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The Court of Justice of the European Union (CJEU) has clarified the circumstances in which a sponsored link advertiser will be liable for trade mark infringement when it makes use of an adword or keyword that has been registered as a trade mark by a third party. In a Judgment delivered on the 22 September 2011 (Case C-323/09) the CJEU answered the questions referred to it by the UK High Court relating to keywords and trade mark infringement. The Court reiterated the need for balance between the protection afforded to trade marks with a reputation and fair competition in the sector for the goods and services for which such marks are registered. The High Court of Justice (England & Wales) referred questions to the CJEU on a number of issues concerning the use by Marks and Spencer of the word “interflora” as a keyword in Google’s referencing service, without the consent of the proprietor of the “INTERFLORA” Community Trademark.
Double identity
In its ruling, the CJEU first clarified the scope of trademark protection in the European Union. It stated that in the case of use by a third party of a sign identical to the trade mark in relation to goods or services identical to those for which the trade mark is registered, the proprietor of the trade mark is entitled to prevent that use only if it is liable to have an adverse effect on one of the “functions” of the mark. A trade mark’s essential function is to guarantee to consumers the origin of the goods or services covered by it (function of indicating origin) while the other functions include the “advertising” and “investment” functions.
Referring to its judgment in Google France (Joined Cases C-236/08 to C-238/08) and BergSpechte (Case C-278/08), the CJEU held that a trade mark’s function of indicating origin is adversely affected where the advertisement displayed on the basis of the keyword corresponding to the trade mark 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 trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party. However, use of a sign identical to another person’s trade mark in a referencing service such as ‘AdWords’ does not adversely affect the advertising function of the trade mark.
The TM’s investment function
The Court also considered, for the first time, the protection of the trade mark’s investment function. The use by a competitor of a sign identical to the trade mark in relation to identical goods or services has an adverse effect on that function where that use 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. In a situation in which the trade mark already enjoys a reputation, the investment function is adversely affected where such use affects that reputation and thereby jeopardises its maintenance.
However, the CJEU held that a proprietor of a trade mark may not prevent such use by a competitor if the only consequence of that use is to oblige the proprietor of the trade mark to adapt its efforts to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty. Similarly, the trade mark proprietor cannot rely on the fact that such use may prompt some consumers to switch from goods or services bearing that trade mark.
Questioned also about enhanced protection for trade marks with a reputation, and in particular about the scope of “dilution and “free-riding”, the CJEU held that the selection without “due cause” in a referencing service, of signs identical with or similar to another person’s trade mark that has a reputation may be construed as free-riding. That is particularly likely to be the conclusion in cases in which internet advertisers offer for sale, by means of the selection of keywords corresponding to trade marks with a reputation, goods which are imitations of the goods of the proprietor of those marks.
Where the advertisement displayed on the internet on the basis of a keyword search provides the internet user an alternative to the trade mark owner’s goods or services and does not offer imitations or adversely affect the functions of the trade mark or cause dilution or tarnishment, then such use will generally fall within the ambit of fair competition in the sector for the goods or services. As such, the use is not without due cause.
So what’s next ?
The CJEU’s ruling clarifies how keyword advertising by a competitor may affect some of the functions of a trade mark in the cases of double-identity and also for marks with a reputation. The ruling provides guidance as to how protection given to TM owners can cohabit with legitimate competition in an online market.
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