Reed Executive v Reed Business Information

With millions of commercial Web sites available, Search Engine Optimisation (“SEO”) is big business. Linked to this, one of the hot topics in trade mark law at the moment concerns the use of a competitor’s trade mark to increase traffic flow to a Web site.

The recent Court of Appeal judgment in Reed Executive plc and another v Reed Business Information Ltd and others [2004] EWCA Civ 159 deals with a variety of issues but is of particular interest to practitioners in the IT sector as a result of its analysis of the use of a competitor’s trade mark as a metatag or for the purpose of reserved keyword advertising. Although this case dealt with other issues, this article will focus only on the impact of this judgment on metatag use and reserved keywords.

First, for those readers unfamiliar with the terminology:

• A “metatag” is text inserted into the HTML code of a Web site page that is not visible when the page is viewed with a browser but which some search engines read along with the visible contents of the Web site.
• “Reserved keyword advertising” is used to refer to advertising arrangements between a Web site operator and certain search engines where, when particular terms are entered into the search engine, that Web site will be displayed higher in the list of search results, or as a sponsored link or result, or a pop-up banner, which advertises and enables click through to that Web site, will be displayed.

Background to the case

Reed Executive plc and Reed Solutions plc were associated companies, whose business could be broadly defined as that of an “employment agent”. In other words, they put prospective employers in contact with candidates that they considered to be suitable. In the mid 1990s the methods of operation were expanded to include the use of the Internet and a Web site, www.reed.co.uk, was set up. In this article we will refer to these companies collectively as “Reed Employment”.

Reed Solutions plc was the registered proprietor in the UK of the trade mark REED, which was registered for “employment agency services, included in Class 35” (the “Reed Mark”).

Reed Business Information Limited, Reed Elsevier (UK) Ltd and totaljobs.com Ltd were all companies within a publishing group which published a wide range of specialist magazines (which traditionally always included large sections devoted to job advertising). In this article we will refer to these companies collectively as “Reed Publishing”.

The services provided by Reed Employment and Reed Publishing had historically been quite distinct. However, in 1999 Reed Publishing set up a dedicated jobs-related Web site “totaljobs.com” (the “Totaljobs Website”).

Reed Employment alleged that the Totaljobs Website infringed the Reed Mark in various respects, including:

• the use of “reed business information” as a metatag; and

• the use of “reed” as a reserved key word with the Yahoo! Search engine in respect of the Totaljobs Website.

Reed Employment instituted legal proceedings against Reed Publishing for trade mark infringement and also for passing off. The matter was heard before Mr Justice Pumfrey, who handed down judgment on 20 May 2002.[1]

Previous case law

Up until this case was first heard before Mr Justice Pumfrey in 2002 there had been a distinct lack of UK case authority regarding trade mark infringement and passing off arising from the use of another’s trade mark as a metatag and as a reserved keyword. This issue had been more comprehensively analysed in the USA and Europe, where the courts had generally favoured the trade mark owner.[2]

Many practitioners assumed that the UK courts would follow a similar reasoning and Mr Justice Pumfrey’s judgment appeared to reinforce this belief.

Judgment of Mr Justice Pumfrey

Relevant legislation

In considering whether or not there had been trade mark infringement of the registered trade mark, Mr Justice Pumfrey did not clearly distinguish whether the infringement had been pursuant to s 10(1) or s 10(2) of the Trade Marks Act 1994 (the “Act”), although he went on to consider whether or not there had been trade mark infringement under s 10(2) of the Act. This approach was later criticised by the Court of Appeal on the basis that it could lead to “muddle and error”.

Section 10(1) provides that a person infringes a registered trade mark if he uses in the course of trade a sign which is identical with the trade mark in relation to goods or services which are identical with those for which it is registered. In other words, for there to be infringement under s 10(1), there must be identity of the sign and the trade mark and also identity of services/goods.

Section 10(2) provides that a person infringes a registered trade mark if he uses in the course of trade a sign where because:

(a) the sign is identical with the trade mark and is used in relation to goods or services similar to those for which the mark is registered, or

(b) the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered,

there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the mark.

Where there is no identity, but only similarity, of the sign and the trade mark or of services/goods, s 10(2) applies and, for there to be infringement, there is the additional requirement (not present in s 10(1) that there exists a likelihood of confusion on the part of the public.

Judgment

In considering whether the use of the metatag “reed business solutions” infringed the Reed Mark, Mr Justice Pumfrey held that it did, having specific regard to s 10(2) (although not making it clear whether the infringement was pursuant to s 10(2) or s 10(1), as discussed above).

• He held that the word “reed” in the metatag “reed business solutions” was used as a trade mark (in that its purpose or effect was to indicate the trade origin of the services).
• Having referred to the principles established by the European Court of Justice in a number of cases[3] in considering whether there was a likelihood of confusion and noting that the comparison is not a straightforward “mark for sign” comparison and involves a global assessment of the likelihood of confusion as to origin of the goods or services concerned, he held that the purpose of the sign “reed” in the metatag was to suggest a connection which did not exist. He went on to hold that the sign “reed” in the metatag was being used to suggest that the Totaljobs Website was to be treated in a manner appropriate to the way in which Reed Employment’s Web site should be treated which, it seemed to him, was infringement. He held that the short test, which must be applied with caution, was whether the sign “told the truth about the Web site”.

With regard to keyword linked advertising, Mr Justice Pumfrey held that only banner advertisements triggered by the word “Reed” constituted an infringement of the Reed Mark.

Mr Justice Pumfrey held that, with regard to the invisible uses (ie use of the metatag and keywords), the answer seemed to him to turn on the question of whether Reed Publishing could be said to be responsible in any way for the appearance of the Totaljobs Website in response to a search against “Reed” and what the nature of the responsibility was, and that his conclusions echoed his conclusions on infringement.

Court of Appeal judgment

Mr Justice Pumfrey’s judgment was taken on appeal and judgment was handed down by the Court of Appeal on 3 March 2004, Lord Justice Jacob giving judgment.

Section 10(1) or section 10(2) infringement?

As mentioned above, the Court of Appeal was critical of Mr Justice Pumfrey’s failure to make it clear whether he had held that there was infringement pursuant to s 10(1) or s 10(2), and went on to analyse which of these sections would apply in this case.

Lord Justice Jacob reviewed the test of identity of mark and sign as set out by the European Court of Justice in LTJ Diffusion v Sadas Vertbaudet[4] (ie that a sign is identical with the trade mark where it reproduces, without any modification or addition, all the elements constituting the trade mark or where, viewed as a whole, it contains differences so insignificant that they may go unnoticed by an average consumer). He held that “Reed Business Information” was not identical to “Reed”: “reed” was a common surname and the average consumer would recognise the additional words “business information” as serving to differentiate Reed Publishing from “Reeds” in general. He noted that if the added words had been wholly and specifically descriptive (eg “Palmolive Soap” compared with “Palmolive”) the position may have been different.

Lord Justice Jacob went on to examine whether the services provided by the Totaljobs Website were identical to the services for which the registered trade mark REED was registered. He stated that what one must do is identify the core activities of the services for which the Reed Mark was registered (ie the services of an “employment agency”). He held that the Totaljobs Website was not an employment agency and therefore there was no identity.

As there was neither identity of mark and sign nor identity of services, Lord Justice Jacob held that whether or not there had been infringement of the Reed Mark had to be judged by s 10(2).

Metatag use

Lord Justice Jacob first considered whether the use by Reed Publishing of the metatag “reed business information” constituted passing off. He held that it did not, stating: “The totaljobs site, in various versions, had the words ‘Reed Business Information’ as a metatag. Evidence was led as to what happened if a search under the phrase ‘Reed jobs’ was made. In all cases where totaljobs was listed, it came below the Reed Employment site in the search results (which, as is usual, included many other results, irrelevant to both sides). Obviously anyone looking for Reed Employment would find them rather than totaljobs. I am unable to see how there could be passing off. No-one is likely to be misled – there is no misrepresentation. This is equally so whether the search engine itself rendered visible the metatag or not.”

He went on to hold that the use by Reed Publishing of the metatag “reed business information” did not constitute an infringement of the Reed Mark under s 10(2). Commenting on Mr Justice Pumfrey’s judgment, Lord Justice Jacob stated “Assuming that metatag use counts as use of a trade mark, there is simply no confusion here. I confess to not following the Judge’s reasoning on the point. He said that the ‘ultimate purpose [of the metatag] is to use the sign to suggest a connection which does not exist’ but purpose is irrelevant to trade mark infringement and causing a site to appear in a search result, without more, does not suggest any connection with anyone else“. The necessary confusion was therefore not established and the claim for infringement failed.

Reserved keywords

Dealing with the trigger of banner advertising for the Totaljobs Website on the Yahoo! search engine by the word “Reed”, Lord Justice Jacob noted that the banner itself referred only to the Totaljobs Website and there was no visible appearance of the word “Reed” at all. He held that whether the use as a reserved word can fairly be regarded as “use in the course of trade” or not (as to which he expressed no opinion), he could not see that causing the “arguably inoffensive-in-itself” banner to appear on a search under the name “Reed” or “Reed jobs” could amount to a trade mark infringement under s 10(2). He dismissed as fanciful the idea that a search under the name “Reed” would make anyone think there was a trade connection between the Totaljobs Website banner, making no reference to the word “Reed”, and Reed Employment. No likelihood of confusion was therefore established. In other words, he felt that the public are so used to a random selection of sites being displayed as a result of any particular search that they do not necessarily assume that there must be a connection between the two.

He employed a similar reasoning in his finding that this did not amount to passing off.

Infringement under section 10(1)

What about the situation in which the metatag or reserved keyword is identical to the registered trade mark and the services advertised on the Web site are identical to those for which it is registered? In such a case, a claim for infringement could be brought under s 10(1), where there is no requirement to establish likelihood of confusion.

Although expressly reserving his opinion in relation to whether use of such a metatag or reserved keyword constituted s 10(1) infringement, Lord Justice Jacob clearly indicated where his sympathies lay, as he posed the following questions:

• Does metatag use and, use of a reserved keyword count as use of a trade mark at all? He stated that such use “is important not only for infringement but also for saving a mark from non-use. In the latter context it would at least be odd that a wholly invisible use could defeat a non-use attack.”
• If metatag use does count as use, is there infringement if the marks and goods or services are identical? He stated, “This is important: one way of competing with another is to use his trade mark in your metatag – so that a search for him will also produce you in the search results. Some might think this unfair – but others that this is good competition provided that no-one is misled.“

Conclusions

The implications for trade mark infringement claims

Section 10(2) Where a metatag or reserved keyword is used in relation to a Web site, the effect of the Court of Appeal judgment is that this cannot constitute a trade mark infringement under s 10(2) unless the existence of a likelihood of confusion can be proved. In the light of the Court of Appeal judgment, it is extremely difficult, if not impossible, to think of any situation in which use of a metatag or invisible keyword can now give rise to such a likelihood.

However, the gates to future trade mark infringement actions arising from metatag and reserved keyword use have by no means been shut and bolted. Sections 10(1) and 10(3) of the Act remain available to trade mark proprietors.

Section 10(1) Provided that a metatag or reserved keyword is identical to a registered trade mark and the relevant Web site is used to advertise or provide goods or services identical to those for which the trade mark is registered, the use of this metatag or keyword will constitute an infringement of that trade mark pursuant to s 10(1), unless it is held by a court that the metatag or keyword is not “used in the course of trade”. It is our opinion that provided that a metatag is used in relation to goods or services (and here regard must be had to the relevant Web site), it is clearly use in the course of trade and whether or not this use is visible is irrelevant (use is not qualified by a requirement of visibility under s 10(1)). Lord Justice Jacob expressly reserved his opinion on this point and, while his musings suggest a line of argument which may be followed by the courts in future, they would in our opinion be wrong in law to do so. Furthermore, whether or not use of a metatag is “good competition” is wholly irrelevant to whether or not there has been infringement under s 10(1).

It could be suggested that a means for Web site operators to avoid being exposed to a trade mark infringement claim under s 10(1) would be to ensure that the metatag was not identical to the relevant registered trade mark, and that this could be done simply by adding one or more words to the trade mark to make up the metatag. However, Lord Justice Jacob’s example of “Palmolive Soap” compared with “Palmolive” should be borne in mind. The addition of words which are “wholly and specifically descriptive” would not serve to destroy the identity of sign and trade mark. In our view, the more distinctive the registered trade mark and the more descriptive the other words added to it in the sign, the more likely that there will be identity between the trade mark and the sign.

Section 10(3) This provides that a person infringes a registered trade mark if he uses in the course of trade in relation to goods or services a sign which is identical with or similar to the trade mark where the trade mark has a reputation in the United Kingdom and the use of the sign being without due cause, takes unfair advantage of, or is detrimental to the distinctive character or the repute of the trade mark.

This section was amended on 5 May 2004 to remove the requirement that this use be in relation to services or goods which are not similar to those for which the trade mark is registered. Therefore, provided that the registered trade mark has a reputation in the UK, s 10(3), which does not require any likelihood of confusion, remains available in cases of metatag or keyword use, if the other requirements of the section can be satisfied.

The implications for passing off actions

The effect of the Court of Appeal decision is that it will be extremely difficult, if not impossible, to successfully claim on the basis of passing off for metatag or keyword use alone, without any evidence of actual confusion arising from this use.

And finally

It must be borne in mind that the Court of Appeal judgment affects only the invisible use of signs, such as metatags and reserved keywords. Visible use of a sign on the pages of a Web site can still constitute trade mark infringement and passing off on the same basis as it did before this judgment.

As noted at the beginning of this article, the Court of Appeal judgment goes against the prevailing stream of legal opinion in the USA and in continental Europe. However, unless and until there is a clear contrary ruling on the point from the European Court of Justice or the judgment is overturned by the House of Lords, we are likely to have to live with this judgment for the foreseeable future.

Has the Court of Appeal now opened the floodgates for the use of competitor’s trademarks as metatags? Probably not. First, as discussed above, trade mark owners have not been denied all of their rights under the Act. The second reason is practical rather than legal. Use of metatags reached a peak in 1997 when four out of the seven major crawler based search engines were designed to support the metatag and even now many of the Web site building software programs will give the option of inserting metatags. However, it was soon noticed that metatags were an unreliable indicator of the quality and relevance of the site and as a result virtually all search engines now routinely ignore metatags.

The more important implications of this decision appear to be for the use of competitor’s trademarks as reserved key words – a controversial issue of which we shall no doubt hear much more in the future.

Charlotte Colman is a solicitor in the commercial and IP department of Hammonds. Catherine Wilson is a trainee solicitor in that department.