Blake Lapthorn hosts inaugural TAG - IP speciality conference

TAG IP conference 19 – 21 March 2010

Introduction Jonathan Lloyd-Jones

Topical issues in e-commerce TAGLaw

Google AdWords Jill Bainbridge Partner & Head of Intellectual Property Blake Lapthorn

The web is the way ahead
In 2009 on-line advertising overtook TV advertising for the first time
On-line + 5%
TV – 16%

AdWords/Keywords
Search providers allow users to sponsor AdWords/keywords which may be the trade mark of another
Keywords used to rank websites in a search
Sponsored keywords rank higher

AdWords/Keywords
Not evident on the face of search result
Is that “use” for trade mark infringement purposes?

The story so far…
From 5 May 2008 Google changed its policy in the US, Canada, UK and Ireland such that it will only disable keywords where the registered trade mark appears in the heading or text of the advert

Google policy elsewhere
Google has a different policy elsewhere and in particular throughout the rest of the EU.
That policy provides that on receiving a complaint from a mark holder Google will require the advertiser to remove its use of the mark as:
- advertisement text; or
- keyword

French cases
Louis Vuitton & others sued Google France for trade mark infringement on the basis of use of sponsored keywords under Article 5 (1) (a) and (b) and 5 (2) of EU TM Directive ( 2008/95/EC)

Article 5 (1) (a) test for infringement
ECJ previously indicated 4 conditions must be satisfied:
use must be in course of trade
it must be without consent of owner
in respect of goods or services identical to those for which mark registered
must affect, or be liable to affect, functions of trade mark, in particular, guarantee of origin

French questions
Cases C-237/08 C-236/08 C-238/08
Whether a person providing identical or similar goods to those for which TM registered can reserve a keyword which reproduces or imitates the TM
Whether a keyword service provider can sell keywords and then in response display advertising links to sites offering infringing goods

More French questions
Whether if the mark has a reputation the owner can oppose such use on the basis of unfair advantage or causes detriment
Whether keyword provider is an ISP and can therefore take advantage of safe harbour provisions of E Commerce Directive if upon notification they take down infringing material expeditiously

Advocate general opinion on French referral to Court of Justice
Advocate General opinion points Court of Justice towards a ruling that permits Google Adwords
Use of the tool itself cannot amount to trade mark infringement

Articles 5 (1) (b) & 5 (2)
In addition further requirements for infringement :
eg 5 (1) (b) need to show likelihood of confusion on part of public

Keyword use
Attorney General said 2 elements:
Offer by Google to advertisers of keywords to sponsor
Display of adverts in response to input of keywords

Offer of keywords to sponsor
No infringement
No use in relation to goods
Advertisers acting as consumers and not in course of trade

Display of adverts in response to input of keywords
No infringement
Searchers unlikely to be confused into thinking results necessarily linked to the trade mark owner

Famous marks
Attorney General concluded the need for freedom of expression and commerce outweighed need to protect investment that goes into such marks

Dutch cases
5 questions have been raised in the Portakabin case (C07/056HR)
Does use of a TM as a keyword constitute use for goods and services under E Commerce Directive
Does it make a difference if the results come up in ordinary search results or as a sponsored link
Does it make a difference if the offer for sale of identical goods appears on the page generated by the search engine or only on the advertiser’s web page accessed through the link

More Dutch questions
If it is use, is it permissible to use the TM or a variation of it on the grounds it is descriptive or TM rights have been exhausted
If it is not use, can a member state apply it’s own national TM law if the activity occurs without just cause and takes unfair advantage of or is detrimental to the distinctive character or repute of the relevant mark

Germany – Bananabay Case (IZR 125/07)
Mark used by a competitor as an AdWord in same field of adult entertainment. The Court held that use of a descriptive term would not infringe but asked the ECJ:
does use of a third party’s trade mark as a keyword on identical goods/services constitute TM infringement under the Directive?

UK – Interflora v Marks & Spencer & others L’Oreal v eBay
The UK has now added to the list of questions as a result of issues raised in these cases. However, the risk is, a common set of answers from the Court of Justice could leave confusion in UK & Ireland given that Google policy differs in the UK & Ireland compared with the rest of the EU

Interflora
Issue
bidding by competitors for “ interflora” keywords
Impact
Interflora still ranked higher on Google search results than bidding competitors e.g. Marks & Spencer

Commercial Impact
Interflora’s bidding costs for keywords increased dramatically in order to preserve their ranking.
Costs in the 9 days leading up to Valentine’s Day increased from 2p per click in 2008 to 23 – 28p per click in 2009. Total costs estimated to have increased by $750,000 in the year from 5 May 2008 to May 2009

L’Oreal v eBay
Issue
Use of keywords relating to eBay sales of infringing goods
e.g. counterfeits and grey imports

UK Questions
1 Are any of the following “use” of a sign by a competitor as per Art.5(1) (a) Directive 89/104/EEC:
Selects a sign which is identical with TM as a keyword for a sponsored link
Nominates the sign as a keyword
Associates the sign with the URL of its website
Sets the cost per click it will pay in relation to that keyword
Schedules the timing of the display of that sponsored link

More UK Questions
Uses the sign in business correspondence relating to invoicing and payment of fees or the management of its account with the search operator, but the sponsored link does not itself include the sign or any similar sign

More UK Questions
2. Is such use within either/both Art.5(1)(a) & Art 9(1)(a)
3. If so, assuming use is detrimental to the distinctive character of the mark or takes unfair advantage, does it fall within Art5(2) & 9 (1)(c)
4. Does it make a difference if presentation of the sponsored link in response to a search is liable to lead some members of the public to believe the competitor is a member of the TM proprietor’s commercial network OR

And more UK questions
the search engine does not permit TM proprietors in the relevant member state of the Community to block selection of signs identical to their TMs as keywords by other parties
5. Do any of the following constitute “ use” by search engine operators as per Art.5(1)(a) or 9(1)(a):
Present sign to user in search bars that contain a sponsored link to competitor site
Present a sign in summary of search results

Yet more UK questions
Present sign as alternative suggestion when user enters a similar sign in search engine
Present search results page to user containing competitors sponsored link in response to user entering the sign
Adopt user’s use of sign by presenting user with search results page containing competitor’s sponsored link but that link does not itself include the sign or any similar sign

And more…
6. If is use for those purposes is it covered at all by the provisions of the E Commerce Directive regarding transmission, storage such that search engine operator is exempt from liability
7. Can the competitor be held liable jointly under national law

The likely outcome…….
The Court of Justice ruling will determine how far trade mark protection extends online
Impact on marketing budgets and strategies
Financial impact for Google – bulk of revenue derived from AdWords

Coffee break

TAGlaw IP Conference Southampton 19 – 21 March 2010 BSkyB –v– EDS Lessons from an IT Project Disaster John Warchus – Partner, Clarkslegal LLP [email_address]

Background
Request for a new CRM system
Timescales:
target date - March 2002
actual completion - March 2006
Costs:
budgeted cost - £50 million
actual cost - £265 million
legal costs - £70-80 million

Background
Decision:
In favour of BSkyB for
fraudulent misrepresentation on timescales
negligent misrepresentation on project plan
breach of contract (failure to provide experienced personnel, deliver services in accordance with the contract, exercise reasonable skill and care)
Result:
EDS ordered to pay interim damages of £200 million by 17 February 2010, final damages likely to b higher

Misrepresentation
Majority of claims dismissed
Fraudulent misrepresentation:
Court agreed that EDS had been fraudulent in claiming that the project could be completed within 18 months as it knew it had no grounds to make the claim
EDS intended BSkyB to rely on it
BSkyB relied on the representation and suffered harm
Effect of fraudulent misrepresentation
the liability cap (£30 million) was invalid and BSkyB is able to recover all damages which it can demonstrate
stinging criticism of the EDS MD (Joe Galloway)

Misrepresentation
Negligent misrepresentation
court also accepted that there had been a negligent misrepresentation by EDS in representing that they “had a programme plan that was achievable and the product of proper analysis and re-planning”.
EDS had no reasonable grounds for such a representation, but EDS’ culpability was not as great as with regard to the misrepresentation on timescales.

Breach of Contract
EDS held to be in breach due to:
failure to provide experienced personnel
failure to deliver the services/documentation in accordance with the contract
failure to exercise reasonable skill and care
Documentation/Evidence:
the Court was able to point to numerous minutes/emails which showed that EDS had had serious problems with resourcing the project, meeting contractual deadlines and only making minimal progress. The breach of contract finding was the result of the cumulative effect of these deficiencies.

Breach of Contract
Repudiation
could BSkyB terminate in March 2002?
repudiation only possible if EDS indicated it would not follow contract or committed a breach going to root of contract
poor performance not sufficient per se to terminate
no repudiation where breach is less serious than that required in express termination clause
in addition, repudiation needs clear acceptance – none here

Limiting Liability
the £30 million liability cap cannot apply to damages arising from fraudulent misrepresentation
Entire Agreement defence
could EDS use clause to avoid negligent misrep?
no - argument failed
wording excluded representations from the “contract” but did not mean they never existed
really explicit wording required to indicate that representations have been withdrawn, overridden or have no legal effect

Limiting Liability
Settlement Agreement defence
clear wording in relation to settlement of contractual claims
silence as to tortious claims
failure to include tortious claims expressly was fatal – liability not excluded for negligent misrepresentation

Limiting Liability
Memorandum of Understanding
signed in March 2002, EDS claimed it was binding and settled contractual claims
stated to be “without prejudice” and “subject to contract”
was part of MOU binding?
claim rejected: MOU not binding, as clearly inconsistent with parties’ intent/behaviour

Damages
BSkyB’s claim:
induced into awarding the contract to EDS due to the misrepresentations and without these
it would have contracted with one of the other bidders (PwC) who would have
completed the project earlier
at a lower cost and
would have delivered IT benefits sooner

Damages
Contractual damages:
court assessed that BSkyB was entitled to £52.8 million due to incurring that amount of cost over and above what it would have paid EDS to complete the project – but contract damages subject to the limitation cap of £30 million
Misrepresentation damages:
after extensive analysis, the Court accepted that BSkyB would have contracted with PwC who would have achieved go-live on 1 February 2005

Damages
Mitigation
duty on innocent party to minimise loss
EDS claim that BSkyB failed to act reasonably
should BSkyB be judged as a systems integrator?
EDS claim rejected: delayed completion not per se evidence of “unreasonable” behaviour
key issue: was assuming the SI role reasonable?
step-in rights supported
Interim award of damages reported to be £200 million, suggesting that any final award is likely to be for a larger sum

Implications for the IT Sector
Suppliers need to control bids
danger of the rogue salesman
better vetting of key employees
better ITT/Proposal analysis
tougher peer review/approval process
reducing risk by contract drafting
rewarding the sales team
higher bids/fewer bidders?

Actions for customers
check supplier references/key individuals
tougher analysis of the ITT – legal dilemma?
greater interest in supplier’s internal bid documents
attempts to invalidate all pre-contract representations?
check supplier’s terms
IT contract pricing - reinforcement of milestone approach, further undermining time and materials
an explosion of IT disputes?
special facts present
difficulty in showing fraudulent misrep/attacking limitation caps
cost and disruption of all litigation

CV Details
John qualified in 1990 and has practised in City firms before joining Clarkslegal LLP as head of the Technology Law Team. He specialises in all aspects of IT and IP law including:
IT Services and Outsourcing Agreements
Software Development Projects
Pharmaceutical/BioTech Agreements
Protection and exploitation of all IP rights
Trade marks and branding
Dispute management and resolution
John’s clients span many sectors including Infrastructure, Technology and Retail and he has acted for ICL Fujitsu , Balfour Beatty, G4S , Mouchel and Asos.com .
He is recognised as a Technology Law expert in both the Legal 500 and Chambers directories.

Contact
[email_address]
+ 44 (0)118 953 3956
www.clarkslegal.com