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UNITARY PATENT

In 2012 Member States and the European Parliament agreed on the "patent package" - a legislative initiative consisting of two...

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Combating "Bait and Switch" Tactics by Online Retailers

Online retailers like Amazon stock nearly everything under the sun. If they do not stock it, then they offer alternatives. Where retailers use a brand owner’s registered trademark to lead customers to competing goods, though, those activities may amount to infringement. The High Court’s recent decision in Cosmetic Warriors Ltd. & Lush Ltd. v Amazon.co.uk Ltd. &Anor. [2014] EWHC 181 (Ch) shows what brand owners can do to combat such bait and switch strategies by Internet sellers.


​Law of the Jungle

A core element of Amazon’s commercial success was what landed it in court in Lush.

Lush, a cosmetics company and owner of the registered trademark LUSH, did not sell its products through Amazon.co.uk, citing incompatibility of the company’s business ethos with the brand image of LUSH. Amazon sought to pull in LUSH customers anyway by bidding on LUSH as a keyword, which resulted in the display of ads for Amazon.co.uk, some of which referred to LUSH, but none of which mentioned that LUSH products were not available on the Amazon.co.uk site. In addition, visitors to the Amazon.co.uk site could search for LUSH products on the website search engine and were offered alternative suggested search terms including LUSH (such as “Lush Bath Bomb”), based on previous customer searches. Any such searches displayed results for competing products, again with no express indication that LUSH products could not be purchased on the site.

Lush sued for registered trademark infringement, claiming that these activities damaged the ability of the LUSH mark to guarantee the origin of authentic LUSH products, as well as undermining the value of the LUSH mark in advertising and Lush’s investment in promoting it. Lush referred to various instances of actual confusion that it said arose from Amazon’s activities.

Amazon, Explored

The Court reviewed Amazon’s conduct step by step and concluded that it was indeed infringing Lush’s trademark rights.

The use of LUSH as a keyword to prompt the display of Amazon.co.uk ads for cosmetics when Internet users searched for LUSH was use of the LUSH mark in relation to Lush’s registered goods. To succeed at that point, Lush needed only to show that the use was likely to damage a function of the trademark. Where the ads prompted by the search included the word LUSH, the Court had no hesitation in finding that the ability of the LUSH mark to denote the claimants’ goods was damaged, since Internet users would be drawn to the Amazon.co.uk website under the false impression that LUSH products could be purchased there.

Amazon’s position was no better where the ads did not display the word LUSH, since the ads were prompted by a search for LUSH and Internet users could not tell from the content of the ad that LUSH products could not be bought on Amazon’s site.

Amazon’s real business model centred on the search engine on its website, though, and its rearguard battle to defend this model failed. The Court held that the provision of alternative suggested search terms including LUSH and various cosmetic product descriptors (such as “bath bomb” or “cosmetics”) to users typing LUSH into the website search engine was use of the LUSH trademark in relation to cosmetics. So was the display of LUSH on other parts of the screen to describe the search results or to list LUSH as a brand that could be searched. The displayed results contained no LUSH products, nor was there any indication that LUSH products would not be found on the site.

While Internet users might eventually conclude that no LUSH products were available if they delved more deeply into the results, the offer of alternative search terms including the word LUSH and the use of LUSH to describe the search results and to identify LUSH as a brand that could be searched was, in the Court’s view, misleading. It was liable to lead to the confusion of Internet users for the benefit of Amazon, who hoped to lead shoppers to purchase competing products instead.

In doing so, Amazon compromised the ability of the LUSH mark to function as a trademark and its value as an advertising asset in which Lush had invested heavily. The Court found that Amazon’s activities infringed the claimants’ trademark rights.

Comment

There has always been a tension between brand owners and real-world retailers who stock competing third-party or own-brand products. In cyberspace, though, the lines between acceptable and unacceptable advertising strategies have become blurred in new ways, and the power has typically been weighted strongly towards online retailers.

The use of keywords and suggested search terms to lead unwitting consumers to competing products is highly lucrative for retailers, who may not stock a particular brand but can still profit if a consumer buys an alternative. The decision in Lush, however, demonstrates that there are lines that retailers should not cross when using one business’ brands to lead consumers to others.

The outcome of this case offers lessons on both sides of the fence. For Internet retailers like Amazon, it is now apparent that using a brand that is not stocked either as a keyword, website search term or brand name capable of being searched on a site can lead to a finding of infringement if the branded products are not offered and there is no clear indication that they are not there. Leaving it to the shopper to come to that realisation on his or her own, after sifting through results for competing products, is not enough. By that time, the damage to the brand owner may already have been done.

Cyber-retailers may be able to continue to use unstocked third-party brands as keywords and suggested search terms, but only where they make it immediately clear that the goods are not in fact offered and that alternatives will be displayed instead. Some shoppers will no doubt take their searches and their business elsewhere, though, and the potential commercial impact of this is no doubt why Amazon fought this case. Online retailers may eventually find it more palatable not to refer to unstocked third-party brands at all than to flag up online the limitations of their stock. Even that, though, risks undermining a major draw for online shoppers. Given the sums involved, it is easy to imagine that this dispute will run and run.

For brand owners, the Lush decision signals an opportunity to credibly challenge the use of brands by online retailers to lead consumers to alternative products. Where this is done without a clear indication that the brand searched is not itself stocked, brand owners may be in a strong position to demand that an online retailer cease using their brands as keywords and suggested search terms, and thereby stop the re-direction of shoppers to sites that stock only competing products.

Brand owners should note, however, that this decision was made on the basis of registered trademark rights. Had the rights not been registered, the court would have needed to be persuaded that the use of LUSH as a keyword or suggested search term leading to the display of competing products was a misrepresentation that those other goods were LUSH products or related to the LUSH brand. Given that the products displayed were clearly different, it is far from certain that the court would have reached that conclusion. Registration of brand names in use has always been a sound defensive strategy, but its value for businesses whose products may be offered online is now even clearer.

This decision is unlikely to be the last word on Amazon’s third-party brand use. Online retailers in general are likely to resist the implications of the court’s findings, which shift the balance of power toward brand owners in the online retail space. For now, though, brand owners should review how cyber-retailers are using their brands online, where that use is misleading, the decision in Lush shows that now may be the time to act.