Argos goes to the Court of Appeal but leaves empty handed

Aargh, gosh we lost the appeal!
Can a US corporation selling construction software only in the Americas under the name ARGOS be sued for infringement of a registered trade mark by a UK based consumer goods retailer who trades mainly in the UK and Ireland under the same name?

This question is posed by Floyd LJ in the introduction to the Court of Appeal decision on the Argos Ltd v Argos Systems Inc [2018] EWCA Civ 2211. The formulation of the question may make it easy to guess the Court of Appeal's ultimate decision.

Background

The IPKat report on the High Court decision is available here.  Broadly speaking, the dispute concerns the domain name argos.com and Google's AdSense programme. Floyd LJ handily describes this programme as follows:
Google AdSense allows website operators to contract with Google to provide space on members' ("partners'") websites to display advertisements ("ads" for short). Google has a further programme known as AdWords, which enables advertisers to cause ads to appear on the Google search results pages. The AdSense programme uses those ads but delivers them instead to websites operated by partners. Google charges for providing its services to advertisers depending on the level of consumer interest which is generated by the ad, and that revenue is shared with Google's partners who host the ads on their websites. 
Argos Systems was a Google AdSense partner from 2008 to 2015. Argos UK was an advertiser in the AdSense programme throughout the same period. Consequently, Google delivered ads for Argos' UK and Irish retail business to various partner websites, including Argos System's website at argos.com.

Because a lot of internet users in the UK and Ireland wrongly assumed that Argos UK owned the argos.com domain, it was common for these users to visit Argos Systems' website by mistake. When Argos Systems joined the Google AdSense programme it started to earn revenue based on the volume of this traffic.

Argos UK's appeal

Argos UK considered this revenue to be taking unfair advantage of its reputation in its trade marks. Although there were earlier claims based on double identity infringement i.e. Article 9(1)(a) of Council Regulation (EC) No 207/2009 (then in force) and passing off. However, by the time of the appeal, the only remaining claim was to Argos Systems taking unfair advantage of the distinctive character of the ARGOS mark i.e. the Article 9(1)(c).

Targeting

On target?
Image from https://tinyurl.com/y8vz54h8
As in the High Court, the big question on appeal was targeting.

But what is targeting (in this context)? Floyd LJ summarised it as "the criterion which the law has adopted for determining whether a foreign website which is accessible from the state in which the trade mark is protected should be treated as using a sign in the course of trade in relation to goods or services in that state."


Targeting is essentially a jurisdictional principle - a threshold which must be met in order for the question of infringement to be considered.  In other words, if you are doing business exclusively outside the UK, your business dealings should not be subject to UK trade mark law. As Floyd LJ pointed out, just because a website can be accessed from anywhere in the world does not mean that it targets all territories worldwide.

This means that in order to succeed on targeting, Argos UK had to show that Argos Systems was using ARGOS in the course of trade in relation to goods or services in the United Kingdom. The Court of Appeal clarified in Merck v Merck Sharpe & Dohme [2017] EWCA Civ 1834. that this targeting should be considered on an objective basis. A subjective intention to target could be a relevant factor that the court would take into account in a finely balanced case. However, "subjective intention cannot ... make a website or page (or part of a page) which is plainly, when objectively considered, not intended for the UK, into a page which is so intended" [51].

The question in this case was "whether the average consumer would regard the service of the provision of advertising space on [Argos Systems]'s website as targeted at UK consumers"?
There was some fairly strong evidence to show that Argos Systems signed up to the AdSense programme with the intention of making money from the mistaken visitors. An email between a related Finnish company and Argos Systems made this point in terms:
"I still think you may not have understood the idea of putting these Google Ads. 99% of visitors of argos.com are people NOT interested into getting CAD software or potential customers in any way in the future. They are simply there because they typed something in their browsers. 10000 different visitors a day! And simply providing ads for them to VIEW is enough to make money (they don't even need to click on the ads!) Is this money worth the hassle who knows, but without trying how can you know??"
These Google ads ultimately resulted in ad revenue of around $30,000 per year.

The service which Argos Systems offered the UK was found to be electronic billboard services. Therefore it was necessary to look at the ads themselves in order to determine whether Argos Systems' use of the sign ARGOS targeted the UK. Where the ads were relevant to UK consumers "it is difficult to escape the conclusion that the average consumers ... would conclude that someone was targeting the billboard service at them."

The first instance judge found, amongst other things, that Argos Systems introduced the AdSense ads "with the specific intention of making money, by means of the ads, from [Argos UK] customers who were in fact seeking [Argos UK]'s website" but ultimately concluded that the ads did not target the UK because Google and not Argos Systems played the key role of delivering the ads..

Although Google played an important role, the Court of Appeal noted that there was "abundant material" that:

  1. Argos Systems was aware of the misdirected traffic arriving at its website;
  2. the vast majority of this traffic came from the UK and Ireland; and
  3. because of the way the Google algorithm works, it is very likely that these visitors would be shown ads of interest to them.

Therefore the Court of Appeal concluded that Argos Systems was targeting the UK through its electronic billboards. 

Infringement

Although the Court reached a different conclusion on targeting, this was not enough to get Argos UK home on infringement.   The court was also required to determine whether Argos Systems' use of the sign:

i) gave rise to a link between the sign and Argos UK's mark?

ii) took unfair advantage of the distinctive character or repute of the trade mark?

iii) was "without due cause"?

A link

By way of reminder, in order for this link to be established, it is sufficient that the sign calls the trade mark to the mind of the average consumer (this was established by the CJEU in Adidas-Salomon v Fitness World ECLI:EU:C:2003:582 and Intel Corp Inc v CPM ECLI:EU:C:2008:655). However, it is possible to establish a link even without a calling to mind. For example, in Interflora, there was found to be the relevant link despite the fact that the consumer already had the trade mark in mind when they commenced their keyword search.

In this case, the UK and Irish users type in argos.com and immediately realise that they have not reached Argos UK's website. They have come to Argos Systems' website on the strength of Argos UK's website and consequently already have the relevant ARGOS mark in mind. Upon arrival at argos.com, visitors are confronted by the advertising billboard service. Regardless of whether they leave to the site by clicking on an ad or not, Argos Systems will at least gain a small advertising fee via the ad impression.  The Court of Appeal considered that was sufficient for there to be the necessary link - once again overturning the finding of the first instance judge

Unfair advantage

So where did it all go wrong for Argos? They won on targeting and the establishment of a link but unfair advantage eluded them.

What is unfair advantage? The court went back to basics by looking at the CJEU decision in L'Oreal v Bellure ECLI:EU:C:2009:378 at [50].

In that case, the court said that it was all about riding on the coat-tails of a mark with a reputation by seeking to benefit from the mark's power of attraction, reputation and prestige by exploiting the marketing effort expended by the trade mark's owner without paying any form of compensation. However, there are limits to unfair advantage, particularly in these unusual circumstances.

If the Argos name and domain name had been deliberately selected the court may well have considered the advantage that Argos Systems obtained to have been unfair, however, in this case, the internet traffic was initially unwanted and expensive due to the high bounce rate and participation in Google AdSense is a fairly common business practice. There was no attempt made by Argos Systems to draw a link with Argos UK on their website so it was immediately clear to visitors that they had come to the wrong place. Further, the revenue raised was minimal in the context of Argos Systems' overall business.

Consequently whilst Argos Systems did obtain an advantage, the Court of Appeal saw no reason to overturn the High Court judge's conclusion that this advantage was not unfair.

Argos goes to the Court of Appeal but leaves empty handed Argos goes to the Court of Appeal but leaves empty handed Reviewed by Rosie Burbidge on Monday, October 15, 2018 Rating: 5

1 comment:

Nicola Searle said...

I used to use Argos to model cash flows for commercial real estate, back in 2001. It was a nightmare and so easy to make a mistake!

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