Ben Farrow is a JD candidate at Osgoode Hall Law School.

On September 22, 2011, the European Court of Justice handed down a judgement on a series of trade mark related questions spurred by the long running dispute between international flower delivery network Interflora and English retailer Marks and Spencer. The case stemmed from a complaint raised by Interflora that Marks and Spencer used Google’s “AdWords” service to create internet advertisements targeting keywords such as ‘Interflora’, ‘Interflora Flowers’, and ‘Interflora.com’.

This use of Interflora related keywords by Marks and Spencer meant that when users visited sites where the name Interflora appeared, ads for Marks and Spencer’s own flower delivery services would be displayed. Interflora Inc. owns a trade mark on the word ‘Interflora’, and as a result, brought an action against Marks and Spencer alleging that their use of words identical to Interflora’s trade mark is unlawful.

The High Court of Justice (England and Wales), Chancery Division, which heard Interflora’s case for trade mark infringement referred questions to the Court of Justice on a series of issues related to the use of keywords identical to a trade mark, without the consent of the trade mark proprietor, by a competitor within an internet referencing service. It is important to note that the European Court of Justice’s decision does not decide the case between Interflora and Marks and Spencer, it simply clarifies the law for the High Courts of each of Europe’s member states.

As outlined in a press release by the court, because the use of a keyword can only be prevented by a trade mark owner if it is liable to have an adverse effect on one of the functions of that mark, each of the functions of a trade mark were examined and outlined in the course of considering the case. These functions included the origin-indicating function, the advertising function, and for the first time, the investment function of a trade mark.

In dealing with the origin-indicating function of a trade mark, the court followed its decision in Google France (Joined Cases C-236/08 to C-238/08). The Google France case was previously covered by the IPilogue here. In Google France, the court observed that the test to determine whether a trade mark has been infringed should consist of an evaluation of whether a reasonably well informed and observant internet user is able, based on general market knowledge, to determine whether the goods or services referred to by an advertisement originate from the proprietor of the trade mark. Applied to the Interflora v Marks and Spencer case, this element of the trade mark evaluation becomes a question of fact for the lower courts related to whether Marks and Spencer’s advertisement enabled an internet user to recognize whether or not Marks and Spencer is a member of the Interflora network.

Considering the advertising function of a trade mark, the court ruled that a rise in the cost-per-click of advertising online due to a competitor’s use of a trade mark keyword was not sufficient in every case to conclude that the advertising function of a company’s trade mark had been adversely affected. The court also commented that there is nothing wrong with a company using an internet advertising service to create competition by offering alternatives to a particular product of service; however, the trade mark owner must not be prevented from using their mark to attract customers.

The European Court of Justice recognized the investment function of a trade mark for the first time in this judgement. The court ruled that the investment function of a trade mark is adversely affected when use of the mark by a competitor substantially interferes with the owner’s ability to create or preserve a reputation capable of attracting customers and retaining loyalty with the trade mark. This consideration of the investment function of a trade mark was followed by a clarification of the scope of “dilution” (detracting from the distinctive character of a trade mark) and “free-riding” (taking unfair advantage of the distinctive character of a trade mark). The court ruled that choosing to duplicate a trade mark without due cause when selecting keywords for internet advertising may be construed as “free-riding”; however, the court made clear that this was intended to deal with cases where internet advertisers were selling replica and imitation goods by using the trade mark as a keyword to attract potential customers.

Ultimately, the European Court of Justice ruled that the decision in this case would come down to a finding of fact by lower courts as to whether or not Marks and Spencer adversely affected one of Interflora’s trade mark’s functions. However, as re-iterated in the court’s press release, “Where [an] advertisement displayed on the internet on the basis of a keyword corresponding to a trade mark with a reputation puts forward an alternative to the goods or services of the proprietor of the trade mark with a reputation – without offering a mere imitation of the goods or services of the proprietor of that trade mark, without causing dilution of the trade mark or detriment to its repute, and without adversely affecting the functions of the trade mark – such use falls, as a rule, within the ambit of fair competition in the sector for the goods or services concerned.”

It will be interesting to see how the High Court in the UK decides the case of Interflora v Marks and Spencer based on this ruling.