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The War of the Roses rages on…

07/11/2014

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United Kingdom

In the latest instalment in the so-called “war of attrition” between Interflora and Marks & Spencer (“M&S”), the Court of Appeal has unusually called for a retrial of the case.

Summary

In the latest instalment in the so-called “war of attrition” between Interflora and Marks & Spencer (“M&S”), the Court of Appeal has unusually called for a retrial of the case on the basis that Mr Justice Arnold made a number of legal errors compounded by his reliance on impermissible evidence. The 198 paragraph judgment of the Court of Appeal evaluates Arnold J’s High Court decision of May 2013 and his ‘second additional judgment’ of June 2013 and pulls no punches, even describing his reasoning in relation to the doctrine of initial interest confusion as “unnecessary” and “potentially misleading”.

Factual Background

Interflora operates the Interflora flower delivery network in the United Kingdom and possesses over 1,600 members, who conduct business through over 1,800 florist shops. A significant number of flower orders are made through the company online and Interflora has a substantial reputation within both the UK and the wider EU territory. In recent years, Interflora has developed commercial relationships with third parties, including Sainsbury’s and Co-Op and currently operates a co-branded website with Tescos. Interflora owns Community and UK registered trade marks for, INTERFLORA.

M&S, one of the best known retailers in the UK, has sold flowers in its stores since 1986 and has provided an online flower delivery service since 2000. It has never been a member of the Interflora network and at the time of the original claim, its online flower delivery service did not have as strong a reputation as that of Interflora.

In 2008, Interflora brought a claim against M&S for trade mark infringement due to M&S’ sales tactics involving the Google AdWords Service. M&S had purchased a number of AdWords including, amongst others, the word “Interflora” as a keyword for internet searches. When a consumer searched the internet for Interflora services, using the word “Interflora” in the search box, this triggered an M&S advertisement for similar flower delivery services. Interflora claimed that the use of the word “Interflora” as a keyword in order to display M&S’ own advertisements infringed their rights.

The case ended up at the Court of Justice of the European Union (“CJEU”) and following the CJEU ruling (click here for our previous commentary), Arnold J held that Interflora’s trade marks had been infringed by M&S’ actions as per Article 5(1)(a) of the Trade Mark Directive and Article 9 of the Community Trade Mark Regulation (click here for our previous commentary). Despite a lengthy and considered 50,000 word judgment, M&S appealed on a number of points and on 5 November 2014 the Court of Appeal concluded that the case must be remitted to the High Court for retrial of the claims for infringement.

Grounds for Appeal

The Court of Appeal considered several aspects of the decisions by Arnold J in order to reach its decision:

Injunctive Relief and Negative Matching

Interflora had complained not only that M&S had used their trade mark, but also that M&S had infringed their rights by purchasing keywords that contained derivatives of their mark and other flower-related terms without negatively matching “Interflora”. This meant that due to Google’s advanced broad matching algorithm, an M&S advertisement would be displayed when a consumer searched for “Interflora” as M&S had bid on words such as “flower delivery”. The Court of Appeal concluded that on this point, Arnold J had been correct to rule that by doing so M&S had still used the sign “Interflora”, although indirectly, and that Interflora was entitled to a conventional injunction for the entire territory of the EU, as Arnold J had correctly interpreted the relevant legislation and properly considered the proportionality of the injunction.

Keyword Advertising

The Court of Appeal ruled that the critical question to consider when questioning the trade mark implications of keyword advertising was whether an advertisement prevented a “normally informed and reasonably observant internet user, or only enables them with difficulty, to ascertain whether the goods or services referred to in the advertisement originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party”. The Court of Appeal concluded that a trade mark proprietor was entitled to prevent third party advertisements if internet users were unable to distinguish whether the third party advert was connected to the proprietor or was so vague as to its origins that the internet user thought that the two were connected.

However, the Court of Appeal made it clear that the hypothetical internet user was the average consumer, who was reasonably well-informed and reasonably observant and circumspect. Arnold J had suggested in his main decision that the confusion on the part of internet users who were ill-informed or unobservant must be discounted. While the Court of Appeal agreed with this, it also stated that this formulation ran the risk of “setting the bar too low”. The Court concluded however that Arnold J had been entitled to consider the effect of the advertisements upon a significant section of the relevant class of consumers and was not barred from finding infringement by a determination that the majority of consumers were not confused.

Onus of Proof

The Court of Appeal stressed that when considering the onus of proof for a likelihood of confusion, it was the duty of the claimant to prove the case, not the defendant to disprove it. The Court also stated that it was not the purpose of a trade mark to restrict competition. The Court therefore disapproved of the approach taken by Arnold J, who wrongly held that the onus lay with the third party advertiser to show that the use of the sign in context was sufficiently clear and would prevent any confusion to the average customer as to the origins of the advertised goods or services. It was held that the onus lay on the trade mark proprietor to establish that the advertisement complained of would prevent a normally informed and reasonably attentive internet user to ascertain whether the goods referred to by the advert originated from the trade mark proprietor or not.

Initial Interest Confusion

As stated above, the Court of Appeal held that it was unhelpful to seek to import the doctrine of initial interest confusion (a doctrine derived from US trade mark law, where a consumer is confused by a defendant’s sign at the time of interest in a product or service which is then corrected by the time of purchase) into EU trade mark law. The Court held that the tests developed by the Court to determine trade mark infringements had been carefully formulated to reflect the tension between the development of a system of undistorted competition and recognising that the purpose of this system was not to protect the proprietors against fair competition. The Court ruled that Arnold J was incorrect to consider the doctrine in his decision.

Procedural irregularities and errors on the evidence

The Court of Appeal dismissed claims for procedural irregularity with regards to the academic papers put forward by Interflora. It ruled that Arnold J had considered the nature and content of the papers and had taken a view that he could understand them without the need for an expert. Further, he had decided that, in the interests of justice, they should be admitted, which was ruled by the Court of Appeal to be a reasonable exercise of his discretion.

In contrast, the Court of Appeal ruled that Arnold J had incorrectly relied upon the evidence of Mr Rose (an employee of the online marketing company which managed Interflora’s keyword advertising) in reaching his decision. Further, when considering the survey results compiled by Hitwise and the evidence of Mr Pandya, the author of the Hitwise report, the Court of Appeal stated that it was unable to understand how Arnold J had drawn the conclusions that he had and that by failing to provide his reasons for doing so, he had also erred by giving weight to this evidence.

Conclusion

Having analysed the arguments of both parties and having assessed the various alleged legal and procedural errors, the Court of Appeal judges concluded that, regretfully, they were in no position to determine the issue of infringement for themselves (they had not had the benefit of seeing all of the relevant documents or hearing the oral evidence of the witnesses), which would obviously be beneficial in terms of time and cost and that they had no choice but to allow M&S’ appeal and remit the infringement case for a retrial.

Comment:

The Court of Appeal was quick to stress that appellate courts should not interfere with findings of fact made by trial judges unless compelled to do so. They also emphasised that keyword advertising in itself is not inherently or inevitably objectionable from a trade mark perspective and that it was not the advertiser’s duty to prove non-infringement at trial – it was up to the trade mark owner to prove infringement.

This finding will help restore the equilibrium between the rights of legitimate advertisers and trade mark proprietors, but it also highlights that advertisers must take care when constructing their advertisements to ensure that the consumer is not confused by the trade origin of the third party goods or services that are advertised in response to specific searches.

At the time of writing this, the date of the retrial is not known. It will be interesting to see how the High Court determines the case in light of the Court of Appeal’s guidance and without the evidence which is to be discounted.

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