IP ENSight | 6 August 2014

Nakedbus, a more eye-catching title than adwords

by Rachel Sikwane

If a South African court ever gets to consider an Adword trade mark case there will be plenty of foreign case law to guide it. An Adword case is one where the issue is this: if a company buys as an Adword a word that is the registered trade mark of another company (usually a competitor) - with the result that anyone typing in that word as a search term gets to see the online ads or even the website of the Adword buyer - is there an infringement of the registered trade mark?

The most recent decision I’m aware of comes from New Zealand, a country which has two rival bus operators.  The more established company goes by the name of Intercity, whereas the upstart is called Nakedbus.  When Nakedbus bought the word ‘intercity’ as an Adword – which had the effect that people typing in the word as a search term got to see Nakedbus’ online ads, which in turn linked to the Nakedbus website – Intercity sued for trade mark infringement.  The court adopted the following approach: If the use of the Adword simply has the effect that the person who types in the word sees the online ad or website of a rival company, that isn’t an infringement because this is simply invisible use and therefore not trade mark use. On the other hand, if the search term also appears in the text of the online ad or website of the competitor, then there is an infringement. Since there was visible use of the word ‘intercity’ in the text of Nakedbus’ online ads and website, there was an infringement here.

The European courts have been dealing with Adword cases for some time now.  The European courts have adopted the following practical approach: Most consumers are familiar with the Internet and they have a reasonably good idea of how things work. Consumers therefore know that companies can buy competitor’s trade marks as Adwords. Consumers understand that the effect of this is that, if they search a particular brand name, they may well end up seeing advertising material relating to other companies. That’s all fine! But what the material that they end up seeing must not do is confuse them, in other words leave them wondering whether there’s any connection between the material they’re looking at and the owner of the brand name they searched for.

This was the approach adopted in a landmark case involving Louis Vuitton.  The more recent decision in the case of Amazon and the bathroom soap company Lush is an extension of this thinking.  What happened in this case  was that people who typed in the word ‘lush’ on either Google or the Amazon site were directed to goods on Amazon’s site that weren't Lush but were supposedly similar – the court said that Amazon had to make it quite clear to consumers that these weren’t Lush products but similar products made by other companies.

In coming to these decisions the courts have gone back to basics. And the basics are that a trade mark is a badge of origin, in other words its main function is to tell the consumer who or where the goods come from. The effect of this is that a trade mark registration is only infringed if the origin function of the trade mark is compromised, in other words if the consumer is left confused about the origin of the goods. 

There are good reasons to suppose that a South African court considering an Adword case will look at the European decisions.  Our courts follow developments in Europe closely and they have, of late, strongly emphasized the origin function of a trade mark. Most notably, the Supreme Court of Appeal held in the case of BMW v Verimark that Verimark's use of a BMW vehicle in a TV ad for a car polish did not infringe BMW’s trade mark registration for its logo because, even though the badge was visible, the ad didn’t suggest any connection between the car polish and BMW, which meant that the use of the logo wasn’t trade mark use but incidental, or non -trade mark use.

So how is an Adword case likely to play itself out in South Africa? The Adword user will no doubt argue that the court should follow the European approach and hold that there’s no infringement if there’s no confusion about the origin of the goods. This suggests that any South African company that uses a competitor’s trade mark as an Adword should make sure that it’s quite clear to any reasonably savvy Internet user that there’s no connection between the companies - that they are simply competitors.  The South African company should also take the New Zealand decision on board and make sure that there’s no use of the competitor’s trade mark in its actual advertising material. The owner of the registered trade mark, on the other hand, will probably argue that the South African population, taken as a whole, is not very Internet astute, and that many people who type in one brand name and end up seeing the advertising material of another company will be confused. 

It’s tricky stuff and if you are using a competitor’s trade mark as an Adword my advice is simple – get advice!

For more information on the above, please contact:

Rachel Sikwane
senior associate | IP
+27 83 529 3639

No information provided herein may in any way be construed as legal advice from ENSafrica and/or any of its personnel. Professional advice must be sought from ENSafrica before any action is taken based on the information provided herein, and consent must be obtained from ENSafrica before the information provided herein is reproduced in any way. ENSafrica disclaims any responsibility for positions taken without due consultation and/or information reproduced without due consent, and no person shall have any claim of any nature whatsoever arising out of, or in connection with, the information provided herein against ENSafrica and/or any of its personnel. Any values, such as currency (and their indicators), and/or dates provided herein are indicative and for information purposes only, and ENSafrica does not warrant the correctness, completeness or accuracy of the information provided herein in any way.



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