WHAT’S IN A NAME? A CASE FOR A PARADIGM SHIFT IN LEGAL PROTECTION OF TRADE MARKS AND FAIR COMPETITION IN KEYWORD ADVERTISING

Trade mark law and the protections offered to both registered and unregistered brands are essentially about the intrinsic value of names and brands that represent certain commercial interests within an increasingly competitive spectrum as far as the business marketplace is concerned.  The oft-cited aphorism that the law of trade marks is only part of a broader field of unfair competition probably forms one of the strongest premises upon which the law on trade mark infringement and passing off is based.  Indeed, trade mark law is a concept of law diametrically opposed to Shakespeare’s famous quote “What’s in a name?  That which we call a rose by any other name would smell as sweet” in the play ‘Romeo and Juliet’.  Whereas this is the case, trending online marketing strategies have elicited a need to question the real purpose and function of brand names and their fair usage within the arena of competitive brand marketing strategies.

 

Internet search engines have created online marketing tools for marketers to utilise, effectively upping the stakes in as far as marketing strategies are concerned.  Google Adwords is one such online marketing advertising service in which advertisements (ads) appear as “sponsored links” on the Google search results pages as well as the results pages of Google’s partners, such as AOL and Ask.com. The advertiser chooses keywords and a short one or two-line text ad, which is displayed on the results pages when the ad keywords match up with the search keywords. The keywords, when searched for, trigger the advertiser’s ad to be displayed at the top, bottom, or beside the list of search results Google displays for a particular search query.  This service enables advertisers to increase the likelihood of a link to their websites being displayed in the sponsored links section of the search results.

 

Adwords have generated a couple of law suits in the areas of trade mark law and competition law across various jurisdictions, particularly in cases where third party advertisers use or bid on registered trade marks as keywords on Google’s search engines.  Unfair competition and misleading/false advertising have also been a concern with respect to the use of Adwords where users are likely to be misled and targeted by Adwords advertisers misappropriating competitors’ brands.

In response, courts of law have unequivocally established that keyword advertising is not inherently objectionable, the rationale being that there is no reason why an entrepreneur should not take the benefit of marketing their goods and services by associating them with well known brands linked to another entrepreneur, provided there is no element of confusion or deceit to the public.  Indeed, courts generally frown upon creating or promoting non-statutory monopolies; rather, case law recognises that as a general principle, keyword advertising facilitates and promotes competition.

 

More recently, South Africa’s courts delivered their first Google Adwords decision in a case in which the Applicant (Cochrane Steel Products) sought an injunction prohibiting a competitor (M-Systems) from using the Applicant’s brand name as a Google Adwords search keyword.  The trade mark in contention was not a registered trademark and accordingly, the case was based on the common law concept of passing off and ‘leaning on’ under the law of unlawful competition.  The Respondent’s reliance on the concept of ‘leaning on’ as a form of unlawful competition was premised on the idea that using the advertising mark of a competitor is essentially a misappropriation of the advertising value of a trade mark which can result in dilution.  The Applicant’s case was unsuccessful and the ultimate decision of the Court turned on the fact that there was no element of confusion between the search results and the allegedly offending advertisement featured in the sponsored link.

 

The recent Adwords decision by the South African Courts has led to a seemingly inexorable need to reconsider the statutory and common law on the protected functions of trade marks.  Whereas it has become increasingly imperative to strike a balance between protecting brand owners and enabling healthy competition as far as keyword advertising is concerned, is it perhaps time that the law on unfair competition, trade mark infringement and passing off be divorced from the requirement of confusion so as to offer a remedy for certain cases where there seems to be none, especially against the backdrop of the advertising function of a trade mark?

A trade mark, when used by an entrepreneur as an advertisement, enables an entrepreneur to use their trade mark to acquire and preserve a reputation capable of attracting consumers and retaining their loyalty.  Pop-up ads featured alongside search engine search results may contribute to dilution of well known brands through free-riding.  It is therefore possible that keyword triggered trade mark use may result in trade mark infringement or passing off claims where the ad conflicts with a trade mark’s advertising function. Unfair competition/unlawful competition may also arise where false or misleading representations are made with respect to the trade of a particular product or service.  In this regard, false advertising is a possibility where an advertiser’s product or service is likely to be viewed by the public as being associated with, affiliated with, or originating from the owner of a trade mark.

 

Court decisions on Adword trade mark infringement and/or passing off have mainly been premised on a ‘normally informed and reasonably observant internet user’ capable of distinguishing between trade marks associated with a particular entrepreneur and ads by third parties where the ads appear as sponsored links on the area of the search result screen reserved for advertisement.

 

The reasoning that has informed the test of a ‘normally informed and reasonably observant internet user’ is that such an internet user appreciates that if they search a particular brand name, they may in all likelihood be exposed to advertising content relating to third parties.  In this circumstance, the test is whether the advertising material that internet users are exposed to is deceptive or capable of confusing them as to whether there is any connection between the product or service searched for and the advertising content in the sponsored links.  However, perhaps this test may not be entirely practical in some jurisdictions where internet users are fairly unskilled and may not be able to distinguish between natural search results and Adword results.  It has been generally accepted that provided there is no visual use of a trade mark within the Adword results (i.e., use of a competitor’s trade mark as a catchword within the Adword results in a manner calculated to draw internet users attention to a competitor’s trade mark), there is no element of confusion or deceit.

 

The South Africa Adwords judgment noted the growing trend by courts in foreign jurisdictions to treat as fair competition, advertisements triggered by sponsored links which promote alternative goods as opposed to mere imitations.  This is influenced by the courts’ attitude that internet users are accustomed to sponsored advertisements and the need to filter their search results.

 

Nonetheless, this approach seems to be at odds with the advertising function/purpose of a trade mark, which may not necessarily be concerned with the element of confusion, but rather the goodwill and reputation associated with a particular brand.  A greater appreciation of the advertising function of a trade mark would perhaps inform a paradigm shift in statutory and common law protections of trade marks so as to deflect from an over-emphasis of the element of confusion in settling trade mark infringement and passing off claims.

In the recent South African Adwords case, the Applicant’s complaint was also based on the fact that a search of the Applicant’s brand name resulted in the Respondent’s advertisement being displayed prominently in relation to the search results due to the Respondent’s bid on the Applicant’s brand name as a keyword.  The Applicant further contended that the damage to its repute and market share had been aggravated as a result of the Applicant needing to raise the price per click for the use of its own brand name to ensure that its advertisement has a higher ranking and appears in a preferable position to that of the Respondent.  The Applicant therefore contended that it had to pay more than it would have to in order to advertise its own brand.  The Applicant appealed to the court to develop the common law in accordance with section 173 of the Constitution of the Republic of South Africa, so as to incorporate the concept of ‘leaning on’ under the law of unlawful competition.

 

‘Leaning on’ has been defined to occur where a trader ‘leans on’ the reputation or goodwill of another trader for his own financial gain.  It occurs where one trader, in order to advertise his performance and in this way promote and expand his goodwill, uses the advertising mark of another entrepreneur. It is essentially analogous to misappropriating the advertising value which the trade mark of another has in connection with their products or services, resulting in dilution of advertising value of a trade mark/brand.

 

The Constitution of South Africa, a rather progressive document by any standards, vests the Constitutional Court, the Supreme Court of Appeal and High Courts with inherent power under section 173 to protect and regulate their own process, and to develop the common law, taking into account the interests of justice.  The Trade Marks Act of the Republic of South Africa offers statutory protection to the advertising value of registered trade marks, a protection which may have been of benefit to the Applicant in the recent case had its mark been registered.  Section 34(1)(c) of the Act specifically provides that a registered trade mark is infringed by the unauthorized use in the course of trade in relation to any goods or services of a mark which is likely to take unfair advantage of, or be detrimental to the distinctive character or repute of the registered trade mark, notwithstanding the absence of confusion or deception.

 

Whereas the Applicant in the recently decided Adwords case may have had legitimate claims in as far as the advertising value of its unregistered trade mark may have, the fact that the trade mark in question was unregistered and the manner in which it presented its claims may have partly contributed to the outcome of the case.

Conclusion: 

In summary, it is evident that the trends in online marketing strategies and the attendant risks that attach to bidding on competitor brands in keyword advertising should inform marketers’ adaptation of various strategies to enhance their market share and promote their own brands, so as to avoid trade mark infringement, passing off and unfair/unlawful competition claims.

Drawing parallels to the law on trade marks in Kenya, it perhaps calls for a proactive approach by our Tribunals, Courts and Legislature to offer both common law and statutory protections to all the functions of a trade mark in line with competitive brand marketing realities and a conscious de-emphasis on the relative importance of the element of confusion or deception in adjudicating unfair/unlawful competition and trade mark infringement or passing off claims.

NB: The contents of this e-newsletter are for general information purposes only and do not constitute legal advice/legal opinion nor are they intended to create any client-lawyer relationship between the sender and the recipient. As legal advice must be tailored to the specific circumstances of each case, nothing provided herein should be used as a substitute for advice of a competent advocate. No reliance should therefore be placed on any information contained herein without first seeking the advice of an advocate. 

For consultation on this subject, kindly contact:

Stella Murugi

Senior Partner, Corporate & Commercial Law

Mwale & Company Advocates

stella@mwalelegal.co.ke  

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