Comments to Borgarting Court of Appeal’s decision in the Bank Norwegian case
Following the Borgarting Court of Appeal’s verdict in case LB-2019-36567, a company may make use of its competitors’ “distinguishing marks” as paid search words in online advertising. However, such use must be in line with the standard of “Good business practice” in the Norwegian Marketing Control Act, which itself gives rise to a broad legal assessment of the competitive efforts specific to the case.
By Henrik Tessem Kolsaker
On 15 April 2021, the appellate court decided on the extent to which the online advertising of the defendant, Bank Norwegian, could use the “distinguishing marks” of the claimants, Ikano Bank, Brabank, and Komplett Bank.
The case revolved around Bank Norwegian’s paid use of the words “Ikano”, “Ikano Bank”, “Monobank”, “BRAbank”, and “Komplett Bank”, in the Google Ads service.
Borgarting Court of Appeal's decision
Confirming the verdict of the district court, the appellate court acquitted Bank Norwegian.
Turning to the facts of the case, the appellate court remarked how a company website is exclusive intellectual property. The court, however, provided no presumption that such exclusivity similarly extends to online advertising.
Of interest to consumers and businesses, the appellate court explained the elements that influence Google search results. Although not applicable to the case, the appellate court laid out that Google’s automated mechanisms may give search results consisting of other entities than just those that relate to the entered search words. This is the case where the user performs a search with generic words such as “Bank”.
Relevant to the case, and departing from such automated mechanisms, was Bank Norwegian’s use of the Google Ads service (formerly Google AdWords). Although Bank Norwegian used the aforementioned search words, the claimants' trademarks were not visible in the search results.
The appellate court held that the service enables selection of search words that may trigger an advertisement to appear. Acting as a third party intervener for Bank Norwegian, Google LLC explained that this practice has been in effect since 2010 in Norway, and globally from 2013. The specific details in the criteria (algorithms) which decide the search results are, however, unknown to all except Google LLC.
Explaining a topic of interest for both consumers and businesses, the appellate court made a general remark of the Google Ads feature called “negative listing”. Opposite to selecting search words to connect to an advertisement, any “negative listed” words will prevent undesirable search words to trigger the advertisement to appear. In essence, when a Google user searches for the phrase “plane crash”, an airplane company can prevent its advertisement from appearing if it has “negative listed” the search phrase and the company name.
Turning to the law of the case, the appellate court held that cases concerning “good business practice” extend only to assessing whether a competitive effort meets a certain standard of acceptability. Thus, the standard may not be construed as holding Norwegian commercial enterprises to such standards as “best practice”.
Conforming to the legal reasoning of the district court, the appellate court showed deference to the ruling of the Supreme Court of Norway in the Iskrem case.
The Iskrem court remarked that specialised statutes shall have priority over general statutes (known as lex specialis). From this, the Iskrem court held that the “good business practice” clause generally serves as a supplement to any such specialised statutes in the Marketing Control Act or contiguous acts. The Supreme Court noted, however, that the clause may be applied independently of such specialised statutes.
Drawing from the Supreme Court’s reasoning, the appellate court laid out the basis upon which its assessment would follow; establishing the degree to which the “good business practice” in the Marketing Control Act sets limits exceeding those set forth in more specialised statutes.
Providing legal context to this starting point, the appellate court held that the Iskrem case gave precedent for assessing the “good business practice” clause in light of general trademark law.
Having established the grounds for contextually observing trademark law, the appellate court’s assessment further expounded on relevant legal sources. Citing the law commentary on the Norwegian Trademark Act, authored by Schjødt’s Head of Intellectual Property Rights department, Halvor Manshaus, the appellate court found EU trademark law to be relevant for the case.
Of interest to Norwegian and European legal practitioners, is the extent to which the appellate court lends its legal reasoning from that of EU trademark case law. As such, the case displays how EU law may influence upon national courts’ application of internal law.
Referencing the European Court of Justice's (ECJ) verdict in the Interflora case, the appellate court introduced the ECJ case law regarding advertisers’ use of their competitors' “distinctive characters”. The ECJ has held that such use may amount to what it labels “unfair advantage taken of the distinctive character or the repute of the trade mark (free-riding)”.
Building its reasoning on that of the ECJ, the appellate court premised its assessment of “unfair advantage” upon the elements proposed in the Interflora case. In the Interflora case, the ECJ held that the advertiser may have gained an “unfair advantage” where the advertiser (i) is offering a mere imitation of the goods or services of the proprietor of that trade mark, or (ii) is causing dilution or tarnishment of the competitor’s product, or (iii) adversely affects the functions of the trade mark concerned.
Observing such criteria in principle, the appellate court distilled its further assessment into an evaluation of Bank Norwegian’s advertisement and the product offered through it.
Having laid out the legal grounds for its assessment, the appellate court reverted to the starting point of its assessment; namely whether the “good business practice” clause sets limits exceeding that of specialised clauses in the Marketing Act or similar contiguous law.
Finding that European trademark law had found such advertising to be indicative of good competition, the appellate court refrained from giving the “good business practice” clause a wider range of legal effect than that of the case law finding such advertising to be lawful.
Pursuing a broad legal assessment, the appellate court further supported its conclusion by evaluating whether Bank Norwegian’s advertisement may cause a risk of confusion for a “reasonable person” using the internet.
Holding such advertisement mechanisms to be known among consumers, the appellate court narrowed down the perceived risk of confusion for consumers. Observing that such risk may occur in all cases of paid search word advertising, the appellate court found it “natural” that search results become commingled with organic and sponsored results. Building on this, the appellate court held such commingling to be prevalent in consumer markets such as the aviation industry; consisting of standardised products, and a low number of companies providing such services.
For consumers, businesses, and legal practitioners alike, the Borgarting Court of Appeal’s decision in the Bank Norwegian case provides clarity as to the content and boundaries of online advertising.
The online advertising of the case may be likened to a concept well known from real world advertising; namely “shelfing”, in grocery stores. As consumers’ eyes are presumptuously drawn towards groceries at shelves in eye-height, providers of similar products may compete in trying to gain such shelf spots.
An almost similar concept can be found in the digital world; paid search words or “sponsored results”.
The difference from the real world is that company A may influence search engines to show its product first, in cases where the consumer was searching for a product from company B.
Played out in the real world, such practice may be likened to asking the shop clerk for company B’s product. However, before taking you to there, the shop clerk would introduce you to company A’s product.
Use of competitors’ distinguishing marks as paid search words may be lawful, save for cases of mere imitation of the competitor, or acts of depreciating advertising.
Drawing the line between lawful and unlawful use of competitor’s distinguishing marks relies on a broad assessment of factors of law and specific advertisement design.
The disparity in European case law concerning use of competitors’ distinguishing marks remains an unclear point for Norwegian and European courts alike. By placing considerable emphasis on the European case law that supported its view, the Borgarting Court of Appeals missed the chance to evaluate European case law contradicting its view.
While showing deference to the Supreme Court’s legal principle on the independent status of the Marketing Act’s “good business practice” clause, the appellate court did not discuss how its evocation of “systematic consistency” with EU law might impinge upon the independence of the Norwegian legislature. The case in point accentuates by the fact that Directive 89/104/EEC of 21 December 1988 (Trademark Directive) is not formally binding for Norway.