Unfair Advantage of Famous Reputation Brands?

October 26, 2018

What’s in a Reputation?

If you are lucky enough to have a famous brand, for which
you have a trade mark, the law in the UK and Europe usually affords you far
greater protection than if you are lesser-known.

Due to their notoriety, would-be infringers try to seek out
such big-brands to imitate more often, hoping to ride off the coat tails of the
reputation those brands command. As such, there are provisions in both UK and
European trade mark law (by way of Article 9(2)(c) of the EU Trade Mark
Regulation) which provides protection for brands with a famous reputation.

Where an unauthorised third party uses a similar mark, and
such use (1) causes damage to the reputation or the distinctive character
(dilution) and/or (2) takes unfair advantage of the reputation in the trade
mark, the Regulation and European case law deem that the trade mark owner must
be compensated.

This is regardless of whether the third party uses the mark
in relation to similar goods or services to the trade mark owner – as is the
typical complaint of more ordinary trade mark litigation proceedings.

Brands with a certain level of repute (eg Apple), as such,
find themselves capable of enforcing their trade marks more broadly than within
their registered categories.

Such was the nature of the complaint brought by Argos Ltd,
the UK high-street retail outlet against Argos Systems Inc. a small US-based
software company based in Bedford, Massachusetts, which was recently resolved
in the Court of Appeal (see Argos Ltd v Argos Systems Inc [2018] EWCA Civ


Argos dropped allegations on infringement in an Article
9(1)(a) or (b) context, and appealed only in relation to reputation, in
particular on the point of taking of unfair advantage.

A short reminder of the salient facts of this case are:

  1. Argos UK own the EU trade marks for the word ‘ARGOS’;
  2. Argos US bought the domain name www.argos.com, in 1992;
  3. many UK web users type in www.argos.com accidentally believing
    it would take them to Argos UK’s website (actually www.argos.co.uk);
  4. Argos US do not market any goods/services to the EU market
    but placed Google AdSense adverts on their website that may have been seen or
    clicked on by EU visitors;
  5. Argos US did make some profits from the Google AdSense

In the High Court, Argos UK alleged infringement under
Article 9(1)(a) or (b) of the Regulation but, the trial judge rejected that
ground, Argos UK appealed only in relation to reputation, in particular on the
point of taking of unfair advantage. They had lost at first instance on that
ground too.

Deputy Judge Spearman in the High Court (see [2017] EWHC 231
) decided that while an advantage may have been accrued by Argos
Systems (namely, revenue from the AdSense impressions and clicks), this
advantage was not necessarily unfair.

This decision was reached on several factual bases,
including that Argos US had nothing to entice EU visitors to its website, and
that the AdSense program signed up to by both parties was a commercially
reasonable activity that benefited both.

The Appeal: A question of reputation and unfair

In the appeal, primary argument of Argos UK in relation to
unfair advantage was that the respondent had enjoyed an economic advantage by
using AdSense adverts on their www.argos.com domain and that it necessarily
followed that any advantage should be ‘unfair’.

This was derived from the unqualified principles of ‘unfair
’ as were set out in L’Oreal v Bellure
(ie ‘advantage arising from the use by a third party of a sign similar to a
mark with a reputation is an advantage taken unfairly

LJ Floyd was careful not to criticise L’Oreal but stated
that taking such a literal meaning from it would be to ignore the additional
principles set out in Whirlpool Corp v
Kenwood Ltd
and Specsavers
International Healthcare v Asda Stores Limited

Both those later cases were decided on the basis that
something more was required for an ‘unfair’ advantage, and that it mattered
whether the use of the mark was ‘without due cause’.

He also pointed out that L’Oreal was a case where there was
an ‘image transfer’, ie that the average consumer would see the defendant’s use
of the mark. This is to be distinguished in cases such as the Argos situation
or Interflora, for example, where, while there was unauthorised use of a trade
mark, the end-user would not see such use or perceive it as trade mark use.

In that legal context, LJ Floyd decided to uphold the first
instance judge’s findings. The respondent’s use of Argos UK’s trade mark
(through the combination of its use of www.argos.com and the AdSense ads) was
not ‘unfair’ due to the factual findings of the first instance judge.

Interestingly, LJ Floyd regarded the mere fact that Argos US
were making money by using the www.argos.com
domain name and subscribing to the Google AdSense program did not mean the
conduct was deemed ‘unfair’.

The unsolicited traffic to Argos US’s website was causing
major bandwidth issues for some time, and Argos US were not obliged to find the
least damaging way to solve these problems. Indeed, they were entitled to
profit from signing up to a normal commercial activity such as Google AdSense.


The decision seems to reinforce precedent such as Specsavers
and Interflora. It also seems to make reasonable and practical sense.

If it was decided that the advantage taken was necessarily
, it would have meant a party in the same position (where they
unknowingly and in a completely different territory operate a website at a
domain name which uses all or part of an EU trade mark) would not be able to
access the Google AdSense program as they would be liable to trade mark
infringement on another continent if they did.

Lakmal Walawage is a solicitor with Virtuoso Legal, focusing
on all aspects of contentious and non-contentious intellectual property work.
Virtuoso acted for Argos Systems in the UK litigation: www.virtuosolegal.com