Keyword Advertising: The Next Instalment In The Interflora v M&S Saga

By Sadulla Karjiker

[This article first appeared on the Anton Mostert Chair of Intellectual Property blog, here.]

A few days after the first South African case to consider the issue of internet keyword advertising (Cochrane Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd & Another Case 39605/13, 29 October 2014), we had the next instalment – from the English Court of Appeal – in the dispute between Interflora and Marks & Spencer (Interflora Inc & Another v Marks & Spencer plc [2014] EWCA Civ 1403). Yes, it is, indeed, not just any dispute concerning keyword advertising. It appears that these two litigants have taken it upon themselves to definitively settle the law relating to keyword advertising, through the various judgments their dispute is yielding. This article focuses on two areas on which the court has shone some light, and which may be of assistance to our courts when next seized with a matter concerning keyword advertising: the test of the average consumer in determining trademark issues and the use of the doctrine of initial interest confusion; and, the issue of negative matching.

For the uninitiated, internet search engines, most notably Google, with its AdWords service, offer advertisers the right to have advertisements (or “sponsored links”) displayed in response to specified search terms (also known as “keywords”) which internet users are likely to use. Advertisers can select keywords which internet users are likely to use in their searches, and this ensures that their sponsored links to their websites are displayed if an internet user’s search includes one or more of the advertiser’s selected keywords. These sponsored links are, generally, distinguishable from, and displayed separately from, the so-called “natural” (or “organic”) results to search queries.

What has made the practice of keyword advertising so contentious is that internet search companies, such as Google, allow advertisers the right to select third parties’ trademarks, invariably those of their competitors, as keywords. The ranking of the sponsored links is primarily determined with reference to the price advertisers are willing to pay. The advertiser who is prepared to pay the highest price per click (i.e. when an internet user clicks on the sponsored link and goes to the advertiser’s website (a “click-through”)) for a particular keyword will have its sponsored link listed at the top of the sponsored links. Marks & Spencer (“M&S”) paid Google for sponsored links in response to searches for “interflora” or minor variants of it.

Google also offers various refinements, or sensitivity triggers, as to when a sponsored link appears. One of these is “negative matching”; an advertiser can request that its sponsored link should not be displayed even though the internet user’s search contains a related search term.

The court repeated the legal position in relation to keyword advertising as developed by the European Court of Justice (“ECJ”). Given the essential function of a trademark, the crucial issue that had to be determined in the case was whether the average consumer was able, without difficulty, to ascertain the origin of the relevant goods or services. However, it is important to note that there can be infringement of a trademark owner’s exclusive rights by a third party’s use of the trademark if such use has adversely affected any of the functions of the trade mark.

When assessing a particular trademark issue, such as whether the origin function was affected, it had to be assessed from the perspective of the average consumer, who, in the context of keyword advertising, is the reasonably well-informed and reasonably observant internet user. The average consumer test involves a qualitative assessment, not a statistical test, unlike the notion of a “substantial proportion” of the actual public. The court must exercise its own judgment, in accordance with the principle of proportionality and the principles laid down by the ECJ, to determine the perceptions of the average consumer in any given case in light of all the relevant circumstances. In a case concerning ordinary goods or services, the court can exercise its own judgement (based on common sense and experience of the world) in assessing the matter from the perspective of the average consumer.

Ultimately, the court must give a binary answer to the particular question before it. The court does not require evidence from consumers, expert evidence or consumer surveys.

The doctrine of initial interest confusion refers to confusion on the part of the public, as to the trade origin of the goods or services in relation to which the impugned sign has been used, particularly in promotional or advertising materials, prior to – but not at the time of – purchase of those goods or services. The court held that the US doctrine of initial interest confusion should not be used in EU trade mark law, particularly not in relation to keyword advertising because it could result in the incorrect outcome. It did not elaborate on how the application of initial interest confusion could result in a misleading analysis, but said that the doctrine of initial interest confusion did not incorporate the appropriate checks and balances to determine whether the average consumer was able to ascertain the origin of the advertised goods or services and so make an informed decision.

Despite the peculiar facts of the specific situation – Interflora had an extensive flower-delivery network, of which M&S was not a member, and was well-known in the United Kingdom – the court held that M&S was not required to use negative matching on generic flower-related keywords it purchased. It would only be required to do so if it was shown that the sponsored links resulted in the average consumer being unable to ascertain the origin of the goods or services. The court emphasised that the purpose of trademark law is not to protect the trademark proprietor against fair competition. The aim of internet advertising using keywords corresponding to trademarks is, in general, to offer to internet users alternatives to the goods or services of those trademark proprietors, and so is not inherently, or inevitably, objectionable from a trademark perspective.

The case was referred back to the trial court to determine the question of whether there was trademark infringement by M&S of Interflora’s trademark in light of the legal principles clarified by the Court of Appeal.

Dr Sadulla Karjiker is a member of the Anton Mostert Chair of Intellectual Property Law, Department of Mercantile Law, Faculty of Law, University of Stellenbosch, South Africa