O2 has lost its trade mark claim against Hutchison 3G concerning the use of bubble imagery in comparative advertising.
After the use of competitors’ trade marks in comparative advertising was liberalised across Europe in 1994 there were a series of claims in which the limits of the new regime were tested by trade mark owners. Most of these cases turned on the accuracy or otherwise of price comparisons. To avoid infringing a rival’s registered trade mark an advertiser had to show, under Section 10(6) of the Trade Marks Act 1994, that its use of the mark was “in accordance with honest practices in industrial or commercial matters.” Judges adopted a liberal approach: the public expected a certain amount of hyperbole in advertising so you could use your competitor’s trade mark so long as your ad wasn’t “significantly misleading”.
O2’s claim against H3G was unusual because its complaints (at least by the time the case came to trial) related solely to the manner in which H3G had used its trade marked bubble imagery. This was a case not about claims but about branding.
O2, now owned by Telefonica, started life as BT Cellnet. Having demerged from BT in 2001 it traded briefly as mmO2 before launching as O2 in 2002. O2 invested heavily in advertising, spending £320 million in the UK alone between May 2002 and August 2004. There were also high profile sponsorship deals with the likes of Arsenal FC, the England Rugby team and Big Brother.
Much of O2’s advertising has used images of bubbles and eleven depictions of bubbles have been registered as trade marks, four of which were involved in this case.
The Superbrand organisation awarded O2 “Business Superbrand” and “Cool Brand” status, commenting that “the visually striking oxygen bubbles in blue water image … has become its trademark symbol”. A judges’ citation in the IPA Effectiveness Awards in November 2004 said that O2’s “level of cut-through has undoubtedly been driven by the consistent and instantly recognisable use of blue and bubbles across all O2 activity.”
The bubbles were therefore a jealously guarded asset. O2’s marketing department would like to have suppressed the use of bubbles in marketing by almost anyone other than Aero (the chocolate bar) and a few other product categories such as fizzy drinks. Threats had been made or complaints issued by O2 in respect of the use of bubbles by advertisers as varied as Nationwide, Oral B and Davidoff.
H3G, one of the first 3G operators, operates under the brand name “3”. In March 2004 it launched its own pre-pay service under the name “ThreePay”. There were four serious players in the pay-as-you-go market at the time: Vodafone, Orange, O2 and T-Mobile. H3G needed to make a splash and its agency WCRS came up with a “robust but fair” campaign idea involving price comparisons between 3 and the major existing players. Included in this campaign was a 20 second TV commercial featuring animated bubbles (to symbolise O2), an animated “3” and a voiceover comparing O2’s pay-as-you-go pricing unfavourably with 3’s.
The campaign (including ads targeting other operators such as Orange) was highly successful, winning a Marketing Society award in the New Brand category. H3G’s market share rose during 2004 from 5 to 25 per cent and by December 2004 it had 2.5 million subscribers. H3G’s use of its competitors’ trade marks, including not only O2’s bubbles but also a spinning orange square (Orange), a pink triangle (T-Mobile) and abstract shapes resembling inverted commas (Vodafone), had paid off.
In August 2004 O2 applied to the court for an interim injunction. Mr Justice Pumfrey rejected O2’s claims regarding the text of the commercial. He considered H3G’s use of bubbles to be “gratuitous”, but declined to grant an injunction pending trial as the disruption to H3G’s campaign would have been disproportionate to the damage their use of bubbles was doing to O2. In December 2004 an application by O2 to refer various issues to the European Court of Justice was also refused. The case proceeded to a five day trial in the High Court. Judgment confirming the validity of O2’s trade mark registrations but dismissing its infringement claims was handed down by Mr Justice Lewison on 23 March 2006.
To simplify a detailed judgment extending to 52 pages H3G’s defence succeeded because the advertisement complied with the Comparative Advertising Directive checklist (set out in full at the end of this bulletin). The main points of interest were as follows:
- The defence to a trade mark infringement claim for comparative advertising under Section 10(6) of the Trade Marks Act is the same as the defence under the Comparative Advertising Directive, ie the checklist.
- A trade mark can be infringed even if it is used by someone else, as in this case, in relation to the genuine goods or services in respect of which it is registered. (As another example, a trade mark owner can complain if someone lawfully selling his goods advertises them in an inappropriate manner.)
- Advertisements can use imagery which is similar but not identical to a competitor’s registered trade mark. The judge recognised that a TV commercial needs to have visual impact in order to be effective and accepted that, within the limits of the Comparative Advertising Directive, advertisers must be free to choose what visual imagery to present. Furthermore, in line with previous decisions, “a certain degree of robustness” is to be expected in comparative advertising – particularly where a new entrant to a market takes on a powerful established incumbent.
Comparative advertising is an aggressive form of marketing. To include a competitor’s trade marked visual imagery may well, as in this case, be perceived by that competitor as “brand sabotage”. Such advertising should be carefully vetted to ensure that it complies with all legal requirements. There is no comparative advertising defence, for example, to a copyright infringement claim. But this case shows that the legal environment for comparative advertising remains basically friendly.
THE COMPARATIVE ADVERTISING DIRECTIVE “CHECKLIST”
The conditions a comparative advertisement must satisfy in order to be lawful:
- it is not misleading [an advertisement is misleading if it is deceptive and because of its deceptive nature it is likely to affect people’s economic behaviour or injure a competitor]
- it compares goods or services meeting the same needs or intended for the same purpose
- it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price
- it does not create confusion in the market place between the advertiser and a competitor or between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor
- it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of a competitor
- for products with designation of origin [ie specific products referred to in a 1992 EEC Regulation], it relates in each case to products with the same designation
- it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products
- it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name