Court of Appeal sends Interflora back to High Court (again) for retrial with M&S
In Interflora Inc v Marks and Spencer Plc ( EWCA Civ 1403, November 5 2014), the Court of Appeal has allowed Marks and Spencer's (M&S) appeal in part and remitted the case to the High Court for a retrial of the infringement claims under Article 9(1)(a) of the Community Trademark Regulation (40/94), now the Community Trademark Regulation (207/2009). The court made a strong statement in relation to initial interest confusion, finding that it was unhelpful to import this concept into EU trademark law.
The business impact of the decision is as follows:
Keyword advertising - this is not inherently or inevitably objectionable from a trademark perspective. The Court of Appeal reiterated this point in strong terms.
Initial interest confusion - the Court of Appeal found that Arnold J was wrong in his approach and that it is not helpful to import the doctrine of initial interest confusion into EU trademark law. The court found that it is "an unnecessary and potentially misleading gloss" on the tests that the Court of Justice of the European Union (ECJ) has previously articulated in case law in determining whether an accused sign has an adverse effect on the origin function of a trademark. Initial interest confusion should perform no part of the analysis of the national courts in claims of the kind before the courts in this case.
Average consumer - a finding of infringement can be made even if many consumers (of whom the average consumer is representative) would not be confused.
Onus of proof - in proceedings involving Article 9(1)(a) of the regulation, the onus is on a trademark owner (and not the third-party advertiser) to show that the advertisement complained of does not enable informed and reasonably attentive internet users to ascertain the origin of the goods.
Negative matching - a failure to negative match can constitute infringing use of a competitor's trademark within the meaning of Article 9(1) of the regulation, with the Court of Appeal upholding Arnold J's judgment on this point. Whether it constitutes infringing use will depend upon the assessment of the judge of all relevant circumstances, including length of time which the impugned activities have been carried on.
The case was about keyword advertising and the display on the Internet of M&S advertisements in response to the search term 'interflora'. Interflora was successful in its trademark infringement case against M&S at first instance under Article 9(1)(a) of the regulation with Arnold J handing down his judgment in May 2013 (with an additional judgment on the scope of the injunction handed down in June 2013).
M&S appealed both of the judgments of Arnold J and the appeal was heard in July 2014. The Court of Appeal summarised the five main appeal issues as follows:
the average consumer;
the onus of proof;
initial interest confusion;
procedural irregularities; and
injunctive relief and negative matching.
The court found that a number of errors had been made by the judge and it was far from confident that the judge would have come to the same conclusion, had he not made these same errors. The Court of Appeal gave "anxious consideration" to the possibility of simply determining the issue of infringement from a costs and time savings perspective but, with regret, decided that this was something it could not do. It had not heard the evidence or been taken to all of the documents, so the case had to be remitted for a retrial. The court said that it found limited consolation in the thought that such a retrial should now be relatively straightforward.
The average consumer - this case posed the question of whether the advertisements in issue did not enable reasonably well informed and observant internet users (or enabled them only with difficulty) to ascertain whether the goods and services as advertised originated from Interflora or an undertaking economically linked to Interflora, or, on the contrary, from M&S. The court found that the judge was entitled to have regard to the effect of the advertisements upon a significant section of the relevant class of consumers and he was not barred from finding infringement because the majority of consumers were not confused. In the context of internet advertising, the average consumer (who is reasonably well informed and reasonably observant and circumspect) and the reasonably well informed and reasonably circumspect internet user are the one and the same. The average consumer is not a statistical test - the national court must exercise its own judgment in accordance with the principles of proportionality.
Onus of proof - Arnold J had wrongly held that the onus lies on the third-party advertiser to show that the use of the sign in context is sufficiently clear that there is no real risk of confusion by the average consumer as to the origin of the advertised goods. The court found that the onus is on the trademark owner to show that the advertisement complained of does not enable informed and reasonably attentive internet users to ascertain if the goods in the advertisement originate from the trademark owner, or an economically linked undertaking, or from a third party. The error in the judge's reasoning was that he wrongly elided the burden of proof in legal proceedings with the need in practice for third-party advertisers to craft their advertisements with appropriate clarity. One does not follow from the other. Although advertisers select keywords and decide how to use them, this does not mean that in infringement proceedings, the advertiser also has the burden of ensuring that its advertisements make it clear that the goods or services do not originate from the trademark owner, or adversely affect any other function of the mark.
The judge's approach to the burden of proof has likely influenced his assessment of all of the evidence (including the evidence discussed in section 4 below), which consequently affected all of his findings in the case.
Initial interest confusion - this expression derives from US trademark law and is a highly controversial type of confusion which arises when a consumer is confused as to the origin of goods or services prior to the purchase of the product or service (and in particular, confusion arising from the use of a sign in promotional materials). In the High Court, Arnold J had accepted that initial interest confusion as envisaged under Article 9(1)(b) of the regulation (and as previously found in the Och-Ziff case by Arnold J) is equally relevant to show an adverse effect on the origin function of the trademark for the purposes of Article 9(1)(a) of the regulation. The court found that it was not helpful to seek to import the doctrine of initial interest confusion into EU trademark law, at least so far as it applies to the use of a sign which is the same or similar to a trademark as a keyword in an internet referencing service, and has the potential to positively mislead. The ECJ has already enunciated the test to be applied in determining whether the accused sign has an adverse effect on the origin function of a trademark in Google France (Cases C-236/08 to C-238/08) and again in BergSpechte (Case C-278/08) and Portakabin (Case C-558/08). The question is whether an advertiser has enabled the average consumer to ascertain the origin of the advertised goods in order to make an informed decision. The court emphasised that it was not the duty of such advertisers to avoid confusion.
Procedural irregularities and errors in evidence - the court considered the admissibility of evidence in various academic papers and the reliance placed upon those papers and the evidence of Mr Rose and Mr Pandya by the judge. Mr Rose was an employee of the online digital marketing company which managed paid search advertising strategies for Interflora in the United Kingdom and he provided witness statements on behalf of Interflora. Mr Pandya was the co-author of an Experian Hitwise report commissioned by Interflora and was cross-examined on the report at trial.
Arnold J had taken the view that the academic papers were relevant and should be admitted in the interests of justice, despite the fact that they were served on the eve of trial under a Civil Evidence Act Notice. On the issue of the academic papers put forward in support of Interflora's case, the court found that this was a reasonable exercise of the judge's discretion and it was not one with which the Court of Appeal could properly interfere.
Arnold J appeared to have placed considerable weight on Mr Rose's evidence even though he had ruled at trial that he would attach no weight to this evidence and as a result, Mr Rose was not cross-examined. This seemed to be at odds with Arnold J's judgment where he stated that Mr Rose's views represented "an informed assessment from someone whose job it is to have an informed assessment on this subject". On the issue of Mr Rose's evidence, the court found that the judge had fallen into error and should not have attached any weight to the opinion and assessment of Mr Rose at the trial. On the issue of Mr Pandya's evidence, the Court of Appeal found that the judge erred in giving Mr Pandya's evidence the weight that he did. The judge should have explained his reasons for rejecting the evidence of Mr Pandya and it was incumbent on him to do so.
Scope of injunction - in Arnold J's second judgment about the scope of injunction against M&S, he considered the role of negative matching in the Google AdWords process. Interflora complained that M&S had bid upon generic flower related terms without negative matching the word 'interflora'. Arnold J found that a failure to negative match could constitute infringing use of a competitor's trademark.
On appeal, M&S argued that the failure to negative match the word 'interflora' pre-supposes the existence of a legal duty or obligation which required an advertiser to opt in or out of Google's negative matching facilities (when no such duty exists). Moreover, M&S had not selected 'interflora' as a keyword in this process and such selection is an essential requirement of liability. The court was not convinced by these arguments and M&S did not succeed in its appeal on negative matching issues. The ECJ decision in Google France was applied and the court found that the choice and selection by a trader of a generic term as a keyword cannot be considered in isolation and as an activity, separate and distinct from the Google algorithms. Account must be taken of the opportunity available to the trader to negative match. The court came to the conclusion that the bidding by M&S on generic flower terms, without negatively matching the sign 'interflora', may be characterised as use within the meaning of Article 9(1) of the regulation.
M&S further complained about the geographical scope of the injunction ordered by Arnold J, which applied to all of the European Union. The court found that Arnold J had applied the correct test as set out by the ECJ in DHL Express France SAS v Chronopost SA (Case C-235/09) and it was correct that an injunction to prevent infringement of a Community trademark should extend to all of the European Union in these circumstances.
Interflora and M&S have been embroiled in epic litigation on this case since 2008. It seems incredible that the matter is to go back down to the High Court for a retrial on the fundamental trademark infringement questions, and it remains to be seen whether such a retrial will indeed be as straightforward as the Court of Appeal seem to think that it will be.
Joel Smith and Sarah Burke, Herbert Smith Freehills, London
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