07 April 2014

Trade Marks and Internet Searches: Lush v Amazon

Jane Lambert











In Cosmetic Warriors Ltd and Another v amazon.co.uk Ltd and Another [2014] EWHC 181 Mr John Baldwin QC, sitting as a judge of the High Court, had to decide whether causing advertising  to appear on an an Internet user's screen for products that competed with those of the claimants whenever  the user entered the claimants' trade mark into a search box amounted to an infringement of the claimants' mark.

The Parties
The claimants ("Lush") manufacture and supply cosmetics under the Lush brand. They are well known for their colourful soaps and bath bombs.  The first named claimant is the registered proprietor, and the second its licensee, of Community trade mark number 01388313 ("the CTM") under which the word LUSH is registered for
"Perfumes; bath preparations; non-medicated toilet preparations; cosmetic preparations; lotions, powders and creams all for use on the skin; dentifrices; depilatory preparations; deodorants; toilet articles; preparations for care of the hair; shampoos; soaps; essential oils; massage creams and lotions"
in class 3 and
"Pharmaceutical preparations and substances; products and preparations for the care of skin, hair, teeth or nails"
in  class 5.

The defendants are members of the Amazon group which claims to be the largest on-line retailer in the world. Amazon has perfected software that analyses Internet users' behaviour and presents advertisements for products likely to be of interest to them either on Google through Google AdWords or on Amazon's own website whenever a user keys in a particular search term. It was that software that gave rise to this action.

The Complaint
Lush complained had three sets of complaints.

The first was that the following advertisement would appear whenever the word LUSH in  upper or lower case was entered into Google:
"Lush Soap at Amazon.co.uk
www.amazon.co.uk/lush+soap
amazon.co.uk is rated *****
Low prices on Lush Soap
Free UK Delivery on Amazon Orders."
The problem for Lush was that they do not sell their soap or indeed any of their other products through Amazon because they fear that it would be bad for their reputation in the UK if they did. Consequently, anyone clicking on the link would be taken to a page that showed only competing products.

The second complaint was that the following advertisement would appear whenever a user searched for "lush cosmetics bath bomb":
"Bomb Bath at Amazon.co.uk
www.amazon.co.uk/bomb+bath
amazon.co.uk is rated *****
Low prices on Bomb Bath
Free UK Delivery on Amazon Orders."
Again, the user would be led to a page advertising competing bath bomb products whenever he or she clicked the bath bomb link

Lush's third complaint was that the following page would appear whenever a user typed the word "LUSH" in upper or lower case into the search box on the Amazon website:























Lush argued that Amazon's method of advertising amounted to a straightforward infringement of CTM 01388313 under art 9 (1) (a) of the Community trade mark regulation (Council Regulation  (EC) No 207/2009 of 26 February 2009 on the Community trade mark OJ 24.2.2008 L 78/1) in that a sign identical to the CTM had been used in relation to goods that were identical to those for which the CTM had been registered.

The Judgment
Mr. Baldwin found that Lush's first and second complaints were well founded but not the second.

Ratio Decidendi
The judge's starting point at paragraph [29] was
"that, to establish infringement under Article 5(1)(a) of the Directive [the equivalent to art 9 (1) (a) of the Community trade mark regulation], six conditions must be satisfied: (i) there must be use of a sign by a third party within the relevant territory, (ii) the use must be in the course of trade, (iii) the use must be without the consent of the proprietor of the trade mark, (iv) the use must be of a sign which is identical to the trade mark, (v) the use must be in relation to goods or services which are identical to those for which the trade mark is registered, and (vi) the use must be such as to affect or be liable to affect the functions of the trade mark."
From paragraphs [75] and [98] of  the Court of Justice's judgment in Case C-236/08 Google France SARL and another v Louis Vuitton Malletier SA and others [2010] EUECJ C-236/08, 3 ALR Int'l 867, [2010] ECR I-2417, [2011] All ER (EC) 411, [2010] RPC 19, [2010] ETMR 30, [2011] Bus LR 1 Mr Baldwin discerned the following principles:
"1. where an advertiser purchasers from a search engine operator (such as Google) a keyword which is identical to a third party's trade mark in order to display a link to a site on which he offers his goods or services for sale, that advertiser uses the third party's trade mark in the course of trade.
2. where an advertiser, through use of a keyword, is seeking to offer its own goods or services as an alternative to those of the third party, the advertiser uses the sign comprising the keyword in relation to those goods or services
3. in the circumstances of the foregoing, it is for the national court to assess, on a case-by case basis, whether the use made by the advertiser affects the functions of the trade mark.
4. whether the function of a trade mark is adversely affected depends in particular on the manner in which the ad is presented,
5. the function of indicating origin will be 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 in the ad originate from or are connected with the proprietor of the mark or, on the other hand, from a third party
6. ordinary keyword advertising is not liable to have an adverse effect on the advertising function of a trade mark."
 As to whether the use made by Amazon of the word "Lush" affected the functions of the CTM Mr Baldwin referred to the following paragraphs of the judgment in  Google France:
"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, para.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 , para.56, and Case C-245/02 Anheuser-Busch Inc v Budejovicky Budvar NP [2004] E.C.R. I-10989, [2005] E.T.M.R. 27, para.60).
86 Still with regard to adverse effect on the function of indicating origin, it is worthwhile noting that the need for transparency in the display of advertisements on the internet is emphasised in the European Union legislation on electronic commerce. Having regard to the interests of fair trading and consumer protection, referred to in recital 29 in the preamble to Directive 2000/31, Art.6 of that Directive lays down the rule that the natural or legal person on whose behalf a commercial communication which is part of an information society service is made must be clearly identifiable.
87 Although it thus proves to be the case that advertisers on the internet can, as appropriate, be made liable under rules governing other areas of law, such as the rules on unfair competition, the fact nonetheless remains that the allegedly unlawful use on the internet of signs identical with, or similar to, trade marks lends itself to examination from the perspective of trade-mark law. Having regard to the essential function of a trade mark, which, in the area of electronic commerce, consists in particular in enabling internet users browsing the ads displayed in response to a search relating to a specific trade mark to distinguish the goods or services of the proprietor of that mark from those which have a different origin, that proprietor must be entitled to prohibit the display of third-party ads which internet users may erroneously perceive as emanating from that proprietor."
 On AdWords the deputy judge referred to the judgments of the Court of Appeal in Reed Executive Plc and Others v Reed Business Information Ltd and Others  [2004] RPC 40, [2004] ETMR 56, [2004] EWCA Civ 159, (2004) 27(6) IPD 27058, [2004] Info TLR 55, [2004] Masons CLR 29 and Mr Justice Henderson in 32Red Plc (A Gibraltar Company) v WHG (International) Ltd. and Others [2011] ETMR 21, [2011] EWHC 62 (Ch).

As to Lush's first complaint, there was no doubt in the light of Google France that Amazon had used a sign identical to the CTM in relation to identical. The only issue seriously in dispute was whether such use affected or was likely to affect the functions of the trade mark. On that point Amazon had argued that no Internet user was likely to be misled by ads such as the one complained of as he or she would be very familiar with them and was likely to ignore them but if a user did click the link in the ad he would quickly see that Amazon did not offer Lush products. Mr Baldwin rejected that argument at paragraph [42]:
"In my judgment, Lush establishes infringement with respect to this class of case. I consider that the average consumer seeing the ad in paragraph 8 above would expect to find Lush soap available on the Amazon site and would expect to find it at a competitive price. Moreover, I consider that it is likely that if he were looking for Lush soap and did not find it immediately on the Amazon site, then he would persevere somewhat before giving up. My reason is that the consumer is likely to think that Amazon is a reliable supplier of a very wide range of goods and he would not expect Amazon to be advertising Lush soap for purchase if it were not in fact available for purchase. Thus, on the facts of this case, I reject Mr Carr's argument to the effect that the average consumer would, without difficulty, ascertain that the goods referred to by the ad were not the goods of or connected with Lush, the Claimants."
The same point arose with regard to Lush's second complaint. Lush had argued "that it was clear that the average consumer would expect the sponsored link to be of goods which were identified from the search term entered by the consumer." Mr. Baldwin rejected that argument on the ground that it failed "to recognize that consumers are familiar with sponsored ads and are used to seeing such ads from competing suppliers." Lush are brand conscious and had made great efforts to build up a reputation for the Lush mark. The average consumer would not expect to find Lush products on a sponsored search particularly if the same search sparked off all sorts of similar sponsored ads from retailers other than Amazon.

According to Amazon the third complaint went to the heart of Amazon's business model. Amazon contended that the generation of the page shown above did not amount to "use" of the CTM or, if it did, it ought to be allowed because
"Amazon's search facilities are of benefit to the consumer since they enable easy navigation of the Amazon catalogue and enable consumers to locate information and decide for themselves whether that information is relevant. He submitted that the search engine places the consumer in control of the search process and that Lush are seeking by this action to remove that control from consumers and thereby restrict or hinder competition. He urged that intellectual property rights should not be exercised in a way which unduly interferes with the basic right of the public to access technological development, relying onGoogle France and the observations of Lord Sumption in Public Relations Consultants Association Ltd v Newspaper Licensing Agency [2013] UKSC 18."
Mr Baldwin rejected that argument shortly at paragraph [53]:
"In my judgment, however this right of the public to access technological development does not go so far as to allow a trader such as Amazon to ride rough shod over intellectual property rights, to treat trade marks such as Lush as no more than a generic indication of a class of goods in which the consumer might have an interest."
The reason why Amazon argued that it did not use the CTM was that the Court of Justice had said ub Case C-324/09 L’Oréal SA and Others v eBay International AG and Others [2011] RPC 27, [2011] EUECJ C-324/09, [2011] ETMR 52, [2012] Bus LR 1369, [2012] All ER (EC) 501, [2012] EMLR 6:
"C— The eighth question concerning the use of signs corresponding to trade marks in offers for sale displayed on the website of an operator of an online marketplace
98    By its eighth question, the referring court asks, in substance, how the display, on the website of the operator of an online marketplace, of signs identical with or similar to trade marks is to be regarded in the light of Directive 89/104 and Regulation No 40/94.
99    In that regard, it is first necessary to point out that, where sales are made through online marketplaces, the service provided by the operator of the marketplace includes the display, for its customer-sellers, of offers for sale originating from the latter.
100    Next, when such offers relate to trade-marked goods, signs identical with or similar to trade marks will inevitably be displayed on the website of the operator of the online marketplace.
101    Although it is true that, in those circumstances, those signs are 'used' on that site, it is none the less not evident that it is the operator of the online marketplace that is 'using' them, within the meaning of Directive 89/104 and Regulation No 40/94.
102    If a sign identical with, or similar to, the proprietor's trade mark is to be 'used', within the meaning of Art.5 of Directive 89/104 and Art.9 of Regulation No 40/94, by a third party, that implies, at the very least, that that third party uses the sign in its own commercial communication. In so far as that third party provides a service consisting in enabling its customers to display on its website, in the course of their commercial activities such as their offers for sale, signs corresponding to trade marks, it does not itself use those signs within the meaning of that EU legislation (see, to that effect, Google France and Google, paras.56 and 57).
103 As was stated, inter alia by the United Kingdom Government and the Commission at the hearing and by the Advocate General at points 119 and 120 of his Opinion, it follows that the use of signs identical with or similar to trade marks in offers for sale displayed on an online marketplace is made by the sellers who are customers of the operator of that marketplace and not by that operator itself.
104 Inasmuch as it enables that use to be made by its customers, the role of the online marketplace operator cannot be assessed under Directive 89/104 or Regulation No 40/94 , but must be examined from the point of view of other rules of law, such as those set out in Directive 2000/31 , in particular in s.4 of Chapter II , which concerns the 'liability of intermediary service providers' in electronic commerce and comprises Arts.12 to 15 of that directive (see, by analogy, Google France and Google , para.57).
105 In view of the foregoing, the answer to the eighth question is that the operator of an online marketplace does not 'use' —for the purposes of Art.5 of Directive 89/104 or Art.9 of Regulation No 40/94 —signs identical with or similar to trade marks which appear in offers for sale displayed on its site."
Mr Baldwin was unimpressed. He said at paragraph [55]:
"It is clear from this that if third party sellers were using the Lush mark on their goods and were using the Amazon site merely as an online market place, then Amazon would not be using the mark. But that is not this case. None of the products offered on Amazon bear the Lush trade mark of the Claimants (those that do bear the Lush mark, eg Lush Hair Extensions, do so because they are outside the scope of the Claimants' trade marks)."
He continued at paragraph [57]:
"The facts of the present case are quite different from those in either Google France or in L'Oreal v eBay. In brief, in this case Amazon is both the designer and operator of the search engine and the operations on its site include the three categories referred to in paragraph 15 above. Although it may be wearing different hats when it designs its search engines and sells its goods, I have no doubt that the design of the search engine is carried out in order to maximize the sale of goods from the site. It is this philosophy which has made Amazon the UK's biggest online retailer. Nor do I consider it necessary to distinguish for the purposes of determining liability the three separate categories of sales via the website. In relation to the third category, Amazon may just be an online market place but the items in this category are mixed up with those in the other two categories, and Amazon's involvement in the transactions of these other two categories is more than sufficient for it to be commercially involved in the offering for sale and selling; the display on the website is part of its own commercial communication within paragraph [102] of L'Oreal v eBay. In my judgment this use is much more than merely use in a service consisting of enabling its customers to display on its website signs corresponding to trade marks."
Returning to the question of whether Amazon's use of the word "Lush" in generating the web page complained of affected the functions of the CTM the deputy judge held that Amazon could not be held responsible for the typing in by a customer of the word Lush into its search box (paragraph [58]). However, it could be held liable for its software offering consumers "Lush Bath Bombs" and other products the moment they typed in the letters "Lu". In His Lordship's judment the average consumer was unlikely to know how the software worked and was likely to believe that it was "intended to be helpful to him and is some consequence of other searches that have been carried out". He would conclude that that if he were looking for Lush Bath Bombs on Amazon, he would find them by clicking on that menu item. Mr Baldwin rejected in terms the contention that "the average consumer who was typing Lush into the search box would think that the drop down menu reference to Lush Bath Bombs was a reference merely to products which were similar to or competitive with the Lush product." He concluded at paragraph [75] that
"The use complained of by Lush clearly damages the origin function and the advertisement and investment function of the Lush trade mark....."
Comment
Although I struggle to appreciate the distinction  that Mr Baldwin drew between the first and second complaints I believe his reasoning as a whole will be hard to challenge however inconvenient it may be for Amazon and other on-line retailers.

The only thing that worries me is whether he complicated the issue that he had to resolve by taking as his starting point the 6 point summary that he set out at paragraph [29] of his judgment and I have reproduced in full above.  The real argument was the 6th issue and I suspect that that arose because there was a defence under the Trade Marks Act 1938 that a mark was not being used in a trade mark sense. That was the point that arose in Case C-206/01 Arsenal Football Club v Reed [2002] ECR I-10273, [2002] EUECJ C-206/01, [2003] Ch 454, [2003] 3 WLR 450, [2003] CEC 3 and it was knocked on the head pretty comprehensively by the Court in that reference. It is a particularly English notion that is very attractive but has no real place in the Directive or CTM Regulation.

I suggest that Mr Baldwin could have arrived at the same result more simply and directly by considering the language of art 9 (1) (a) of the CTM Regulation.  In this regard it is interesting to note in passing that throughout his judgment the deputy judge referred not to the Regulation but the Directive even though the case concerned a CTM and not a British trade mark. The wording of the provision is as follows:
"A Community trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:
(a)    any sign which is identical with the Community trade mark in relation to goods or services which are identical with those for which the Community trade mark is registered."
Unlike s.10 (4) the Trade Marks Act 1994 "use" is not defined in the Regulation but paragraph (2) is to similar effect:
"(a) affixing the sign to the goods or to the packaging thereof;
(b) offering the goods, putting them on the market or stocking them for these purposes under that sign, or offering or supplying services thereunder;
(c) importing or exporting the goods under that sign;
(d) using the sign on business papers and in advertising."
To my mind, there is no doubt that Amazon was offering goods within the specification or that it was advertising such goods using that sign within the meaning of art 10 (4) (d). It is true that it did not label those goods "Lush" but it offered them to customers in response to enquiries about Lush products.  Being an unsophisticated North Country lass I don't see a whole heap of difference between software that analyses a customer's on-line behaviour and offers competing products and the substitution by a barman of beverage A for beverage B as in the Showerings cases 40 years ago. I do have some sympathy for the argument that intellectual property rights have to be weighed against consumer interests but that is something for the legislature - in this case the European Parliament and Council - and not the judiciary to fix.

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