CAN YOU BID ON A COMPETITOR’S MARK AS A KEYWORD?

In this case Cochrane Steel Products sought an interdict against the M-Systems for bidding on its brand name CLEAR VU as a Google Adwords search keyword. The applicant did not have a trade mark registration for its mark and accordingly relied on unlawful competition. Specifically, it alleged passing off and a new species of unlawful competition, leaning on.

Judgment was delivered by Nicholls J on 29 October 2014.

This case is open for leave to appeal, but as yet not such application has not been filed.

Google Adwords and the conduct of the respondent

Google Adwords is a service offered by the search provider Google. In essence any person can bid on a keyword to increase the likelihood of a link to its website being displayed in the sponsored links section of the search results. This bid constitutes a price per click (which will be charged to the bidder every time the link is clicked.) Whether or not the link is displayed is determined by the ranking of bid. This ranking is determined by the price bid as well as a number of factors including the quality of the website linked and how frequently consumers visit the site.

The applicant alleged two grounds of complaint. The first, which formed the subject matter of the judgment related to the bidding on the key word CLEAR VU which generated an advert containing a link to the respondent’s website. This advert did not make any use of the mark CLEAR VU in its text.

The second ground of complaint related to a similarly generated advertisement which did include CLEAR VU in the text of the advertisement. However, this ground was not considered. The evidence of this conduct was not admitted into evidence for a variety of reasons.

Decision of the court

The Court considered whether the common law should be developed to recognise leaning on and whether the applicant has established the requisite confusion or deception to necessary for passing off. As a result of its answers to these issues the Court declined to decide whether the applicant had established a reputation in CLEAR VU.

Leaning on and dilution

The primary authority submitted to establish leaning on as a cause of action was academic argument in its favour by Van Heerden and Neethling. This species of unlawful competition is defined to occur when “one entrepreneur, in order to advertise his own performance, and in this way promote his goodwill, uses the advertising mark of another entrepreneur”. There is a substantial overlap between this remedy and passing off but leaning on extends beyond this in not requiring confusion. Therefore it would include dilution and misappropriation of advertising value as well as other conduct.

In considering whether the common law should be extend to include leaning on, the Court noted that South African law is generally opposed to monopolies not specifically provided by statute and that generally use of a name, where there is not likelihood of confusion, is not prohibited. The Court drew specific attention to the fact that the broad genus of unlawful competition is not intended to provide a remedy to a litigant who falls short of the requirements for passing off.

The Court concluded that leaning on, as proposed by the applicant, was not unknown to our courts and that it has, in fact, been considered (albeit under different descriptions) and rejected, often with criticism of the practice of relying on this doctrine.

The Court also noted that passing off (and the common law in general) protects goodwill not a trade mark per se, and on this basis concluded that passing off and other common law remedies to do not provide protection against dilution. Such protection, according to the decision, is to be found under the Trade Marks Act, 1993.

Passing off

The Court made extensive reference to foreign cases relating to Google Adwords. It made particular reference to InterCity Group (NZ) Limited v Nakedbus NZ Limited, Google France SARL v Vuitton Malletier SA, Interflora Inc v Marks and Spencer, and Cosmetic Warriors Limited and Lush Limited v Amazon.co.uk.

The Court noted that these cases do not provide authority for the submission that using the trade mark of another as a search keyword is prohibited or, as a general rule, likely to cause confusion but rather that such conduct is legitimate unless it can be shown that confusion is likely and that this will cause detriment to the ability of a trade mark to act as a source indicator. It noted that where a court accepts a likelihood of confusion, this must be done in light of the specific facts of that case.

The Court confirmed that the test for confusion applied in the foreign cases, which is that confusion will only be likely if, in light of the text of the advertisement, a reasonably well informed internet user cannot determine if the goods advertised originate from the brand owner or its competitor. It also took cognisance of the trend in foreign cases which holds that where an advertisement triggered by a sponsored link promotes alternative goods which are not simply imitations, this is likely to be fair competition. The Court noted that internet users are accustomed to sponsored advertisements and the need to filter their search results.

Nicholls J concluded that the consumers who were exposed to the respondent’s advertisements were highly unlikely to be confused or deceived into believing that the goods advertised were those of the applicant, particularly in light of the multiplicity of suppliers whose websites were returned in the search results. The Court specifically mentioned that this was particularly the case where the text of the advertisement itself did not make use of the mark concerned.

Accordingly the Court rejected the applicant’s claim on the basis of passing off, and dismissed the application. The Court did note that this case specifically related to a claim in the absence of a registered trade mark, which differs from the majority of the foreign cases. However, it pointed out that even a claim on the basis of a registered trade mark would only succeed if confusion could be shown. In the context of the judgment, this should not be read to limit the ability to bring such claim on the basis of dilution or unfair advantage in terms section 34(1)(c) as this remedy is recognised elsewhere in the decision, but rather a comment on the likely requirements for a claim for direct infringement on the basis of sections 34(1)(a) and (b).

Conclusion

This decision has brought much needed clarity to the legal position surrounding the practice of bidding on competitor keywords. It has confirmed that such conducted should conform with the general approach to passing off and trade mark infringement, which is that the core test is whether a likelihood of confusion exists. It establishes that the presence or absence of this must be evaluated on the basis of the advertisement itself, and the goods advertised, (in the context of appropriate surrounding circumstances) and that this is not altered by the fact that the advertisement is generated by the use of a keyword bidding service.

It indicates that advertisers who wish to bid on competitor’s trade marks as keywords may do so, provided that they are careful to ensure that these advertisements are clear and not confusing or otherwise do not take unfair advantage of the advertising value of a registered trade mark. As a result of this, traders will also need to adapt their marketing and brand protection strategies to ensure that they adequate deal with the risks such practices pose to their brands and market share.

by Darren Olivier & Ian Learmonth

(Attorneys acting for M-Systems)

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