Court of Appeal Google Ad-words decision may herald a new online threat for brand owners

Court of Appeal Google Ad-words decision may herald a new online threat for brand owners


Author: Jo Joyce

The dispute between Marks & Spencer and Interflora has taken a new turn with a Court of Appeal overturning the previous High Court ruling that M&S had infringed Interflora's trade mark rights in its name by purchasing and using it as a Google Ad-Word.

The Google Ad-Words service allows advertisers to bid for and purchase certain key words ('Ad-Words') for a fee meaning that when a Google user types the word into the search engine the advertiser's sponsored advertisements will be returned in a dedicated box above the organic results on the Google results page. Controversially Google amended its Ad-Words policy in 2008 to allow advertisers to bid for competitors' trade marks as Ad-Words. M&S eagerly took advantage of this policy change to bid for Ad-Words incorporating the trade marks of a number of competitors, including Interflora.

The High Court decision

Mr Justice Arnold delivered a series of High Court judgments dealing with the issues in the case, the costs awarded to Interflora and the scope of the injunction granted against M&S. In his main judgment Arnold J held that 'the M & S advertisements which are the subject of Interflora's claim did not enable reasonably well-informed and reasonably attentive internet users, or enabled them only with difficulty, to ascertain whether the service referred to in the advertisements originated from the proprietor or an undertaking economically connected with it, or originated from a third party...Thus M & S's use of the Signs [the Google Ad-Words] has had an adverse effect on the origin function of the Trade Marks.'

Trade Marks must be functional as well as fun

The origin function of a trade mark demonstrates to consumers the origins of the goods or services to which the trade mark is attached (e.g. the 'Golden Arches' identify a Big Mac as coming from McDonalds and the 'swoosh' symbol identifies a pair of trainers as being made by Nike). It is generally considered that the origin function of a trade mark is its most important function. Damage to one of the recognised functions of a trade mark must be demonstrated by the owner in order to win a claim of trade mark infringement in court.

In cases where similar but not identical signs are used a trade mark holder must also demonstrate that there is likelihood that a reasonably well informed and attentive public will be confused as to the origin of the relevant goods and services as a result.

The Court of Appeal gets critical

M&S appealed against the High Court ruling to the Court of Appeal. Throughout its 198 paragraph judgment the Court of Appeal emphasised that the use of a trade mark as a key word that was not owned by the advertiser is not inherently unfair and will not amount to trade mark infringement in most circumstances, rather it should be viewed as a fair form of competition.

The Court of Appeal considered the arguments put by M&S in turn and concluded that the Judge had erred in his reasoning on a number of matters:

  • Arnold J had held that the onus lies with a third party advertiser to show that its use of a sign similar to a trade mark is sufficiently clear that there will be no risk of confusion on the part of the average consumer as to the origin of the advertised goods or services. The Court of Appeal has found this reasoning to be in error as it effectively reverses the burden of proof. It must be for the trade mark holder to show that there is a likelihood of confusion leading to damage to his trade mark rights
  • The Court of Appeal found that Arnold J had introduced the doctrine of 'initial interest' confusion into his analysis. This concept, arising in US law was described by the Court of Appeal as "highly controversial". The doctrine relates to confusion as to the origin of goods and/or services prior to purchase and generally where used in advertising. The Court of Appeal found that the application of the doctrine could conflict with the already clear rules that the Court of Justice of the European Union has established for determining confusion and risked imposing a duty on advertisers to actively avoid confusion that does not exist under current trade mark law
  • Much has been made of Arnold J's conclusion that internet literacy had increased in the preceding the past five years - he held that the majority of internet users had come to understand the distinction between sponsored and natural search results but found that in this case there was still a likelihood of confusion. The Court of Appeal decided that he placed too much emphasis on those users who did not appreciate the distinction and that he incorrectly relied on certain evidence over other evidence before him in doing so

Back to the High Court

After finding that the Judge may have ruled differently but for the errors discussed above the Court of Appeal allowed the appeal and considered ruling itself on whether there was infringement of Interflora's marks by M&S. It decided however, that without the benefit of all of the evidence, including witness evidence, it would not be able to guarantee the correct decision on the facts. The case will instead return to be re-tried in the High Court.

In the meantime, with initial interest confusion strongly out of favour with the courts, it is going to be increasingly difficult for trade mark owners to object to the use of their mark's in keyword advertising by competitors unless they can prove confusion beyond the initial view of the search engine results by consumers.