New Zealand: Trade mark dispute over Google AdWords settled with flowers?

Brief Counsel
Last Updated: 18 November 2014
Article by Justin Graham, Garth Gallaway, Kelly McFadzien, Matt Sumpter, Jack Hodder QC and Paul Sumpter
Most Read Contributor in New Zealand, September 2016

Download: 2014 PUB BC Trade mark dispute over Google AdWords settled with flowers - 13 Nov.pdf

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Using a competitor's trade mark as a "key word" to get your brand more exposure in Internet search results has been a source of controversy in many jurisdictions, including New Zealand with the Nakedbus / Intercity dispute.

But the UK Court of Appeal – in a case involving Interflora and Marks and Spencer – has made some observations which will inform the debate here.

The AdWords service has a number of features, but, in essence, an advertiser can bid on certain terms as "key words" which, when entered into the Google search engine, will trigger the advertiser's website in the search results.

Interflora v Marks and Spencer

Interflora took on Marks and Spencer (M&S) in 2008 after M&S bid on the key word "interflora" so that its advertisements for its own flower shop would be triggered when a user searched for that term on Google Adwords.

Interflora thought this infringed its trade mark, and would mislead consumers into thinking M&S was associated with Interflora.

By the time the case reached the Court of Appeal, the issues had been refined down to five. Three of particular interest are:

  • the test to be applied to determine whether the "average consumer" would be confused
  • the onus of proof to establish confusion or otherwise, and
  • the role of negative matching in AdWords disputes.

The average consumer

Courts are often required to make decisions based on "reasonable person" tests. This evaluation involves an artificial hypothesis of a person who is average, objective and reasonable. M&S said its evidence showed that most consumers would not be confused given the sophistication of modern Internet users.

The Court said that was not the test. The question to be answered was "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 so advertised originated from Interflora or an undertaking economically linked to Interflora, or, on the contrary, originated from M&S, a third party."

The Court said the High Court Judge was entitled to have regard to whether a significant class of consumers would be confused, and was not barred from finding infringement because a majority of consumers were not.

Onus of proof

In the High Court, the Judge had expected M&S to demonstrate steps it had taken to ensure there was no real risk of confusion to consumers arising out of its use of Interflora's trade mark.

But the Court of Appeal was critical of this approach. It said that the onus lay, not with M&S but with Interflora as the trade mark proprietor to establish that the normally informed and reasonably attentive Internet user could be misled into thinking that the advertisement originated from it or from a party connected to it.

Negative matching

One of the abilities of the Google AdWords service is to negatively match key word terms. That is, to specify terms which, when entered, will not trigger your advertisement. For example, a cat breeder could negatively match the word "dog" to avoid anyone looking for dogs from being side-tracked to its site through an unhelpful search result.

M&S had failed to "negatively match" the key word "interflora" and the High Court Judge decided this could still infringe. That is because, for example, even if M&S did not bid on the word "interflora" but bid on the word "flowers", a user searching for "interflora flowers" could still generate an M&S advertisement, and it could be that that was M&S's design.

Without making a formal assessment, the Court of Appeal agreed that such conduct could, depending on the circumstances, amount to infringement.

Talking points for New Zealand

The Court of Appeal was at pains to point out that generally there is nothing inherently objectionable about using key word searching to give consumers choices. That is an important starting point to remember. Issues arise where there is clear coat-tailing or conduct aimed at confusing a section of the market and obtaining sales as a result.

The lessons for New Zealand are:

  • the salient reminder that the majority does not rule when it comes to confusion – a significant minority of confused "average consumers" will be enough to be on the wrong side of the line
  • trade mark owners still have to go through every hoop when proving a case of infringement – it is not enough to establish trade mark use and leave it to the other party to show their use was innocent, and
  • although there may be more to be said on this point, using generic key word terms with a goal of triggering your advertisement when users search for a competitor may amount to infringement. The corollary of this finding is that businesses may need to take more care to think about what "negative matches" they should use when dealing with Google AdWords.

The last word has not been had however. Because the Judge got the onus of proof wrong, the Court of Appeal had no choice but to send the matter back for a re-trial. With the case's 7th anniversary coming up, that order was unlikely to fill the parties with joy.

The information in this article is for informative purposes only and should not be relied on as legal advice. Please contact Chapman Tripp for advice tailored to your situation.

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Justin Graham
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