The UK Court of Appeal ("CA") has unanimously overturned the first instance finding of infringement in Interflora v Marks & Spencer and has ordered a retrial. The CA's decision to order a retrial is unusual, although it is most likely a function of the unique circumstances surrounding this litigation. The CA also reiterated that under UK (as well as under EU) law, internet advertising on the basis of keywords corresponding to trademarks is not inherently objectionable because its purpose is, in general, to offer internet users alternatives to the goods or services of the trademark proprietors. Keyword advertising will amount to trademark infringement only where it suggests an economic link with the trademark owner or is vague as to whether such a link exists.
Background
This case concerns the use by Marks & Spencer
("M&S") of the word "Interflora" as an
advertising keyword in Google's search engine. Searches
involving the keyword led internet search engine users to
advertisements for M&S flower delivery services. M&S had
used the Google AdWords service, bidding on a number of keywords
containing the mark "Interflora" and close variations of
it. The relevant M&S advertisements appeared on a separate part
of the search results known as "sponsored links" and did
not feature the "Interflora" name.
The case has had a protracted history, which included a reference
to the Court of Justice of the European Union ("CJEU")
and a number of subsequent UK appellate rulings on evidentiary and
procedural matters. The proceedings finally came to trial in 2012,
and first instance judgment was delivered in May 2013. The trial
judge, Arnold J, found M&S liable for trademark
infringement.
Why Did the Court of Appeal Order a Retrial?
It is standard practice for the CA to determine the issue of
infringement according to the correct legal principles where it
sets aside a first instance ruling. In this case, however, the
court said that whilst such an approach would have obvious benefits
in terms of time and costs, it was not in a position to substitute
its own findings because it had not been taken to all of the
documents or had the benefit of hearing the oral evidence.
Whilst retrials in IP cases in England are rare, there are a
number of factors that explains the CA's reluctance to
determine infringement in this case. First, the evidence that was
led at trial was both substantial and complex. Much of this
evidence was not canvassed before the CA. Second, much of the
witness evidence was impressionistic and/or was concerned with
whether and to what extent there was consumer confusion. Given that
the CA had not heard the oral evidence and was not in a position to
assess witnesses' demeanour and approach, the cautiousness of
the court is understandable. Finally, it is also important to
recognise that the relevant legal tests in issue require a very
nuanced and careful balancing of various factual considerations.
Given the fundamental nature of the errors made by the trial judge,
the CA simply believed that it was not in a position to determine
how these issues would have been determined if the correct approach
had been adopted.
When is Keyword Advertising Objectionable?
The CA were at pains to emphasise that using keywords that are
identical to trademarks in online advertisements is not an
inherently objectionable practice. Referring to earlier CJEU
authority, the court reiterated that it will amount to infringement
only where the advertisement does not enable the average consumer,
or enables him only with difficulty, to ascertain whether the
relevant goods or services originate from the trademark owner or an
undertaking economically connected to it or, on the contrary, from
a third party.
The practical effect of this legal formulation, however, is that
it effectively requires establishing confusion even in cases
involving identical marks and identical goods and services
(so-called double identity infringement). This is not entirely
straightforward given that liability for double identity
infringement historically has been generally understood to be
absolute, and proof of confusion is only part of the statutory
wording where an identical or similar sign is used in relation to
identical or similar goods or where a trademark has a reputation.
The trial judge attempted to resolve this anomaly by finding that
to the extent that likelihood of confusion needs to be shown in
double identity cases, the onus of proof is reversed such that it
is up to the alleged infringer to show that the advertisement is
not objectionable. The CA rejected this reasoning. Although the
advertiser needs to ensure that its use of keywords does not
misleadingly suggest a link with the trademark proprietor, the
legal burden of proving infringement lies entirely on the trademark
owner.
The CA also rejected the trial judge's reliance on the
recently developed concept of "initial interest
confusion", namely where a consumer may be initially misled by
use of a trademark, but that confusion is then dispelled before it
can be acted upon. The court said that the doctrine, which is
borrowed from US law, should not perform part of the analysis in
claims of this nature as it is "unnecessary" and
"potentially misleading".
Who Is the Average Consumer?
It is well established that the average consumer is a
"reasonably well informed and reasonably observant internet
user". The trial judge found that even though a majority of
such persons would not have been confused with M&S's
advertisement, a significant proportion of such consumers did
believe there was a connection with M&S and Interflora. It was
on this basis that he found M&S liable for infringement.
The CA held that a finding of infringement is not precluded by a
finding that many consumers, of whom the average consumer is
representative, would not be confused. In determining the issue,
the court is faced with a binary question and not a statistical
test. This is interesting because whilst the CA expressly
recognised that survey evidence may sometimes be of assistance,
such evidence will be of limited probative value in determining the
approach of the hypothetical average consumer. Indeed, attempts by
Interflora to introduce survey evidence were rejected by the CA
twice in the course of this litigation itself.
Conclusion
The CA's decision to order a retrial in this case is unusual
for litigation in England. However, the unique circumstances of the
case mean that this is unlikely to set a general precedent for
retrials of IP cases in England, even though the CA will never have
had the benefit of seeing the oral evidence. The relevant factual
matrix and the legal issues will be sufficiently clear in the vast
majority of cases for the CA to properly dispose of the
dispute.
The ruling also makes clear that keyword advertising will be
objectionable only where it misleads (or is liable to mislead) the
average consumer as to the origin of the goods or services. Given
that even the trial judge acknowledged that the majority of
internet users are now aware of the distinction between sponsored
and natural search results, this will be an increasingly difficult
threshold to satisfy.
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