Tempur regularly litigates against competitors who are using the designation 'Tempur' in their advertising campaigns. When a competitor buys the adword 'Tempur' from Google, advertisements and banners of this competitor appear on top of and next to the ordinary search results when the term 'Tempur' is searched for in Google. Is this allowed? Which circumstances play a role here?
Recently (in Dutch) the Court of The Hague allowed all Tempur's claims against a competitor. This was not surprising, because the defendant did not put up a substantive defence. The defendant may not use the designation 'Tempur' anymore, not even as an AdWord. On the other hand, at the end of 2011 the Court of Appeal of The Hague rejected (in Dutch) Tempur's claims in another legal action instituted by Tempur against Medicomfort. This judgment was rendered in a defended action and dovetails with case law of the European Court of Justice. This judgment of the Court of Appeal of The Hague serves as a guidance for Dutch practice.
What is and what is not allowed with AdWords? There are two key questions. The first is whether there is trademark infringement when the trademark of another party (in this example the Tempur trademark) is used by a competitor as AdWord, and the second is whether, on the contrary, such use is allowed on the basis of the rules for comparative advertising. It should not have to matter for the outcome of the case in which order the court answers these questions. For the judicial review the following rules of thumb apply.
The starting point is that the use of the trademark of another party as an AdWord is allowed, as inherent in free competition. This is not altered by the fact that this forces the trademark holder to increase its own investments, not even if the AdWord advertisement leads to it that part of the public will choose the products of a competitor.
Double Identity and the Functions of the Trademark
If the AdWord used by the competitor is identical to the trademark of the trademark holder (in this example, if the competitor uses the word Tempur) and if it is used for the same kind of products, this is referred to as 'double identity'. In such a case there is only trademark infringement if a function of the trademark is affected. Five functions are distinguished, namely (a) the designation of origin, (b) the guarantee of the goods or services, (c) the communication function, (d) the investment function, and (e) the advertising function. In the Tempur case the Court of Appeal of The Hague discusses these functions on the basis of European case law, and concludes that there is no question of trademark infringement.
The Trademark-Law Reference Person
In this case the reference person is 'the normally well-informed, reasonably observant and circumspect internet user'. According to the Court of Appeal, this reference person knows very well that third-party advertisements may appear under the heading 'Advertisements' or 'Sponsored links' in the Google search engine.
Is A Mistake Possible?
Whether the use of of another party's trademark as an AdWord is allowed depends on the advertisement that is shown. If this advertisement may cause the reference person to be mistaken, there may be trademark infringement. This is the case when the AdWord advertisement (1) does not make clear whether the products originate from the trademark holder or from another party, (2) creates the impression that there is an economic relationship between the supplier and the trademark holder, or (3) is so vague that it is unclear whether there is a relationship between the supplier and the trademark holder. It is, however, not required in this respect that the advertisement itself explicitly indicates that the supplier is not connected to the trademark holder in any way.
No Imitation Products, But an Alternative
It is not allowed to use an AdWord to draw the public's attention to imitation products. But if the competitor offers a legal alternative for the products of the trademark holder, this is a valid reason for the trademark use, even if it concerns a well-known trademark.
Comparison of Prices and Other Characteristics of the Product
The use of another party's trademark as an AdWord is also tested against the rules for comparative advertising. In this case, the reference person is slightly different, namely 'the average consumer who is reasonably well-informed, reasonably observant and circumspect'. In practice this difference has no consequences for the adjudication by the court. According to the Court of Appeal it suffices that the consumer can obtain further information about the characteristics and prices of the products concerned via the websites of Tempur (which website appears as a natural search result) as well as those of the competitor (whose website is mentioned in the advertisement). Therefore, it is not necessary to mention this information in the advertisement itself.
Competitors have lots of room to use a word mark, on the proviso that they make clear in their advertisements that their own products are being recommended, and do not create the impression that there is a relationship between the trademark holder and the competitor. It is adamant that the consumer cannot be mistaken about that. Moreover, the products of the competitor must be a legal alternative to the products of the trademark holder. If these requirements have been met, the trademark holder cannot prohibit a competitor from using its trademark as an AdWord.
First published in the Kennedy Van der Laan newsletter - February 2012
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.