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UK retailer Argos loses its battle against US company in Court of Appeal

Earlier this week, the UK Court of Appeal delivered its keenly awaited ruling in the dispute between the UK retailer Argos and Argos Systems, a US company. Although the retailer ultimately lost its appeal, the court did disagree with some key aspects of the High Court's decision, including on the question of website targeting, as we discuss briefly in this blog.

Earlier this week, the UK Court of Appeal delivered its keenly awaited ruling in the trade mark dispute between the UK retailer Argos Ltd and Argos Systems Inc, a US company. Although the retailer ultimately lost its appeal, the court did disagree with some key aspects of the High Court's decision, including on the question of website targeting, as we discuss briefly in this blog.

Quick recap of the dispute

The UK retailer (Argos UK) alleged that Argos Systems Inc (a US company providing CAD systems) was infringing its EU trade marks for ARGOS by allowing its argos.com domain to feature Google AdSense advertising. Argos Systems had registered its domain name in 1992 and Argos UK had registered the domain name argos.co.uk in 1996.

Argos UK did not dispute Argos Systems’ use of argos.com as a website and for email to promote its software. Instead, it argued that the use of argos.com in conjunction with the advertisements amounted to trade mark infringement and passing off. Argos Systems participated in Google’s AdSense advertising program and Argos UK’s ads were among those that appeared on Argos Systems’ website. This meant that indirectly the money Argos UK paid to Google (as part of the Google Adsense program) was being received by Argos Systems, as the clicks on the ads were from Argos Systems’ website. According to the evidence, Argos Systems earned roughly US$100,000 from the AdSense programme over a seven-year period.

In February 2017, the High Court rejected Argos UK's action under Article 9(1)(c) of the EUTM Regulation (207/2009) on the basis that the US company's use of "Argos" did not :

  • constitute use in the UK as its website was not targeted at UK consumers;
  • meet the requirement for a link between it and the UK retailers' trade marks in the average consumer's mind; and
  • take unfair advantage of Argos UK's marks.

Court of Appeal ruling

Argos UK appealed to the Court of Appeal. The appeal was heard this summer and the judgment  published on 9 October 2018.

The Court of Appeal's decision differs in several respects from the High Court's decision, however ultimately the UK retailer still lost.

  1. Targeting

In contrast to the High Court's decision, the Court of Appeal found that Argos Systems was targeting UK users. It said that the issue of targeting had to be considered objectively from the perspective of average UK consumers; the question was whether they would consider that the advertisement was targeted at them. Whether a website's landing page was targeted at the UK would depend on the consumer's reaction to it.

The Court of Appeal considered that the US company was providing a billboard service which included advertisements which were plainly aimed or directed at UK visitors, although Google and its advertisers were also targeting advertisements at the UK. It was clear that the appearance of such advertisements was neither de minimis nor accidental.

  1. Link

The Court of Appeal also disagreed with the High Court in respect to the judge's findings about the requisite link between Argos System's use of the sign "Argos" and Argos UK's trade mark, concluding that there was one.

The court considered that the internet traffic which arrived at the US company's website on the strength of the UK retailer's reputation already had the ARGOS trade mark in mind. While the visitors would immediately realise that they were in the wrong place, they were also immediately confronted by Argos System's billboard service. Then, they either left the site altogether or clicked on an advertisement to do so, but the US company still obtained the impression fee earned by the downloading of the advertisements. Advantage was thereby taken of an opportunity which arose only because the internet traffic had arrived at the site on the strength of Argos's UK's reputation. The Court of Appeal concluded that this was sufficient to establish the necessary link.

  1. Unfair advantage

Having overcome the first two hurdles, unfortunately for the UK retailer, it fell at the final one, with the Court of Appeal agreeing with the High Court that no unfair advantage had been taken of the distinctive character or repute of the ARGOS trade mark.

The judge had found that Argos System's use of "Argos" did not cause Argos UK's customers to click on advertisements for competitors, or cause any diversion of business away from it. The Court of Appeal said that there was no basis for interfering with the judge's evaluation.

The court added that the fact that Argos System's could have stopped participating in the AdSense programme, leaving the misdirected traffic to work out for itself that it was in the wrong place or, perhaps have provided a simple link for internet users to click on if they were seeking the UK company, did not mean that the AdSense solution to the problem was unfair. There was no reason why, as a matter of fairness, the US company should have adopted the least advantageous or most burdensome way of dealing with the unwanted traffic. Equally, there was no reason to say that the US company should not take steps to optimise the advantage they received from the AdSense programme.

Comment

In this dispute Argos UK was unfortunately at a commercial disadvantage from the outset as it had not secured the argos.com domain name before Argos Systems. However, the registration of the domain name was towards the end of the last century when the online marketplace had scarcely begun.

It is noteworthy how the Court of Appeal approached the first and second limb of Article 9(1)(c) of the EUTM Regulation differently to the trial judge, although Argos UK still lost overall because the courts reached the same conclusion with regard to unfair advantage. It will be interesting to see what impact the Court of Appeal's approach in this case to both targeting and the requisite link has in future disputes of this nature.

Postscript

In March 2019, the Supreme Court refused to give leave to appeal the Court of Appeal's decision.

 

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