The relative unfairness of sponsored advertisements in the "Orona" case before the Spanish Supreme Court

Return to News — Sunday 23 April — 2017 by Baylos
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What are the effects deriving from the conduct of a company, for example, Citylift SA, which buys keywords through Google AdWords in order to use the referencing service of Adwords to promote its products, and it buys, among others, the word Orona which is a well-known mark owned by a competitor and leader in the respective market sector?

In its judgment No. 94/2017 of 15 February 2017, the Supreme Court annulled the judgment of the Court of Appeal of Alicante for it considered that the conduct carried out by Citylift SA did not constitute trade mark infringement, according to the Law No. 17/2001 on trade marks, nor unfair competition, according to the Law No. 3/1991 on Unfair Competition (LCD). The Supreme Court based its decision on the principle of relative complementarity between the trade mark and unfair competition legislations.

Contrary to what the Court of Appeal of Alicante stated, the Supreme Court deemed that the claims brought forward by Orona S.Coop. were all founded on the same factual circumstances. Therefore, once trade mark infringement was excluded, since the essential function of the plaintiff’s trade mark Orona had not been affected, the conduct of Citylift SA could not be regarded as taking unfair advantage of the well-known character of such mark, given that otherwise the doctrine of relative complementarity would have been violated.

In reaching such conclusion the Supreme Court applied the case-law construed by the CJEU in case C-323/09 ‘Interflora’ as it is apparent in the judgement of 22 September 2009. In that case the CJEU was called to analyze identical factual circumstances with those which the Spanish Courts have been confronted with: the use of a well-known trade mark as keyword in the context of the referencing service of Adwords provided by Google with the aim at promoting goods which were in direct competition with those protected by the well-known trade mark of a competitor, whilst the term constituting the well-known mark did not appeal within the sponsored link, nor in the advertisement, nor in the advertiser’s webpage.

The Supreme Court reiterated what the CJEU had already affirmed in case Interflora: when a trademark is well-known, the likelihood that Internet users will use the sign as a keyword to search for the corresponding goods and services increases. Therefore, a competitor who buys the well-known trade mark as keyword to promote the sponsored advertisement of its own products or services obtains a real/(unfair) advantage without paying compensation for such use to the owner of the trade mark.

Notwithstanding the above, the Supreme Court considered that the conduct perpetrated by Citylift SA is not unfair in view of the wording of paragraph 91 included in the CJEU’s judgement, provided that in both the Interflora and Orona cases the advertisement would offer an alternative to the products or services of the trade mark holders. The Supreme Court indeed stated that:

The Citylift’s advertisement to which the sponsored link refers and for which the term orona" is used as a keyword offers an alternative to the services of the owner of the well-known mark, without offering an imitation of such services, without causing a dilution of the trade mark and without impairing its other functions, and thus constitutes a healthy and fair competition in the market sector of elevator maintenance services, and therefore constitutes the 'due cause' excluding the unlawfulness of the conduct.

In our opinion, the Supreme Court erroneously applied the case-law construed in Interflora. It is not sufficient that the advertiser provides an alternative to the products or services protected by the well-known mark, it is also needed that such alternative does not constitute a mere imitation of the products or services of the trade mark holder, nor it can cause dilution or tarnishment, nor can affect the essential function of the mark, since in all these situations the use of the well-known mark could not be justified.

In this regard, the CJEU held that It is for the referring court to determine, in the light of the foregoing interpretative guidance, whether, on the particular facts of the dispute in the main proceedings, there is use of the sign without due cause which takes unfair advantage of the distinctive character of the repute of the trade mark.

Instead, the sole purpose for a third party to use a sign as keyword where the sign constitutes a well-known mark is the willful strategy to take unfair advantage of the well-known character/reputation and the efforts of the trade mark holder, so that it should be regarded as being without due cause. Nor such conduct could be certainly deemed to be compliant with fair commercial practices.

In addition, I should point out that the concept of alternative should not simply be considered as the possibility for a third party to advertise its own products through the attractive power of a well-known brand of another company, especially if this latter is a competitor. The alternative would become relevant if the well-known sign was registered for products that, notwithstanding their functional relationship with the ones advertised by the third party, had a sufficiently different use in the market, as would be the case for the promotion of bicycles through a keyword "BMW", which is a well-known brand for, among others, motorcycles.

Finally, I consider that, in view of the application of the case-law in Interflora by our Supreme Court, as explained above, and taking into account the principle of relative complementarity characterizing the Spanish case-law, it can only be concluded that the holders of well-known trade marks must be recognized the possibility of challenging the use of their trade marks as keywords in sponsored advertisement services solely and exclusively through the unfair competition legislation, including according to Article 12 LCD.

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