Europe’s Court of Justice (CJ) has provided further guidance on keyword advertising in search engines with its 27 September ruling in Case C-323/09 – Interflora v Marks & Spencer, referred from the Chancery Division of the High Court of England and Wales. The case concerned efforts by Marks & Spencer (‘M&S’) to reserve keywords on Google’s AdWords service that included ‘Interflora’, a mark with a reputation. Building on its decision in Case C-236/08, aka Google France, the CJ has now given useful directions on the legal effects of the use of keywords on vital aspects of trademark protection such as the origin function and the investment function; and on marks with reputation – an area it examined both in terms of dilution and unfair advantage.

To find out more about the Interflora case, click here for a NewLegal Review feature published in July, which looked at a preliminary opinion issued in the case. For insights on what the latest ruling means, read on…

1) Origin and investment

a) The origin function
While the CJ largely repeated its guidance in Google France on this subject, it also dropped some heavy hints as to how the High Court of England and Wales might apply that guidance to the Interflora dispute.

An unusual feature of the case is that Interflora operates a large network of independent retailers that vary greatly in size and commercial profile. The CJ suggested that, in the absence of an indication from the advertiser, this fact could make it particularly difficult for the user to determine whether or not M&S was part of Interflora’s network – particularly if the user was unaware that it was not.

b) The investment function
This concept is not mentioned at all in the relevant legislation and only emerged, with its siblings - the advertising and communication functions - in Case C-487-07 – L’Oréal v Bellure. The vagueness with which these functions have been described has provoked intense criticism, not least from Lord Justice Jacob of the Court of Appeal of England and Wales. The result, as Advocate General (AG) Niilo Jääskinen put it in Interflora, has been to leave the CJ in ‘a rather challenging situation’ as to the acceptability of its caselaw. Some explanation of the function was therefore to be expected.

According to the CJ, the investment function involves use of a mark to acquire or preserve a reputation capable of attracting customers and retaining their loyalty. Seemingly, this goes beyond the origin function – although precisely how is not stated. In the CJ’s judgement, the investment function overlaps with, but also goes beyond, the advertising function. This is because when the mark is used to acquire or preserve a reputation, ‘not only advertising is employed, but also various commercial techniques’. Presumably, the term ‘various commercial techniques’ is a reference to other marketing activities under the mark – although, again, this is not stated.

So, what amounts to an adverse effect on the investment function? Unfortunately, the CJ provided no indication, except to identify two things that would not constitute adverse effect.

Firstly, the CJ said, it is not enough for the proprietor to show that the use complained of has obliged it to adapt its efforts to acquire or preserve a reputation.

Secondly, in the CJ’s view, the fact that the use of a registered mark as a keyword may prompt some consumers to switch away from goods or services bearing that mark cannot be successfully relied upon by the proprietor either.

In identifying what would not adversely affect the investment function, the CJ was clearly aiming to balance the protection of registered marks against the need for free competition. No doubt it will apply similar considerations when identifying what will adversely affect that function.

2) Marks with reputation

a) Dilution
Interflora argued that the effect of the advertisements complained of, and those of other advertisers, was gradually to persuade internet users that ‘Interflora’ was not a trademark but a generic word for any flower-delivery service.

At first sight, this seems an attractive argument. However, the CJ pointed out that such ‘genericisation’ was only capable of occurring if there was already an adverse effect on the origin function. It therefore seems that, in this context at least, the concept of dilution adds nothing to the protection otherwise afforded to marks with a reputation.

b) Unfair advantage
As AG Jääskinen pointed out in Interflora, in L’Oréal v Bellure the CJ had held that there might be an unfair advantage even if the use complained of was not detrimental to the trademark proprietor. In Lord Justice Jacob’s view on the same case, the effect of this was that ‘all free riding is “unfair”’; the result, ‘a pointless monopoly’.

The CJ seems to have taken this criticism to heart. It started with the proposition that the purpose of selecting a mark with a reputation as a keyword is to take advantage of it without compensating the proprietor. But – as the CJ emphasised – the question is whether such use amounts to taking unfair advantage without due cause. In instances where the advertiser’s object is to sell imitations of the proprietor’s goods, it very likely will be.

However, the CJ held, if the object is to sell genuine alternatives to the proprietor’s goods, and if there is no dilution, tarnishment or adverse effect on any functions of the mark, the use complained of falls within the ambit of fair competition, and does not amount to taking advantage without due cause. This clearly signals a welcome change of focus: away from an unbridled concept of unfair advantage, and towards what most would regard as fair competition.

Summary

The ruling in a nutshell? While the law about the origin function in this area is beginning to emerge from the shadows, the scope of the investment function remains hazy. At the same time, the CJ has taken welcome steps to rein in the concept of unfair advantage, which had threatened to run rampant.


Gwilym Harbottle is a barrister at Hogarth Chambers