Argos falls at the last hurdle of "unfair advantage" claim at Court of Appeal

Argos Ltd v Argos Systems Inc. [2018] EWCA Civ 2211

Introduction

In Argos Ltd v Argos Systems Inc. the Court of Appeal has upheld the High Court’s decision that a US corporation, selling construction software only in the Americas under the name ARGOS, was not liable for infringement of a registered trade mark owned by a UK based consumer goods retailer who trades mainly in the UK and Ireland under the same name.

Background

In 1992, Argos Systems Inc (ASI), an American company specialising in CAD systems for the design and construction of buildings, registered the domain argos.com. In 1996, Argos Limited (Argos), the well-known UK retailer, registered the domain name argos.co.uk. Argos owned various EU and UK trade marks for ARGOS, but it accepted that it was too late to secure the argos.com domain name.

Between 2008 and 2012, ASI's website included Google AdSense ads to all visitors. From 2012 to 2014, the website settings were reconfigured so that only visitors from outside the Americas saw the Google ads. The vast majority of visitors to argos.com came from the UK and Ireland, with the majority of these visitors (83%) immediately leaving the site. Argos was understandably suspicious that the Google ads were left on for visitors outside the Americas with the intention of generating advertising revenue from their interest in Argos' name. Argos alleged free riding and damage to the distinctive character and reputation of its trade marks.

At the High Court

Argos argued that the combination of the domain name argos.com plus Google ads (some of which included ads for Argos or Argos' competitors) amounted to trade mark infringement. This allegation failed for two main reasons:

1. Argos had expressly and unequivocally consented to the use of the mark ARGOS in advertising when it signed up to Google's AdSense Programme. It had been open to Argos to block its ads from appearing on argos.com, but it had declined to use this feature. Argos had knowledge of where its ads were appearing through its advertising agency, whose “knowledge” was attributed to Argos under ordinary agency principles.
2. ASI was not targeting UK consumers. This was assessed from the perspective of the average consumer. The judge considered there were two types of average UK Internet user. The first was the “enquiring user” who would assume some connection between their browsing history and the adverts displayed to them on a website. The second was the “unenquiring user” who would not think about the reasons for the ads being there.

The Judge held that ASI obtained traffic to its site due to the domain name which they had lawfully registered, and not because of the adverts displaying the ARGOS trade mark.

As to whether the ads in question were “targeting” the UK, the judge held that ASI had introduced the AdSense ads "with the specific intention of making money, by means of the ads, from [Argos’] customers who were in fact seeking [Argos’ website". However, he concluded that the ads did not target the UK because Google were delivering the ads and not ASI.

Court of Appeal

On appeal, Argos argued that ASI was taking unfair advantage of the distinctive character of the ARGOS mark under Article 9(1)(c) of Council Regulation (EC) No 207/2009.

As in the High Court, the focus on appeal was the question of “targeting”. As Floyd LJ pointed out, just because a website can be accessed from anywhere in the world does not mean that it “targets” all territories worldwide.

The High Court had concluded that ASI’s ads did not target the UK because Google, and not ASI, played the key role in delivering those ads. However, the Court of Appeal noted that ASI was aware of the misdirected traffic arriving at its website and the vast majority of this traffic came from the UK and Ireland. Because of the way the Google algorithm works, it is very likely that these visitors would be shown ads of interest to them. Therefore, the Court of Appeal concluded that ASI was indeed “targeting” the UK through its electronic billboards.

However, this was not enough to amount to infringement. Argos also needed to show that ASI’s use of the sign ARGOS gave rise to a “link” between the sign and Argos’ trade mark and that ASI took unfair advantage of the distinctive character or repute of the trade mark without due cause.

The Court of Appeal found that there was such a link. UK and Irish consumers typing in argos.com, although immediately realising that they had not reached Argos’ website, arrived there on the strength of Argos’ trade mark and already had the ARGOS mark in mind. Upon arrival at argos.com, visitors were then confronted by the advertising billboard service.

However, on the question of “unfair” advantage, the Court of Appeal found that there was no attempt made by ASI to draw a link with Argos on their website so it was immediately clear to visitors that they had come to the wrong place. Further, the revenue raised was minimal in the context of ASI's overall business. Therefore, ASI was not found to be riding on the coat-tails of with the ARGOS trade mark.

Consequently, whilst ASI did obtain an advantage, the Court of Appeal saw no reason to overturn the High Court’s conclusion that this advantage was not unfair.

Comments

This case highlights the importance of registering key domain names as early as possible, to minimise the risk of confusion with other businesses online. Businesses who advertise online should also ensure that they use the blocking feature on the AdSense programme to exclude domains where they do not wish their adverts to appear.