ARGOS aggro: UK infringement issues arising from US advertising site


Author: Eddie Powell


Eddie Powell, Partner, Fladgate LLP (epowell@fladgate.com)


 

The Court of Appeal for England and Wales was asked to consider a case where two companies were using the same name in different territories, both legitimately, but one decided to exploit traffic mistakenly hitting its website by using targeted ads[1]

The dispute involved two businesses who shared the “Argos” name, but on different sides of the Atlantic. Argos Limited (AUK) operates a very well-known catalogue and online UK consumer goods retailer under the “Argos” brand.   Argos Systems Inc. (AUSA) is a US business which provides computer aided manufacturing services for the construction of buildings to customers in North and South America. Each are long-standing businesses who had traded under the same brand in their respective territories without problem.

In 1992 AUSA registered the domain name www.argos.com and it set up a website to promote its American business.

Four years later, in 1996, AUK registered the domain name www.argos.co.uk, and in 2004 it launched its e-commerce site using that domain, which was (and still is) highly successful.

In 2008 AUSA started using Google AdSense on its website. This meant that space on its screen was ‘rented’ to advertising service providers, so site visitors would see adverts displayed beside the website’s content.  AUSA was paid for the number of times the ads were seen or clicks they generated.

During the case, the court heard evidence which clearly showed that a large proportion of visitors to AUSA’s website mistakenly did so in the belief that they were visiting AUK’s website. Almost 90% of visitors to AUSA’s website were from the UK and almost all of them immediately left the webpage within seconds of arriving (presumably after realising their mistake in not reaching AUK’s website).

In 2012, AUSA set up a separate web landing page for visitors from outside America, so that American traffic went to an ad-free site for AUSA’s business, but visitors from elsewhere in the world, including the UK, saw the ads.  Until AUK objected, the ads shown would include ads for AUK.

AUK contended that the only reason AUSA began to use Google AdSense was to derive commercial profit from the number of users mistakenly arriving at AUSA’s website, and that the different landing pages on AUSA’s website were configured so that visitors from the UK would receive targeted adverts which would drive more commercial revenue for AUSA. In nearly seven years, the ads generated about US $100,000 in revenue for AUSA. AUSA contended that this sum was used in part to offset the costs of the bandwidth and infrastructure needed to host AUSA’s website due to the extra traffic caused by AUK.

AUK claimed that AUSA’s advertising infringed AUK’s EU registered trade mark rights under Article 9(1)(c) of the EU Trade Mark Regulation.  This anti-dilution provision allows owners of brands which have a reputation in the EU to prevent their marks being used on other goods or services where such use “without due cause takes unfair advantage or is detrimental to” the brand.

The trial judge found for AUSA, and AUK appealed to the Court of Appeal.  The Court considered three issues in reaching its decision.

1.Territorial issues

To even get to the stage of considering whether AUSA’s activities fell within Article 9(1)(c), AUK had to show that AUSA was targeting UK users, so as to bring its activities in the USA within the scope of EU trade mark infringement. This was an important point; all trademarks have a territorial scope, and AUK’s trademarks cover activities within the EU (which – for the moment- includes the UK) only. To infringe, AUSA had to be shown to be targeting users in the UK (deliberately or otherwise) in displaying ads to UK visitors to the website.

The Court of Appeal disagreed with the trial judge’s finding that there was no targeting; what AUSA was doing was, it said, in effect an ‘electronic billboard’.  If the ad content was US-based content, then there clearly would be no targeting of UK visitors.  But because AdSense would generate ads for visitors based on their browsing history, UK visitors would have been shown UK-relevant ads, and that would mean that both AUSA and (interestingly) Google were targeting UK consumers.

2. Establishing a link with AUK’s brand

A key issue in cases involving Article 9(1)(c) is showing that the use of the allegedly infringing brand meant that consumers linked it to the brand with the reputation – i.e it was ‘brought to mind’.  In this case the Court felt that the consumer arriving at AUSA’s’ site and seeing the adverts already had AUK’s brand in mind and it was that factor that led to them arriving at AUS’ site in the first place.  Again, characterising AUSA’s activities as providing an ‘electronic billboard’ under the name “Argos” meant that they were taking advantage of the AUK brand (to generate viewing revenue), so the link was there.

3. Was this advantage ‘unfair’?

Here was where AUK’s case came unstuck.  The Court felt that while AUSA was ‘taking advantage’ of the link between the 2 brands to present its electronic billboard service, it was not unfair for it to do so.  This was because:

  1. AUSA did not seek out the unwanted internet traffic which arrived at its website and AUSA could do nothing to prevent it;
  2. AUK received some benefit as ads for AUK would redirect consumers who might have lost interest;
  3. AUSA’s participation in AdSense was a normal commercial activity and AUSA were entitled to derive an income from it;
  4. The income generated by AUSA was small in the context of the parties’ respective businesses; and
  5. Consumers would quickly realise that the AUSA site was nothing to do with AUK.

So, although much of the trial judge’s conclusions were overturned, ultimately AUK was still unsuccessful.   

Thoughts on the decision

It is interesting that the Court characterised a website which carries ads as an ‘electronic billboard’, and that it found the ads that the website carries will be relevant for determining the question of targeting, especially as ads are often the product of the browsing habits of the site visitor.  It seems clear that if AUSA had set up its site to drive revenue by ads (for example by providing a ‘free’ consumer service such as email or social networking but paid via ads) under the ‘Argos’ name, then AUSA would have probably infringed.  The Court said in its decision that the intention of AUSA was not relevant, but there is a clear undercurrent in the decision that the fact that the original name choice was innocent was key in deciding that what AUSA did was ‘fair’.

The other point to note is the Court’s reference to the fact that both AUSA and Google were responsible for the targeting of the ads to the UK, so that the liability could be joint.  Google were not a party to the litigation, but it will be interesting to see whether they have to be more cautious about how they serve ads to consumers, taking into account the branding of the website concerned.


[1] Argos Limited v Argos Systems Inc,  9 October 2018 [2018] EWCA Civ 2211

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