In the first of two reports on the recent outcome of O2’s case against Hutchison 3G over TV advertising for 3’s ‘ThreePay’ pay as you go service, we focus on findings of the Judge which, subject to any appeal, will have a high impact on how future courts approach knocking copy litigation.
Topic: Comparative Advertising
Who: 02 and 3G UK3
Where: The Chancery Division of the High Court, London
When: March 2006
Mr Justice Lewison pronounced judgement in the case of O2 Holdings Limited and another versus Hutchison 3G UK Limited.
The story began in the summer of 2004 when mobile telecoms provider 3 ran a series of comparative advertisements comparing its "ThreePay" pay as you go package with those of its competitors. One of the ads compared the 3 package with a package offered by O2 ("TV ad").
As the Judge states at the start of his judgement, the case is about bubbles.
How the offending ad unfolds
The 20 second TV ad starts with a mass of white bubbles appearing in a circular shape on a black screen. The bubbles then start to expand in size and a male voice says "On O2 pay as you go the first three minutes peak call rate each day could cost you 75p".
As the bubbles expand, a soundtrack of bubbling noises begins and a caption appears mentioning detailed aspects of the O2 tariff. Eight seconds in, the voiceover ends and an upbeat jingle fades in, lasting until the end of the ad. A large circular bubble then sweeps across the screen, seen against a mass of smaller bubbles.
The screen then clears quickly from the centre and 9.7 seconds in, a stylised and animated number "3" appears on the screen (the first reference to 3), entering stage right with a fizzing tail. A brighter female voiceover then starts saying "or with ThreePay, that exact same call could cost you 15p". The stylised number "3" continues to move across the screen changing colour from red to blue to green and rotating and it continues to move and change colour until the end of the ad.
Soon after the campaign broke, O2 sought an immediate injunction banning further broadcasts, but the court refused. Later the court also refused an application by O2 to have the case referred to the European Court of Justice.
Various claims dropped
By the full hearing before Mr Justice Lewison in March 2006, O2 had admitted that the 3 ad was not misleading in any way. It also dropped a previous passing off claim as well as a claim that newspaper and radio advertisements by 3 based on the TV ad also infringed its trademarks.
Also abandoned by O2 was a claim that the ad infringed its registrations of the mark "O2".
So by the time of the trial the only issue before the Judge was whether the TV ad infringed one or more of four trademark registrations in the name of O2. All of the registrations in question were in respect of telecommunications apparatus (class 9) and telecommunications services (class 38) and all were representations of bubbles in oxygenated water. There was a countersuit by 3 that all of these registrations were invalid.
The court dealt with numerous issues and arguments put forward by the parties. The Judgement helpfully goes through these one by one, finding for or against as the case may be. It then applies these conclusions to the TV ad and pronounces on whether the parties' claims succeed.
In this report we will focus on the first stage of this process and the various findings on points directly related to comparative advertising and trade mark law. In a subsequent report we will focus on how the conclusions on these points were applied to the TV ad and gave rise to the judgement in favour of 3.
Submission by 3: Since it is possible to register moving images as trade marks and 02 failed to do so, 02 cannot now use static registrations of images as the basis of a claim that moving images infringe those marks.
Judge's finding: Argument rejected. Depending on the circumstances it is quite possible for a moving image to infringe a static device mark.
Submission by 3: A registered trade mark cannot be infringed by the use of a "sign" ("sign" is used in trade mark legislation to describe the material used by the defendant that allegedly infringes the claimant's registered trade mark) unless there is an attempt to attribute the origin of the relevant goods or services to someone other than the owner of the registered trade mark. As the TV ad expressly refers to O2 at the same time as the bubbles are appearing and therefore correctly attributes to O2 the service referred to during that sequence, there can therefore be no infringement.
Judge's finding: Argument rejected. Any use of a sign in a context that makes a statement about the origin of goods or services can be an infringement if the other requirements for trade mark infringement are satisfied.
Submission by O2: In determining whether the bubble "signs" used by 3 in the TV ad are (1) "similar" to the O2 bubbles registrations and (2) give rise to "a likelihood of confusion on the part of the public" including a likelihood of association, the court must focus purely on the bubbles in the O2 registrations and the bubbles in the 3 TV ad. It must not be distracted by the extraneous material in the TV ad such as the voiceover, the sequence after the bubbles which features the number 3 and the music.
Judge's finding: Argument rejected. It is highly artificial to compare the mark and the sign through the eyes of the average consumer without considering what impact the overall use of the sign in context would have upon him. The court "should look at the advertisement as an integrated audio-visual presentation".
Submission by 3: There cannot be a likelihood of confusion or association if it is quite clear in the TV ad that the bubbles signs are referring to the services of O2.<2/p>
Judge's finding: Argument rejected. There can still be a likelihood of confusion including a likelihood of association if the allegedly infringing "sign" leads the average consumer to believe that the services identified by the sign come from the same undertaking as the owner of the equivalent registered trade mark.
Submission by 3: The courts should be reluctant to import into UK law American concepts such as those of "dilution" or "tarnishment" when considering whether the use of a registered trade mark is "detrimental" to its distinctive character or repute in the context of an argument that a sign infringes under s. 10 (3) of the Trade Marks Act 1994.
Judge's finding: Argument rejected. These general concepts must be taken to be part of our law, although one must be cautious not to take such general statements out of context.
Detriment would certainly apply for instance, to cite a classic case, to the potential effect on a mark registered for gin by allowing the same mark to be registered for cleaning fluid. This is not to say that "detriment" could not possibly occur in comparative advertising, but this is an altogether different scenario to the gin/cleaning fluid case and in comparative advertising "it is to be expected that in robust competition, competitors will not be over sensitive to the competitor's marks".
Submission by 3: To be non-infringing under trade marks legislation, comparative advertising does not necessarily have to comply with the Comparative Advertising Directive (97/55/EC) (implemented in the UK by the Control of Misleading Advertisements Regulations 1988 as amended by the Control of Misleading Advertisements (Amendment) Regulations 2000).
Judge's finding: Argument rejected. The Comparative Advertising Directive was intended to carry out an exhaustive harmonisation of the conditions under which comparative advertising in the EU might be lawful. So much is stated by the European Court of Justice in the 2003 case of Pippig Augenoptik GmbH v Hartlauer. This is also supported by Recital 15 of the Comparative Advertising Directive itself which states that in cases where it complies with the conditions of the Comparative Advertising Directive, comparative advertising does not infringe the rights of a trade mark proprietor.
Submission by 02: In order to comply with the Comparative Advertising Directive, an advertiser can only use an exact duplicate of his competitor's registered trade mark. He is not entitled to use a sign that is merely similar to it.
Judge's finding: Argument rejected. An advertiser may comply with the Comparative Advertising Directive even though he uses a sign or other distinguishing mark of his competitor which is not identical to a registered trade mark.
Submission by 02: Recital 14 to the Comparative Advertising Directive states:
"Whereas it may, however, be indispensable, in order to make comparative advertising effective, to identify the goods or services of the competitor, making reference to a trade mark or trade name of which the latter is the proprietor".
The effect of this is that the comparative advertiser's use of his competitor's branding must be indispensable or "essential" in order to make the comparison. Otherwise the comparative advertising will breach the Comparative Advertising Directive.
Judge's finding: Argument rejected. Under the ECJ Judgement in Pippig (see above), the "indispensability" relates to making the comparative advertising effective and this requirement must also be interpreted in a sense most favourable to comparative advertising. What is indispensable to make comparative advertising effective will depend on the medium in which the ad appears.
Submission by 3: All questions of infringement of trade marks in comparative advertising must pay due regard to freedom of expression as enshrined in the European Convention on Human Rights.
Judge's finding: Argument rejected. An argument based on freedom of expression, as applied to a field as complex and fluctuating as advertising, does not add anything of significance to the statement of the court in Pippig that the requirements of the Directive must be interpreted in the sense most favourable to comparative advertising.
Submission by 3: It is possible to comply with Section 10(6) of the Trade marks Act (requiring comparative advertising to be in accordance with honest commercial practices etc) without necessarily complying with the Comparative Advertising Directive.
Judge's finding: Argument rejected. The defence under Section 10(6) in the case of comparative advertising is the same defence as the defence under the Comparative Advertising Directive itself. Section 10(6) must be interpreted as permitting comparative advertising so long as it is conducted in accordance with honest practices, as those practices have been defined for the purposes of the Comparative Advertising Directive.
Why this matters:
It is not yet clear whether O2 will be appealing any of these findings or the final verdict. Whatever their decision, however, and whatever the verdict on any ensuing appeal, there can be no doubt that, although not binding authority since it does not fall from an appeal court, this judgement is essential reading material by any comparative advertiser planning to refer to his competitors.
The findings also put centre stage the Comparative Advertising Directive, a hitherto largely ignored measure so far as the UK courts are concerned, although we happen to believe that this is not the end of the debate as to whether Section 10(6) was effectively eclipsed by the Comparative Advertising Directive.