Interflora: sweet smell of success or muted victory for trademark owners?

European Union
In Interflora Inc v Marks & Spencer Plc (Case C-323/09, September 22 2011), the Court of Justice of the European Union (ECJ) has held that the proprietor of a trademark is entitled to object to the use of the mark as a keyword where:
  • a reasonably well-informed and reasonably observant user cannot tell if the goods originate from the trademark proprietor or a third party; or
  • advertising on the basis of a keyword contributes to turning the trademark into a generic term.
However, it is legitimate for advertisers to present themselves as commercial alternatives to the trademark proprietor. The ECJ's decision broadly follows the opinion of the attorney general (for further details please see “Mixed bouquet for M&S as AG gives opinion on keyword advertising”).
 
Interflora Inc, the well-known company running a network of flower delivery services, objected to the use by Marks & Spencer Plc (M&S) of the name Interflora as a keyword for M&S's own flower delivery services.
 
The High Court of England and Wales referred a number of questions to the ECJ in 2009 relating to whether the proprietor of a trademark is entitled to prevent a competitor from using a keyword identical to the trademark. The court also asked if the answer was affected by the fact that some members of the public might be led to believe that the competitor is a member of the trademark proprietor's commercial network (for further details please see “Questions to be referred to ECJ in INTERFLORA case”).
 
Considering Article 5(1) of the First Trademarks Directive (89/104/EEC) and Article 9(1)(a) of the Community Trademark Regulation (40/94) (now Regulation 207/2009), and following the ECJ's decision in Google France (Joined Cases C-236/08 to C-238/08), it is settled law that trademarks are infringed only by the use of keywords where use adversely affects one of the functions of the trademark. In this case, as well as considering the essential function as an indicator of origin, the ECJ also considered the impact upon the 'investment' function and the 'advertising' function:
  • Trademarks as an indicator of origin (the essential function) - whether a trademark's function as an indicator of origin is affected by the use of a keyword depends on the way in which the advertisement is presented. The function is adversely affected if the advertisement does not enable a reasonably well-informed and reasonably observant user, or enables them only with difficulty, to ascertain whether the goods or services referred to in the advertisement originate from the trademark proprietor or a third party. In this case, the court noted that the network of a large number of retailers employed by Interflora might contribute to confusion on the part of consumers.
  • Advertising function - the ECJ accepted that use of a keyword might result in the proprietor having to expend more money on, or increase the intensity of, its advertising. However, the purpose of a trademark is not to protect a proprietor against practices inherent to free competition. Considering that the aim of internet advertising via keywords is to offer internet users alternative goods or services, the ECJ was of the opinion that the use of a keyword does not impact upon the advertising function of a trademark.
  • Investment function - a trademark may also have an 'investment function' if it is used to acquire or preserve a reputation capable of attracting consumers and retaining loyalty. However, the ECJ observed that it is not enough that the consequence of the competitor's use is that the trademark proprietor needs to adapt its efforts to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty. Similarly, the trademark proprietor cannot rely on the fact that some consumers switch to the competitor's goods.
Further, the ECJaccepted that the INTERFLORA mark had a reputation. The ECJ considered the circumstances in which an advertising link can cause detriment to a trademark by dilution, or take unfair advantage of the distinctive character of the mark (both relevant where a mark has a reputation under Article 5(2) of the Trademark Directive):
  • Detriment - the ECJ agreed with the advocate general's opinion that detriment is caused when the use reduces the ability of the mark to distinguish the origin of goods or services. This is the case where the use contributes to turning the mark into a generic term. Where the use merely draws the customer's attention to the existence of an alternative product or service than that of the proprietor, detriment cannot automatically be assumed.
  • Free riding - the ECJ agreed with the advocate general that a competitor who buys sponsored listings on search engines is purposefully taking advantage of the distinctive character or repute of the mark. Furthermore, that person derives a real advantage from diverting customers away from the trademark proprietor to their own goods and services. However, this use generally falls within the ambit of fair competition and, as such, is not free riding so as to amount to trademark infringement.
On the face of it, the willingness of the ECJ to recognise the potential impact of keywords upon a number of the functions of a trademark is positive for brand owners. However, the reality is that the ECJ's recognition that most internet users are reasonably savvy means that it may be difficult for brand owners to demonstrate infringement of their rights, unless there is confusion as to origin or a risk of the mark becoming generic.
 
We will know more when this case returns to the High Court of England and Wales, although Interflora's business model may yet prove, in this case, to be the factor that tips the balance in its favour.
 
Joel Smith and Rosie Patterson, Herbert Smith LLP, London

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