Use or fair use of trademarks on the web - territorial allocations of trade marks & the Treaty of Tordesillas (1494)

Morris Averill, 12 April 2011, Media Downunder Blog http://mediadownunder.blogspot.com/2011/04/use-or-fair-use-of-trademarks-on-web.html

International Hair Cosmetics Group Pty Ltd v International Hair Cosmetics Limited [2011] FCA 339 (8 April 2011) As a publishing forum the world wide web creates the potential for trade mark uses to come into conflict with territorial based allocation of trade marks. By the Treaty of Tordesillas (1494) Spain and Portugal divided the new world by a fixed meridian, Justice Logan references this treaty and describes the parties to the deed of settlement as dividing the world of the AFFINAGE trade mark although litigation over web use of the mark soon followed. In this case Logan J considered whether the respondent used trade marks, including the AFFINAGE trade mark as a sign on a website and whether the use of the mark was directed at Australian. Logan J described the scope of the problem posed by trade marks on the internet as being to reconcile the irrelevance of physical geography in cyberspace with the limits of jurisdictional competence in the protection under domestic law of local intellectual property rights.1 In determining that the respondents website was targeted towards Australia Logan J applied a narrow test that is directed to identifying whether there is use of a trade mark. I would argue that other jurisdictions, in applying a fairness of use test, are closer to reconciling conflicting uses of trade marks on the web. The parties to the litigation are firms that were previously related, but had separated their business dealings in hair care products. The litigants, (with the names abbreviated to IHC AU and IHC UK), had in the past, agreed a territory allocation in which the IHC AU owned the marks in Australia and IHC UK owned the marks in the United Kingdom. No sales of hair care products had occurred, indeed, the website that was the subject of the litigation did not offer any e-commerce facility. The argument focused on whether there was use of the trade mark as a sign in relation to marketing in Australia. In 2010 the firms were in litigation with each other and came to an agreement to settle the court proceedings, which agreement became a consent order of the court (the consent order). IHC UK agreed that it would not use certain trade marks, including AFFINAGE, as a sign in connection with the importation, marketing, sale or manufacture in Australia of hair care products including hair colours and dyes. (underlining added for emphasis). This factual background resulted in Logan J having to consider the difference between interpreting and applying the consent order and what would be the analysis if the court had been obliged to consider the applicable test as to an infringement of a trade mark under s. 120 Trade Marks Act 1995 (Cth); that section would have
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International Hair Cosmetics Group Pty Ltd v International Hair Cosmetics Limited [2011] FCA 339 [57]. 1

require the court to determine whether the trade mark concerned had been used in Australia. 2 Logan J was of the opinion that in order to reconcile the global reach of the world wide web and the territory based application of trade mark law requires an approach that finds a use of the nominated words in connection with marketing in Australia if the words as so used are downloaded in Australia and there is evidence that the use was specifically intended to be made in, or directed or targeted at Australia.3 In applying this test to the specific facts of this case, Logan J identified that on the home page of the website of IHC UK a country box could be accessed which gave an option of Australia. By clicking an arrow associated with the Australia option a page was loaded that promoted two trademarked products of IHC UK (the A.S.P. & KITOKO brands). By selecting the Profile tab on that page another page was loaded that provided under the heading Company Profile, the following statement appeared: In 1996 [IHC UK] conceived, created and lunched the premium hair care brand AFFINAGE. Originated as a line of hair colour, the AFFINAGE brand grew rapidly to include [reference to other types of product]... Now we are introducing our exciting new hair care brand, ASP, to the Australian and Asian markets. Having already signed distribution agreements with a number of companies we look forward to fantastic success in 2011. In relation to the question as to whether the use was specifically intended to be directed at Australia was, on the facts, determined by the operation of the Australia option in the drop down box leading to the conclusion that the website being patently a means of marketing that is directed to Australia.4 While this finding resulted in orders directing IHC UK to change the web site, however Longan J accepted that the same conclusions as to the use of the mark being directed to Australia could not be reached in relation to Facebook and Twitter links displayed on the home page. Whether or not it is accepted Logan J applied the correct test, what can be taken from this case is that where firms agree a territorial allocation as to the use of trade markets attention should be directed to describing the nature of activities that firm made do online that reference trade marks so that what are permitted online marketing activities are identified with precision. As the factual background of the case is focused on the wording of the consent order, it may be that the effect of this decision is more limited as the more likely web use scenario for trade marks will involve the direct application of the s. 120 test of infringement of a trade mark.

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Ward Group Pty Ltd v Brodie & Stone plc [2005] FCA 471; (2005) 143 FCR 479 [43] per Merkel J. Ibid.[59]. Ibid.[61-62]. 2

In the operation of the < www.affinage.com> website, IHC UK are now subject to restrictive orders as to references on that site to Australia, including the removal of Australia from the list of countries able to be displayed and selected in the country box on the website; and the removal of any link to any website marketing or promoting hair care products including hair colours and dyes for sale within Australia. These orders would inhibit the development of a web-based marketing campaign that references IHC UKs involvement with the AFFINAGE brand, so as to leveraged the goodwill in that brand to promote other IHC UK brands in Australia but them one can presume that is an outcome that IHC AU would consider as assisting it in maintaining market share in products sold in Australia under the AFFINAGE brand. The question I would pose is whether the analysis should go on to consider whether ITC UK made a fair use of the marks it was entitled to use outside Australia? It is to be acknowledged that the dispute over the use of the AFFINAGE mark arises in a specific context that is focused on the interpretation of the consent orders. Notwithstanding these factual differences, I would argue that better approach is to incorporate into the analysis the question posed by Jacob J in Euromarket Designs, Inc v Peters, who stated that [t]he right question, I think, is to ask whether a reasonable trader would regard the use concerned as in the course of trade in relation to goods. 5 The U.S. courts appear to be moving to applying a test that considers a fair use of marks when used on the web.6 In the post 12 months the European Court of Justice (ECJ) has addressed different facets of the use of trade marks as search engine keyword triggers for advertising in an internet referencing service (such as the Google AdWords service) . Starting with the Google France decision the ECJ has held that while the selection of trade marks for keyword advertising is a use in the course of trade; however trade mark infringement under the European Trade Mark Directive requires establishing detriment to the functions of trade markets to indicate origin or in their advertising function. 7

Euromarket Designs, Inc v Peters [2001] FSR 288; [2000] EWHC Ch. 179. EDI is a US chain store that did not trade in the UK but held a class 21 Trade Mark for Crate & Barrel for domestic and garden items. The Defendant ran a shop in Eire called Crate & Barrel and also did not trade in the UK. EDI claimed that an advertisement in a magazine published in the UK and a web site on which the Crate & Barrel mark appeared, were in breach of its TM.
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See Tiffany (NJ) Inc. v. eBay Inc, 600 F.3d 93(2d Cir. 2010) held eBays use of the TMs were a protected, nominated fair use of the marks. Rosetta Stone Ltd v Google, Inc, 1:09-cv-00736-GBL-TCB (E.D. Va. August 3, 2010), on appeal to the 4th Circuit. The district court granted Google summary judgment on the issue as to the likelihood of consumer confusion being attributable to keyword advertising. The court held that no reasonable trier of fact could find that Google's practice of auctioning Rosetta Stone's trademarks as keyword triggers to third party advertisers creates a likelihood of confusion as to the source and origin of Rosetta Stone's products.
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Google France SARL v Louis Vuitton Malletier SA [2010] EUECJ C-236/08 held that use of a sign selected as a keyword for an internet referencing service is a used in the course of trade [51-52]; however the TM owner cannot oppose that use of the sign, if that use is not liable to cause detriment to any of the functions of that mark [76]. That is, either the function of indicating origin [77] or the function of advertising [98]. 3

This approach to assessing whether there is a fair use of a mark is further advanced in the opinion provided by Advocate General Jskinen to the ECJ in the Interflora case.8 This is another keyword advertising dispute in which Jskinen argues the test as to whether or not there is free riding on a trade mark should be determined by a test of the fairness of use, which considers whether there is due cause for using the competitors trade mark. With a fair use test the degree to which a trade mark appearing on the web conflicts to the functions of a mark to indicate origin of products or to advertise products will be assessed so as to determine whether there is in reality conflict with trade mark protection under domestic law.

Interflora and Others (Intellectual property) EUECJ C-323/09 (Opinion of Advocate General Niilo Jskinen, 24 March 2011). 4