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Victoria Plums

Author Rasbak
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Victoria Plum Ltd (t/a Victoria Plumb) v Victorian Plumbing Ltd and Others [2016] EWHC 2911 (Ch) (18 Nov 2016)  Mr Justice Henry Carr

In this case, Victoria Plum Ltd. had registered the words VICTORIA PLUMB as a UK trade mark in relation to a range of goods and services in classes 11, 20 and 35 under trade mark number 3,066,332. The specified services include:

"the bringing together, for the benefit of others, of…[bathroom items]… enabling customers to conveniently view and purchase those goods… via a website."

The question before Mr Justice Henry Carr was whether that trade mark was infringed by a process known as pay-per-click bidding.

Pay-Per-Click Bidding

Just about everyone who has ever used the internet will be familiar with Google, Yahoo and other search engines. Whenever a user wants to search the internet he or she enters search terms that the user thinks may be relevant into a slot on the search engine's web page and then clicks the "Search" symbol. Those search terms are known as "keywords" and search engine operators have found a way of making money out of them.

Whenever a user clicks a link to a website the website owner becomes liable to pay the search engine operator a sum of money.  That is what is known as "pay per click" (see the article on Pay-per-click in Wikipedia). The operators have developed software that enables advertisements containing pay-per-click links to be generated by typing keywords. Those advertisements appear on pages known as "search engine results pages" or "SERPS".  The position and prominence of such advertisements on a SERP depend on how much the advertiser wishes to pay for each keyword. Whoever is prepared to pay the most gets the best advertisement in the most prominent position. The price of each keyword is determined by the software through an automated online auction.

The process is perhaps better explained in this Wikipedia article:

"The advertiser signs a contract that allows them to compete against other advertisers in a private auction hosted by a publisher or, more commonly, an advertising network. Each advertiser informs the host of the maximum amount that he or she is willing to pay for a given ad spot (often based on a keyword), usually using online tools to do so. The auction plays out in an automated fashion every time a visitor triggers the ad spot.
When the ad spot is part of a search engine results page (SERP), the automated auction takes place whenever a search for the keyword that is being bid upon occurs. All bids for the keyword that target the searcher's Geo-location, the day and time of the search, etc. are then compared and the winner determined. In situations where there are multiple ad spots, a common occurrence on SERPs, there can be multiple winners whose positions on the page are influenced by the amount each has bid. The bid and Quality Score are used to give each advertiser's advert an ad rank. The ad with the highest ad rank shows up first. The predominant three match types for both Google and Bing are broad, exact and phrase match. Google also offers the broad modifier match type which differs from broad match in that the keyword must contain the actual keyword terms in any order and doesn't include relevant variations of the terms."

There is more information in paragraphs [23] to [29] of Mr Justice Henry Carr's judgment.

The Complaint

S.9 (1) of the Trade Marks Act 1994 confers on the registered proprietor of a trade mark "exclusive rights in the trade mark which are infringed by use of the trade mark in the United Kingdom without his consent." The next sub-paragraph of that section adds that the acts amounting to infringement, if done without the consent of the proprietor, are specified in s.10.  Subsection (4) of that section provides:

"For the purposes of this section a person uses a sign if, in particular, he-
(a). affixes it to goods or the packaging thereof;
(b). offers or exposes goods for sale, puts them on the market or stocks them for those purposes under the sign, or offers or supplies services under the sign;
(c). imports or exports goods under the sign; or
(d). uses the sign on business papers or in advertising."

Victorian Plumbing Ltd. had  bid quite considerable sums for the following keywords:

a) "victoria plumb" / "victoriaplumb";
b) "victoria plum"/ "victoriaplum";
c) "victorian plumb" / "victorianplumb";
d) "victorian plum" / "victorianplum"; 

When keyed into search engines those keywords generated advertisements with links to Victorian Plumbing's website. The claimant submitted that bidding for those keywords constituted use within the meaning of s.10 (4) and hence infringement of its trade mark in that each of those keywords was either identical or similar to that mark and used in respect of the same or similar goods and services.

The Defence

Victorian Plumbing could not deny that those search terms were identical or similar to the registered trade mark or that they were used in respect of the same or similar goods and services but it raised the defence of honest concurrent user which Mr Justice Henry Carr summarized at paras [13] and [14] of his judgment:

"[13] .............  The parties have traded for many years in a wide range of directly competing goods. It is self-evident that the parties' names are so similar that there is a likelihood of confusion on the part of the public between them. In spite of actual confusion, the parties have co-existed peaceably for many years, each trading, without complaint, on an increasing scale.
[14] They allege that the parties have, honestly, built up their respective businesses and reputations using confusingly similar names, over many years. Consequently, as a matter of law, they have to live with the resulting confusion. To those consumers who are confused, the Claimant's trade mark does not constitute a unique guarantee of origin. The Defendants have done nothing to exacerbate confusion. Bidding on the Claimant's trade mark as a keyword constitutes fair competition. It is less likely to cause confusion than, for example, the First Defendant's television advertising, about which the Claimant does not even try to complain."

Victorian Plumbing also relied on estoppel and acquiescence.

The Counterclaim

The learned judge noted at para [12] that:

"The Claimant has also bid on the First Defendant's name as a keyword. It ceased this activity in 2016. The Defendants claim that, as a result of this conduct, the Claimant is estopped from pursuing its claim of infringement of trade mark. Alternatively, it has pleaded a counterclaim for passing off, which it relies on solely as a "squeeze" in the event that its defences fail."

He added at [138]:

"The Defendants complain of the Claimant's bidding on the name "Victorian Plumbing" as a keyword, so as to cause the return of sponsored links containing the text "Victoria Plum(b)". They allege that if, contrary to their primary case, bidding by the First Defendant on the Victoria Plum(b) marks as keywords is an infringement, then the same is true of the Claimant's keyword bidding."

Director's Liability

The claimant also joined the first defendant's managing director, John Radcliffe, as a second defendant on the basis that he was a joint tortfeasor. It contended that  he had day-to-day control of his company's activities, that he maintained its website and dealt with making changes to it, that he was solely responsible for branding the site, that he undertook the majority of the search engine optimization work. that he nvested time and money into SEO and that until 2012 he was solely responsible for ad words campaigns.

The Issues

The issues that the judge had to decide were as follows:

• whether bidding for the keywords constituted use within the meaning of s.10 (4);
• whether the defence of "honest concurrent user" applied in a case such as this;
• whether Mr Radcliffe was personally liable for his company's wrongdoing; and
• whether the claimant was liable to the first defendant for passing off.

The Judgment

His Lordship held at [143]:

"i) The First Defendant is liable for infringement of trade mark of the Claimant's "Victoria Plum(b)" marks.
ii) The Second Defendant is not jointly liable with the First Defendant for infringement of trade mark.
iii) The First Defendant's counterclaim for passing off against the Claimant is successful."

Whether Pay-per-click Bidding infringes a Trade Mark

In Case C-236/08 Google France Sarl v Louis Vuitton Malletier SA  [2010] ECR I-2417, [2011] Bus LR 1, [2011] All ER (EC) 411, [2010] RPC 19, [2010] ETMR 30, 3 ALR Int'l 867, the Court of Justice of the European Union decided that bidding on a trade mark as a keyword could constitute use of a sign identical with that mark in the course of trade. However, the Court hinted in paras [82] to [90] of its judgment that might not always be the case. It was possible to envisage circumstances when bidding for a keyword might not indicate the origin of goods or services and hence not infringe.

The Court of Appeal considered Google France in Interflora Inc and another v Marks and Spencer Plc (Rev 1) [2014] EWCA Civ 1403 (5 Nov 2014), [2015] ETMR 5, [2015] FSR 10, [2014] WLR(D) 473, [2015] BUS LR 492. Lord Justice Kitchin noted at para [98]:

"… internet advertising using keywords which are identical to trade marks is not an inherently objectionable practice. On the contrary, its aim is, in general, to offer to internet users alternatives to the goods or services of trade mark proprietors and it is not the purpose of trade marks to protect their proprietors from fair competition"

After considering both cases Mr Justice Henry Carr and reconciled them as follows at para 51:

"In my view, the case law establishes the following:
") A user who searches by reference to a brand name is likely to be looking for that brand. In this context, there is a particular propensity for confusion if the resultant advertising is vague as to origin; Google France at [85]; Interflora at [132].
ii) This explains the particular emphasis on "transparency" in the judgment of the CJEU. The reason why transparency is necessary is to protect the consumer from unclear advertising which, in context, is liable to mislead; Google France at [86] – [87]; Interflora at [143].
iii) On the other hand, bidding on trade marks as keywords, where the advertiser ensures that his advertisements enable average internet users to ascertain whether the goods or services originate from the trade mark proprietor or an unconnected third-party, cannot be objected to; Google France at [57] – [59]; Interflora at [98]."

Earlier in his judgment at para [48] he distilled the following principles:

"In my judgment, it is necessary, first, to identify the signs complained of. These are 'Victoria Plumb' and trivial variations on that sign. This constitutes use of signs identical to, or immaterially different from, the Victoria Plum(b) marks. This is not use of the First Defendant's name 'Victorian Plumbing'. Secondly, it is necessary to ask whether such use is likely adversely to affect the origin function of the Claimant's trade marks (since, in the present case, is not alleged that any other function is adversely affected). If the answer to this second question is in the affirmative, then, subject to the various defences advanced by the defendants, there is infringement. If it is answered in the negative, then there is no infringement. This does not alter the fact that the First Defendant is using the Claimant's name, rather than its own name, in the keyword bidding complained of."

Applying that test to the facts of the case he found that the trade mark had been infringed.

Honest Concurrent User

Noting that there was no provision for the defence of honest concurrent user in Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks or indeed Council Regulation (EC) No 207/2009 of 26 February 2009 on the European Union trade mark, Mr Justrice Henry Carr explained that the doctrine derived from the CJEU's decision in Case C-482/09, Budejovicky Budvar NP v Anheuser-Busch Inc.  [2012] ETMR 2, [2012] RPC 11, [2011] EUECJ C-482/09, [2012] Bus LR 298 that:

"Article 4(1)(a) of Directive 89/104 must be interpreted as meaning that the proprietor of an earlier trade mark cannot obtain the cancellation of an identical later trade mark designating identical goods where there has been a long period of honest concurrent use of those two trade marks where, in circumstances such as those in the main proceedings, that use neither has nor is liable to have an adverse effect on the essential function of the trade mark which is to guarantee to consumers the origin of the goods or services."

That judgment was considered by the Court of Appeal upon receiving the CJEU's ruling and again in IPC Media Ltd v Media 10 Ltd [2014] EWCA Civ 1439 (12 Nov 2014).

After considering those cases, the judge concluded at [74]:

"i) Where two separate entities have co-existed for a long period, honestly using the same or closely similar names, the inevitable confusion that arises may have to be tolerated.
ii) This will be the case where the trade mark serves to indicate the goods or services of either of those entities, as opposed to one of them alone. In those circumstances, the guarantee of origin of the claimant's trade mark is not impaired by the defendant's use, because the trade mark does not denote the claimant alone.
iii) However, the defendant must not take steps which exacerbate the level of confusion beyond that which is inevitable and so encroach upon the claimant's goodwill."

A crucial element of that defence was honesty and that had to be assessed as follows:

"i) The defendant has a duty to act fairly in relation to the legitimate interests of the trade mark proprietor.
ii) All circumstances must be considered when ascertaining whether or not the use by the defendant is honest, including whether the defendant can be regarded as unfairly competing with the trade mark proprietor.
iii) However, the question is not simply whether use of the sign complained of gives rise to consumer deception, as such deception may have to be tolerated. Similarly, the defendant may well be aware of the existence of such confusion, having lived with it for a considerable period.
iv) The question is whether the defendant has taken steps which exacerbate the level of confusion beyond that which is inevitable and so has encroached upon the claimant's goodwill.
v) Whether the defendant ought to be aware that such steps will exacerbate confusion is a relevant factor."

His Lordship decided that the honest concurrent user defence could not apply when the parties used different trade marks . In any case, Victorian Plumbing had greatly increased its expenditure on keywords thereby greatly exacerbating the level of confusion.

Mr Radcliffe's Liability

The judge referred to Lord Neuberger's judgment in Sea Shepherd UK v Fish & Fish Ltd  [2015] 4 All ER 247, [2015] 2 WLR 694, [2015] WLR(D) 102, [2015] 1 AC 1229, [2015] UKSC 10, [2015] 1 Lloyd's Rep 593, [2015] 2 All ER (Comm) 867, [2015] AC 1229 where he identified three conditions for joint liability:

"First that he has assisted in the commission of the tort by another person; second, that it is pursuant to a common design; and third, an act is done which is, or turned out to be tortious."

In his Lordship's view the first and second conditions had not been satisfied:

"The acts complained of were not commenced until the end of 2012 and Mr Radcliffe's knowledge of and involvement in these acts was at a very high level of generality. He mistakenly claimed during his oral evidence that the First Defendant was still using the Victoria Plumbing ad format, although this was clearly incorrect. This shows his lack of involvement in the First Defendant's keyword advertising. The Claimant submits that because Mr Radcliffe stated in cross-examination that he took full responsibility for all actions of his staff, and had regular meetings with Mr Pascoe to discuss the success of the bidding campaign, this is sufficient to show a common design. I disagree. Mr Radcliffe was fulfilling his responsibilities as Managing Director but was not sufficiently involved in the acts complained of by the First Defendant for joint liability to be established."

This reasoning suggests quite a narrowing of scope for holding directors personally liable for their company's IP infringements since the Court of Appeal's decision in  MCA Records Inc and another v Charly Records Ltd and Others [2003] 1 BCLC 93, [2002] FSR 26, [2002] ECDR 37, [2001] EWCA Civ 1441, [2002] EMLR 1, [2002] BCC 650.

Claimant's Keyword Bidding

Victoria Plumb began to bid on Victorian Plumbing's name, initially in May 2011 and then on a more substantial scale in August 2012. That bidding continued until 2016. Victorian Plumbing and Mr Radcliffe argued that against the background of long-standing and peaceable coexistence of the parties' businesses, a reasonable party in their position would have understood the other side as positively indicating that it did not object to their bidding on its trade marks as keywords and that in the light of that representation, it would be unfair to allow the claimant to complain about those acts.  The judge rejected that contention on the ground that the claimant's conduct did not amount to a representation and, even if it did, the defendants never relied on it.

However, the claimant's bidding did amount to passing off.  The judge was satisfied that the first defendant had goodwill in the Victorian Plumbing name and that bidding for those keywords was a misrepresentation. In the circumstances, damage could be inferred. The counterclaim therefore succeeded.

Conclusion

This is an important decision on three difficult points of law, namely:

• when keyword bidding infringes a trade mark and amounts to passing off;
• whether the honest concurrent user defence applies under the 1994 Act; and
• when a director can be personally liable for the wrongdoing of his company.

It is likely to be quoted frequently in skeleton arguments as well as case notes and articles. Should anyone wish to discuss this case or trade marks and passing off generally, he or she should call me on +44 (0)20 7404 5252 or send me a message through my contact form.