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The Liability of Internet Intermediaries The Liability of Internet Intermediaries

Contents

The Liability of Internet Intermediaries The Liability of Internet Intermediaries
1

The scope of liability for trade mark infringement 7.04

1.1

Targeting 7.07

1.2

Use of a trade mark 7.42

1.3

Meta tags 7.59

1.4

Sales of counterfeit goods 7.67

1.5

Keyword advertising 7.96

2

Secondary liability for passing off 7.114

2.1

Enabling or assisting a passing off 7.117

2.2

Instruments of deception 7.124

2.3

Application to internet intermediaries 7.144

3

Domain name disputes 7.153

3.1

Liability of registrants 7.158

3.2

Liability of registrars and registry operators 7.175

3.3

Statutory regulation of registries 7.182

3.4

Alternative dispute resolution 7.193

3.5

Seizure and cancellation 7.237

7.01 This chapter examines the secondary liability of internet intermediaries for trade mark infringement and passing off occurring online. The internet intrinsically relies upon a functioning system of domain names, keyword-based search tools, and advertising. These arenas present ample opportunities for conflict over protected signs. At one extreme are territorial conflicts between legitimate traders who happen to possess parallel rights in different jurisdictions; at the other extreme lie cases of opportunistic squatting on a rivalrous keyword resource, such as a domain name, for commercial gain, or outright counterfeiting. Within the contested space that lies between, the line between honest and unfair competition is becoming increasingly blurred, as traders seek to exploit rivals’ names in keyword advertising, practise aggressive search engine optimisation, and compete for traffic, reputation, and attention. The zone of accepted commercial practices is fluid and extremely nebulous.

7.02 Actions against a primary party who engages in wrongful use of a protected sign on the internet raise ordinary principles of trade mark law and passing off, and do not concern us here. This chapter instead considers claims against secondary parties whose services are used to facilitate such wrongdoing. At the outset, it must be emphasised that there is no general doctrine of ‘contributory infringement’ under European trade mark law.1 Secondary trade mark liability remains a matter for national law. English courts have traditionally declined to impose monetary liability upon facilitators, and have recognised limited categories of injunctive relief. The CJEU has so far largely resisted attempts to expand the margins of primary liability to encompass internet intermediaries.

7.03 The scope of substantive secondary liability for trade mark infringement and passing off is limited in a number of ways. First, the threshold of ‘targeting’ restricts the extraterritorial effects of registered and unregistered rights. Second, concepts of ‘use’ restrict who can be held liable for acts of trade mark infringement. Third, substantive liability rules demarcate when and how trade marks are infringed; these rules are the subject of other texts.2 Fourth, general limits on remedies, such as proportionality, place upper limits upon the terms of injunctive and other relief; these are considered in chapter 13. Finally, safe harbours such as those examined in chapter 12 operate to shield service providers from monetary liability in certain circumstances.

7.04 This section considers the threshold requirements of ‘targeting’ and trade mark ‘use’, before examining three areas of online activity in which internet intermediaries have been implicated in trade mark litigation. First, meta tags cases consider the liability of website operators who include a trade mark in the source code or other invisible regions of website content without authorisation. Second, counterfeit goods cases consider the liability of online marketplaces, payment intermediaries, and ISPs for transactions in which infringing goods are bought and sold by third parties online. Third, keyword advertising cases involve advertisements, usually appearing on search engines and social networks, which are triggered by or contain the claimant’s mark. Disputes concerning domain names are addressed separately in section 3.

7.05 What these situations share in common is the presence of a solvent intermediary who is in a position to supervise or regulate infringing uses of marks by third parties, and who derives some profit or advantage from those infringements. These cases press at the borders of responsibility for trade mark infringement and define its outer limits. In parallel, the CJEU has developed more flexible limiting doctrines, such as use, targeting, and functional analysis, which serve to demarcate those limits. Liability is sometimes said to be justified to prevent conduct which impairs the origin function of trade marks by making it difficult for internet users to access reliable information about the origin of goods or services. At other times liability may simply restrain conduct which harms the ‘characteristic values’ of cyberspace,3 for example by undermining the accuracy of the domain name system.

7.06 Trade mark liability in these contexts presents a useful point of comparison with doctrines of secondary responsibility arising elsewhere in English private law: like defamation, most trade mark liability is primary and non-derivative, based on the intermediary’s own ‘use’ of the mark; however, various conceptual or normative limitations on primary liability are emerging; like copyright, industry co-regulation is proving to be of vital importance, particularly through domain name dispute-resolution procedures and registry enforcement activity. Additionally, the focus is beginning to shift from monetary to non-monetary liability.

7.07  Territoriality of trade mark rights. Trade mark rights, like goodwill, are territorial. As such, any acts of primary infringement must occur within the territorial scope of those rights. Acts that take place outside that territory of protection do not infringe any more than acts that fall outside the substantive scope of the monopoly conferred upon a trade mark proprietor.4 However, because uploading material to the internet is normally sufficient to render it universally accessible in all connected territories, limiting doctrines are needed to determine when a trade mark will be considered to be ‘used’ in a particular place. These principles are properly understood as localisation rules that apply to determine where an impugned act occurs. Like the principles that apply in cases of defamation and copyright infringement, they are closely related to the substantive norms governing primary liability.

7.08  The EU law concept of ‘targeting’. In the European Union, trade mark localisation rules are harmonised by means of the Trade Marks Directive5 and, in cases involving Community trade mark rights, the Community Trade Mark Regulation.6

7.09  Mere accessibility insufficient. The starting point is that merely being accessible in a place by means of the internet is not sufficient to use a mark in that place. The test is one of ‘targeting’, which examines the objectively manifested intentions of the trade mark user. Targeting rests on the legal fiction that an act takes place where it is objectively intended to take place. This resembles the approach taken to internet jurisdiction in a line of United States decisions.7 The test developed in a series of English and Court of Justice decisions, which are discussed in the following paragraphs.

7.10  Use on websites hosted abroad. In 1-800 Flowers Inc v Phonenames Ltd,8 the trial judge held that evidence of internet use of the applicant’s mark ‘1-800 FLOWERS’ was not inevitably evidence of use in the United Kingdom. Although the mark was visible on websites accessible in the United Kingdom, use ‘in an omnipresent cyberspace’ was not sufficient. As Jacob J observed:

a fishmonger in Bootle who put his wares and prices on his own website, for instance, for local delivery can hardly be said to by trying to sell the fish to the whole world or even the whole country. And if any web surfer in some other country happens upon that website he will simply say ‘this is not for me’ and move on. For trade mark laws to intrude where a website owner is not intending to address the world but only a local clientele and where anyone seeing the site would so understand him would be absurd.9

7.11  The multi-factorial assessment. The court applied a multi-factorial test of use, looking at matters including the intention of the website operator, the impression formed by readers, and where the relevant service was performed. In that case, English users could order flowers from the applicant’s website, but flower picking and delivery took place entirely in New York. Accordingly, there was no use of the mark in the United Kingdom. This conclusion was affirmed by the Court of Appeal: merely accessing a website on which the mark appears is not ‘use’ of the mark at the point of access.10

7.12 The Court of Appeal emphasised the lack of evidence demonstrating any pattern of trade with customers resident in the United Kingdom. In particular, there were no data concerning ‘the number and nature of hits’ on the website or the location of its customers.11 In obiter remarks, Buxton LJ (Peter Gibson LJ agreeing) defended a contextual treatment of publication in trade mark law, and its divergence from the rule applied in defamation proceedings:

the essence of the problem is to fit the factual circumstances of internet use into the substantive rules of law applying to the many and very different legal issues that the internet affects. It is therefore unlikely, and it is nowhere suggested, that there will be one uniform rule, specific to the internet, that can be applied in all cases of internet use.... There is something inherently unrealistic in saying that A ‘uses’ his mark in the United Kingdom when all that he does is to place the mark on the internet, from a location outside the United Kingdom, and simply wait in the hope that someone from the United Kingdom will download it and thereby create use on the part of A.12

7.13  Need for an ‘active step’. The Court held that use requires ‘some active step’ going beyond providing facilities to enable others to bring the mark into the area. Such a conclusion, it is suggested, flows naturally from the fact that trade mark rights are territorial. This also suggests that an internet service which provides facilities to enable a mark to be used (eg by hosting a website or allowing users to upload material which includes signs) will not be sufficient. The ‘active step’ must be a step undertaken for the purpose of using a mark in the course of trade, not merely assisting or enabling some other person to use the mark.

7.14  Incidental trade. In Euromarket Designs Inc v Peters, the claimant alleged that its United Kingdom trade mark for CRATE & BARREL had been infringed by the defendant placing an advertisement in an English magazine for its Dublin store of the same name.13 The advertisement referred prominently to the fact that the store was situated in Dublin, referenced the defendant’s website <http://www.crateandbarrel-ie.com/>,14 and gave a telephone number with an Irish dialling code. The defendants did not sell to British customers, perhaps apart from tourists who visited Dublin.

7.15 The Court held that there was no infringement. Having regard to the purpose and effect of the advertisement, a reasonable trader would not regard it as use of the mark in the United Kingdom. It promoted an Irish shop in a magazine that was widely circulated in both Ireland and the United Kingdom, but where the shop was not trying to sell any goods into the United Kingdom. The advertisement was one that ‘slips over the border’, rather than one that seeks to establish a trade in the territory of the trade mark.15

7.16 This approach was followed in KK Sony Computer Entertainment v Pacific Game Technology (Holding) Ltd.16 In that case, the defendant was a company incorporated in Hong Kong that operated a website offering videogames and accessories for sale to customers in the United Kingdom, including certain Japanese editions of the claimant’s consoles. Although the defendant had no trading presence within the European Union, HHJ Fysh QC took the ‘pragmatic’ view that the website was akin to a shopfront in the defendant’s country, into which visitors were invited to look. It was at least partly directed at European customers.

7.17  Perception of the average consumer. Strictly speaking, the test is whether the average consumer in the territory of the trade mark and of the goods or services for which the trade mark is registered would regard the website as being directed at him. This approach is reflected in Dearlove v Combs,17 where Kitchin J explained that this was the ‘fundamental question’ and involved a contextual and multi-variate analysis of: the nature of the goods or services, the appearance of the website, its operator’s intention, whether it sells the goods or services, and any evidence of local sales.

7.18  Type of domain name used. In Mecklermedia Corporation v DC Congress GmbH, the claimants had an arguable claim in passing off against a German defendant who used a country-code domain name that was (apart from the country code suffix) identical to the claimants’ unregistered sign. The defendant, who organised trade shows, owned the trade mark INTERNET WORLD in Germany and used internet-world.de. The claimants were publishers of a magazine under that title and were prior users in the United Kingdom and the United States. They also owned the domain name internet-world.com. The activities of the German company were held to be ‘deliberately targeted’ at English consumers because, among other things, the defendant was ‘drumming up business from the UK’ and added to its database the names of people who participated in the claimants’ trade shows in London.18

7.19  Relationship between UK and CJEU authorities. In Stichting BDO v BDO Unibank Inc, Arnold J concluded that the English authorities adopted ‘essentially the same approach’ as the later Court of Justice authorities concerning website targeting.19 Those cases are considered in the next section.

7.20  Overview. A series of Court of Justice authorities have explained the ‘targeting’ test in the context of internet wrongdoing of various kinds. That test now appears to be applied in cases under the Brussels I Regulation, of internet copyright infringement, and of infringement of national and Community trade marks. Similar factors have been referred to in many of these contexts, suggesting that the same overall test applies regardless of the nature of the primary wrong.

7.21  Origin of EU concept of ‘targeting’. The targeting test derives from article 15(1)(c) of the Brussels I Regulation, which establishes a jurisdictional rule where a consumer wishes to bring a claim under a consumer contract made with a commercial or professional party who is domiciled elsewhere in the EU. The rule states that, contrary to the ordinary rule under article 2, the courts of the consumer’s member state will also have jurisdiction if the non-consumer party ‘by any means, directs such activities to that Member State or to several States including that Member State.’20 As an exception to the general rule that claims must be brought in the domicile of the defendant, article 15 must be interpreted strictly, at least in the context of that Regulation.21

7.22  Mere accessibility not enough. The starting point is that the mere fact that a website may be accessed from within the European Union is not enough.22 The question is whether the website targets consumers in the territory covered by the trade mark. This is an objective test assessed by reference to the average consumer who perceives the manifested intentions of the website operator. Only if accessible internet material is targeted solely at consumers in third states will it not be subject to European Union law and national trade mark rules. Whether this is so is a matter for the national court to assess.

7.23 This policy is expressed in recital (24) of the Rome I Regulation, which adopts Joint Guidance from the Council and Commission stating that ‘the mere fact that an Internet site is accessible is not sufficient for Article 15 to be applicable...In this respect, the language or currency which a website uses does not constitute a relevant factor.’23 In Pammer, the Advocate General explained that this guidance makes ‘absolutely clear’ that the concept of targeting does not encompass ‘the mere fact that a website can be consulted on the internet’.24

7.24  Underlying policy of ‘targeting’. Targeting represents an expansion of trade mark rights beyond acts occurring wholly within the territory of the trade mark, to encompass certain extraterritorial acts which occur on marketplaces and other websites where those acts are directed at the relevant territory. Such expansion of the rights of proprietors is said to be justified by the need to ensure that European liability rules cannot be circumvented by the mere hosting of an infringing offer of sale on a foreign website. Otherwise, the effet utile (effectiveness) of those rules would be significantly undermined.25

7.25 Targeting is thus a rule of European private international law which demarcates the territorial extent of a national court’s jurisdiction to hear cross-border claims. When applied to internet trade mark claims, it functions as a connecting factor to the member state of the court seised, allowing protection to be extended beyond its borders.

7.26  ‘Targeting’ and ‘directing’. In eBay, the Court of Justice cited by analogy its earlier approach to internet jurisdiction in cases under the Brussels I Regulation. Helpful guidance as to the factors relevant to targeting may be taken from these authorities. The most important is Pammer v Reederei Karl Schlüter GmbH & Co KG and Hotel Alpenhof GmbH v Heller.26 In those cases, the issue was whether a website was ‘directing’ its activity towards a particular member state for the purposes of article 15(1)(c) of the Brussels I Regulation. The Court explained that, to direct its activity in this way, ‘the trader must have manifested its intention to establish commercial relations with consumers from one or more other Member States’.27 There does not appear to be any material distinction between the concepts of ‘targeting’ and ‘directing’.

7.27 In Pammer, the claims related to two websites: a German website from which an Austrian consumer obtained details he used to book a voyage holiday by mail order, and an Austrian hotel website which a German consumer used to make an online booking. The issue was whether either website operator had directed its activities at the member state in which each consumer was domiciled. The Court explained that whether the websites were targeted to the relevant member state was a question to be answered ‘from those websites and the trader’s overall activity’, and is focused on whether ‘the trader was envisaging doing business with’ consumers in the relevant place.28

7.28  Use of intermediaries’ websites. Where a trader conducts an activity through a website operated by a third party intermediary, it is clear that the targeted acts of the website operator may be attributed to the trader for the purposes of assessing whether their activities are targeted to the relevant territory, if the trader knew or ought to have known that the intermediary’s activity had an ‘international dimension’ and was linked to the trader.29

7.29  Distribution channels. In Donner, the Court of Justice ruled on the interpretation of ‘distribution’ for the purposes of copyright.30 For a distribution to the public under article 4(1) of the Information Society Directive to occur in a member state, it was necessary to ask whether the trader ‘did actually target members of the public residing [there]’ and whether the trader was aware of the acts of distribution. Relevant factors suggesting targeted activity in that case were the existence of a German-language website, the content and distribution channels of advertising materials, and the defendant’s cooperation with a German distributor which made deliveries to Germany. Thus, where a trader directs advertising at members of the public in a member state and makes a delivery system and payment method available to them it will target that member state.

7.30  Targeting on websites. In Football Dataco Ltd v Sportradar GmbH,31 the issue was whether an act of re-utilisation of database right on a website took place in the United Kingdom. The CJEU repeated the maxim that ‘the mere fact that the website containing the data in question is accessible in a particular national territory is not a sufficient basis’ for localising the act in that territory. To be targeted, there must be ‘evidence from which it may be concluded that the act [of re-utilisation] discloses an intention on the part of its performer to target persons in that territory’.32 In that case, relevant factors were said to include the fact that the Sportradar website incorporated data relating to English football league matches and that it had concluded contracts with English betting companies.

7.31  Targeting in online marketplaces. In eBay, the CJEU applied Pammer to an online marketplace (ebay.co.uk) in which counterfeit goods were advertised by third parties domiciled in China. The Court reiterated the orthodox starting point that mere accessibility of the website in a particular territory ‘is not a sufficient basis for concluding that the offers for sale displayed there are targeted at consumers in that territory’.33 Otherwise, websites that are technically accessible from the EU but ‘obviously targeted solely at consumers in third states’ would be wrongly subjected to European trade mark law.34

7.32 The CJEU explained that targeting is a matter for the national court to assess on the basis of ‘any relevant factors’. Among them, any details of the geographic areas to which the seller is willing to dispatch the product are of ‘particular importance’.35 On the facts, the Court was prepared to conclude in the absence of any evidence to the contrary that the website ebay.co.uk was targeted at consumers in the United Kingdom or in the Community. This meant that the offers for sale on that website fell within the scope of EU trade mark law.36

7.33 It is sufficient to show that some commercial act has been directed at consumers in a relevant territory, such as a sale, offer for sale, or advertising. Thus, trade mark rights may be infringed even before goods are delivered or services supplied in the territory where they are protected.37 This is consistent with the act of infringement being the offer or exposure of the infringing goods or services; it is that act which must be directed to the territory in which the claimant’s rights subsist.

7.34 Based on the guidance in eBay, Pammer, Donner, and other decisions, the following factors are examples of the kind of matters that have been held to be relevant to determining the territory or territories at which internet material (such as an offer for sale, an advertisement, or other information on a webpage) is targeted:

(a)

most importantly, any details which are given of the geographic areas to which the website operator is willing to dispatch any goods or supply services: eBay, [65];

(b)

use of a country code second-level domain name (such as .co.uk or .de) other than that of the place where the website operator is established: Pammer, [83];

(c)

use of a country code second-level domain name in the absence of any evidence to the contrary: eBay, [66];

(d)

mention of goods or services being available in places designated by name: Pammer, [81];

(e)

the purchase of keyword advertisements for the website from search engines which are displayed to consumers in certain areas: Pammer, [81];

(f)

the international nature of the activity, such as travel or delivery services: Pammer, [83];

(g)

the location of the website operator’s clientele, including any mention of customers domiciled in a particular place and customers’ testimonials: Pammer, [83];

(h)

use of a language or a currency other than the language or currency generally used in the place where the website operator is established: Pammer, [84];

(i)

mention of telephone numbers with an international code: Pammer, [93] (but not mere mention of an email or postal address or local number: Pammer, [77]);

(j)

use of a local telephone number which allows consumers to contact the website operator without incurring the cost of an international telephone call: Emrek, [30];38

(k)

the circulation figures of a publication (and, by extension, a website): BDO, [114];

(l)

the use of distribution channels in a particular place by the website operator or someone under his control (provided he must have been aware of the actions of that third party): Donner, [27];

(m)

whether a payment method is used which permits consumers in a particular place to purchase goods or services: Donner, [30]; and

(n)

any other clear expression of the intention to solicit the custom of customers in the relevant territory: Pammer, [80].

7.35  Other relevant factors. These factors are not exhaustive. Potentially any aspect of the conduct of a website operator is relevant for the purpose of assessing targeting. Also relevant may be the conduct of third parties, such as payment processors, social networks, couriers, and search engines, whom an internet service has engaged for the purpose of trading with consumers in particular places. Following Donner, it would need to be shown that the defendant ‘must have been aware’ of the actions of the third parties; this suggests that either actual or constructive knowledge will suffice. It is for the national courts to assess whether the evidence of targeting is sufficient in light of all relevant circumstances.

7.36  Objective assessment. In BDO, Arnold J considered the authorities on targeting and concluded that the European cases dealing with the Brussels I Regulation, Information Society Directive, and Trade Marks Directive were equally applicable to claims of infringement under the Community Trade Mark Regulation. The approach to targeting was essentially the same as the earlier English decisions. Arnold J confirmed that ‘at least in this context, the question is not one of the subjective intention of the advertiser, but rather one of the objective effect of its conduct viewed from the perspective of the average consumer’.39 However, in Argos Ltd v Argos Systems Inc, the Court refused to strike out claims of trade mark infringement and passing off on the basis that evidence of a website operator’s subjective intention may be relevant to the question of targeting.40

7.37  Print publications. In BDO, the relevant publications were not websites but took place in magazines and trade journals. The same general approach will apply regardless of medium, though the relevance and weight to be accorded to the various targeting factors may differ. Relevant factors in that case were the language of the publications, their target market, whether the advertisements made clear to consumers that services were or were not available in particular countries, the domicile of the publishers, and regional circulation figures. By analogy, evidence of significant website access within the territory may support a finding of targeting; however, this is only relevant if such access would be evident to the average consumer from viewing the website.41

7.38  Facebook pages. In Thomas Pink Ltd v Victoria’s Secret UK Ltd, the defendant’s Facebook page was held not to be targeted at consumers in the European Union. That page consisted of several hundred postings relating to the defendant’s business activities in the United States, such as American store openings and holiday sales. Although several more recent postings referred to English store openings, this was not enough to make the Facebook page as a whole targeted there.42 This suggests that targeting rests on analysis of the preponderance of material on a website, rather than a more contrived division of a site into individual pages or postings.

7.39  Country-code domain names. More difficult questions arise where a defendant advertises goods or services under a sign using a country-code domain name that is different from the territory in which the claimant brings his action or in which he has registered or unregistered rights. For example, goods may be sold on a .com.au website under a Community trade mark, whose proprietor wishes to take action against the website operator in a member state. The proper approach is that this is simply one factor among many indicating the relevant targeting intention to the average consumer. However, it seems likely that consumers of most goods and services will realise that a website may well seek to sell to people located outside the country where its domain name is registered (eg few would expect that an internet television service with the country code domain name .tv sells only to residents of Tuvalu). In many cases, the domain name may have been selected not because it has any particular or exclusive geographic connection with the merchant, but because it happened to be available.

7.40 This approach is reflected in Wintersteiger AG v Products 4U Sondermaschinenbau GmbH.43 There the Court of Justice held that an Austrian court could have jurisdiction to hear claims for infringement of an Austrian trade mark by reason of advertisements placed on the .de version of the Google search engine. The defendant had taken out keyword advertisements for the claimant’s trade mark, but restricted their display to searches carried out via Google.de. In so holding, the Court necessarily accepted that material on a German country code website could, in principle, be targeted to consumers in Austria so as to infringe Austrian trade mark rights. Whether that was so was a matter for the national court.

7.41  Imported goods. For the purposes of the Customs Regulation, it is not necessary that goods which enter the territory of a member state were also sold or offered for sale through a website which targeted consumers in that territory: thus, where goods are bought on a website hosted outside the European Union, it is enough that the infringing goods do in fact enter the territory of a member state when purchased by someone who is resident there.44 In the Blomqvist case, a Danish consumer had purchased a counterfeit Rolex watch from a Chinese e-commerce retailer. The watch had been detained by the Danish customs authorities. In those circumstances, the authorities were entitled to destroy the watch under the Customs Regulation, whether or not the retailer’s website was targeted to consumers in Denmark.

7.42 A defendant is not primarily liable for trade mark infringement unless it has been used by him in the course of trade. The concept of ‘use’ is an important limiting criterion that determines when, and to whom, infringement liability may attach. It does so by restricting liability to those who deal with signs in ways that indicate to consumers that the sign is meant to be treated as an indication of origin.

7.43  Statutory definition. The starting point is that a trade mark is used when the defendant carries out some act falling within section 10(4) of the 1994 Act, article 9(2) of the Community Trade Mark Regulation, or article 5(3) of the Directive. Section 10(4) provides four examples:

a person uses a sign if, in particular, he—

(a)

affixes it to goods or the packaging thereof;

(b)

offers or exposes goods for sale, puts them on the market or stocks them for those purposes under the sign, or offers or supplies services under the sign;

(c)

imports or exports goods under the sign; or

(d)

uses the sign on business papers or in advertising.

7.44  ‘Representation’ of a mark. Article 9(2) of the Regulation and article 5(3) of the Directive give the same examples. These provisions are obviously non-exhaustive and it is clear that use is a very broad concept. What must be asked is whether the defendant has engaged in any act which involves the use of a sign. In Google France, the Advocate General explained that there is use of a trade mark ‘where the trade mark is represented’.45 The ‘representation’ of a mark is an essential precondition for the existence of a use, but of course is not sufficient for infringement, which will require other elements (such as double identity, or likelihood of confusion) to be satisfied.

7.45  Non-graphical use. Section 103(2) of the 1994 Act clarifies that ‘use’ of a trade mark includes use otherwise than by means of a graphical representation. Although some forms of non-graphical use (such as olfactory or aural use) are less relevant on the internet, at least today, it is not difficult to envisage circumstances in which a sign may be included in internet materials in such a way that it cannot be directly perceived by humans, but nevertheless amounts to use. Meta tags and triggering keywords in search engine advertising may be examples; these are considered in sections 1.3 and 1.5.

7.46 It is axiomatic that a use must occur in the course of trade. In other words, it must not be a private or domestic activity, but undertaken in the context of ‘commercial activity’ with some profit motive or view to economic advantage.46

7.47 Mere possession of goods is not traditionally regarded as ‘use’ of a sign. Thus, a transporter or warehouseman who carries or stores infringing goods does not use any sign that is affixed to them, unless he intends to deal in the goods.47 Such a person must not have any intention of selling the goods or putting them on the market in some way; to do so would involve a use of the sign. Confusingly, this suggests that use embodies a mental element, and may depend on the intention of the alleged user. The preferable approach is to treat evidence of such an intention as the basis for a quia timet injunction to prevent a future use of the goods.

7.48 It follows from the definition of infringement that any use of a trade mark must be use by the defendant. To take a simple example, article 9(1) defines infringement in terms of the right to ‘prevent all third parties...from using in the course of trade’ the relevant signs.

7.49 A similar observation was made in R J Reuter Co Ltd v Mulhens [No 2],48 a case concerned with the appropriation of various trade marks and good will formerly owned by a German company under the Trading with the Enemy Act 1939 (UK). One of the alleged infringements by a German perfumer concerned letters sent to addresses in the United Kingdom whose envelopes bore prominent indicia corresponding to the trade marks. The Court held that the sender had thereby used the marks in the United Kingdom, though it was the Post Office which carried the letters. There was no suggestion that the Post Office could be liable for carriage of the infringing articles.

7.50  Use by a carrier. The Court of Appeal in 1-800 Flowers considered that Reuter was an example of a case where the defendants were taken to have delivered the letter and used the mark, since the Post Office was merely their agent. Thus, the case could be taken in support of the view that where the carrier of an infringing sign was acting as an agent for the sender or consignor, the relevant act of infringement would be taken to be carried out by the sender and not the agent:

the very idea of ‘use’ within a certain area would seem to require some active step in that area on the part of the user that goes beyond providing facilities that enable others to bring the mark into the area. Of course, if persons in the United Kingdom seek the mark on the Internet in response to direct encouragement or advertisement by the owner of the mark, the position may be different; but in such a case the advertisement or encouragement in itself is likely to suffice to establish the necessary use.49

7.51  Use in keyword advertising. The issue of trade mark use was considered by the Court of Justice in Google France SarL v Louis Vuitton Malletier SA.50 In that case, the claimants sought to prohibit the use of their trade marks in sponsored keyword advertisements on Google’s search engine. The Court held that the only relevant use of any sign was by the person who bid on the keyword and not by Google. Such use was by the bidder in relation to his own goods or services. Google was not, simply by storing the relevant keyword and processing advertisements, ‘using’ the sign:

Although it is clear...that the referencing service provider [ie Google] operates ‘in the course of trade’ when it permits advertisers to select, as keywords, signs identical with trade marks, stores those signs and displays its clients’ ads on the basis thereof, it does not follow from those factors that that service provider itself ‘uses’ those signs...A referencing service provider allows its clients to use signs...without itself using those signs.51

7.52 In reaching this conclusion, the Court rejected the opinion of the Advocate General that the ‘use’ requirement was ‘clearly satisfied’ by Google allowing advertisers to select keywords corresponding to trade marks in AdWords.52 The Advocate General thought this involved two distinct uses: the ‘internal’ use of permitting selection of keywords by advertisers, and suggesting popular keywords; and the act of displaying the resulting advertisements alongside organic search results. However, the Court held that merely allowing others to use signs did not itself amount to use.

7.53  Use by advertisers. Similarly, when an advertiser selects a sign that is displayed to users, that is a use by the advertiser in relation to the goods or services of that advertiser.53 As the Court explained, Google does not use signs simply by storing them as keywords and permitting the display of advertisements triggered by those keywords.54 This conclusion was not altered by the fact that keywords were sometimes stored in combination with other terms such as ‘imitation’ and ‘copy’. This suggests a relatively high threshold of use.

7.54  Use by sellers of goods. To similar effect, in eBay the Court of Justice held that eBay did not ‘use’ a sign when sellers uploaded offers for sale onto its marketplace for goods bearing the sign. Nor did it ‘use’ the sign when those offers were displayed or sales were concluded. Although these acts all involved uses of the sign, those uses were by the seller who was offering the goods for sale. As the Advocate General explained:

The operator’s activity consists of storing and displaying listings that the users upload to its system and of running a system for facilitating the conclusions of deals. It is no more using trade marks than a newspaper publishing classified ads mentioning trademarks where the identity of the seller is not revealed in the ad but must be requested from the newspaper. Hence, even if the listing of trade mark protected goods by users of an electronic marketplace may have an adverse effect on the origin, quality or investment function of a trademark, those effects cannot be attributed to the marketplace operator unless national legal rules and the principle[s] of secondary liability for trade mark infringements apply.55

7.55  Use in own commercial communications. The Court in eBay went on to hold that, to be ‘used’, a person must include the sign ‘in its own commercial communication’ rather than that of a third party.56 The mere enablement of use by its customers was not sufficient for eBay itself to use the sign. Liability for such facilitation fell to be assessed under national rules of secondary liability.

7.56 Conversely, eBay did use the claimant’s signs when it advertised its online marketplace in Google keyword advertisements triggered by L’Oréal trade marks. Of course, such use was in relation to its own marketplace services, and not goods or services identical with or similar to those for which the marks were registered.57 This approach is consistent with Google France, since eBay was essentially just another advertiser using signs in Google AdWords.

7.57 In Marks & Spencer plc v Interflora Inc [No 3], the Court of Appeal re-expressed the ‘essential reasoning’ of the Court of Justice in Google France as follows:

the choice and selection by a third party of the sign as a [search advertising] keyword has the object and effect of displaying an advertisement, and this constitutes use of the sign in the course of trade. By contrast, the referencing service provider, Google France, was not using the sign, and that was so because use by a third party of a sign implies, at the very least, the use by that third party of the sign in its own commercial communication. That was not something that Google France did.58

7.58 This emphasises that the focus will be on the person who uses a sign in his or her own communication in the course of trade. The object and effect of that use must be considered in the light of algorithms and practices employed by third party service providers, such as keyword matching (and the availability of negative keyword matching). However, the technical means or service by which such use occurs will not itself amount to independent use.

7.59 One of the earliest battlegrounds of internet trade mark use involved ‘meta tags’ and other invisible markers that could be used to associate a website with a particular keyword.59 Although these markers were usually determined by the website operator itself, they also implicated a number of secondary parties, such as search engines and directories that acted upon metadata when displaying search results. The significance of meta tags is now limited: advances in search engine technology have rendered their existence all but obsolete.60 Nevertheless, judicial consideration of meta tag infringement does shed some light on the function of ‘use’ as a liability-limiting criterion and its relationship to internet intermediaries.

7.60 In Reed Executive plc v Reed Business Information Ltd,61 the claimant was a well-known high street employment agency and the registered proprietor of the mark REED in relation to those services. The defendants were the founders and operators of a recruitment website called totaljobs.com, on which they published employment classifieds, listings, and advice targeted at job-seekers. The claimant objected to various practices of the defendants in relation to their website, including that its source code specified the words ‘Reed Business Information’ in the ‘keywords’ meta tag, which caused certain search engines to include the page among the results of searches for the claimant’s trade mark—albeit at a significantly lower ranking.62 Keyword meta tags are not, by their nature, directly visible to consumers. The evidence suggested that the term had been included during a revision to the website in order to optimise its search engine rankings more generally.63

7.61 At first instance, Pumfrey J held that ‘invisible’ references to a trade mark could not amount to use in the course of trade, though any use of meta tags which caused a visible display of the trade mark could found an action for infringement. The defendants were held liable for trade mark infringement and passing off in respect of visible metadata, among other activities. The Court distinguished between keywords meta tags, which are invisible, and description meta tags, which are sometimes used by search engines as the basis for result summaries. Referring to text appearing in the latter type, Pumfrey J stated:

This seems to me to be an infringing use: it is akin to having the labels printed and attached to the goods, but not yet having moved them outside the factory. But where no such material appears on the search engine results, why should it infringe? The argument by analogy suggests that the search engine is to be taken to be the eyes of the user, but I suspect that is a poor analogy. Like many computer applicants, the intervention of a human is essential to sort the rubbish from the potentially interesting in any web search. Nonetheless, my view is that the concept of use is wide enough to cover invisible use in metatags which is visible in the search results.64

7.62 The Court of Appeal overturned this conclusion and held that invisible meta tag use could not amount to passing off (there being no misrepresentation) and would not be sufficient to establish a likelihood of confusion (there being no confusion).65 Due to the unreliable nature of search results, simply ‘causing a site to appear in a search result, without more, does not suggest any connection with anyone else’.66 Consumers would appreciate that not all search results which appear are relevant and so would not be confused by seeing the defendant’s website listed.67

7.63 If this approach continues to be followed, then a person would not be liable simply for causing a search result to be displayed which contained a meta tag or other invisible sign which was identical or similar to a trade mark. Jacob LJ emphasised the fact that, in all instances, the defendants’ website ranked lower than the claimant’s in organic search results for ‘Reed’ and ‘Reed jobs’.68 His Lordship even doubted whether meta tags could be considered trade mark use at all:

In this context it must be remembered that use is important not only for infringement but also for saving a mark from non-use. In the latter context it would at least be odd that a wholly invisible use could defeat a non-use attack....Uses read only by computers may not count—they never convey a message to anyone.69

7.64 The distinction between uses read only by a computer and those read by human eyes is important. It suggests that service providers who process or extract data automatically may not ‘use’ a mark unless it is made directly visible to end users. The Court of Appeal noted the distinction between visible and invisible meta tags but left open the possibility that a more overt instance of a competitor’s mark in website source code could be characterised as ‘use’.70

7.65 Although his Lordship stopped short of a positive finding that meta tag use cannot support any infringement claim, Jacob LJ did express concern that such conduct ought not to be prohibited too readily, and was evidently reluctant to permit metadata claims to be decided on the basis of double identity infringement under article 5(1)(a) of the Directive. Whether this was because there was no relevant use of a sign or because the use was in relation to different goods or services is unclear.71 Underlying this concern may have been a perception that search engine optimisation is a lawful ‘game’ played between rivals and an incidence of healthy and honest competition:

The order in which search results appear is a matter for the particular search engine’s secret system. Naturally website owners play the game of trying to get their site to appear high up in any search....If metatag use does count as use, is there infringement if the marks and goods or services are identical? This is important: one way of competing with another is to use his trade mark in your metatag—so that a search for him will also produce you in the search results. Some might think this unfair—but others that this is good competition provided that no-one is misled.72

7.66 Although his Lordship probably had in mind horizontal disputes between competitors rather than vertical disputes involving service providers, the same reasoning suggests that a service which aggregates, displays, or adopts third party source code containing a sign identical to a mark is unlikely to infringe, absent a likelihood of confusion. Following Google France, there would also be strong arguments that such a service provider has not ‘used’ the sign at all.

7.67 Many counterfeit goods are sold online by means of internet marketplaces and websites partly or wholly dedicated to the sale of infringing goods. In some cases, the infringing nature of goods will be obvious to the consumer from direct signalling (eg textual descriptions of the goods as ‘replicas’ or ‘fakes’) and in other cases from indirect signalling (eg abnormally low pricing, poor presentation of the website, or missing hallmarks associated with the genuine brand). Their true provenance may of course be far less obvious.

7.68 Recognising that counterfeit goods detract from the perceived reliability and safety of internet shopping, operators of legitimate marketplaces have developed a range of strategies designed to prevent counterfeit goods from being sold and to enable trade mark proprietors to identify and remove infringing listings. Two main classes of dispute have occurred: first, cases in which the proprietor alleges that an application layer service should do more to prevent infringement; and second, cases in which the proprietor seeks the assistance of a network layer intermediary such as an ISP to block access to webpages offering the counterfeit goods for sale.

7.69  No harmonisation of secondary liability rules. European Union trade mark law does not harmonise secondary liability for trade mark infringement, other than by providing for safe harbours that restrict substantive liability and place limits on injunctions.73 As such, the prima facie substantive liability of marketplace operators and other facilitators of trade mark infringement is a matter for national law. Aside from joint tortfeasorship there is currently no doctrine of contributory trade mark infringement in the United Kingdom, whether derived from European or national law.

7.70  Joint tortfeasorship. The joint liability of online marketplace operators for infringements by their users was first considered by the High Court in L’Oréal SA v eBay International AG.74 The claimants were manufacturers and distributors of perfume and other cosmetic products. The first three defendants were the European subsidiaries of eBay Inc. The case centred on sales of counterfeit and parallel-imported goods on eBay by the fourth to tenth defendants, who were registered eBay sellers.

7.71 In addition to pursuing claims against these sellers for infringement of various registered trade marks,75 the claimants argued that the eBay defendants should be liable as joint tortfeasors, and sought injunctive relief against eBay to prevent future infringements by the sellers.76 eBay responded that it had done nothing which could give rise to joint liability, and in any case was entitled to safe harbour protection. To the extent it was liable, eBay sought contribution from the fourth to tenth defendants for breaches of the eBay user agreement.

7.72 In a considered judgment, Arnold J held that eBay was not jointly liable with the sellers, even though the fourth to tenth defendants had infringed the trade marks. After discussing the requirements for primary infringement under the Directive, Arnold J observed that:

Those rules do not, however, harmonise the law of accessory liability applicable to such infringements. Accordingly, the question of accessory liability is primarily a matter for national law.77

His Lordship did leave open the possibility that European instruments ‘implicitly regulated’ domestic rules of accessory liability in the context of trade mark infringement. However, on the facts of eBay, the parties agreed that the rules were unlikely to be in conflict.

7.73  English principles of secondary liability. The approach taken by Arnold J reflects a traditional view of tortious secondary liability, in which his Honour applied ‘well-established principles to a new and rather different scenario’ to previous cases.78 Those principles are examined in detail in chapter 5.

7.74Procurement. In relation to procurement, the Court held that eBay could not be said to procure the acts of infringement from the fourth to tenth defendants. Arnold J retained the technical formulation expressed by Lord Templeman in CBS, that ‘[g]enerally speaking’ the secondary defendant must procure (which is to say, induce, incite, or persuade) a particular infringement from a specific infringer.79 Because there was no evidence to suggest that eBay had specifically induced any of the proved infringements by its sellers, this claim failed. Procurement was treated as a narrower category than common design, in that a failure to prove common design would make it impossible to establish procurement.80

7.75Common design. The issue of common design required a more granular analysis of the facts. The claimant pointed to eBay’s encouragement of infringement, and the extent of its technical and legal control over sellers by means of its user policies and Verified Rights Owner (‘VeRO’) programme. For obvious reasons, many of these methods are confidential and were the subject of confidential witness statements in L’Oréal. The main function of VeRO was to apply a set of 16,000 filtering rules periodically to auction listings on a post-moderation basis; flagged listings are then manually reviewed by an employee of eBay. According to eBay’s evidence, tens of thousands of listings were removed in this manner each month.81

7.76 Another aspect of the VeRO system involved classifying goods which had been the subject of counterfeiting as ‘High Risk Brands’, to the sellers of which additional restrictions were applied (mostly relating to account verification). Additionally, eBay employed a team of operators to deal with claims under the VeRO notice-and-takedown programme. Claims must relate to a specific listing, which will be removed without prior notice to the seller if an eBay employee is satisfied that the listing refers to infringing goods or contains infringing content. The evidence in L’Oréal suggested that most claims were acted upon promptly: roughly 90 per cent of VeRO notices led to removal within 6–12 hours, with 98 per cent removed within 24 hours.82

7.77 Around 18,000 rights owners participated in the VeRO programme, with the notable exception of the claimants, who refused, citing what were in their view inherent difficulties with the system. These difficulties were largely related to who assumed the onus and financial burden of enforcement: a post-moderation mechanism placed the onus on the proprietor, and it was costly to identify specific listings and ensure that effective sanctions were applied to sellers (since infringing items could simply be relisted or suspended users could re-register under a different account name). L’Oréal pointed to other websites which, in its view, took a more stringent approach.83

7.78 Taken together, L’Oréal argued that eBay’s conduct was sufficient for it to be regarded as participating in a common design. The Court rejected this argument. It held that:

as a matter of domestic common law, eBay Europe are under no legal duty or obligation to prevent infringement of third parties’ registered trade marks.84

The claimants’ suggestion that such a duty arises in tort was dismissed as circular.85 Subject to one qualification, Arnold J accepted the defendant’s submission that its systems and policies did not actually encourage the sale of infringing goods.86 To the contrary, policies such as the VeRO programme and seller listing rules suggested it sought to discourage infringement. The one exception concerned goods sourced from outside the EEA, whose sale in the United Kingdom was encouraged by the International Site Visibility option. However, even this level of inducement was insufficient to make eBay jointly liable for this category of infringements. Although capable of being used to infringe, it was not an inevitable result or inherent in the platform’s design. For infringement to occur, certain actions must first be taken by ‘autonomous’ foreign sellers—namely, the listing of foreign-sourced products bearing the claimants’ trade mark that had not been placed on the European market.

7.79  Facilitation of trade mark infringement. Arnold J considered that such facilities, and the eBay platform as a whole, did facilitate acts of infringement by the sellers. In relation to the claimants’ trade marks, infringement was reasonably widespread on eBay: a random sample of purchases over a three-month period indicated that roughly 53 per cent were counterfeit or non-EEA products (typically sourced from the American market), while only 30 per cent were legitimate EEA products.87 Moreover, eBay’s facilitating conduct occurred in circumstances where it knew that infringements of this quantity were ongoing—in the sense of being aware of ‘common patterns and themes’—could exercise a degree of control over the infringers, and generally profited from the infringements.

7.80 Despite this, Arnold J concluded that mere facilitation with knowledge and intent to profit was not enough to justify secondary liability. Even though eBay had the ability to take additional steps to prevent infringement, it did not follow from this capacity that eBay was legally obliged to do so.88

7.81  Injunctions to prevent infringement. In Cartier International AG v British Sky Broadcasting Ltd,89 the claimants sought injunctions against the five main ISPs in the United Kingdom to require them to take reasonable steps to prevent access to seven websites which were selling counterfeit goods. The goods in question were luxury watches, pens, and jewellery sold under the famous CARTIER, MONT BLANC, and IWC marks. The claimants based their contentions on the Court’s general powers under section 37(1) of the Senior Courts Act 1981, which the claimants said should be interpreted in light of article 11 of the Enforcement Directive. Their argument was that, ‘by analogy’ with section 97A of the Copyright, Designs and Patents Act 1988, the Court should fashion a remedy to give effect to their trade mark rights. The defendants argued that they were not ‘intermediaries’ within the meaning of article 11, since they did not themselves host the websites or actually transmit the infringements (which required the intervention of the postal service to dispatch purchased goods to consumers).

7.82  The nature of injunctive relief. At first instance, the Court granted the injunctions. The details of the blocking orders made are discussed in detail in chapter 14. For now, three features of the Court’s reasoning are of interest. First, the Court accepted that it had the inherent power to issue injunctions against an ISP to block access to websites infringing the claimants’ trade mark rights. Although the ISPs were not (and were not alleged to be) liable for trade mark infringement, they nevertheless could be ordered to prevent infringements carried out using their services. Arnold J drew an analogy with the equitable protective jurisdiction (of which Norwich Pharmacal is the best example), but explained that it did not apply on the facts of the case:

Although this principle is inapplicable to the circumstances of the present case, it is not a long step from this to conclude that, once an ISP becomes aware that its services are being used by third parties to infringe an intellectual property right, then it becomes subject to a duty to take proportionate measures to prevent or reduce such infringements even though it is not itself liable for infringement.

7.83 This appears to reflect the approach taken to dealing with the operators of offline marketplaces in which infringing goods were sold. In Upmann v Elkan, Lord Hatherley LC rejected an argument that ‘mere carriers’ of goods which infringed the claimant’s trade mark were not liable to injunctive relief, observing:

I cannot conceive a doctrine more dangerous or mischievous or more fatal to the authority of the Court with respect to trademarks.90

7.84 In Cartier, Arnold J added that ‘not only does the Court have jurisdiction to grant a website blocking injunction against an ISP in a trade mark case, but also there is a principled basis upon which the Court may exercise that jurisdiction’.91 The reason appears to have been the unlimited breadth of section 37(1) of the Senior Courts Act. However, that section does not confer a cause of action upon any party; it merely permits courts to make orders ancillary to other causes of action, rights, or duties.

7.85  Conditions for grant of injunctions. Second, the Court adapted to trade mark blocking orders the criteria that apply to section 97A copyright blocking orders, namely:

(a)

Is the defendant an ‘intermediary’ (in the sense of a service provider)?

(b)

Are the operators of the target websites infringing the claimant’s trade marks?

(c)

Are the operators of the target websites using the defendant’s services to infringe?

(d)

Does the defendant have actual knowledge of this?

7.86  Application to the facts. On the facts, all these criteria were satisfied. Each of the defendants were ISPs, who are plainly service providers. The target website operators infringed the claimant’s trade marks in two ways: first, by selling counterfeit goods that bear the marks; and second, by offering such goods for sale and advertising them on the websites using the marks. The websites were targeted at consumers in (among other places) the United Kingdom, since they offered to despatch goods there, offered goods in pounds, and in some cases used .co.uk domain names. All of the requirements for double identity infringement were satisfied.92

7.87 By analogy with the principles outlined in Promusicae and UPC Telekabel (cases considered in chapters 13 and 14),93 Arnold J concluded that the ISPs’ services were used by the target website operators to infringe: the ISPs had ‘an essential role’ in the infringements, since the offers for sale ‘are communicated to 95% of broadband users in the UK’ via the ISPs’ connections; where a consumer orders counterfeit goods, the contract of sale is concluded via the target website.

7.88 Actual knowledge was conferred by a letter before action sent by the claimants (who had carried out test purchases from the sites) and from the evidence in support of the application. However, there was no evidence that the ISPs were aware that their services had been used to infringe. For example, the test purchasers did not state which (if any) English ISP had been used to purchase the counterfeit goods, and no evidence was adduced of any access by consumers in the United Kingdom. In reality, the websites were very lowly ranked: none of the target websites had sufficient English visitor traffic to receive an Alexa ranking, and there was no evidence that the websites were known about or used by English consumers.

7.89  Discretion. Once jurisdiction has been established, the Court will in the exercise of its discretion consider whether blocking orders are effective, dissuasive, not unnecessarily costly or complex, fair and equitable, do not create barriers to legitimate trade, and are (in the overall assessment) proportionate. These issues are considered in detail in chapter 13. It is noteworthy that the ISPs were ordered to bear the costs of implementing the blocking orders, despite being non-wrongdoers. This is discussed further in chapter 18.

7.90  Future implications. The impact of Cartier is not yet known. It signals a very clear move towards conscripting network layer services to prevent the advertisement and sale of trade mark infringing goods online. The decision extends non-monetary trade mark liability far beyond the boundaries of primary or secondary monetary liability. How far the courts will exercise their jurisdiction—against which intermediaries, and for what types of infringement—remains unclear. How the courts will deal with future applications also remains uncertain, but Cartier appears to be uniquely sympathetic to trade mark proprietors, granting injunctive relief in respect of relatively unknown, albeit commercial scale infringers, despite the availability of alternatives. More doubtful is whether a blocking order would be appropriate as an adjunct to monetary remedies in a hard-fought trade mark dispute between business rivals, or whether a blocking order would be appropriate against an application layer service, such as a website operator or search engine.

7.91  Query autocompletion. In Google France, the Advocate General was alive to the possibility that a search engine such as Google may contribute to consumers’ access to counterfeit goods to such an extent that secondary liability may be imposed under national law. The Advocate General referred, in particular, to Google’s AdWords selection tool, which can be used to show the popularity of search keywords related to counterfeits (eg a trade mark coupled with ‘imitation’, ‘fakes’, ‘replica’, or ‘copy’). Although such liability was outside the scope of the Trade Marks Directive and Community Trade Mark Regulation, this speculation leaves open the possibility that a future claim may be brought against a search engine:

In such a situation, Google may incur liability for contributing to a trade mark infringement. Even though an automated process is involved, there is nothing to prevent Google from making limited exclusions from the information which it provides to advertisers regarding associations with expressions clearly denoting counterfeit. The conditions under which Google might be liable are, however, a matter to be decided under national law.94

7.92 It is submitted that, at least under United Kingdom law, Google would not be a joint tortfeasor with infringing advertisers for at least three reasons. First, mere assistance is not enough. Even if Google enables or facilitates access to counterfeits, that is neither a primary nor a secondary infringement of a trade mark proprietor’s rights without more.

7.93 Second, by analogy with eBay, even facilitation with knowledge and intent to profit is insufficient. The fact that Google profits from advertising does not provide a basis for inferring a common design to infringe, even if it is put on notice of specific keywords being used for that purpose. All its algorithms have done is suggest keywords based on automatically aggregated statistics—the use of those suggestions will not inevitably infringe.

7.94 Third, Google is clearly not a procurer of any trade mark infringement; it does not induce or exhort advertisers to place specific advertisements for counterfeits.95 A general encouragement to advertise, coupled with automatically generated suggestions for keywords, seems unlikely to be sufficient—any more than a general encouragement to users to search, coupled with automatic query completion, would be.

7.95 Another possibility is that Google may become jointly liable for authorising wrongdoing if it fails to remove a keyword advertisement for counterfeit goods within a reasonable period of acquiring actual knowledge of it. This would be by analogy with defamation cases, such as Day v Bream, and under the common law doctrine of joint tortfeasorship by authorisation.96 A more realistic possibility may be to treat such a keyword advertisement as an instrument of deception, whose use or supply in trade could be restrained by injunction against Google, but not such as to create monetary liability in damages.

7.96 This section considers cases in which trade mark infringement is alleged by keyword advertising on search engines. English courts quickly exonerated search engines from this kind of primary infringement, an approach that was endorsed by the Court of Justice in Google France. As a result, more recent cases tend to involve disputes between trade rivals where the defendant is alleged to select and administer the relevant advertisements directly.

7.97  Liability of search engine. In the first case, Wilson v Yahoo! UK Ltd,97 Morgan J held that ‘sponsored links’ displayed by the defendant search engine in response to search queries for the claimant’s registered trade mark did not involve a ‘use’ of the trade mark by the intermediary. In that case, the claimant—a mobile caterer trading under the name ‘Mr Spicy’—alleged that Yahoo had infringed his Community trade mark for MR SPICY by displaying advertisements for supermarket and shopping websites alongside search results for ‘Mr Spicy’. Those third parties had bid on ‘spicy’ as a generic search keyword, but Yahoo’s advertising algorithm also displayed advertisements for parent keywords alongside derivative searches, such as ‘Mr Spicy’.

7.98 In granting the defendants’ application for summary judgment, Morgan J observed that an action for trade mark infringement under article 9(1)(a) of the Regulation requires ‘us[e] in the course of trade’.98 However, the only ‘use’ of the claimant’s mark was by the person who entered a search query for ‘Mr Spicy’. The search engine’s automatic response to that query, including the delivery of advertising, was not a relevant ‘use’ by the search engine of the mark:

The response of the defendants to the use of the trade mark by the browser is not use of the trade mark by the defendants. That is enough to decide the case in the defendants’ favour. But the matter does not stop there. If, by some process of reasoning, one were to hold that the search engine’s response...was, itself, use by the defendants, in my judgment, it is not use of the mark ‘Mr Spicy’. What, instead, is being used is the English word ‘spicy’ as it appears in that phrase.99

7.99 Morgan J went on to conclude that, even if there was a use of the claimant’s trade mark, it was not use ‘as a trade mark’ that impaired its origin function. Reference was made to Arsenal Football Club plc v Reed, where the Court of Justice explained that an infringing use of a mark must be liable to affect its functions, and in particular its ability to convey the origin of goods or services to consumers.100 Here, ‘using’ the claimant’s trade name in connection with a supermarket neither suggests to a consumer that all food from that supermarket originates with the claimant, nor adversely affects the claimant’s rights as proprietor. For similar reasons, any claim under articles 9(1)(b) or 9(1)(c) would also fail.101

7.100  Offers to sell advertisements. The second aspect of the claimant’s claim in Wilson concerned a hyperlink placed by Yahoo on search results pages, which offered to supply keyword advertising to the public for the particular search query. The claimant considered that offering his mark as a keyword to be bid upon also constituted infringement. Morgan J rejected this claim, characterising the offer not as ‘some sort of domain name or special number plate’ that was being sold specifically under the claimant’s mark, but as a generic facility that applied to all search keywords in any language.102 Even to the extent this involved a use of the claimant’s mark, it was not use in relation to food products, but rather search advertising services:

It seems to me that this is a million miles away from Yahoo! using Mr Wilson’s mark in relation to goods or services which are identical [or] similar to those protected by the mark.... Yahoo!...are offering services of their own which are of a radically different character and they are saying to the public generally...that [they] can place any advertisement for anything the public likes on the Yahoo! page...But that does not appear to me to be even arguably an infringement of anything in Art 9.103

7.101  Liability of application developer. For similar reasons, the claim in Wilson failed against Overture Services Ltd, which developed and supplied the relevant sponsored search engine technology to Yahoo UK Ltd. However, their position was not separately considered in detail.

7.102  Liability of rival trader. As noted in section 1.3, the issue in Reed arose in the context of pop-up banner advertisements purchased by the defendants through Yahoo! and associated by Yahoo!, at the defendants’ direction, with search queries for the claimant’s mark. The primary reason for the Court of Appeal’s conclusion was that the context in which the advertisement appeared did not create any likelihood of confusion:

The web-using member of the public knows that all sorts of banners appear when he or she does a search and they are or may be triggered by something in the search. He or she also knows that searches produce fuzzy results—results with much rubbish thrown in. The idea that a search under the name Reed would make anyone think there was a trade connection between a totaljobs banner making no reference to the word ‘Reed’ and Reed Employment is fanciful. No likelihood of confusion was established.104

7.103  Liability for invisible use. Jacob LJ also made obiter comments to the effect that an invisible keyword trigger for banner advertisements might not be a ‘use’ of the trade mark at all. This would be on the basis that such a trigger is used only by ‘the computers who “read” sets of letters’ and ‘merely “look for” patterns of 0s and 1s’. Such patterns do not convey a specific meaning to the average consumer.105 However, this approach now appears to be inconsistent with later Court of Justice authorities to the effect that invisible keyword ‘triggers’ for search engine advertising will involve a use of the mark,106 albeit one which may or may not adversely affect its functions.

7.104  Liability for keyword triggers. The leading authority on keyword advertising is Interflora Inc v Marks and Spencer plc.107 This case concerned Google AdWords, which are a sponsored link technology similar to the service offered by Yahoo. However, unlike Wilson, which concerned the liability of the search operator, this action was a claim between trade rivals. The defendant retailer, among its various businesses, delivered flowers in competition with the claimants, who operated an international flower delivery network. The defendant had bid on and obtained AdWords for the keyword ‘interflora’, which was identical to a trade mark registered to the first claimant and licensed by the second. The claimants contended that this practice amounted to unauthorised use in the course of trade of their trade mark in relation to identical goods and services, within the meaning of article 5(1)(a) of the Directive.

7.105  Claims between trade rivals. Interflora is of only peripheral relevance to the present work, since it is essentially an ordinary claim for trade mark infringement which simply happens to involve allegations of use that are partly facilitated by a third party internet intermediary. Although a suggestion was made early on in the litigation that Google may be jointly liable with the advertiser for certain acts, such an approach now appears to be foreclosed by the decision in Google France.108 It is clear from the answers given by the Court of Justice to the questions referred in Interflora that keyword advertising claims between rival traders are highly fact-sensitive. In this respect, they are entirely typical of most primary trade mark infringement claims.

7.106  Facts. Welcome clarity is provided by the decision of the Court of Justice in Google France. This judgment arose from three references made in litigation before French courts over various aspects of Google’s AdWords service. The first case concerned a suit by the proprietor of a well-known mark against Google for offering, in response to queries containing its trade mark, sponsored links to websites which sold infringing products. The second and third cases were actions brought by proprietors against Google for publishing sponsored links to the websites of trade competitors in response to queries for their trade marks.

7.107  Decision of the CJEU. The Court held that Google was not prima facie liable for using any of the relevant trade marks in commerce. It was a threshold requirement of trade mark infringement that the defendant made use of the mark in the course of trade. However, any use of the trade marks was here made by the advertisers who selected and paid for the sponsored links.109 This primary use was uncontroversial, since in all three cases the advertiser selected a keyword identical to the proprietor’s trade mark with the effect of advertising competing or imitation goods or services alongside searches for that mark.

7.108  No ‘use’ of mark by intermediary. As noted in section 1.2, the Court of Justice refused to attribute the advertisers’ use of signs to Google, which functioned as a passive medium through which the keyword choices of its customers were given effect. In consequence, although the advertisers’ use of the trade marks might satisfy the other requirements of infringement, that result would not be visited upon the search engine that facilitated it.

7.109  Cost of advertising to the proprietor. The Court added that higher cost-per-click rates were not of themselves evidence that use of the mark adversely affected its advertising function—even if the higher price was attributable to competitors or imitators who placed advertisements using the trade mark as a keyword. The fact that a proprietor was forced to pay more to appear at the top of sponsored results was not significant given that its website would already be likely to rank highly in organic search results.110 In any case, a multitude of factors affect both the ordering of sponsored results and click-through rates, so it is not possible to conclude that paying a higher price would necessarily lead to any better outcome for the proprietor.

7.110  Search engine advertising policies. Despite the decision in Google France, it is clear that intermediaries’ policies can exert a substantial—even determinative—influence upon the factual environment in which such claims fall to be determined. The dispute in Interflora emerged from Google’s decision to relax its United Kingdom advertising rules so as to allow anyone to bid on keywords containing registered trade marks.111 Previously, identical keywords were reserved to the proprietor of the mark. It was this policy change that enabled third parties such as the defendant to bid on keywords containing the claimants’ mark; the alleged infringement would not have been possible without Google’s permission.

7.111 Google thus occupies the position of a strong gatekeeper: it both provides the means of infringement, but also has the technology to prevent such infringements as it may choose to disallow. Its choice not to deploy that technology (or, rather, to deploy it in a particular way) is what created the potential for infringing conduct.

7.112  Complaints about marks in advertising text. Google continues to allow trade mark owners to block the use of trade marks in the text of sponsored links, but this is a reactive facility that must be invoked by a trade mark owner and acted upon by Google.112

7.113  Complaints about marks in triggers. Consistently with the judgments of the CJEU in Interflora and Google France, Google does not generally entertain complaints made by trade mark proprietors in relation to keywords that are used to trigger the display of AdWords advertising. As to those complaints, Google’s international policy states: ‘we do not investigate the use of trademarks as keywords’. Within Europe, its policy is expressed in slightly different terms:

Google will not prevent the use of trademarks as keywords in the EU/EFTA regions. However, in response to a complaint, we may do a limited investigation to see whether a keyword and ad text is confusing users about the origin of an ad. If we find that it is, we’ll remove the specific ad that is the subject of the complaint.113

7.114  The classic trinity. The tort of passing off protects the claimant’s goodwill in a name, mark, or other indication from deceptive use that would injure that goodwill. The elements of the cause of action are well known114 and were helpfully summarised by Arnold J in Starbucks (HK) Ltd v British Sky Broadcasting Group plc as follows:

(a)

the claimant’s goods or services have acquired a goodwill in the market and are known by some distinguishing name, mark or other indication;

(b)

the defendant has used, or threatens to use, a name, mark or other indication which has led, or is likely to lead, the public to believe that goods or services offered by the defendant are goods or services of the claimant, or connected with it, and thus to a misrepresentation by the defendant (whether or not intentional); and

(c)

the claimant has suffered, or is likely to suffer, damage as a result of the erroneous belief engendered by the defendant’s misrepresentation.115

7.115  Forms of secondary liability. This section does not seek to analyse the scope of primary liability, for which readers are referred to a specialist text.116 Instead, the focus of this section is the scope and basis of secondary liability for passing off. Such liability could be alleged for a number of reasons. First, an internet intermediary may repeat or disseminate misrepresentations previously made by a third party. Second, it may deal in deceptive goods or other materials produced by a third party, or may facilitate the third party to deal in those goods or materials. Third, such an intermediary may equip another with the means to carry out passing off or may provide some other form of assistance to the person who passes off.

7.116 The following sections consider two ways in which secondary liability for passing off is sometimes framed, only one of which is properly regarded as a true basis for secondary liability. We then return to the three scenarios outlined in the previous paragraph.

7.117  The need for a misrepresentation. The starting point is that the conduct of a defendant must satisfy each of the three elements of passing off to be actionable. The cardinal feature of that tort is a ‘misrepresentation by the defendant’.117 If the defendant has not made a misrepresentation, an essential ingredient of the tort will be missing.

7.118  Assistance to the misrepresenting party. Simply aiding someone else to make an actionable misrepresentation is not enough. This is because mere assistance is, consistent with the principles of tortious secondary responsibility applied throughout English private law, insufficient to establish monetary secondary liability. Similarly, merely acting in a way that causes injury to goodwill is not enough if that party has not also engaged in a relevant misrepresentation, or has acted as a joint tortfeasor with someone who has.

7.119  Enabling a passing off. Nevertheless, some early cases refer to liability for ‘enabling passing off’. This description appears to be an historical relic and not a separate head of primary liability. It proceeds from the misapprehension that merely assisting another person to carry out wrongdoing, even if intentionally, could create secondary liability. For example, in Farina v Silverlock, Page Wood VC said that the basis of the injunction was, among other things, to prevent the defendant from ‘enabling parties to commit frauds upon’ the claimant by passing off, in circumstances where the defendant knew it was distributing the means of doing so.118 That reasoning is now open to doubt, and it is suggested that the case is better treated as an example either of joint tortfeasorship or of the equitable protective jurisdiction being used to restrain the dissemination of instruments of fraud.

7.120  Injunctive relief. Later, in Singer Manufacturing Co v Loog, Lord Selborne LC explained that an injunction to restrain passing off could issue against a secondary wrongdoer, but only where (1) that party created the deceptive materials specifically with the intention of passing off, or (2) the materials were ‘of such a nature as to suggest, or readily and easily lend themselves to such a fraud’. This passage actually suggests a relatively restricted understanding of secondary liability for passing off, a claim which failed on the facts. The Lord Chancellor went on to observe that, were broader relief available, the wrongdoing would be ‘too remote, speculative, and improbable to be imputed to the defendant’ or to justify ‘the interference of a court of justice with the course of the defendant’s business’.119

7.121 In Singer, the defendant was a wholesaler of sewing machines, whom the claimant argued was enabling retailers to pass off the machines as genuine Singer machines by supplying certain operating manuals that referenced the name ‘Singer’ but in the context of describing how the defendant’s own machines worked.120 That case is better regarded as one in which there was no misrepresentation at all.

7.122  Other explanations. In British Telecommunications plc v One In A Million Ltd, Aldous LJ reviewed these authorities and concluded that they could all be explained as cases of common design, cases in which no relief was granted, or cases based on the equitable protective jurisdiction to restrain dealings with instruments of deception.121 The claimant had argued that dealing with a domain name such as virgin.co.uk was able to be restrained by injunction, not because it was an instrument of fraud but by analogy with the principles of dishonest assistance that create secondary liability for breach of fiduciary duty in equity.122 The defendant argued that mere assistance was insufficient; even sale to a third party whom they knew would use it to pass themselves off would not be enough.123 Although the claim succeeded, that result was premised not upon assistance but upon restraining the defendant from disseminating instruments of deception.

7.123  Scope of monetary liability. The consequence of this is that, properly understood, there is no doctrine of monetary liability for ‘assisting’ or ‘enabling’ a passing off. In its classical form, the tort is restricted to conduct engaged in by the defendant which is the actual conduct causing the deception and damage to goodwill. In large part, these will be statements made by traders and, in particular, retailers. However, to ensure that deceptive conduct may be arrested at its source, courts have developed a more limited doctrine known as ‘instruments of deception’.

7.124  The principle restated. An internet intermediary may be enjoined from equipping another with an instrument of deception. This form of liability reflects a duty not to put into circulation an ‘instrument’ that will inevitably deceive consumers once it reaches them. Traditionally, the instrument was a tangible object, such as a wrapper, label, bottle, or manual, which was to be used by a third party to package goods or admixtures falsely. However, the doctrine has since been extended to intangibles such as domain names and company registrations. If this extension is correct, then it could apply, in appropriate circumstances, to conceivably any act of internet dissemination which puts a deceptive thing into circulation.

7.125  Terminology. Although sometimes described as ‘instruments of fraud’, the less loaded term ‘instruments of deception’ is preferred here. The language of equitable fraud is found mostly in the nineteenth-century authorities, but deception better reflects the conceptual foundation of the doctrine.

7.126  Nature of liability. The doctrinal basis of this rule is difficult to explain. While it is sometimes wrongly treated as an instance of joint tortfeasorship, it does not depend on common design or procurement, and is much wider than any tortious connecting factor known to the common law. It does not depend on proof of damage or deception, and so may be difficult to describe as liability which is truly ‘secondary’ in the sense identified by Lord Hoffmann in OBG v Allan. However, because establishing passing off does not require proof of actual damage or deception, the principle may simply reflect the fact that the primary wrong can be complete once inherently deceptive materials are in circulation. The best explanation seems to be that it involves the quia timet use of the equitable protective jurisdiction124 to prevent a party from facilitating wrongdoing.

7.127  Rationale. The rationale for the doctrine was explained by James LJ in Singer:

no man is permitted to use any mark, sign or symbol, device or other means, whereby, without making a direct false representation himself to a purchaser...he enables such purchaser to tell a lie, or to make a false representation to somebody else who is the ultimate consumer.... [H]e must not...make directly, or through the medium of another person, a false representation that his goods are the goods of another person.125

This suggests that liability is primary and is, in effect, an extension of the concept of a misrepresentation. The intermediary who conveys the lie to the ultimate consumer is a kind of amanuensis or ‘medium’ for the misrepresentation, such that the original producer of the deceptive means is also responsible for how they may later be used. However, the position is somewhat more complex than this: liability is not automatic but depends on the mental state of the producer, the nature of the goods, and whether the means are inherently deceptive.

7.128  Providing the means of deception. In Silverlock, an injunction issued against the printer and distributor of imitation cologne labels which it sold to retailers. The Court reasoned that, by selling the labels to retailers (who may be less scrupulous), the defendant was ‘thus scattering over the world the means of enabling parties to commit frauds upon the Plaintiff’.126 This remedy recognised secondary liability for passing off where a party is ‘enabling others’ to engage in wrongful conduct by ‘distributing the means of doing so’. The justification was said to be prophylactic: by targeting the producer of the necessary components or instruments of fraud, the Court could ‘arrest the evil at its source’ before any harm befell the claimant.

7.129  Common design. Another possibility, noted by the Court of Appeal in One in a Million, is that Silverlock was simply as a case of joint tortfeasance between printer and retailer.127 Although this appears difficult to reconcile with Credit Lyonnais and Paterson, it must be recalled that the remedy was an injunction and not damages. This is consistent with the use of the equitable protective jurisdiction to cease or prevent wrongdoing. In any case, the arrangement between printer and retailer can probably be understood as participation in a tacit common design for the retailers to engage in passing off. The agreement was for one party to print and the other to sell, and thereby both to profit. It is therefore not a mere ‘means’ case.128

7.130  The intermediary’s mental state. Liability for disseminating instruments of deception was described by Chitty J in Lever v Goodwin in terms which suggest that it has an element of knowledge:

But what is done by the manufacturer is this—he puts an instrument of fraud into [retail sellers’] hands. It has been said more than once in this case, in substance, that the manufacturer ought not to be held liable for the fraud of the ultimate seller, that is, the shop-keeper, or the shop-keeper’s assistant. But that is not the right view of the case. Have the Defendants in this case, or not, knowingly put into the hands of the shopman, who is more or less scrupulous or unscrupulous, the means of deceiving the ultimate purchaser? That is the question which I have to try, and that is a question of fact, and nothing else.129

7.131 In One in a Million, Aldous LJ understood Chitty J’s reference to ‘means’ to be a reference to one that is inherently deceptive, rather than one that was or was potentially innocuous.130 However, Aldous LJ rejected any analogy between the Court’s jurisdiction to prevent the use of these instruments and the remedies available for dishonest assistance of a breach of trust,131 and with it, any putative concept of ‘knowing assistance of passing off’. This must be correct—for there would be obvious difficulties in suggesting that a retailer owes fiduciary duties to third party owners of goodwill with whom they have not chosen to assume any relationship of trust and confidence.

7.132  Strict liability. Despite Lever v Goodwin, later cases have treated liability for dealing in instruments of fraud as strict, in the sense that if the instrument is inherently deceptive then the mental state of the disseminator does not matter.132 An innocent disseminator may just as readily be enjoined as one who shares the fraudulent intention of the primary retailer. Equally, a disseminator may be liable even if the primary retailer acts innocently. Conversely, if the instrument is not inherently deceptive, then the disseminator must normally intend to pass off. This principle appears most clearly in the nineteenth-century cases,133 but still appears to be good law.

7.133 In Draper v Trist, Sir Wilfrid Greene MR treated the gist of the disseminator’s liability as resting on the deceptive nature of the goods and not on the intermediate seller’s intent. The judge noted the possible distinction between a ‘middleman’ who fails to see any risk of deception and another who foresees it and deliberately seeks to take advantage of it. He then rejected the suggestion that knowledge or fraudulent intent was required on the part of the intermediary:

I must dissent from the view that the only case in which it would be permissible to award damages to the plaintiff would be a case in which it was shown that the middleman had re-sold fraudulently. After all, the question is the amount of the damage which the Plaintiff has suffered by having these deceptive goods sold. He will suffer precisely the same damage if the ultimate purchaser from the middleman is in fact misled by their deceptive description whether or not the middleman is himself fraudulent in his intent.134

7.134 In the labelling and admixture cases, courts enjoined parties who supplied inherently deceptive instruments whose natural consequence was to enable a third party to pass off his goods as another’s. The remedy tends to be an injunction rather than damages. For example, in John Walker & Sons Ltd v Henry Ost & Co Ltd the first defendant made and supplied labels knowing that the second defendant would attach them to bottles that would be filled with admixtures of cane spirit and sold as Scotch whisky. Although Foster J described these as ‘tortious acts’, the remedy was injunction rather than damages.135

7.135 In Cadbury, the chocolate bars were supplied without any deceptive packaging and could not be considered instruments of fraud; accordingly, the sale of goods which were not inherently deceptive was not tortious, and the defendant was not a procurer but a mere facilitator. For similar reasons, the suggestion that secondary liability could attach for passing off also failed.136 Like the online marketplace cases, secondary liability was the central issue in Cadbury because there was no relevant act of the defendant which could amount to the misrepresentation causing deception.

7.136  Instrument should be inherently deceptive. Subject to one qualification, it is vital that the instrument is inherently deceptive. This requirement is expressed in various ways: that the instruments ‘are saying something about themselves which is calculated to mislead’,137 or are weapons that provide to middlemen ‘the means of deceiving the ultimate purchasers’,138 or ‘inherently tell a lie’.139 In the latter case, the description of an instrument of deception as ‘a misrepresentation waiting to happen’ was approved: such an instrument needs only ‘exposure to the eyes, ears (or in this case nose) of the ultimate consumer to complete the tort’.140

7.137  Derivative nature of deception. The consequence is that the doctrine of instruments of deception properly does not permit a less stringent standard of liability to be applied to secondary disseminators than would apply to a primary wrongdoer: if the instrument, when turned into a misrepresentation at the point of sale, would or might not deceive, then disseminating it should not be wrongful.

7.138  Potential for deceptive use not enough. Thus, it is not normally sufficient to disseminate instruments which could be used deceptively. As Joyce J memorably remarked in Horlick’s Malted Milk Co v Summerskill, ‘I cannot assume all vendors to be knaves, any more than I can assume all purchasers to be simpletons.’141 In other words, if instruments have lawful uses as well as deceptive ones in the hands of the purchaser, they will not be instruments of deception.

7.139  Intended use. The qualification is that in marginal cases, it may be possible for instruments that are not inherently deceptive to be considered instruments of deception in the particular circumstances of their intended use. Usually, this would be on the basis of the defendant’s manifested intent. As appears from One in a Million (discussed below), three requirements must be satisfied:

(a)

the instrument must have been produced for the purpose (one assumes the sole or dominant purpose) of enabling passing off by others;

(b)

the instrument must, objectively speaking, be adapted to be used for passing off; and

(c)

the instrument must, if used, be more likely than not to be used for passing off.

7.140  Remedy. If all these requirements are met, the remedy is an injunction (and not, it appears, damages), which seems to reflect the use of the equitable protective jurisdiction. This is a very high threshold.

7.141  Domain names. In One In A Million the Court of Appeal enjoined a domain name registrar (acting in substance as a registrant) from using or reselling domain names which were identical to signs in which the claimants possessed goodwill and trade mark rights. Insofar as the claim was based on instruments of deception, the Court upheld the conclusion that the domain names were inherently deceptive. Aldous LJ explained the basis for relief in the following terms:

In my view there can be discerned from the cases a jurisdiction to grant injunctive relief where a defendant is equipped with or is intending to equip another with an instrument of fraud. Whether any name is an instrument of fraud will depend upon all the circumstances. A name which will, by reason of its similarity to the name of another, inherently lead to passing off is such an instrument. If it would not inherently lead to passing off, it does not follow that it is not an instrument of fraud. The court should consider the similarity of the names, the intention of the defendant, the type of trade and all the surrounding circumstances. If it be the intention of the defendant to appropriate the goodwill of another or enable others to do so, I can see no reason why the court should not infer that it will happen, even if there is a possibility that such an appropriation would not take place. If, taking all the circumstances into account the court should conclude that the name was produced to enable passing off, is adapted to be used for passing off and, if used, is likely to be fraudulently used, an injunction will be appropriate.142

7.142  Non-proprietary instruments. One in a Million establishes that injunctive relief may issue to prevent an internet service from equipping another with an intangible instrument of deception. As such, it suggests that it does not matter whether or not the deceptive instrument is itself classified as property. Thus, the Court was not concerned with whether or not the domain names were property, but whether their registration interfered with or appropriated ‘the plaintiffs’ property, their goodwill’.143

7.143  Monetary remedies. The availability of damages or an account of profits is less clear and there are good arguments that monetary relief should not be available for dealing in instruments of deception. Although there was an inquiry as to damages sought at trial in One in a Million, that appears to have been on the basis of trade mark infringement; the only remedy awarded on appeal for creating instruments of deception was an injunction. This approach is consistent with the principle that substantive liability arises where the defendant is actually a primary wrongdoer or joint tortfeasor, whereas a party who simply provides assistance in breach of an equitable duty will, in the absence of dishonesty, face only injunctive liability in equity.

7.144  Identifying maker of representations. The starting point is that it will be necessary to identify who has made the relevant misrepresentation. In general, an internet intermediary who does no more than disseminate in the course of providing its service misrepresentations previously made by a third party will not normally itself be liable for passing off. This is because it would not be regarded as having ‘made’ those representations, which are instead made by the relevant users of the service.

7.145  Instruments of deception. Liability for disseminating instruments of deception raises more complex issues, but it appears that an injunction will be available against an intermediary only in very rare cases. Platforms and website operators, for example, commonly store data supplied by their users. Such data are the intangible instruments which may be used to cause deception when communicated to third parties.

7.146 There are several problems with seeking to adapt the approach of One in a Million to dealings by a platform or website operator. First, it would be difficult to characterise the act of hosting or receiving data by the intermediary as one that creates or deals in an instrument of deception; the instrument is created by the user, not the intermediary, and it is a far cry from a manufacturer selling goods to be used by a retailer. Second, it seems unlikely that the instrument (the hosted data) could be considered inherently deceptive. Data could take any form, some deceptive and some not, and could be presented by third parties in virtually any way. Third, absent exceptional circumstances or prior notification, it seems unlikely that the platform or host would have the necessary knowledge or intent to disseminate the instrument in a deceptive way.

7.147  Duty not to facilitate deception. If a website is inherently deceptive and is notified as such to the service provider, then it would be arguable that continuing to supply services to that website may involve disseminating an instrument of deception. The website may be selling counterfeits; the website may pass itself off as the website of another; it may use an inherently deceptive domain name; or uploaded material may simply direct consumers to such a website using a hyperlink. In those circumstances, it may be possible to argue that the host of the deceptive website or material comes under an equitable duty not to continue assisting in its dissemination and can be ordered by injunction not to do so. Similar arguments could be envisaged against ISPs who supply access to the website and thereby enable the misrepresentations to reach consumers. However, these arguments are yet to be considered by the English courts.

7.148  Domain name registries. One in a Million dealt with the position of a domain name registrant who had himself registered inherently deceptive domain names. There was no suggestion in that case that the operator of the registry or the upstream registrar could be liable to an injunction for ‘creating’ the inherently deceptive instrument. However, it seems arguable that a registrar or even a registry could be enjoined from permitting further dealings (eg transfer or redelegation) in a domain name that is inherently deceptive.

7.149  Identifying the deceptive instrument. Where an internet intermediary such as an online marketplace or payment intermediary facilitates dealings in deceptive (eg counterfeit) goods produced by a third party, it may be arguable that the service provider is disseminating instruments of deception. This may be on the ‘technical’ basis that the data constituting the listing or transaction are inherently deceptive, since—when conveyed to the consumer—they will result in the deceptive goods being offered or sold, or on the more direct basis that the dissemination puts the deceptive instrument into circulation.

7.150  Marketplace and payment intermediaries. Consider a case where a vendor sells counterfeit goods on a marketplace such as eBay, which are paid for using a third party payment processor. Let us assume that the goods are counterfeit and pass themselves off for the genuine article so as to be inherently deceptive if shown to a consumer (or if later used and then shown to other consumers). Neither the payment processor nor the marketplace operator can easily be said to have ever had any deceptive ‘goods’ in their possession, custody, or control, but assuming that the logic of One in a Million does not require possession, they are each causing a deceptive instrument to be put into the channels of commerce: the marketplace operator publishes the listing page for the counterfeit goods which enables them to be offered to consumers; the payment processor supplies the means of paying for those goods and thereby putting them into circulation. Their mental states, however innocent, are not determinative. It therefore seems at least arguable that they can be restrained by injunction from dealing in instruments of deception once put on notice of the listings amounting to instruments of deception.

7.151  Limitations on dissemination liability. Despite these arguments, it is clear that principled limits must be developed to the largely theoretical jurisdiction to restrain the dissemination of instruments of deception on the internet. It would be both unnecessary and excessively burdensome to subject all internet intermediaries to the prospect of an injunction to restrain the passing off of goods or services with which they had no obvious connection and which were never within their possession. Whether this limitation should be clarified at the level of causation or remoteness, or through a shift towards fault-based standards of dissemination liability is not yet clear. However, it is suggested that, in whatever form it takes, such a limitation should furnish a principled distinction between physical or network layer services who assist but cannot reasonably prevent conveyance of the instrument, and the host of the instrument who assists and could bring the wrongdoing to an end. In any case, because neither intermediary is itself committing any tort, it is arguable that the Norwich Pharmacal costs rules should apply.144

7.152  Lesser facilitation. Where an internet intermediary supplies some other form of assistance that falls short of disseminating an instrument of fraud, it is difficult to see on what basis they could face liability for passing off. As discussed elsewhere, mere assistance is insufficient.145 So there is no suggestion that the telecommunications provider who supplies the telephone number which is used deceptively is liable;146 nor could there be any allegation against the website developer who, innocently and on instruction, developed the get-up of a deceptive website.147 In more extreme cases, assistance of this second kind may approach participation in a common design to pass off, but considerably more is required.

7.153  Overview. This section briefly introduces the rules that regulate internet services who supply and manage domain names. The focus of this section is the liability of service providers and not individual registrants, who may of course commit acts of trade mark infringement and passing off by their registration of and dealings with domain names.

7.154  Relevant intermediaries. Aside from the registrant himself, the most relevant intermediaries are network layer services:

(a)

the domain name registrar, who accepts registrations from third parties for a domain name, reserves that domain name in the relevant registry, and permits registrants to manage its configuration, in return for payment of an annual fee;

(b)

the domain name reseller, who may be interposed between a registrar and the ultimate registrant and carry out registrations on behalf of the registrar;

(c)

the domain registry operator, who maintains a listing of registered licensees for domain names within a regional namespace, such as .co.uk or .com.au, or generic top-level domain (‘gTLD’), such as .com or .info; and

(d)

the governing authority, such as the Internet Corporation for Assigned Names and Numbers (‘ICANN’), which is responsible for managing and regulating namespaces and identifiers.

These network layer services are discussed in more detail in chapter 2. Together they are responsible for managing the namespaces in which domain names may be registered, determining the conditions of registration, accrediting registrars, maintaining a register of domain names, keeping records of ownership and transfer, and of course creating specific identifiers (domain names) when they are registered within each namespace.

7.155 Trade mark rights and passing off are frequently invoked in disputes over the ownership or control of internet domain names. Typically, but not exclusively, this is because the domain name contains, consists of, or is similar to a trade mark belonging to the claimant or a sign in which the claimant possesses goodwill. The remedy sought in most cases is transfer or cancellation of the offending domain name, rather than monetary relief.

A taxonomy of domain name misuse

7.156 At least ten types of potential domain name misuse can be identified, and it is useful to distinguish between them since each raises slightly different considerations:

(a)

registration for sale: the opportunistic registration of a domain name (commonly in a new gTLD) with the intention of selling it to the highest bidder or to the rightful trade mark owner for a profit;

(b)

domain parking: registration for the purpose of deriving passive income from banner and keyword advertisements, typically accessed by users attempting to guess the URL of the real website;

(c)

typo-squatting: a variation on domain parking which uses a close variation on the spelling of a legitimate website, relying on users’ typographical errors;

(d)

drop-catching: registration of domain names immediately upon their expiry, with the intention of selling them back to any unlucky registrant who forgot to renew the registration;

(e)

portfolio investment: registration with the intent not to use or dispose of the domain name, but to add it to a large portfolio of assets maintained by a so-called domaineer for the purpose of realising a long-term commercial return;

(f)

domain tasting: successive short-term registrations and cancellations of a domain name with a view to determining whether its retention would be profitable;

(g)

domain kiting: engaging in tasting for an extended period, effectively obtaining the domain name for free;

(h)

botnet control: registration of a network of domain names according to a pre-determined algorithm embedded in malicious software, which allows for its central control;

(i)

phishing: registration of a domain name which is plausibly associated with the trade mark owner (typically a bank) for the purpose of tricking users into divulging their access credentials; and

(j)

gripe sites: registration of a domain name for the purpose of publicly criticising the activities of the trade mark owner, often under a domain name comprising the mark and the suffix sucks.com or a similarly blunt epithet.

7.157 These categories of misuse go beyond traditional ‘cyber-squatting’ cases, which are mostly limited to categories (a)–(d). Moreover, not all will amount to any wrongdoing in law or equity; for example, category (j) will often involve perfectly legitimate, if unwanted, criticism of the proprietor or its goods or services.

7.158 Due to the existence of highly effective administrative procedures for the resolution of domain name disputes, few courts have determined cyber-squatting disputes in the United Kingdom. The main authority is One in a Million, which was considered in section 2.2.

7.159  Stage 1: inherent deception. The analytical inquiry described by Aldous LJ in One in a Million involves three main stages. First, one must ask whether or not the domain name in question would ‘inherently lead to passing off’, in the sense of being inherently deceptive and likely to be used to deceive. A domain name that is identical to a trade mark or other protected sign and does not have any obvious non-deceptive uses is likely to be inherently deceptive. Conversely, examples of shared-use domain names may be those permitting homonymic uses, such as nike.gr (for Greek mythology) or apple.co.uk (by the record company), or those capable of being used lawfully under the own name defence. Domain names that are not identical to the sign may still be inherently deceptive (eg gooogle.com), but it is suggested that obviously dissimilar domain names will not be inherently deceptive (eg [brand]-sucks.com).

7.160  Stage 2: deception in the circumstances of use. Second, if the use of a domain name would not inherently deceive, it must be asked whether the domain name is nevertheless an instrument of deception having regard to all the circumstances. It is suggested that the most relevant factors are likely to be:

(a)

the degree of similarity (the higher the similarity between the claimant’s sign and the defendant’s domain name, the greater the likelihood of deception);

(b)

the intention of the defendant (and, in particular, whether they registered the domain name in good faith or merely to exact a toll from the claimant);

(c)

any lawful use of the domain name made by the defendant (use of the domain name for a legitimate purpose strongly suggests that it is not an instrument of deception);

(d)

the duration of any lawful use (the longer the period of use, the harder it will be to characterise the domain name as an instrument of deception);

(e)

the type of trade (a domain name relating to a trade that is the same as or closely related to the claimant’s is more likely to be an instrument of deception);

(f)

the region of trade (where the parties do not carry on trade in the same territory, deception is significantly less likely); and

(g)

other surrounding circumstances (eg any third parties who use the domain name; any offer to sell the domain name to the claimant).

7.161  Stage 3: purpose of registration. Third, assuming that the domain name is either inherently deceptive or, in the circumstances, still apt to be characterised as an instrument of deception, it must be asked whether the domain name in question:

(a)

was registered to enable passing off;

(b)

is adapted to be used for passing off; and

(c)

if permitted to be used by the defendant, is likely to be deceptively used.

Only if the answer to each of these questions is ‘yes’ will an injunction be appropriate.

7.162  Facts. In One in a Million, the Court of Appeal held that a person could be liable for registering domain names corresponding to the claimants’ registered trade marks. The second and third defendants, acting through various entities, had engaged in ‘systematic registration’ of domain names for well-known brands—including sainsbury.com, marksandspencer.com, bt.org, cellnet.net, and virgin.org—in order to pre-empt their registration by the brand owner and thereby extract a nuisance fee from them.148

7.163  Ratio. The case stands as authority for the proposition that the registrar or registrant of a domain name that is an instrument of fraud can be restrained from dealing with it in any manner that infringes the claimant’s trade mark rights or is deceptive, regardless of fault.

7.164  The defendants’ position. Although technically registrars, the defendants were unlike any normal domain name registrar because they were registering domain names for their own purposes rather than on behalf of third party clients. Their position was therefore essentially one of individual registrant. The registrations fall within the first category of misuse: domain names acquired with the sole intention of profiting from their sale—whether to the claimants or to interested third parties—and without any plans to trade under their banner. On this basis, the defendants argued that their conduct could neither amount to trade mark infringement or passing off, nor render them liable as joint tortfeasors with a purchaser who subsequently used one of the domain names to commit a tort. The trial judge, Deputy Judge Sumption QC (as his Lordship then was), rejected the defendants’ arguments and granted summary judgment and quia timet relief.149

7.165  Reasoning on appeal. The Court of Appeal upheld these conclusions, characterising a deceptive domain name as an instrument of deception when its similarity to a trade mark or protected sign would inherently lead to passing off by a subsequent purchaser. This was true in the case of all of the domain names complained of by the claimants, even though some—such as virgin.co.uk—had potential alternative uses that were non-infringing. Because the defendants had registered the domain names for the purposes of appropriating the claimants’ goodwill and of equipping others with these instruments of deception, injunctive relief was justified.150 Aldous LJ considered that the law of passing off was capable of application to the defendants’ conduct, since this would simply entail ‘the common law evolving to meet changes in methods of trade and communication as it had in the past’.151 An analogy was drawn with cases in which defendants opportunistically annexed trading names in anticipation of a foreign or new market entrant.152 In the vast majority of these cases, injunctive relief issued in favour of the claimant.

7.166  Application to the facts. On the facts of One in a Million, the domain names registered by the defendants were inherently deceptive. The Court observed that they were identical to the claimants’ trade marks and signs, and could only be used to imply a connection with the claimants that did not exist. Importantly, although the websites were not used for trading, the mere fact of registration resulted in an entry being created in the WHOIS database which implied an association between the registrant and the trade mark owner. Accordingly, the Court concluded that each of the domain names was an instrument of fraud any use of which would result in passing off.153

7.167  Remedy. The Court’s conclusions on passing off were sufficient to justify injunctive relief (transfer of the domain names). The Court was undoubtedly influenced by the cynical intention underlying the defendants’ systemic registrations:

No doubt the primary purpose of registration was to block registration by the owner of the goodwill. There was, according to [counsel for the defendants] nothing unlawful in doing that. The truth is different. The registration only blocks registration of the identical domain name and therefore does not act as a block to registration of a domain name that can be used by the owner of the goodwill in the name. The purpose of the so-called blocking registration was to extract money from the owners of the goodwill in the name chosen. Its ability to do so was in the main dependent upon the threat, expressed or implied, that the defendants would exploit the goodwill by either trading under the name or equipping another with the name so he could do so.154

7.168 Additionally, the actions of the defendants in attempting to sell the domain names (and hinting at possible sale to third parties) amounted to trade mark infringement under section 10(3) of the 1994 Act. Domain names, as indicators of origin, were used as trade marks through the mere fact of registration, and in the circumstances the defendants’ registration for the sole purpose of sale amounted to an unfair taking advantage of the claimants’ distinctive marks.155

7.169 The approach in One in a Million has been applied in many later decisions and remains good law. Several examples are given below.

7.170  Opportunistic registration. In Global Projects Management Ltd v Citigroup Inc, Park J held that ‘the mere registration and maintenance in force of a domain name which leads, or may lead, people to believe that the holder of the domain is linked with a person is enough to make the domain a potential “instrument of fraud”, and it is passing off’.156 In that case, the defendant registered the domain name citigroup.co.uk shortly after the merger of the claimant’s predecessors was announced. The domain name was not actually associated with any website: visitors to it would simply see the message ‘an error has occurred’. Nevertheless, the domain name was obviously an instrument of deception and the Court granted summary judgment.

7.171  Good faith registration. In Phones 4u Ltd v Phone4u.co.uk Internet Ltd,157 the Court of Appeal held that the second defendant’s innocent registration of phone4u.co.uk was an actionable passing off. At the time of its registration, although the claimant’s business was relatively small, it had an established goodwill in the sign PHONES 4U. In light of that, such a similar domain name could not be used without causing deception, despite being registered without any knowledge of the claimant or its business. Customers were being deceived by being ‘lured’ to the defendants’ website. Even if no purchase eventuated, this caused damage to goodwill.158

7.172  Registration of domain name variants. In Thomson Ecology Ltd v Apem Ltd, the claimant owned the .com domain name for its trading name. A former employee registered the .co.uk domain name and other variants upon it, for use in connection with a competing business. In those circumstances, the registration of the domain names was an actionable passing off, despite there being no possibility of actual damage to the claimant because the defendants had agreed to transfer the domain names to the claimant before proceedings began. The Court held that damage could be presumed, but declined to order an inquiry as to damages, which would be pointless.159

7.173  Bulk keyword registrations. In Tesco Stores Ltd v Elogicom Ltd, the defendant registered 24 domain names which all included the word ‘tesco’ in some form. The defendant had done so in order to direct consumers to the official Tesco website in order to generate commission as an affiliate seller. However, in so doing, the defendant had used signs which were similar to the claimant’s mark in relation to identical or similar services in circumstances likely to cause confusion.160 The relevant use was in relation to the provision of ‘assistance’ for viewing and purchasing goods on a website. Additionally, such use took unfair advantage of the marks. In addition to trade mark infringement, the domain names were either ‘inherently fraudulent’ and likely to be so used, or otherwise to be regarded as instruments of deception in all the circumstances. This justified quia timet injunctive relief.161

7.174  Registration by trade rival. In Vertical Leisure Ltd v Poleplus Ltd, HHJ Hacon granted an application for summary judgment in a claim of trade mark infringement and passing off.162 The parties were competitors; the defendant had registered various domain names containing the word ‘X-Pole’ or ‘SILKii’, which corresponded to products and trade names of the claimant, a manufacturer of pole dancing equipment. The Court rejected a suggestion that the public today would be less likely than in 1999 to be deceived by an entry on the WHOIS register. The second defendant created instruments of deception by registering the domain names and then offering them for sale to the claimant. The Court made an order transferring the domain names to the claimant.163

7.175  Injunctive relief. By analogy with the labelling cases and One in a Million, it seems arguable that a domain registry operator or registrar could be enjoined if it equips a registrant with an inherently deceptive domain name.

7.176  Monetary remedies. However, there appear to be considerable difficulties associated with an argument that an upstream domain name intermediary should face monetary liability as a joint tortfeasor simply for assisting the registrant to register a domain name later used tortiously.164 Claims of negligence and breach of contract would be governed by ordinary principles, subject to the safe harbours considered in chapter 12. Only three cases directly consider the position of the registry. Each turns on its facts, and none offers any support for monetary liability.

7.177  Registration in error. In the first case, Pitman Training Ltd v Nominet UK,165 the claimants and the second defendant both carried on business under the sign PITMAN. Both sought control of the domain name pitman.co.uk. An application was lodged by the second defendant with a registrar and Nominet allocated the domain name accordingly; one month later, a second application was lodged by the claimants, whose registrar was misinformed that the domain name was still available for registration. Ordinarily, domain names are allocated by Nominet in order of application. However, by some mistake, the domain name was reallocated to the claimants and redelegated to their nameservers. In reliance, the claimants began to use the domain name in advertising material. Several months later, the defendants realised what had happened and, after a series of negotiations with Nominet, arranged for the domain name to be transferred back to their control.

7.178 The claimants commenced proceedings against the original registrant and Nominet, seeking injunctive relief. Scott V-C dismissed the application, holding that the facts disclosed no arguable cause of action: the second defendant’s use of the domain name would not amount to passing off since there was no suggestion that the domain name had become associated with the claimants; additionally, arguments based on interference with contract and abuse of process failed.166 Strangely, no claim of negligence was pursued against Nominet. The Court was understandably reluctant to hold the registry operator responsible for what was essentially a dispute between trade rivals, especially where the defendant’s application was first in time.

7.179  Lapsed registrations. The second case to consider the role of the registry is Alliance Francaise de Londres Ltd v Nominet UK.167 The claimant sought an injunction to prevent its .co.uk domain name from lapsing upon dissolution of the legal entity to which it was registered. It feared ‘catastrophic consequences’ to its business if the domain name expired.168 Ultimately, the application was not pursued in light of technical measures169 agreed with Nominet to prevent the automatic expiry of the domain name. The Court awarded costs to Nominet, considering that the application was unjustified and motivated by ‘paranoia’ and lack of understanding about Nominet’s facilities.170 The Court did not comment on the scope, if any, of Nominet’s responsibility to prevent harm to the claimant.

7.180  Orders for cancellation and locking. In Cartier International AG v Nominet UK, the claimant sought an order requiring Nominet to ‘de-tag’ and lock 12 .co.uk domain names which the claimant alleged were used to sell counterfeit goods.171 This would result in their effective cancellation and they would no longer resolve to any associated website. The domain names did not themselves contain the CARTIER mark, but instead used generic terms such as shop-4-watches.co.uk and highqualitywatches.co.uk. In light of their generic composition, it is obviously difficult to describe these instruments as inherently deceptive, so the claimant instead sought an order on the basis of section 37(1) of the Senior Courts Act 1981, construed compatibly with article 11 of the Enforcement Directive. It did not allege any direct cause of action against Nominet.

7.181 The action was evidently a test case, pursued in parallel with the claimant’s action against the ISPs.172 By the time the claim was commenced, 10 out of 12 target domain names had been suspended voluntarily by Nominet in accordance with its registration policies. Of the remaining domain names, one had been cancelled and re-registered by a third party for a different website that did not appear to sell counterfeits; the registrant of the other had supplied verified contact information to Nominet, though this later turned out to be inaccurate so that domain name was also suspended. The claimant’s assumption seems to have been that Nominet was an intermediary whose services were being used by the third party website operators to infringe the claimant’s trade marks. At the time of writing, the claim had not been determined.

7.182 The Digital Economy Act 2010 was considered in chapter 6 in relation to the statutory regulation of internet copyright infringement. In addition to the statutory infringement notification regime, the 2010 Act confers a number of powers upon the Secretary of State to regulate domain name registries. These provisions, which are now found in the Communications Act 2003, have been largely overlooked but have potentially far-reaching consequences for domain name intermediaries. They provide further examples of the shift away from monetary liability measures and towards softer regulatory measures designed to influence the behaviour of internet intermediaries, including those who administer the domain name system.

7.183  UK registries. The measures apply to any second- or third-level registry that operates within a ‘UK-related’ top-level domain (‘TLD’), such as .uk, or second-level domain (‘2LD’), such as .co.uk. In practical terms, only Nominet UK Ltd and Janet Ltd (which manages the .ac.uk and .gov.uk namespaces) meet these criteria.

7.184  Unfair practices or misuse. The measures are triggered by contingency: a ‘serious relevant failure’ must occur. The 2010 Act defines two relevant failures. First, the registry, or any of its registrars or end-users, must have engaged in prescribed practices that are unfair or involve the misuse of internet domain name.

7.185  Inadequate arrangements. Second, the arrangements made by the registry for dealing with complaints in connection with internet domain names must not comply with prescribed requirements.173

7.186  Serious harms. Either of these failures will be ‘serious’ if it harms (or is likely to harm) the reputation or availability of electronic communications networks or electronic communications services, or the interests of consumers or members of the public in the United Kingdom.174

7.187  Remedial powers. Upon being notified of a failure, a registry is given a period in which to remedy it. If, after the expiration of that period, the Secretary of State is satisfied that appropriate remedial steps have not been taken, he or she may intervene in the management of the registry in various ways—including by appointing a new manager175 and altering the company’s constitution.176 These powers are clearly of a highly intrusive and interventionist nature. However, in practical terms, they are unlikely ever to be exercised; instead, they create a strong incentive for registry operators to comply with government domain name policy and respond to criticism. In this sense, the regulatory scheme relies on soft measures and backstop powers, rather than the direct imposition of liabilities.

7.188  Responsibility for end-users. Several features of the scheme are noteworthy from the perspective of service provider liability. First, a registry operator is responsible not simply for its own failures but for failures by ‘any of its registrars or end-users’. Although this responsibility sounds not in damages but in possible future regulatory intervention, it goes beyond more traditional forms of secondary liability. Responsibility flows mainly from the acts of a large and highly dispersed class of third parties. The relevant harms are suffered by others. The registry operator need neither intend nor know of those acts or harms. In some cases, it may be unable to prevent them, yet still owe remedial duties. This effectively places registry operators in the position of a de facto insurer of electronic communications, providing a statutory guarantee to the public that it will remedy (or take appropriate steps upon notification of) any sufficiently unfair practice or misuse of domain names.

7.189  Application limited to registries. Second, the scheme targets only the lowest-level domain intermediary; registrars (agents of end-users), resellers (agents of registrars), and registrants (end-user licensees of domain names) are not affected. This means that one intermediary can be responsible for the acts of other intermediaries, who can in turn bear different liabilities for acts by the primary wrongdoer. This arrangement becomes even more puzzling when it is recalled that registry operators are concerned with the functionality of the underlying domain name system, whereas registrars provide services to the public, who in turn register and use domain names with the assistance of third party network hosts for the purpose of establishing websites.

7.190 It is therefore surprising that responsibility for harming the interests of consumers or the reputation of electronic networks should rest on a party that has no direct involvement with consumers or network management. The explanation may lie in the fact that domain registries are classic examples of efficient loss avoiders: by adopting policies which prohibit the registration or use of domain names for socially undesirable purposes, a single registry can prevent harms from occurring more efficiently than the hundreds of individual registrars or millions of registrants could compensate them. In practice, it might be thought that the difference is immaterial: the relationship between registry and registrar being contractual, the registry could simply recover damages from any registrar who contributed to the failure, who may in turn be entitled to recover from the registrant. However, because parties at higher network layers tend to be smaller and harder to identify, the risk of insolvency or anonymity rests initially with the registry.

7.191  Standard of care. Third, the regulatory scheme established under the 2010 Act expressly contemplates that domain name registries will be held to a standard of conduct that proscribes various practices (such as cyber-squatting and pressure sales) and uses (such as phishing and spam). Based on the examples provided in the explanatory notes,177 this standard is far higher than those which apply in other countries. Although considerable uncertainty surrounds the scope of these obligations (which are yet to be made the subject of delegated legislation), they may be used to prohibit registry operators from engaging (or allowing downstream service providers to engage) in conduct such as drop-catching,178 DNS error redirection,179 and pre-emptive registration.180 Besides having significant financial implications for these network layer services, the potential to proscribe new or emerging practices signals a more active legislative role in the future development of the domain name system in the United Kingdom.

7.192  Intervention by registry operators. Finally, the scheme envisages a more active policing role by registry operators. It does this in two ways: first, by requiring registries to meet prescribed standards of dispute resolution procedures (such as the Nominet DRP and UDRP); and second, by encouraging registries to deal pre-emptively with emerging threats to network stability and consumer confidence (such as phishing, malware, and unfair business practices by registrars). These policing roles arguably ‘deputise’ registry operators in a similar way to ISPs, and may lead to additional contractual constraints being placed on registrars, coupled with periodic monitoring and complaint mechanisms.

7.193 Almost all top-level domain namespaces provide for some form of alternative dispute resolution to deal with complaints about abusive registrations. The applicable dispute resolution policy will depend on the suffix of the domain name about which complaint is being made. However, they tend to share common features and themes. Those themes are introduced by reference to two of the most common policies: the UDRP (for top-level domains including .com, .net, and .org) and the Nominet DRS (for .uk domain names).

7.194  Contractual foundation. Domain name dispute resolution policies are agreements entered into between domain name registrars and their customers, individual registrants. The relevant policy is incorporated into the contract for registration of the domain name and is a term of the licence pursuant to which the registrant may use the domain name for the term agreed with the registrar. Incorporation of the policy is, in turn, mandated by the contract between the registrar and the registry operator pursuant to which the registrar is licensed to create and renew domain names. In this way, domain name dispute policies form part of an enforceable chain of contracts between the person who registers a domain name and those who regulate and administer its namespace.

7.195  Interpretation and jurisdiction. As ordinary contracts, the normal rules governing formation, interpretation and enforcement apply. By extension, it seems likely that disputes arising under a policy agreement would be subject to the ordinary jurisdictional rules applicable to contractual disputes. Almost all domain name registration agreements also contain an express choice of forum clause.

7.196  Suspension of panel proceedings. Domain name dispute resolution forms a natural complement to judicial adjudication. It offers disputants access to an alternative forum in which disputes may be determined quickly and cheaply by subject matter experts using an efficient online filing system. Such a system is one alternative to judicial determination, but most policies do not see the two systems as mutually exclusive. For example, rule 18(a) of the UDRP Rules gives the Panel ‘discretion to decide whether to suspend or terminate the administrative proceeding, or to proceed to a decision’ where a parallel court action is commenced before or during an administrative proceeding. Similarly, paragraph 4(k) of the UDRP itself permits either party to a complaint to bring court proceedings at any time before, during, or after the administrative proceeding.

7.197  Ouster of jurisdiction. Difficult questions may arise where the dispute resolution policy in question purports to restrict recourse to court proceedings; whether an anti-suit injunction may issue to prevent parallel action in the registrant’s national courts appears to be an untested question in the United Kingdom. However, most common policies contemplate dual competence. Indeed, they see such dual competence as a desirable feature: the policy exists to permit rapid determination of a limited subset of the issues which may be raised by an abusive registration; for the remainder, judicial determination is required.181

7.198  United States case law. A number of foreign decisions have considered the relationship between judicial and administrative proceedings relating to the same domain name. In Dluhos v Strasberg, the United States Court of Appeals for the Third Circuit held that UDRP proceedings did not ‘replace’ formal litigation but simply provided an ‘additional forum’ which was both more streamlined and also more limited, both in the relief that it can grant and in the types of complaints it can adjudicate. For this reason, parties were free to choose between them.182

7.199 In Barcelona.com Inc v Excelentisimo Ayuntamiento De Barcelona, the Fourth Circuit explained that the UDRP was ‘adjudication lite’ that directly contemplated the possibility of judicial intervention. Such intervention ‘can occur before, during, or after the UDRP’s dispute-resolution process is invoked’.183 The Court concluded that:

domain names are issued pursuant to contractual arrangements under which the registrant agrees to a dispute resolution process, the UDRP, which is designed to resolve a large number of disputes involving domain names, but this process is not intended to interfere with or modify any ‘independent resolution’ by a court of competent jurisdiction.184

7.200  Canadian case law. In Tucows.com Co v Lojas Renner SA, the claimant was a Brazilian trade mark proprietor who submitted a UDRP complaint in respect of a domain name (renner.com) which had been registered by the defendant, a large Canadian domain name registrar. The registrar did not respond substantively to the complaint but instead commenced proceedings in Ontario and requested that the Panel terminate the administrative proceeding under paragraph 18(a). In overturning the trial judge’s conclusion that court proceedings would undermine the UDRP process, the Ontario Court of Appeal commented that litigation in the courts was appropriate for a hard-fought trade mark dispute:

Where, as here, the administrative tribunal considers the dispute to be a ‘legitimate’ dispute, the policy of the UDRP is to refer the dispute to the courts. The reasons given by the administrative tribunal for terminating the proceeding were in accordance with the UDRP. They were not unreasonable. I respectfully disagree with the motions judge’s conclusion that the domain name dispute should be left with the administrative panel.185

7.201  Opting-out of UDRP proceedings. If a similar approach is taken in the United Kingdom, then domain name dispute resolution will be treated as an alternative rather than a substitute for decisions in national courts. This means that a disputant who is unsatisfied with the progress of an administrative proceeding remains free to commence judicial proceedings at any time before a decision is handed down, and can thereby ‘opt-out’ of the UDRP framework in favour of the courts.

7.202  Overview. The Uniform Domain Name Dispute Resolution Policy (conventionally abbreviated as the lipogram UDRP)186 applies to domain names registered by an ICANN-accredited registrar.187 Registrants are required to submit to proceedings before an administrative panel (‘the Panel’) where a complaint is validly made by a third party.

7.203  Purposes. The UDRP was promulgated ‘in order to deal first with the most offensive forms of predatory practices and to establish the procedure on a sound footing’.188 This suggests that a relatively restrictive meaning should be given to its terms: it was not intended to resolve ordinary disputes between trade rivals, but rather to provide a vehicle for dealing with the most serious cases of cyber-squatting and other abusive registrations.

7.204  Elements of a complaint. Under the UDRP, complaints must satisfy three elements to be upheld:

(a)

confusing similarity: that the domain name is identical or confusingly similar to a trade mark or service mark in which the complainant has rights;

(b)

no rights or legitimate interests: that the registrant has no rights or legitimate interests in respect of the domain name; and

(c)

bad faith: that the domain name has been registered and is being used in bad faith.189

7.205 These grounds are conjunctive. The onus of proving them rests on the complainant, who may choose the dispute resolution provider from among a list of ICANN-accredited services and is required to bear the provider’s fees. All submissions are made in writing electronically and there are not normally oral hearings.190 The parties are required to exclude both the provider and the members of the Panel from liability for any act or commission in connection with an administrative proceeding under the policy.191

7.206  The complainant’s rights. The concept of a ‘trademark or service mark’ is broad and includes both registered and certain unregistered trade mark rights, such as goodwill. However, it does not normally extend to other unregistered rights, such as trade and business names, personality rights, and geographical indications,192 and there have been calls to extend the policy.193 However, the right need not relate to any particular territory; thus, it does not matter whether the complainant has rights in the same territory as the registrant or registrar.

7.207  Identity. For the purpose of assessing identity, the TLD suffix appears to be disregarded. Minor typographical differences attributable to characters that cannot be present in a domain name (such as spaces and ampersands) are also ignored.194

7.208  Confusing similarity. In the absence of strict identity, there must be confusing similarity. The confusion inquiry is simple and pragmatic, but panels take different approaches. In most panel decisions, confusion is determined by a superficial comparison of the domain name and the protected sign on their face.195 Other panel decisions more closely resemble the multi-factorial approach to trade mark infringement under article 5(1)(b) of the Directive, applying a test which compares the goods or services of the registrant and the complainant, examines the contents of the website, and considers whether and how the claimant’s mark is being used. Ultimately, what must be shown is that internet users would be confused into thinking that the domain name belongs to or is licensed by the complainant.196 Initial interest confusion appears to be enough.197

7.209  Sucks.com cases. A particular issue arises where domain names incorporate the claimant’s mark but attach it to a pejorative or negative suffix, such as ‘-sucks’. The prevailing approach seems to be that the presence of a negative term indicates to internet users that the domain name is not affiliated with the trade mark holder,198 but the panel decisions are not easy to reconcile.

7.210 The UDRP gives three non-exhaustive examples of what will demonstrate that a registrant has rights or legitimate interests to the domain name:

(a)

use in trade: before receiving notice of the complaint, use or demonstrable preparations to use the domain name or a name corresponding to the domain name in connection with a bona fide offering of goods or services;

(b)

reputation: the registrant has been commonly known by the domain name, even if it has not acquired trade mark or service mark rights; or

(c)

fair use: the registrant is making a legitimate non-commercial or fair use of the domain name, provided that the registrant is not for the purpose of commercial gain either (i) misleadingly diverting consumers for commercial gain, or (ii) tarnishing the trade mark or service mark at issue.199

7.211 The bad faith inquiry is a necessarily wide-ranging one that considers all the circumstances of the registrant’s registration and use. The UDRP gives four non-exhaustive examples of when registration and use of a domain name will be in bad faith:

(a)

registration for sale: where the circumstances indicate that the registrant acquired the domain name primarily for the purpose of selling, renting, or otherwise transferring the domain name to the complainant or a competitor for profit;

(b)

cyber-squatting: where the registrant registered the domain name in order to prevent the complainant from using it, as part of a pattern of such conduct;

(c)

unfair competition: where the registrant registered the domain name primarily for the purpose of disrupting the business of a competitor; or

(d)

deliberate confusion: where the registrant’s use of the domain name was an intentional attempt to attract, for commercial gain, internet users by creating a likelihood of confusion with the complainant’s mark.200

7.212 Although this element literally requires both registration and use in bad faith, panels sometimes conflate these two requirements, or infer bad faith use from bad faith registration.201 However, properly understood, paragraph 4(b) requires that the complainant prove bad faith both at the time of registration and throughout the period of subsequent use of the domain name.202 Where a domain name is not being substantively used but merely held defensively, panels will consider whether the circumstances are such that passive registration is essentially equivalent to bad faith use.203 Evidence of other abusive registrations held by the registrant may well tip the balance.204

7.213  Registrant’s secondary liability. The UDRP dictates an objective inquiry into whether the registrant’s domain name has been registered and used in bad faith. It follows from the wording of the UDRP that the use need not be use by the registrant himself. Although all four examples relate to conduct of the registrant, it is conceivable that a registrant may become liable to transfer a domain name under the UDRP because of bad faith use by a third party. For example, use by an entity under the practical control of the registrant may be sufficient, as may use by an employee.205 It is more doubtful whether relevant use could be carried out by a user of the website with whom the registrant has no other relationship.

7.214  Reverse hijacking. In some cases, a complainant may misuse the UDRP procedure for the purpose of improperly gaining control of a domain name that has been legitimately registered. In such cases, paragraph 15(e) of the UDRP Rules entitles the Panel, after considering the parties’ submissions, to declare the complaint an abuse of the procedure. The registrant must show that the complaint was brought in bad faith (eg in an attempt at ‘reverse domain name hijacking’) or primarily to harass the registrant. If the Panel agrees, the complaint will be dismissed.

7.215 The remedies available to a successful complainant are limited but effective. Paragraph 4(i) of the UDRP states:

Remedies. The remedies available to a complainant pursuant to any proceeding before an Administrative Panel shall be limited to requiring the cancellation of your domain name or the transfer of your domain name registration to the complainant.

This indicates that the panel does not have jurisdiction to make any order other than: (1) refusing the complaint; (2) upholding the complaint with transfer; or (3) upholding the complaint with cancellation. For example, it appears that the Panel cannot order the registrant to pay costs or surrender the contents of the website.

7.216  Overview. A similar dispute resolution policy exists for .uk domain names in the form of the Nominet Dispute Resolution Service (‘DRS’) policy. It is a condition of registration of a .uk domain name that the registrant agrees to be bound by the DRS policy and procedure.206

7.217  Elements of a complaint. The substantive conditions which a complaint must satisfy are slightly different to the UDRP. A complainant must show that the domain name was an ‘abusive registration’, meaning that it:

(a)

was registered or otherwise acquired in a manner which, at the time when the registration or acquisition took place, took unfair advantage of or was unfairly detrimental to the Complainant’s Rights; or

(b)

has been used in a manner which has taken unfair advantage of or has been unfairly detrimental to the Complainant’s Rights.207

7.218  Relevant rights. The definition of ‘Rights’ is broader than under the UDRP: it refers to any ‘rights enforceable by the Complainant, whether under English law or otherwise’.208 This means that both registered trade marks and goodwill protected under the law of passing off will qualify under the policy, regardless of the territory where they subsist.

7.219  The concept of an abusive registration. The requirements of an abusive registration are also different to the UDRP, and may again cover broader terrain. They appear superficially similar to the requirements for infringement under section 10(3) of the 1994 Act or article 9(1)(c) of the Regulation, though there is no requirement that the sign in respect of which the complainant has rights should possess a reputation. Examples of abusive registrations are given in paragraph 3 of the DRS Policy, and include:

(a)

registration primarily for the purposes of selling, renting, or transferring the domain name to the complainant or a competitor for profit;

(b)

a ‘blocking registration’ against the complainant’s name or mark;

(c)

registration for the purpose of unfairly disrupting the business of the complainant;

(d)

use or a threat to use the domain name in a manner likely to confuse people or businesses into believing that the domain name is registered to, operated or authorised by, or otherwise connected with the complainant;

(e)

a pattern of abusive registrations for well-known names or marks;

(f)

where the respondent has given false contact details to Nominet; and

(g)

where the domain name had been paid for and used by the complainant and was registered by the respondent pursuant to that relationship.209

7.220  Failure to use the domain name. The Nominet DRS Policy explains that a mere failure to use the domain name is not evidence of an abusive registration. However, a rebuttable presumption of abusive registration may arise on the basis of previous behaviour, if the respondent made three or more abusive registrations in the two years preceding the complaint.210

7.221  Evidence of legitimate use. A respondent to a DRS complaint may demonstrate that his or her registration is not abusive in similar ways to the manner in which a registrant may show a ‘right or legitimate interest’ under the UDRP. For example, a registrant may have used or made preparations to use the domain name ‘in connection with a genuine offering of goods or services’, may have been commonly known by the name (or a similar name), made a fair use of the domain name, used it for legitimate non-commercial purposes, and so on.211 In contrast to the UDRP, the Nominet DRS Policy expressly provides that fair use ‘may include’ tribute and criticism websites.212

7.222  Opting-out of DRS proceedings. Like the UDRP, the operation of the DRS policy does not prevent either party from submitting the dispute to a court of competent jurisdiction.213 That may occur before, during, or after the outcome of the DRS dispute—though the unsuccessful party to a DRS complaint will need to act swiftly if they wish to prevent implementation of the expert’s decision, which is normally implemented by Nominet 10 days after the conclusion of the complaint. If court proceedings are initiated before a decision, Nominet will suspend the dispute until the outcome of the legal proceedings.214

7.223  Rights of appeal. The parties to a DRS dispute have the right to appeal a DRS decision to an appeal panel of three members, upon payment of an appeal fee.215

7.224  gTLD disputes. One important form of administrative secondary liability for trade mark infringement arises from the new Trademark Post-Delegation Dispute Resolution Procedure (‘PDDRP’).216 The function of the PDDRP is to regulate the liability of a registry operator for trade mark infringement at the first and second levels of a new gTLD. Essentially, this mechanism allows a complainant to object to the use of a gTLD which interferes with the complainant’s trade mark rights.

7.225  Elements of a gTLD complaint. The PDDRP is more limited in scope than the UDRP. For complaints about the top level of a gTLD (such as .sony or .apple), the complainant must prove, first, that the gTLD string is ‘identical or confusingly similar’ to the complainant’s mark; and, second, that the registry operator’s affirmative conduct causes or materially contributes to the gTLD:

(a)

taking unfair advantage of the distinctive character or reputation of the complainant’s mark;

(b)

impairing the distinctive character or reputation of the complainant’s mark; or

(c)

creating a likelihood of confusion with the complainant’s mark.

In other words, a trade mark proprietor could object to a registry operating a gTLD which took unfair advantage of its mark, caused detriment to it, or which suggested that the registry operator was, or was authorised by, the proprietor. It is likely that the inquiry will involve similar factors to infringement under article 9(1)(c) of the Regulation.

7.226  Elements of a 2LD complaint. The requirements for 2LD complaints (such as hilton.london or louisvuitton.fashion) are stricter. Complainants must prove that the registry operator’s affirmative conduct:

(a)

shows a ‘substantial pattern or practice’ of selling infringing domain names; and

(b)

exhibits a ‘bad faith intent’ to profit from registrations within the gTLD that are identical or confusingly similar to the complainant’s mark (and which satisfy the criteria applicable to first level gTLD complaints).

As the PDDRP explains, it is insufficient that the registry operator has actual or constructive knowledge of infringing registrations within the gTLD, or has failed to monitor registrations. Similarly, a registry operator will not be liable under the policy simply because of ordinary registrations by unaffiliated registrants for the usual registration fee. Conversely, if the operator ‘actively and systematically’ encourages registrants to register trade marks as domain names, or reserves those domain names for its own use or benefit, that may amount to a pattern of bad faith registrations under the policy.

7.227  Available remedies. The remedies under the PDDRP are different to the UDRP, since domain name registrants are not party to complaints. Accordingly, it is not possible to transfer, cancel, or suspend registrations of third parties who are unconnected with the registry operator. Similarly, the expert panel may not order monetary remedies to be paid by the registry operator. However, the panel may ‘recommend’ a variety of graduated enforcement tools, which can be enforced by ICANN under the applicable registry agreement. For example, the panel may prohibit the registry from accepting new domain name registrations, or may require the registry to prevent future infringing registrations. However, this cannot extend to active monitoring of registrations that are not related to the complainant’s marks, or be contrary to the applicable registry agreement. In extreme cases, the panel can recommend termination of the registry agreement.217 Recommendations of the panel may be implemented by ICANN after a grace period to allow for appeals.

7.228  Overview. A related function is served by the Trademark Clearinghouse Rights Protection Mechanism, which is a policy governing the establishment of trade mark rights before the launch of new gTLDs.218 The Mechanism Requirements policy has contractual effect by being incorporated into the Registry Agreement between ICANN and the relevant registry operator. All registry operators of a gTLD must comply with the policy, whose object is to provide protection for ‘verified legal rights’.

7.229  Main obligations. In summary, the main obligations are:

(a)

to comply with certain testing procedures before launch of the new gTLD;

(b)

to operate a ‘sunrise period’ during which trade mark proprietors may apply to be verified by the registry and be given an opportunity to register or watch domain names corresponding to their marks before other registrants;

(c)

to notify registrants of the rights of trade mark proprietors in a domain name by means of claims notices, and to notify proprietors of applications for registration; and

(d)

to meet various general requirements related to matching rules, service levels, and support services.

7.230  Overview. Finally, the Uniform Rapid Suspension (‘URS’) policy is designed to offer more cost-effective enforcement tools for trade mark proprietors to deal with ‘clear-cut cases of infringement’ for domain names in new gTLDs.219 The URS is, in effect, a mechanism for summary determination of domain name disputes where the evidence is clearly and convincingly in the complainant’s favour.