage of the distinctive character and repution of the trademark, will not be considered “without due cause” or “free riding” if it is aimed at offering alternative goods or services to those offered by the trademark owner. By contrast, if a competitor takes advantage of a trademark, and its reputation, to offer for sale imitations of these goods or services, then such use will be considered free-riding. [Béatrice Martinet Farano]