European Court of Justice: Keyword Advertising Can Constitute Trade-mark Infringement

The European Court of Justice (ECJ) recently released its decision in the long-standing dispute between the flower-delivery service Interflora and the department store retailer Marks & Spencer. Interflora claimed that the keyword advertising used by Marks & Spencer’s competing flower delivery service was confusing with the INTERFLORA mark. The claim arose because Marks & Spencer used Google’s AdWords referencing service and selected Interflora and phrases incorporating Interflora as keywords. The dispute reached the ECJ by way of a reference from the UK High Court. The ECJ has ruled that keyword advertising constitutes trade-mark infringement when a competitor uses a keyword identical to a proprietor’s trade-mark in relation to goods or services that are also identical to those for which the mark is registered, and where that use has an adverse affect on one of the functions of the trade-mark. The three functions of a trade-mark, as stated by the ECJ, are: (1) an indication of origin; (2) the function of advertising the product or service; and (3) the investment function. Regarding the first function (indicating origin), the ECJ held that there is an adverse effect where the keyword advertising does not enable reasonably well-informed and observant Internet users to conclude that the goods or services advertised originate from the trade-mark holder, and not from a third party. As for the second factor (the advertising function), keyword advertising does not typically have an adverse affect on the advertising function, said the ECJ, since it does not deny the proprietor the ability to advertise. The purpose of the trade-mark is not to protect proprietors against practices inherent in competition. The proprietor, at its option, may pay a higher price to have its advertisement appear before that of a competitor that uses the proprietor’s trade-mark as a keyword. Finally, regarding the third function (the investment function), the ECJ stated that it is adversely affected if there is substantial interference with the proprietor’s use of its trade-mark to acquire or preserve a reputation capable of attracting and retaining customers. However, the ECJ observed that where the competitor’s use of an identical sign is used fairly and respects the trade-mark’s origin-indicating function, the investment function is not adversely affected if the only result is to force the trade-mark owner to adapt its continuing efforts to acquire or preserve its reputation. The ECJ also provided direction about enhanced protection for trade-marks with a reputation, specifically regarding the scope of dilution (detriment to the distinctive character of a trade mark with a reputation) and free-riding (unfair advantage taken of the distinctive character or the repute of the trade mark). Regarding the appropriate remedy, the case was remitted back to the UK High Court to decide whether Marks & Spencer’s keyword advertising had had an adverse affect on one of the functions of the INTERFLORA mark and to decide whether dilution or free-riding had occurred. The full text of the decision, Interflora Inc et al v Marks & Spencer et al, Case C-323/09, is found here. Summary by: Adam Lis