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Trade mark owners should remain vigilant as the Top Level Domain Space expands

15th July 2013

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The Google AdWords programme, where the highest bidders are offered third party-owned trade marks for keyword advertising, remains debated by trade mark owners. This programme is on a pay-per-click basis, also known as the sponsored link campaign, whereby an advertiser pays only when the link is clicked on.

The Google Adwords programme is a highly popular means of generating traffic to a website and helps to boost online advertising. As a general rule, foreign courts have said that the use of a trade mark as a keyword is acceptable; provided the internet user can discern that there is no connection or association of the mark with the trade mark proprietor. In considering the issue of keyword advertising and trade mark infringement, the importance of fair competition has therefore remained paramount.

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Recent key ruling

On 21 May 2013, the High Court of Justice (England and Wales, Chancery Division) found in favour of Interflora, Inc (“Interflora”) ruling that Marks & Spencer’s (“M&S”), use of the INTERFLORA trade marks by virtue of its successful bids in the Google Adwords programme amounts to trade mark infringement. This brings to an end a four-year battle between Interflora and M&S (Interflora British Unit v Marks & Spencer PLC, Flowers Direct Online Limited C-323-09) and as a consequence, M&S is now prevented from future bids on INTERFLORA trade marks in the Google AdWords programme.

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It would be fair to infer from this judgment that the use of someone else’s trade mark in keyword advertising will now be more restricted. The Interflora ruling is however very specific because the court found that due to the manner in which the advertisements were displayed, it wasn’t evident to the “reasonably well informed and reasonably attentive internet user” that M&S is not part of the Interflora network of florists.

Relevant to the ruling is that M&S had purchased keywords in the Google AdWords programme. As a result, M&S adverts appeared on sponsored links when internet users searched terms including “Interflora”, “Interflora Flowers”, “Interflora Delivery”, “Interflora.com” and “Interflora.co.uk” on Google. Although these adverts did not contain any references to the INTERFLORA mark and its services per se, they did offer internet users flower delivery services.

Defining the trade mark

Contextually, this judgment comes after various questions concerning the interpretation of European trade mark law were referred to the Court of Justice of the European Union (“CJEU”). Striking a balance between protecting trade mark owners while fostering competition remains paramount, and important considerations concerning the use of trade marks in keyword advertising have emerged as a result:

  1. The function of a trade mark indicates origin – In so far as keyword advertising is concerned, the CJEU in its erstwhile Google France decision, introduced a test of a reasonably well informed and reasonably observant internet user to determine whether there is trade mark infringement where key word advertising is concerned.
  2. In applying this test in the Interflora case, the CJEU’s ruling recognises two other functions of trade marks that should be considered when assessing whether there are any adverse effects in keyword advertising that is:-

a)    the investment function meaning that a trade mark allows the owner to acquire a reputation and further attract consumers and retain their loyalty;

b)    the advertising function whereby it is recognised that a trade mark is instrumental in advertising the owner’s goods and services

Consequently, the CJEU found that only when these three functions are adversely affected through use of a trade mark in keyword advertising, will there be trade mark infringement. The court, in applying this test, considered it relevant that the reasonably well informed and reasonably observant internet user could not necessarily discern from the advertisements concerned that M&S was not part of the Interflora network.

It is speculated that the amount of successful claims by trade mark owners, even as a consequence of the Interflora ruling, will however be small. As a norm, internet adverts do indicate that the advert is that of a competitor and that the goods or services are those of the competitor and not the trade mark owner.

Comment

While the CJEU ruled in Interflora’s favour, the case illustrates a continued awareness of the need to foster competitive behaviour on the world wide web.  Provided a reasonably well informed and reasonably observant internet user does not infer an association between the trade mark owner and advertiser, keyword advertising by virtue of using a third party’s trade mark is permitted and may not constitute trade mark infringement.

This impartial approach is no doubt necessary with the release and registration of approximately 1900 new Top Level Domains (gTLDS) which commenced at the beginning of 2013. These will include, among others, generics such as .wine and .adult; brands such as .mcdonalds; community such as .latin; and geographics, such as. joburg and .africa.
What does this mean for trade mark owners?

This gradual introduction of more domain names and more websites will increase both competitive and anti-competitive activity. The considerations herein highlight two issues which trade mark owners should heed:

  1. Keyword advertising will increase – A trade mark owner should monitor any third party use of its trade marks on the internet. A registered trade mark affords the proprietor the exclusive right to use the trade mark for goods and/or services for which it is registered and consequently, any unauthorised use could constitute trade mark infringement. While it may be possible to rely on an unregistered trade mark by demonstrating goodwill and repute in the mark as a consequence of use, this may prove onerous. Proprietors of unregistered marks would be best advised to register trade marks so as to circumvent rampant online advertising.
  2. Cyber-squatting will increase – Unauthorised third parties are likely to register gTLDs comprising trade marks. The damage this may cause remains unknown.
  3. Trade mark owners should apply for TradeMark Clearinghouse (TMCH) validation and registration which provides two distinct advantages:

a)   Sunrise period: Trade mark owners will be given preference to register a trade mark as a domain name prior to the registry opening up for the public. The Sunrise period for all new domain name registries will be at least thirty days;
b)   Alert: Should an unauthorised third party register a trade mark as a domain name, the trade mark owner will be notified within the first ninety days of general registration, thus allowing the trade mark owner to take the relevant recourse.
.AFRICA on the horizon

As Africans, it is of particular interest that the .africa TLD will launch towards the end of 2013, making it possible to register domain names ending in .africa. It is envisaged that the .africa TLD will exemplify Africa’s growth and development, presenting an opportunity to identify the African continent online.

Although the percentage of internet users in Africa is comparatively low to other continents, efforts to improve access to the internet in Africa continue.  Improved access translates into improved prospects for Africa’s economic, social and political future.  Studies conducted by the Internet Society* show that internet access is particularly important in emerging economies as it helps bridge divides such as language, culture, religion and education across countries and continents. Social media is fundamental to freedom of speech. According to the Internet Society*, “Africa was one of the first areas in the world where regular citizens, activists, nongovernmental organizations, and business people demonstrated the freedom of speech these online tools can give. It was, and is, history in the making.”
.Africa domain name registration

The procedure to register .africa domain names hasn’t yet been disclosed. The Internet Corporation for Assigned Names and Numbers (“ICANN”) is however the coordinator of the launch of the new gTLDs and therefore one can expect the .africa TLD to launch in two phases; first the Sunrise phase and second the Landrush phase.

During the Sunrise phase, trade mark owners have priority to register .africa domains incorporating their trade marks for a certain period of time. It is for this reason that trade mark owners should validate their trade marks at the TMCH as only trade mark owners with TMCH validation can take advantage of the Sunrise period. Importantly, it is however only possible for the TMCH to validate registered trade marks and thus only proprietors of registered trade marks will have preference. The Landrush phase will open thereafter and domains can be registered on a first-come-first-serve basis. The .africa registry will be managed by UniForum SA, trading as ZA Central Registry (ZACR). Annual registration costs are expected to be reasonable.

.Africa is described as a “truly African initiative created for Africa, by Africans** offering exciting prospects for businesses and individuals affiliated with Africa to identify themselves in a global audience.

Conclusion

As the world wide web grows, the message to brand owners and trade mark holders remains this: be vigilant and protect, monitor and maintain your brands and trade marks in all territories concerned.

Written by Donvay Wegierski, Director, Werksmans Attorneys

*Internet Society is a global cause-driven organization governed by a diverse Board of Trustees that is dedicated to ensuring that the Internet stays open and transparent – www.internetsociety.org

**www.africainonespace.org

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