Interflora Ruling: Trademark Bidding is Fair Game in UK

A ruling has been made on the Interflora trademark case in the UK. The ruling could impact the restrictions on bidding for trademarked terms in Google AdWords. While Interflora won the case, some bidding permissions have also been granted.

The Interflora v M&S and Flowers Direct Online Case

legal-gavelThe court case started in September 2009, more than a year after Google originally gave UK AdWords users permission to bid on trademarked terms. Interflora, a florist network, sued Marks & Spencer plc (M&S) and Flowers Direct Online ltd, two companies that was bidding on the “Interflora” term. Now the case has a ruling, but the signals are mixed for advertisers.

At first glance, Interflora won the case. This preliminary ruling indicates that a trademark holder can restrict competitors from bidding on trademarked terms and can collect damages for the improper use of a trademarked term in specific circumstances. For Interflora, any actual payment from M&S and Flowers Direct Online will be ruled on by the national court.

However, it must be noted that bidding on trademarked terms was also protected in some instances.

When You Can and Can’t Bid on Trademarked Terms

This UK ruling indicated that bidding on trademarked terms, when taken by itself, falls within fair competition:

[I]t cannot be accepted that the proprietor of a trade mark may […] prevent a competitor from using a sign identical with that trade mark […] if the only consequence of that use is to oblige the proprietor of that trade mark to adapt its efforts to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.

To translate that into plain English, if the only consequence of bidding on a trademarked term is that the trademark holder has to compete with the bidding company, then there’s nothing the trademark holder can legally do to prevent the bid or seek damages.

However, in many cases there are additional consequences of bidding on a key term, with many of those consequences being contingent on the ad copy presented. The twomajor circumstances cited in this ruling are instances where the bid and ad:

  • ”adversely affects the trade mark’s function of indicating origin.” In other words, you can’t do anything that makes it unclear whether or not you are the trademark holder or sell the trademarked goods.
  • ”adversely affects the trade mark’s investment function” by “interfer[ing] with the proprietor’s use of its trade mark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.” In other words, you can’t use the trademark bid to damage the reputation of the company that holds the trademark or make the trademarked term less powerful (for example, by treating it as a generic term).

In summary: You can bid for trademarked terms, but you can’t do so in a way that confuses consumers about your company or products (including by presenting your company as the trademarked company) or that damages the reputation or power of the trademarked term.

You can read the additional details and definitionsin the legally dense full reading.

”Unfair Use”: Is All Trademark Bidding Restricted?

Interflora indicated that they were excited about the ruling, largely because (in Interflora’s words) “a competitor may be construed as free-riding on a brand when that competitor uses the brand owner’s trade mark as a paid for keyword to deliver sponsored advertising along side natural search results.”

However, Interflora’s statements may be based on portions of the ruling that were taken out of context.

It’s true that the ruling states that restrictions will be placed on bidding that “takes unfair advantage of the distinctive character or repute of the trade mark (free-riding).” While the ruling gives a lengthy discussion on unfair use, deeming that any targeted bidding of a trademarked term is a clear attempt to take advantage of a competitor’s established reputation, they also provide one exemption: if the competing company has “due cause,” they are not considered to be taking unfair advantage. The ruling then defines online advertisements that “puts forward […] an alternative to the goods and services of the proprietor of the trade mark” as “not without ‘due cause’” (section 91).

Interflora is still the likely winner, however. While this ruling specified that an additional court ruling was needed to determine the extent of the violations from M&S and Flowers Direct Online, and that further rulings would be needed to enforce future trademark bidding violations, it’s likely that at least some violations will be cited in this case. Interflora is now seeking damages for those violations in a national court; the remainder of Interflora’s legal battle is likely to run its course during 2012.

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