IPwars.com

Mainly intellectual property (IP) issues Down Under

More ‘fun’ with initial interest confusion

Following last week’s post where Arnold J found Marks & Spencer liable for buying ads on the keyword INTERFLORA because of the initial interest confusion, the 10th Circuit Court of Appeals in the USA has heavily qualified when (perhaps that should be “if” or “if ever”) initial interest confusion can constitute trade mark infringement in the USA.

The case is 1-800 Contacts, Inc. v. Lens.com, Inc., 2013 WL 3665627 (10th Cir. July 16, 2013).

It involved Lens.com buying ads on the keyword, 1800contacts, for contact lenses.

The 10th Circuit  upheld the trial judge’s exclusion of a consumer survey proferred by 1-800 Contacts to establish confusion. There were a number of reasons for its rejection including its flawed methodology. The 10th Circuit went on to conclude that the approximately 7% confusion shown by the survey would be insufficient to rise to trade mark infringement under US law. Accepting that each case depended on its own facts, the 10th Circuit endorsed the general proposition that:

The great weight of authority appears to be that “[w]hen the percentage results of a confusion survey dip below 10%, they can become evidence which will indicate that confusion is not likely.” 6 McCarthy § 32:189 at 32-440 (emphasis added by 10th Circuit).

One wonders whether an Australian court, which must ascertain whether a [substantial][OR a significant] number of the relevant audience might be caused to wonder, would be so robust as to conclude that 5% or 7% of the market was not a substantial (or significant) number?

Professors Goldman and Tushnet identify a range of reasons to regret the 10th Circuit’s decision not to drive a stake through the heart of initial interest confusion. Prof. Goldman does speculate, in particular, whether measuring “click-throughs” as a proxy for confusion could ever cross the 10% threshold.

Keywords – Marks & Spencer infringes INTERFLORA TM

Marks & Spencer has been found to have infringed Interflora’s trade mark in the UK by ‘buying’ ads triggered by Google searches for the keyword INTERFLORA.

An example of the ads Arnold J found infringing:

Keyword search results
CLICK to enlarge

In Google France, the CJEU established that an advertiser would infringe a registered trade mark when its ads were triggered by a trade mark as a keyword where: [1]

“82 The essential function of a trade mark is to guarantee the identity of the origin of the marked goods or service to the consumer or end user by enabling him to distinguish the goods or service from others which have another origin (see, to that effect, Case C–39/97 Canon [1998] ECR I–5507, paragraph 28, and Case C–120/04 Medion [2005] ECR I–8551, paragraph 23).

83 The question whether that function of the trade mark is adversely affected when internet users are shown, on the basis of a keyword identical with a mark, a third party’s ad, such as that of a competitor of the proprietor of that mark, depends in particular on the manner in which that ad is presented.

84 The function of indicating the origin of the mark is adversely affected if the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party (see, to that effect, Céline, paragraph 27 and the case-law cited).

85 In such a situation, which is, moreover, characterised by the fact that the ad in question appears immediately after entry of the trade mark as a search term by the internet user concerned and is displayed at a point when the trade mark is, in its capacity as a search term, also displayed on the screen, the internet user may err as to the origin of the goods or services in question. In those circumstances, the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark (see, by way of analogy, Arsenal Football Club, paragraph 56, and Case C–245/02 Anheuser-Busch [2004] ECR I–10989, paragraph 60).

Arnold J found on the evidence that a significant section of the public were confused and so Marks & Spencer infringed.

It is not possible to do justice in a blog post to the full range of reasons[2] contributing to his Lordship’s conclusion. Some that stand out follow.

Arnold J accepted (at [316]) that the majority of UK internet users appreciated the difference between paid ads and natural or organic search results, but there was still a significant proportion of internet users in the UK who did not. His Lordship also accepted that “nowadays” the majority of consumers appreciate .

nowadays the majority of consumers appreciate [they are being presented with ads by competitors to the brand they had searched for]. But I consider that a significant proportion do not. (emphasis supplied)

Secondly, the nature of the INTERFLORA brand appears to have been crucial. As you will no doubt be familiar, INTERFLORA is a network. It operates through a network of agents who are usually (always?) branded under their own names and trade marks. Those customers who were not buying online from “interflora.co.uk” or “interflora.com”, for example, would typically go into a retail outlet operating under its own name (and which may display the INTERFLORA name and logo).

The significance of this (at [297] and [299]) was that there was great potential for those customers who realised they were dealing with Marks & Spencer when they clicked on the ad mistakenly to think it was part of the INTERFLORA network.

That potential was in fact borne out by the evidence. In particular, there was evidence from “Hitwise data” that people who (1) searched on the keyword INTERFLORA and (2) as a result clicked on a Marks & Spencer ad generated in response to the search (3) were between 44 and 106 times more likely than the average visitor to the M & S flowers site to leave the M & S site without purchasing and instead go on to an INTERFLORA site.

At [304] – [306], his Lordship accepted the propositions that:

a significant number of consumers in Segment A decided after they had clicked through to the M & S website that it was not where they wanted to be and went to the Interflora website instead. The second is that the reason for this change of mind was that those consumers had clicked through from the M & S advertisement because they assumed from the appearance of the advertisement in response to their search that M & S was part of the Interflora network, but they realised that that was not the case when they clicked through to the M & S website and saw no reference to Interflora.

and such “initial interest” confusion was itself enough for trade mark infringement.

Thus, while Google doesn’t infringe by ‘selling’ keywords, the advertiser may and, in this case on Arnold J’s findings, did.

What, if anything, does it mean for us?

First off, the judgment is full of fascinating details about the “AdWords” and “search” market and the strategies that businesses deploy. For example, it appears that Google held around 90% of the global search (and paid advertising relating to search) market, with Bing and Yahoo! trailing out of site. There are also discussions of market research reports and Ofcom studies into what consumers understand when using the internet.

It is not clear whether Arnold J’s reasoning will provide us with much assistance here. First, while EU law does not appear to require use as a trade mark to infringe, the origin function referenced by the CJEU in Google France appears similar to our concept of use as a trade mark – as a badge of origin or to identify the trade source.[3]

Secondly, it seems doubtful that the considerations identified in [84] of Google France would be relevant at all under our law. The idea of examining whether the “normally informed and reasonably attentive internet users” could ascertain the trade source from the ad, or do so “only with difficulty”, indicates that the content of the advertisment may make it clear that the trade mark owner is not the source of the advertised product. However, a registered trade mark is infringed in Australia even if the trade source is made clear, for example by a disclaimer or other identifying factor. The type of analysis being engaged in under EU law is rather more like what would take place in a passing off action or action for misleading or deceptive conduct.[4]

Thirdly, our law does recognise the idea of “initial interest confusion”,[5] but the number of people who apparently went to M & S’ website and “clicked away” does rather highlight the difficulties with the concept as applied to web searches: clicking the back button, or even doing another web search in the browser, is not so costly as walking out of the shop, hopping back in your car and going looking for the intended destination.

Arguably, the most significant point could be the starting point identified at [288] – the Court of Justice’s recognition that:

keyword advertising is not inherently or inevitably objectionable from a trade mark perspective. On the contrary, the case law of the CJEU in this field recognises that, as a general rule, keyword advertising promotes competition ….

On this view, it was only the very special nature of INTERFLORA as a ‘network’ that convicted Marks & Spencer.

Interflora Inc v Marks and Spencer plc [2013] EWHC 1291 (Ch)


  1. See also [226] – [267] (esp.) of Arnold J’s judgment  ?
  2. Embracing some 318 paragraphs! His Lordship does start drawing the threads together at [295].  ?
  3. See *e.g. Optical 88 (No 2)* at [212].  ?
  4. See *e.g. Optical 88 (No 2)* at [99] and Crazy Ron’s at [86] – [88].  ?
  5. For example Southern Cross v Toowoomba at [5] but, at least in the context of misleading or deceptive conduct / passing off (yes, I know this is a post about registered trade marks) some brake may be imposed on that in at least some cases.  ?

Google not liable for sponsored links

The High Court has unanimously allowed Google’s appeal from the Full Federal Court’s ruling that Google was liable for misleading or deceptive statements in sponsored links.

According to the Court’s summary (pdf):

The High Court unanimously allowed the appeal. Google did not create the sponsored links that it published or displayed. Ordinary and reasonable users of the Google search engine would have understood that the representations conveyed by the sponsored links were those of the advertisers, and would not have concluded that Google adopted or endorsed the representations. Accordingly, Google did not engage in conduct that was misleading or deceptive.

French CJ, Crennan and Kiefel JJ delivered the principal judgment, Hayne J and Heydon J each delivered separate concurring opinions.

Google Inc v Australian Competition and Consumer Commission [2013] HCA 1

Not a bad way to start off the legal year!

Google v ACCC

Following on from yesterday’s post, @davidstarkoff points out that:

  • the transcript of the special leave application can be found here; and
  • in due course, the submissions will appear here.

The hearing of the appeal has been fixed for 11 September 2012.

ACCC v Google

Apparently, back on 25 June the High Court granted Google special leave to appeal from the Full Federal Court’s ruling that Google is liable for the misleading ads placed by advertisers.

Maybe the internet will be able to keep working in Australia after all.

Austlii is only up to 20 June, at the time of posting.

Lid dip “Law Geek Down Under

Agreements to block parallel imports

According to the Age today, a number of (fashion) importers have agreed with their overseas manufacturers that the manufacturers will not supply orders to online purchasers in Australia:

Importers close door on overseas online stores by Rachel Wells.

The Gerry Harvey-esque arguments about how GST makes local retailers uncompetitive get a run again but, as previously noted, Prof. Gans is not convinced by that (in the context of digital downloads).

This announcement seems like particularly good timing given Senator Conroy’s plans to have somebody inquire into something.

Maybe this is not exclusive dealing in contravention of s 47 of the Competition and Consumer Act 2010 because does not have the purpose, and it is not likely to have the effect, of substantially lessening competition, but:

(a) I hope they talked to the lawyers before they started making what might be thought of as “admissions”; and

(b) the record companies didn’t get away with the argument.

I guess we can look forward to some further instalments in this story.

The price of digital downloads in Australia

Apparently inspired by this report, Senator Conroy, the Orwellian named Minister for Broadband, Communications and the Digital Economy,[1] has acted to announce a new inquiry to be undertaken by the House of Representatives’ Standing Committee on Infrastructure and Communications.

Reports here and here.

According to that second report, someone trailed a coat on the issue last week when ACCC Commissioner Ed Willett appeared before the Joint Committee on the National Broadband Network.

Now, as a purchaser of digital files, I am hardly unbiased but it does seem hard to justify price differentials of 50% or more. Seems like there is economic reasoning that challenges the Gerry Harvey-esque explanations.

Only problem, almost 20 years ago, the Prices Surveillance Authority recommended (what became in effect) this provision and some record companies got into big trouble trying to circumvent their own corresponding provision, but it would seem nothing has changed. Gartner analyst, Brian Prentice, reported here might be on to something suggesting the problem is the territorial nature of copyright itself. A (copyright) world without borders. Imagine!


  1. He is afterall the man who wants to impose filtering on the internet.  ↩

Convergence Review

The Commonwealth Government has released the Final Report of the Convergence Review (pdf).

While initially there were some indications that this review might relate to intellectual property issues, especially copyright, the Final Report focuses on the areas of regulation traditionally covered by labels like “broadcasting”, telecommunications, “spectrum allocation”, “media ownership” and “local content” requirements.

The Minister’s Press Release notes that:

The release of the report provides an opportunity for stakeholders to engage with the Committee’s recommendations. I expect the recommendations will generate robust public debate

and indicates the Government will respond in due course

Links to various preliminary documents and Word version of Final Report.

Lid dip: Copyright Council

Does anyone think Google is advertising the sponsored links?

The Full Federal Court in Australia does.

The ACCC has successfully appealed the Google Adwords case for misleading and deceptive conduct.

So, for example, Alpha Dog Trainging has been operating a dogtraining business for 12 years. Dog Training Australia (Ausdog) bought ads on the keywords Alpha Dog Training through Google’s Adwords program. One ad generated was:

Alpha Dog Training 
DogTrainingAustralia.com.au All Breeds. We come to you. No dog that can’t be trained. 

Instead of being taken through through to Alpha Dog Training’s website, however, a user who clicked on the ad was taken through to Ausdog’s website.

A clear case of misleading or deceptive conduct by Ausdog.

Because of its role in “selecting” which ads got placed in what order, Google has also been found liable.

Prof. King, formerly an ACCC commissioner, highlights why and thinks the Court got it seriously wrong.

Did we just kill the Internet in Australia?

ACCC v Google Inc. [2012] FCAFC 49 (Keane CJ, Jacobson and Lander JJ)

ISP gets DMCA win in USA

The Ninth Circuit has affirmed the trial court’s summary dismissal of UMG copyright claims against Veoh on the basis of §512(c) – the ‘hosting’ safe harbour. UMG argued 3 reasons why §512(c) did not apply:

First, UMG argues that the alleged infringingactivities do not fall within the plain meaning of “infringe-ment of copyright by reason of the storage [of material] at thedirection of a user,” a threshold requirement under§ 512(c)(1). Second, UMG argues that genuine issues of factremain about whether Veoh had actual knowledge of infringe-ment, or was “aware of facts or circumstances from whichinfringing activity [wa]s apparent” under § 512(c)(1)(A).Finally, UMG argues that it presented sufficient evidence thatVeoh “receive[d] a financial benefit directly attributable to. . . infringing activity” that it had the right and ability to control under § 512(c)(1)(B). We disagree on each count, andaccordingly we affirm the district court.

Each of these requirements has a counterpart in our US Free Trade Agreement ‘inspired’ – see s 116AH items 1 and 4 and therefore should repay consideration.

On the knowledge / awareness point:

At [11], Judge Fisher noted that UMG had not notified Veoh of any infringing material under the DMCA before commencing proceedings. After noting at [12] that Congress placed the burden of policing infringements on copyright holders, Judge Fisher continued at [13]:

[13] UMG asks us to change course with regard to§ 512(c)(1)(A) by adopting a broad conception of the knowl-edge requirement. We see no principled basis for doing so.We therefore hold that merely hosting a category of copy-rightable content, such as music videos, with the generalknowledge that one’s services could be used to share infring-ing material, is insufficient to meet the actual knowledgerequirement under § 512(c)(1)(A)(i).
Then at [14], Judge Fisher rejected UMG’s arguments that Veoh should be held to have sufficient awareness of infringing activity:
…. For the same reasons, we hold that Veoh’s general knowledge that it hosted copyright-able material and that its services could be used for infringe-ment is insufficient to constitute a red flag.
In Section 2, Judge Fisher dismissed UMG’s other evidence of awareness. One point of interest was that an email from Michael Eisner CEO of Disney would have been sufficient if from a third party, but was rejected since it was from a copyright holder and did not follow the DMCA process.

The 1709 blog has a good summary and links here.

As Techdirt points out, however, the costs of the litigation drove Veoh out of business.

Next up, presumably, the Ninth Circuit’s decision in the appeal from Viacom v Youtube.

Although, as noted above, the decision has potential ramifications for the corresponding Australian provision, I am not convinced it has much to say on Roadshow v iiNet (which concerned Category A activity, not Category C anyway) where the AFACT Notices seemed to provide specific notice (once properly explained).

UMG Recording Inc v Shelter Capital Partners LLC., Case: 09-55902, 9th Cir. December 20, 2011

%d bloggers like this: