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Adwords and honest concurrent use: Victoria Plum v Victorian Plumbing

13 June 2017

Victoria Plum Ltd v Victorian Plumbing Ltd [2016] EWHC 2911 was a trade mark case in which the issues of keyword advertising and honest concurrent use were intertwined.  The case highlights the fact that the ‘honesty’ of trade mark use can differ between the online and offline environments. The case also saw a successful counterclaim for passing off resulting from keyword advertising.

Legal Background – Keyword Advertising

Keyword advertising is a form of search advertising, whereby an advertiser pays for its advert to appear as a search result in response to particular search terms entered by users.  The key principles in respect of trade mark infringement were established by the CJEU in Google France.  That case found that keyword advertising is essentially pro-competitive and therefore good for consumers.  One can bid on the registered trade marks of others without infringing those trade marks.  What is important is the content and presentation of the advertisement itself.  There will be infringement where:

“the advertisement does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party”

The Proceedings

Both Victoria Plum (“the Claimant”) and Victorian Plumbing (“the Defendant”) are bathroom retailers who operate chiefly through online channels.

Both had begun to use their respective names in 2001, although Victoria Plum were at that time Victoria Plumb. Despite the close similarity of the two names, there was no clear earlier right, and the two brands coexisted for over a decade.

However, this changed in 2012 when the Defendant began to increase its bidding on the Claimant’s “Victoria Plumb” registered trade marks as keywords in pay-per-click search advertising.  The increased investment was significant, rising from a mere £15 in 2008 to £46,017 in 2013 and £626,175 in 2015.

Two types of advertising were displayed to searching consumers:

i.  Advertisements that included the “Victoria Plumb” trade mark as a consequence of Google’s dynamic keyword insertion process (DKI). DKI populates the advertiser’s advertisements with the keyword terms searched for by the consumer

ii.  Advertisements that included small variations on the trade marks, such as:

a) Victoria Plumbing
b) Victorian Plumb
c) Victorian Plumbing

The Defendant conceded that the advertisements at i. were infringing.  No context had been provided in those adverts to dispel confusion, such that they evidently fell foul of the Google France test.

The second category of ads posed more complex legal questions, as the Defendant sought to rely on its defence of honest concurrent use.

A determination of “honesty” depends on a number of factors, including:

• the Defendant’s duty to act fairly to the legitimate interests of the trade mark proprietor
• whether the acts complained of constitute unfair competition
• whether the use complained of exacerbates the level of consumer confusion (where there is honest concurrent use, it is assumed that a certain level of confusion must be tolerated)
• whether the Defendant ought to be aware that its actions will exacerbate the confusion

Having reviewed the facts of the case, the judge found that the honest concurrent defence could not save the Defendant.

Firstly, the defence only applies in respect of the use of a defendant’s own trade marks.  Here, the Defendant was using the Claimant’s mark, which was not identical to its own.  The Defendant had only used the Claimant’s mark in the context of pay per click advertising.  It could not point to a history of use of that mark.

Secondly, the use did not appear to be honest.  The increase in keyword bidding since 2012 was substantial, and it was obvious that this would exacerbate confusion.  Evidence of vastly increased click-through rates as a result of the increased spend appeared to support this contention.

Counterclaim for Passing Off

Although its honest concurrent use defence failed, the Defendant succeeded with a counterclaim for passing off.  Commencing in 2011, the Claimant had also bid on the Defendant’s mark, “Victorian Plumbing”.  It was accepted that the Claimant’s activities in this respect were on a lesser scale than the Defendant’s, but they were not de minimis and had continued for several years.  The court found that the Defendant had goodwill in its name by 2011, and that internet users who entered “Victorian Plumbing” were likely to be looking for the Defendant’s website.  There was nothing in the Claimant’s advertisements to indicate that the Claimant was not, in fact, connected with the Defendant, and therefore a substantial proportion of the relevant public were likely to be misled.   The court therefore found that there was misrepresentation and a likelihood of damage.

Lessons

From the Defendant’s perspective, the difficult aspect of this decision lies in the fact that other competitors – whose names differ considerably from that of the Claimant- are free to bid as aggressively as they wish on the Claimant’s marks as keywords, provided that their advertisements do not fail the Google France test.  From that point of view, the Defendant is being denied a competitive opportunity afforded to its peers.  However, from the Court’s perspective, this is a necessary price to pay in order to minimise consumer confusion where two highly similar brands operate in the same commercial space.

Two main lessons emerge from this case.  Firstly, scrutiny is required when purchasing paid search advertising as to how a particular technological development will influence the legality of a keyword advertising strategy.  The DKI service is commercially attractive but there appears to be a clear risk of trade mark infringement.

Secondly, coexistence arrangements- whether express or otherwise- which function adequately in the offline world may pose different issues in an online context.  In that respect, the factors summarised by the court in this case regarding honesty provide a useful starting point when considering a change in advertising strategy.

Charles King
Trade Mark group

If you require further information on anything covered in this briefing, please contact Charles King (cking@withersrogers.com ; +44 207 940 3600) or your usual contact at the firm. This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Withers & Rogers LLP, June 2017