BACKGROUND AND INTRODUCTION
On 29 October 2014, the Gauteng Local Division, Johannesburg handed down its judgment in the case of Cochrane Steel Products (Pty) Ltd v M-Systems Group (Pty) Ltd and Another (Case number 39605/13). Essentially this case dealt with the bidding on keywords (relative to Google advertising) which are the trade mark of a competitor (see below for further details of the facts). After considering both passing off and unlawful competition arguments, the court dismissed Cochrane’s claim, allowing M-Systems to continue to bid on its competitor, Cochrane’s trade mark CLEARVU in M-Systems’ Google advertising campaign.
The basis of the Gauteng Local Division’s judgment was as follows:
Unlawful Competition (leaning on)
Relying on several High Court, Supreme Court of Appeal and Constitutional Court judgments, the court in this matter held that there was ‘no room in our law for the applicant to avail itself of ‘leaning on’ as a common law action independent of passing off or statutory registration.’ Whereas passing off deals with the reputation or distinctive value of trade marks, leaning on focuses on the advertising value thereof. Therefore, theoretically, if leaning on is to have occurred, one entrepreneur must misappropriate the advertising value of the trade mark of another, thereby “leaning on” the reputation of the other. The court felt it did not need to develop the common law in line with the Constitution and its Bill of Rights in this regard. Effectively, the court was of the view that ‘leaning on’ is not a valid cause of action. In the absence of passing off (likelihood of confusion), one could not rely on ‘leaning on’ to protect the advertising value of the reputation of the business (the good name of the business) under the common law of unlawful competition.
There are three requirements for passing off:
However, the court dealt with only one of these requirements and found it lacking i.e. a misrepresentation which is likely to cause deception or confusion. In coming to its decision that no deception or confusion had occurred, the court referred to several foreign judgments – some used in support of its decision and some distinguished. The High Court stated that these judgments have ‘held that the proprietor of a trade mark cannot oppose the use of an identical mark unless it causes detriment to the functioning of the mark in that it is likely to cause confusion as to the origin.’
Further, the High Court opined that ‘Generally foreign jurisdictions have held that ordinary keyword advertising using another proprietor’s trademark does not have an adverse effect on the advertising function of a trade mark and does not necessarily lead to confusion. This only occurs where the advertisement of the competitor does not enable the average internet user to ascertain with a certain degree of ease whether the goods and services originate from the proprietor of the trade mark.’ How this is determined is with reference to the “reasonably well informed consumer”. The rule is that as long as the use of the keyword prompts the display of an advertisement which the reasonably informed and observant internet user can determine that the goods originate not from the proprietor but from the competitor, then the advertisement is not unfair. Furthermore, where advertisements are displayed without offering imitations of the goods, merely an alternative to the original goods, these are considered fair competition. In this context, the fact that one proprietor’s selection of a sign that is identical to another proprietor’s trade mark does not present an obstacle and/or prevent the proprietor of that trade mark using its mark effectively to educate and attract customers.
The High Court, again referring to a foreign judgment, concluded that internet users were used to having to filter their searches, were acquainted with sponsored advertisements and seeing them from competitors and that something in their search description may trigger these results. Also, consumers are aware that their searches produce “fuzzy results” i.e. results with irrelevant information, which may have nothing to do with the object of their search. The critical question is whether the average consumer could or could not reasonably fail to appreciate the fact that the competitor’s advertisement was just another advertisement from another supplier of similar or identical goods and/or services to those requested by the internet searcher?
Some important comments
THE NEXT STAGE – TAKING IT TO THE ADVERTISING STANDARDS AUTHORITY (“ASA”)
In a ruling handed down by the ASA Directorate on 3 February 2015 (M-Systems Group v Cochrane Steel Products; Case number 2014-1859F), the next stage of the saga between the parties was decided. The complaint lodged by Cochrane was based on identical facts as contained in above judgment, which Cochrane admitted. The facts form part of the ruling and are as follows:
Cochrane argued that despite the same facts being in issue as in the Gauteng Local Division, Johannesburg judgment, the ASA is still obliged to ‘determine whether or not the Adwords used by M-Systems amount to “unlawful advertising”, more specifically, a breach of clause 8 of Section II of the Code’ (the Advertising Code), which relates to the ‘exploitation of advertising goodwill’.
M-Systems responded to the complaint above as follows:
THE RULING OF THE ASA DIRECTORATE
The main issue that the ASA Directorate dealt with was its jurisdiction in the current matter. It stated that the ASA only hears matters relating to “published advertising” (in relation to the definition of ‘advertising’ in the ASA Code). Despite the fact that Google’s Terms and Conditions for its Adwords specifically incorporating ‘any applicable advertising codes of practices’, this does not automatically extend the scope of the ASA Code to include Adwords purchased on a “behind the scenes” basis’.
The ASA Directorate proffered that Cochrane is not objecting to the actual content or claims of M-Systems’ GoogleAds that appear when one does a search for “clearvu”, but rather finds it objectionable that M-Systems uses the keyword “clearvu” to ensure its sponsored link appears as one of the GoogleAds.
Clause 4.1 of Section I of the ASA Code defines an ‘advertisement’ as follows:
‘… any visual or aural communication, representation, reference or notification of any kind which is intended to promote the sale, leasing or use of any goods or services; or which appeals for or promotes the support of any cause. Promotional content of display material, menus, labels, and packaging also fall within the definition. Editorial material is not an advertisement, unless it is editorial for which consideration has been given or received.‘
The court then referred to Revivo Tea v P Linzer / 13898 (29 June 2011), Loan Discovery SA v Brown / 21626 (17 April 2013) and the websites, http://www.webopedia.com/TERM/A/adwords.html and http://www.google.co.za/adwords/how-it-works/ , in coming to its decision that an Adword is not regarded as the “advertisement” itself, but merely as a trigger that ensures that a person’s advertisement is triggered. There is a marked difference between what is considered as the person’s “advertisement” and the “Adwords” selected. The latter webpage adds that if the input of certain search words into Google match your keywords, your advertisement may appear above or next to the search results.
All of this supports the argument that the “adwords” selected are not the actual advertisements, but merely the variables that trigger the display (or not) of a person’s advertisement.
The court held that the “Adwords” in which Cochrane seeks to establish goodwill are not “advertisements” as defined in Clause 4.1 of Section I of the Code. In the circumstances, the ASA does not have jurisdiction to rule on the business or advertising practices of Google Adwords. Rather than the complaint’s dealing with the “content” of advertising as such, it rather deals with the advertising practices of Google AdWords.
Bearing this in mind, and given that the words “clearvu”, “clear vu” or “clear view”do not appear in the GoogleAd submitted by the complainant, the complaint cannot be entertained, as it does not relate to any published “advertisement” as defined in Clause 4.1 of Section I of the Code.
COMMENTS AND ANALYSIS
This ASA ruling serves to add yet another nail in the Cochrane Google Advertising complaint’s coffin. The ruling does not add too much in terms of substantive principles in Google Advertising claims that would be taken to the ASA, but does send a clear, unequivocal message that the ASA will not entertain these cases on the basis of lack of jurisdiction (referring to the baseline requirement that the complaint relates to an ‘advertisement’ in terms of Section I of the ASA Code). However, by extension, this ruling, in conjunction with the High Court judgment, serve to provide ample grounds for businesses to bid legally on their competitor’s trade mark or company name, unless an appeal is successful.
As far as we have been informed, as yet, there has been no request to appeal the ASA ruling, however, there has been a request for leave to appeal the High Court judgment. Also, there is a pending trade mark opposition hearing of Cochrane’s CLEAR VU trade mark application. A trade mark opposition is a procedure that follows acceptance of a trade mark application by the Registrar of Trade Marks. After acceptance, the trade mark application must be advertised in the Patent Journal, whereafter third parties have an opportunity (3 months) to oppose the trade mark application based on sections 9 and 10 of the Trade Marks Act 194 of 1993. An example of a ground that can be used by an opponent of the trade mark application is that the applicant does not have a bona fide claim to proprietorship in the trade mark.
Having said that, we believe that the reliance by the ASA Directorate on the technical point of jurisdiction based on a strict reading of the definition of ‘advertisement’ in the ASA Code, to exclude Google Advertising from its ambit, needs to be reconsidered. If one considers the modern commercial marketplace and how digital advertising has become a critical and prominent element in many businesses’ advertising efforts, we believe that the ASA Directorate should have developed the definition of ‘advertisement’ in line with these modern developments, and include digital advertising, and in particular Google Advertising within its scope. We would like to stress that the definition of ‘advertisement’ includes ‘any visual or aural communication, representation, reference or notification of any kind…’ Surely the use of the words “of any kind” should have been taken by the Directorate to incorporate digital advertising and Google Advertising in particular.
In conclusion, we pose one final question: If the ASA Directorate had ruled (as we suggest) that digital advertising (in particular Google Advertising) fell within the bounds of the definition of ‘advertisement’, would M-Systems have fallen foul of clause 8 of section II of the ASA Code (exploitation of goodwill)?
By Ryan Tucker of RM Tucker Attorneys and guest co-author, Lisa Oken, Advocate of the Johannesburg Bar, Duma Nokwe Group