High Court issues first decision on use of third-party trademarks as keywords

In Intercity Group (NZ) Limited v Nakedbus NZ Limited ([2014] NZHC 124, February 12 2014), the High Court of New Zealand has held that Nakedbus NZ Limited had infringed Intercity Group (NZ) Limited's trademark by using the words 'inter city' in Google advertisements. 

Intercity and Nakedbus both provide long-distance bus services in New Zealand. Intercity had 95% of the market until Nakedbus started up business in 2006. The competition has been good for consumers, with the cost of bus travel generally being much cheaper than it was prior to 2006, including $1 fares.

Nakedbus had a habit of annoying Intercity by using the word 'intercity' in its advertisements and on its website, as its metatags and keywords for Google searching and advertising. The two exchanged letters over several years. In October 2012 Intercity discovered that searches for 'inter city' on Google were producing Nakedbus advertisements containing the words 'inter city', for example “Inter city buses from $1 – We’ll beat any inter city fare”. Intercity issued proceedings against Nakedbus. The proceedings were heard in November 2013, and the High Court of New Zealand issued its decision in February 2014.

Intercity claimed trademark infringement, passing off and breach of the Fair Trading Act. The trademark claim was in two parts:

• first, against Nakedbus’ use of the keywords 'inter city' in Google’s AdWords; and 
• second, against the Nakedbus advertisements that appeared in the Google results page. 

Surprisingly, there have been no proceedings in New Zealand considering the use of keywords.

The evidence demonstrated that Nakedbus’ use of the keywords 'inter city' were resulting in significant click-throughs and sales for Nakedbus.

Nakedbus argued that there was no use in the course of trade of Intercity’s registered trademarks because the selection of keywords is invisible to everyone, including consumers, except Nakedbus and Google. The judge agreed that this was not use as a trademark. The use of the keywords was by Nakedbus when it purchased them prior to the placement of its advertisement, and then by Google when, through its search engine, it made the Nakedbus advertisement appear when 'inter city' was typed in the search field. If it could not be seen by a consumer, it could not be “taken as being used as a trademark”. 

The judge distinguished European decisions such as Interflora Inc v Marks and Spencer plc ([2013] EWHC 1291 (Ch)) on the basis that the New Zealand Trademarks Act 2002 specifically requires the allegedly infringing use to be “taken as being used as a trademark”. The use by Nakedbus of 'inter city' as keywords was found not to infringe any of Intercity’s registered trademarks.

In terms of Nakedbus’ use of 'inter city' in Google advertisements and on its website, Nakedbus argued that it was using the words descriptively, as in to travel between cities. The judge accepted that the words 'inter city' have a descriptive meaning, but also that it is the name of a well-known bus company in New Zealand.

Intercity produced survey going to the question of whether New Zealand consumers use the terms 'inter city'/ 'intercity' descriptively or use it to search for the Intercity bus company. The judge found that consumers travelling between cities were unlikely to use the terms 'inter city'/'intercity' descriptively, but instead were more likely to use the word 'bus' and the names of the cities, and when the terms 'inter city'/'intercity' were used, they were used to find the Intercity website.

The judge concluded that Nakedbus had deliberately set out to use 'inter city' as a trademark and “rejected entirely” Nakedbus’ evidence that it only wanted to use the term to describe to consumers what it does. The judge accepted that a consumer might think that the Nakedbus advertisements were Intercity advertisements.  Intercity succeeded on its claim of trademark infringement in respect of the advertisements. The judge rejected Nakedbus’ defence of “honest use”.

Intercity also brought claims under passing off and under the Fair Trading Act for misleading and deceptive conduct. In respect of the advertisements, the judge found that Nakedbus was passing off its services as those of Intercity, and was also misleading and deceiving consumers under the Fair Trading Act. 

The judge awarded declaratory and injunctive relief to Intercity. The parties had earlier agreed to a split trial in respect of account of profits, and a further hearing will take place this year.

Kate Duckworth, Catalyst Intellectual Property, Wellington