e-commerce law reports volume 07 issue 06

Comparative advertisingThe Control of MisleadingAdvertisements (Amendment)Regulations 2000 (CMA) amendedthe Control of MisleadingAdvertisements Regulations 1988(which implemented the CAD) byadding provisions dealing withcomparative advertisements to theexisting regime governingmisleading advertisements.

An advertisement is comparativeif ‘in any way, either explicitly or byimplication, it identifies acompetitor or goods or servicesoffered by a competitor’3 and shall,‘so far as the comparison isconcerned, only be permitted whenthe following conditions, amongothers, are met:● it is not misleading;● it compares goods or servicesmeeting the same needs orintended for the same purpose;● it objectively compares one ormore material, relevant, verifiableand representative features of thosegoods and services, which mayinclude price;● it does not create confusion inthe market place between theadvertiser and a competitor orbetween the advertiser’strademarks, trade names, otherdistinguishing marks, goods orservices and those of a competitor;● it does not discredit or denigratethe trademarks, trade names, otherdistinguishing marks, goods,services, activities, or circumstancesof a competitor;● for products with designation oforigin, it relates in each case toproducts with the samedesignation;● it does not take unfair advantageof the reputation of a trademark,trade name or other distinguishingmarks of a competitor or of thedesignation of origin of competingproducts;● it does not present goods orservices as imitations or replicas ofgoods or services bearing a

protected trademark or tradename.’4

While the TMD confers exclusiverights on the proprietor of aregistered trademark, the CADstates that ‘it may, however, beindispensable, in order to makecomparative advertising effective,to identify the goods or services ofa competitor, making reference to atrademark or trade name of whichthe latter is the proprietor’ and thattherefore ‘use of another’strademark, trade name or otherdistinguishing marks does notbreach [the] exclusive right in caseswhere it complies with theconditions laid down by thisDirective, the intended target beingsolely to distinguish between themand thus to highlight differencesobjectively.’

Trademark infringementUK trademarkAs this case was a similartrademarks case, Sections 10(2)and 10(3) of the Trademarks Act1994 (TMA) were at issue. Underthese sections, a person infringes aregistered trademark if he uses inthe course of trade a sign which:● ‘because ... (b) the sign is similarto the trademark and is used inrelation to goods or servicesidentical with or similar to thosefor which the trademark isregistered, there exists a likelihoodof confusion on the part of thepublic, which includes thelikelihood of association with thetrademark;● (a) is identical with or similar tothe trademark, and (b) is used inrelation to goods or services whichare not similar to those for whichthe trademark is registered, wherethe trademark has a reputation inthe United Kingdom and the use ofthe sign, being without due cause,takes unfair advantage of, or isdetrimental to, the distinctivecharacter or the repute of thetrademark.’

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For a short time in August 2004,Hutchison 3G UK Ltd (H3G) rantelevision, press and radioadvertisements comparing O2Holdings Ltd (formerly O2 Ltd)and O2 (UK) Ltd (O2) mobileprices against those offered by its‘3’ network. H3G claimed that its‘Threepay’ telephone service wascheaper than the equivalent serviceoffered by O2 on its Talkalot andTalkalotmore tariffs. Theadvertisements involved the use ofvarious O2 registered trademarks -UK and community trademarks(CTM) - and raised two issues:comparative advertising andtrademark infringement.

O2 quickly became aware of theadvertisements and wasted no timein putting the legal wheels inmotion to obtain an injunction tostop them. Unfortunately, O2 didnot get the injunction and wasforced to go to trial. It accepted thejudge’s ruling in the interimapplication hearing that theadvertisements were notmisleading and only pursued H3Gfor trademark infringement. Thatpursuit took O2 all the way to theEuropean Court of Justice (ECJ).

More than a year after referral ofthe matter to the ECJ, AdvocateGeneral Mengozzi (AG) deliveredhis long-awaited opinion on 31January 2008. He opined, in favourof H3G, that use of a competitor’strademark in comparativeadvertising should be consideredsolely under the ComparativeAdvertising Directive1 (CAD) andnot the Trademarks Directive2

(TMD). We now wait to seewhether the AG’s opinion will befollowed.

This article looks at the lawsrelating to comparative advertisingand trademark infringement anddiscusses how this case progressedfrom the High Court to the ECJ. Italso analyzes the effect the AG’sopinion will have if it is followed.

02 Holdings Limited & 02 (UK) Limited v Hutchison 3G UK LimitedC-533/06. 31 January 2008The European Court of Justice issues an opinion on the use of a competitor’strademark in comparitive advertising.

The TMA provides that: ‘Nothingin the preceding provisions of thissection shall be construed aspreventing the use of a registeredtrademark by any person for thepurpose of identifying goods orservices as those of the proprietoror a licensee. But any such useotherwise than in accordance withhonest practices in industrial orcommercial matters shall betreated as infringing the registeredtrademark if the use without duecause takes unfair advantage of, oris detrimental to, the distinctivecharacter or repute of thetrademark’.

CTMUnder the Community TrademarkRegulation (CTMR), a trademarkowner is entitled to prevent thirdparties from using in the course oftrade:● ‘any sign where, because of itsidentity with or similarity to the[CTM] and the identity orsimilarity of the goods or servicescovered by the [CTM] and thesign, there exists a likelihood ofconfusion on the part of thepublic; the likelihood of confusionincludes the likelihood ofassociation between the sign andthe trademark;● any sign which is identical withor similar to the [CTM] in relationto goods or services which are notsimilar to those for which the[CTM] is registered, where thelatter has a reputation in theCommunity and where use of thatsign without due cause takes unfairadvantage of, or is detrimental to,the distinctive character or therepute of the [CTM].’

A CTM does not entitle ‘theproprietor to prohibit a third partyfrom using in the course of trade ...(b) indications concerning thekind, quality, quantity, intendedpurpose, value, geographicalorigin, the time of the productionof the goods or of rendering of the

service, or other characteristics ofthe goods or service, provided heuses them in accordance withhonest practices in industrial orcommercial matters.’

High Court to ECJHigh Court - interim applicationO2’s application for an interiminjunction was to restrain H3Gfrom continuing with itsadvertisements and using its UKand CTM trademarks - the O2bubbles (Bubble Marks) and O2sign (Word Mark).

In simple terms, the 20-secondtelevision advertisement started inblack and white with a shot of acircular field of bubbles, whichthen expands to fill the screen. Avoice then said “on 02 ‘pay-as-you-go’ the first 3 minute peak rate calleach day could cost you 75 pence.”This was followed by an animatedfigure 3 and a voice saying “or withThreePay, that exact same callcould cost you 15p.”

O2 argued:● “the first 3 minute peak rate calleach day could cost you 75 pence”versus “that exact same call couldcost you 15p” was grosslymisleading and an oversimplification of any legitimatecomparison which can be made;and● there was infringement of itsBubble Marks and Word Mark.

H3G said:● the advertisements wereaccurate or, alternatively, fair;● there was no possibility oftrademark infringement of theBubble Marks because the bubblesin the advertisement areinsufficiently similar to theregistered marks to beinfringements and in any event itsuse was entitled to protectionunder Section 10(6) of the TMA;and● there was no infringement of theWord Mark as H3G’s use wasprotected by Article 12(b) of the

CTMR.O2’s application was dismissed by

the judge and a trial ordered. Thejudge felt that:● H3G’s price comparison was atrue one - no evidence ofdishonesty on the part of H3G hadbeen put forward by O2;● it was arguable that use of theBubble Marks in the advertisementconstituted trademarkinfringement, but he was notsatisfied that the necessaryelements for an interim injunctionto be granted had been establishedas the disruption caused was notproportionate to the damage beingcaused to O2; and● use of the Word Mark in thecontext of the price comparisondid not constitute trademarkinfringement.

While O2 accepted the judge’sposition on the price comparisonand use of the Word Mark, itdecided to continue its trademarkinfringement allegations in respectof the Bubble Marks.

Before the trial, O2 tried to refer12 trademark questions to the ECJ(for a preliminary ruling underArticle 234 of the EC Treaty) butthe High Court refused to considerits request. O2 argued that theanswers to its questions would/mayhave an impact on the main trialbut H3G argued that:● it could not be predicted at thisstage that it would be “necessary toenable [the court] to givejudgment” to have answers to thesequestions (as is required underArticle 234); and● there may be other questions torefer to the ECJ.

High Court Trial At trial, the judge was asked todetermine whether the BubbleMarks were valid. If they werevalid, had H3G infringed themunder the TMA and did H3G havea defence under the CAD orsection 10(6) of the TMA? H3G

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e-commerce law reports volume 07 issue 06

● In particular, if there is arequirement of indispensability,does that requirement preclude anyuse of a sign so similar to theregistered trade as to beconfusingly similar to it?

ECJ - AG’s OpinionIn response to the Court of Appeal’squestions, the AG opined that:● Question 1 - The use of a signidentical or similar to theregistered trademark of acompetitor in an advertisement,which compares the characteristicsof goods or services marketed bythat competitor under thattrademark with the characteristicsof goods or services supplied bythe advertiser, is coveredexhaustively by Article 3a of theCAD and is not subject to theapplication of Article 5(1)(a) or (b)of the TMD.

In coming to this conclusion, theAG acknowledged the differentoutcomes of other comparativeadvertising/trademarkinfringement cases such as BMW,Hölterhoft, Adam Opel and theArsenal Football Club. Support forthe AG’s response came from thewording in recitals (14) and (15)and Article 3a of the CAD.● Questions 2 and 3 - Article 3(a)of the CAD is not to be interpretedas permitting the use, in acomparative advertisement, of asign identical or similar to theregistered trademark of acompetitor only when that use isindispensable for the purpose ofidentifying the competitor or thegoods or services concerned.

In coming to this conclusion, theAG found no language in Article3(a) which could be interpreted toimpose a requirement ofindispensability and rejected O2’sargument that a requirement ofnecessity could be deduced byimplication of Article 3a(1)(g) orfrom previous ECJ decisions inToshiba and Siemens.

If followed, what effect will thishave on advertisements?

While the AG’s opinion does notfavour trademark owners trying toprotect the use of their trademarksin comparative advertising, heacknowledged that some form ofnecessity requirement should beconsidered to avoid unfairadvantage being taken of atrademark’s reputation.

UK consumers are used to seeingadvertisers comparing theirproducts/services with those of acompetitor. This is unlikely to goaway as competition betweencompanies for consumer buy-in is,and will continue to be, fierce.Mobile phone companies,supermarkets and banks areprobably the most well-knownindustries which frequentlycompare the services they offerwith those of their rivals. Iffollowed, the AG’s opinion is likelyto be seen as a ‘green light’ bycompanies to use theircompetitors’ trademarks in theiradvertisements. However, anyadvertisement must still stay withinthe parameters of the CMA/CADto be acceptable.

Companies should be prepared toreview (and if necessary, amend)their advertising policies to ensurethat they are consistent with theCAD, not the TMD.

Lisa Comber Associate Faegre & Benson LLPlcomber@faegre.com

1. 84/450/EEC (of 10 September 1994)as amended by Directive 97/55/EC (of 6October 1997). The Misleading andComparative Advertising Directive(2006/114/EC) came into force on 12December 2007, and (from that date)repealed Directive 85/450/EEC andconsolidated all the amendments to it in asingle legal act. The UK implementinglegislation, the Business Protection fromMisleading Marketing Regulations 2007 isdue to come into force on 26 May 2008.2. 89/104/EEC of 21 December 1988.3. Regulation 2(2) of the CMA.4. Regulation 4A of the CMA,implementing Article 3(a)(1) of the CAD.

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counterclaimed that Bubble Markslacked distinctiveness undersection 3(1)(b) of the TMA.

The judge held that:● the Bubble Marks had bothinherent and acquireddistinctiveness;● H3G had a defence underRegulation 4A of the CMA/Article3(a)(1) of the CAD due to a primafacie case of infringement undersection 10(2) of the TMA/Article5(1)(b) of the TMD and so theconditions under Section 10(6) ofthe TMA/Article 6(1)(b) of theTMD were satisfied; and● O2 had not establishedinfringement under section 10(3)of the TMA/Article 5(2) of theTMD, to which H3G would in anyevent have had a defence underRegulation 4A of the CMA/Article3(a)(1) of the CAD.

O2’s case and H3G’scounterclaim were dismissed. Bothappealed.

Court of AppealIn order to settle the dispute, thecourt concluded that an EU-wideanswer was needed from the ECJto the following questions:● Where a defendant in the courseof trade uses a sign in a contextpurely for the purpose ofcomparing the merits (includingprice) of his goods or services withthose of the trademark owner andin such a way that it cannot besuggested that the essentialfunction of the trademark toguarantee the trademark as anindication of origin is in any wayjeopardised, can his use fall withineither (a) or (b) of Article 5.1 of[the TMD]?● Where a defendant uses, in acomparative advertisement, theregistered trademark of another, inorder to comply with Article 3a of[the CAD], must that use be‘indispensable’ and if so, what arethe criteria by whichindispensability is to be judged?