UK: When Not Using A Competitor's Trade Mark Might Still Infringe It - The Curious Case Of Negative Matching

Last Updated: 10 July 2015
Article by Lucy Nunn

The Courts have made it clear that Internet users are familiar with sponsored advertising, and that they are used to searching for a brand and being presented with ads from competitors.  The legal position on this practice in Europe is well-established: bidding on your competitors' trade marks as keywords is unobjectionable unless the ad does not enable normally informed and reasonably attentive Internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to in the ad originate from the proprietor of the trade mark.

But what if you don't bid on your competitors' trade marks at all.  Could you still be infringing?  That is one somewhat surprising potential effect of the Court of Appeal's decision in Interflora v Marks and Spencer resulting from the Court's views of a practice known as 'negative matching'.

What is negative matching?

At its most basic level sponsored advertising involves a party paying a search engine so that their click-through ads appear in response to Internet users' searches for keywords chosen by the advertiser.  The process has evolved over the years.  The world's biggest search engine Google now uses a system called 'broad match' as its default setting for sponsored advertising.  Google explains broad matching as follows: "The Google AdWords system automatically runs your ads on relevant variations of your keywords, including synonyms, singular and plural forms, possible misspellings, stemmings (such as floor and flooring), related searches and other relevant variations".  So, if an advertiser bids on the keyword "low-carb diet plan" under a broad match strategy, their ads may appear if an Internet user searches for "carb-free foods".

'Negative matching' allows users to tailor the impact of their broad match strategy.  Advertisers can specify search terms they do not wish their ad to appear in response to.  For example a ski holiday provider might want to bid on the keyword "ski holiday", but presumably would not want its ads to appear when Internet users search for "water ski holiday".  One way to avoid this would be to add "water" as a negative keyword.

Background to the law on keyword advertising

To put the Court of Appeal's comments on negative matching in Interflora in context, it is helpful to first consider the earlier jurisprudence on keyword advertising, in particular the Court of Justice of the European Union's landmark decision in Google France in 2008.

In Google France the CJEU held that by choosing a sign identical to a competitor's trade mark as a keyword, the advertiser (but not the search engine) was "using" that sign in its own commercial communication for the purposes of Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark.  The CJEU said "the selection of a keyword identical with a trade mark has the object and effect of displaying an advertising link to the site on which he offers his goods or services for sale. Since the sign selected as a keyword is the means used to trigger that ad display, it cannot be disputed that the advertiser indeed uses it in the context of commercial activity and not as a private matter."

The CJEU in Google France went on to explain that a sponsored ad would only infringe the competitor's trade mark if the other elements necessary for infringement were present, including an adverse effect on one of the functions of the trade mark.  It then set out the now well-established test to apply in keyword advertising cases: "the function of indicating the origin of the mark is adversely affected if the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party."

Negative matching in the Interflora case

The facts of the Interflora case were such that, when M&S bid on generic flower-related terms in Google's broad match system, the effect was that M&S ads might appear when an Internet user searched for "interflora".  The ads themselves did not refer to the term "INTERFLORA".

In a second judgment in Interflora v Marks & Spencer given at a relief hearing after his first instance judgment had been handed down Mr Justice Arnold held that by failing to negatively match M&S was "using" the sign INTERFLORA, albeit in a less direct way, because what M&S was doing had "the object and effect that a search by a consumer for "interflora" results in the display of M&S's advertisement".  Although the Court of Appeal remitted the Interflora case to the High Court for retrial, it agreed with the judge's conclusions on negative matching, leaving open the possibility of liability for trade mark infringement in keyword advertising cases by omission.

Analysis of the Court of Appeal's decision in Interflora

The Court of Appeal in Interflora held that the selection of a generic term as a keyword could not be considered in isolation and as an activity separate and distinct from the Google algorithms and match types used in relation to them; account must be taken of the opportunity to negatively match.  Having regard to all these matters, the Court of Appeal determined that it is open to a trial judge to conclude that a trader has chosen a generic term "with the object and effect of triggering the display of his advertisement in response to a search by a consumer of a term including or consisting of a sign which is the same as or similar to the trade mark", in which case the judge may find that the trader has used that sign in the course of trade under the CTM Regulation, although indirectly and by different technical means.

So, the Court of Appeal found that a party could be "using" a sign in a manner that infringes a trade mark in circumstances where it did not bid on that sign and nor did that sign appear in its sponsored ads.

In such a case the only visible use of the sign is by the Internet user typing the sign into the search engine.  That search term is then processed by the search engine's algorithm which may perceive a connection between the sign and certain generic terms upon which a party had bid, thereby causing that party's ads to be displayed.

Understandably, this may be cause for concern among online advertisers.  However, there are other aspects of the Interflora judgment and surrounding circumstances that may provide some comfort.

Firstly, the other elements of infringement must still be met.  Under the test in Google France, that means an ad will infringe only if it does not enable normally informed and reasonably attentive Internet users, or enables them only with difficulty, to ascertain from whom the goods or services referred to in the ad originate.  Disagreeing with the first instance judge on the point, the Court of Appeal in Interflora determined that the onus is on the trade mark proprietor to establish that all the elements of infringement are satisfied.

Secondly, the Court of Appeal's use of the words "object and effect" suggests that the advertiser's knowledge and intention is a factor in determining whether his failure to negatively match constitutes infringement.  Indeed, the Court of Appeal went on to say that a judge must consider all the circumstances "including the length of time for which the impugned activities have been carried on" in making his assessment on infringement.  This appears to provide some leeway for the 'innocent' infringer.

Finally, the reason that the judge at first instance found that M&S fell foul of the Google France test was because Interflora represents a network of florists and, he felt, a significant proportion of the relevant public might believe that M&S was part of that network.  As explained above this part of the decision has been remitted to the High Court for retrial and it remains to be seen what the outcome will be.  However, the Courts have already indicated that Interflora was a special case.  In Lush v Amazon, Amazon had bid on the keyword "LUSH" and there was therefore no question that it was "using" the "LUSH" mark.  Distinguishing that case from Interflora, Deputy Judge John Baldwin QC found that there was no infringement where resulting ads did not refer to the sign "LUSH" because average consumers would expect ads for Lush products to include some reference to the Lush mark.

What should online advertisers learn from Interflora?

Interflora is undoubtedly an unusual case, and the fact remains that bidding on competitors' trade marks per se is not infringing, at least under EU trade mark law.  However, whether or not you bid on your competitors' trade marks, pending clarification of the issues raised in the Interflora appeal advertisers are advised to take special care in arranging their sponsored advertising campaigns.

Firstly, think about the effect of your campaign, particularly if utilising broad match or similar.  Have you set up your campaign intending that your ads will appear when Internet users search for your competitors?  If you have, or if you are aware that this will be the effect, you should ensure that your ads stay on the right side of Google France or you may be liable even if you have not bid directly on your competitors' trade marks.

The best way to avoid infringement is not to include your competitor's trade marks in your ad text, link or URL.  As seen in Lush v Amazon, if your competitor's trade marks do appear then this is likely to lead to the ads falling foul of the test in Google France.  Best practice is to ensure that the origin of the goods or services advertised is completely clear.  Including your own trade mark or brand name in your ad will undoubtedly help to avoid any possibility of confusion and ensure your ads clearly and unambiguously appear to emanate from you.

However you should also consider whether any circumstances may apply that could make yours a special case such as if – like Interflora – the trade mark in question represents a network of brands.  In such cases, even including your own brand name in your ad might not be enough to dispel confusion.

Finally, if in doubt, consider either specifying your competitors' trade marks as negative keywords or avoiding 'broad matching' (or equivalent systems) altogether.

What next for keyword cases?

The outcome of the retrial in Interflora will be hotly anticipated and hopefully will clarify the position for advertisers on negative matching.  In the meantime, as the sponsored advertising market continues to grow, search algorithms become more sophisticated and the means and channels for advertising on the Internet and social networks expand, there will no doubt be further litigation to test where the line should be drawn in sponsored advertising and other types of online use.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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