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Argos Limited v Argos Systems Inc

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IP Disputes

“Argos”, High Court Trade Mark Infringement, Domain Names and Google AdSense

Digital assets are some of the most important that contemporary businesses hold. Whether it’s a domain name, social media profile or other asset which is part of a company’s digital footprint - all have become lynchpins to modern business activity. What’s more, as they are digital assets, they transcend borders and quickly have an international footprint. The law surrounding the protection of brands online is highly complex.

Argos Limited v Argos Systems Inc.

 

Prior to the “digital age”, retailers would outbid one another for prestigious units on the High Street; those with the largest stores in the location with the greatest footfall usually succeeded. These days, customers prefer to purchase online rather than in-store. At present, the key digital “real estate” are domain names.

In around 2008, recognising the changing times, Argos Limited (“Argos UK”), one of the largest retailers on the UK High Street, poured huge investments into its online sales platform argos.co.uk; as they had identified this critical shift in retail were going digital in a big way. However, Argos UK did not own the domain name at argos.com, it was owned by a US-based software company, Argos Systems Inc (“Argos US”). This was a problem for Argos UK, as .com domain names usually attracted more footfall than a ".co.uk" domain names and, more importantly, UK customers often typed "argos.com" into the URL assuming that it would take them to Argos UK’s website. 

Most businesses who want to acquire any asset seek to negotiate with the owner to agree on a purchase price. Instead, Argos UK decided to use the “carrot and stick” approach and pressure Argos US into favourable negotiations by dragging them into High Court proceedings in the UK on the basis of trade mark infringement and passing off, with the ultimate remedy sought being the transfer of the argos.com domain name to Argos UK.  

During the cross-examination at trial, it became clear that one of Argos UK’s main concerns was that consumers, who were looking for Argos UK’s website by mistakenly believing that it would be at argos.com, would then see Google AdSense adverts for Argos UK’s competitors, such as John Lewis.

With the help of Virtuoso Legal, Argos US was able to successfully defend against Argos UK’s “carrot and stick” approach, at the High Court, the Court of Appeal and Supreme Court.

 

Trade Mark Infringement & Passing Off

The key issue for Argos UK was that it was using its European trade marks (for the brand “ARGOS”) to bring an action against Argos US, who only operated in the United States and had no customers in Europe. As such, Argos UK had to overcome the hurdle of proving that Argos US’s actions amounted to “targeting” customers in the UK. In short, the High Court rejected Argos UK’s arguments and found that Argos US had not targeted European customers, although this element was later overturned at the Court of Appeal.

Although Argos UK had claimed that Argos US was offering “advertising services”, this claim was rejected. As such, Argos UK was required to prove that Argos US’s use of the identical brand for dissimilar services was “without due cause” and took “unfair advantage of, or is detrimental to, the distinctive character or the repute of Argos UK’s trade mark”. Ultimately, both the High Court and Court of Appeal refused Argos UK’s claims in this respect, mainly because they considered the inclusion of Google AdSense to be a legitimate commercial activity of any website owner.

Virtuoso Legal also successfully argued that Argos US benefited from defences including the “Own Name” defence and a defence by way of Argos UK’s consent by its agents signing up to the Google AdSense programme on its behalf.

Argos UK also argued that Argos US had, through its actions, committed the tort of “passing off”, relying upon the famous “One in a Million” case, i.e. that the registration of the argos.com domain name and subsequent inclusion of the Google AdSense programme amounted to a misrepresentation that would result in customers being confused as to who was behind the argos.com domain name. Ultimately, the judge rejected Argos UK’s claims in this respect because there was not at any material time any misrepresentation by Argos US.

Deputy Judge Spearman acknowledged that this was a special case as the “effect of a foreign trader’s use of Google advertising for purposes of the assessment of targeting” had not been determined and the issues it raised were “important and potentially far-reaching”.

Argos UK failed in all of their claims at the High Court. A full copy of the judgment is here. However, that did not stop them. Argos UK went on to appeal the decision to the Court of Appeal (see decision here) and Supreme Court, but failed in both attempts to overturn the decision.

 

An Ineffective & Expensive “Stick”

During the course of the proceedings, which took around 3 years, Argos UK failed in numerous interim applications in relation to their own deficient disclosure, resulting in payments of Argos US’s legal costs of around £40,000. Argos UK then lost at trial, meaning Argos UK were required to pay Argos US over £300,000 in legal costs. Argos UK’s further loses in the Court of Appeal and Supreme Court meant that they had to pay Argos US over £100,000 in further legal costs. This totals around £440,000, but does not include the legal costs Argos UK also paid their own lawyers, which was likely to be in excess of £1million. An awful lot of money spent by Argos UK, which failed to result in the transfer of the argos.com domain name.

 

Conclusion

In conclusion, the results were a series of thumping success for Argos US, who were represented by Virtuoso Legal. The decision is of “wide importance” as it sets a new precedent for online advertising and will certainly be seen with a sigh of relief from Google, as it further clarifies, legitimates and solidifies its Google AdSense programme.

 

Elizabeth Ward, Principal of Virtuoso Legal said:
"During the course of the proceedings, we successfully defeated Argos UK at two interim applications in relation to their disclosure, obtaining substantial costs awards in our client’s favour.  We then went on to defeat Argos UK at trial, with a further substantial costs award in our client’s favour.  In total, Argos UK had paid well in excess of £330,000 in costs to our client. Despite this, Argos UK sought to challenge the (in my view) the very reasoned decision of the trial judge and, thankfully, the Court of Appeal has now dismissed that appeal and we expect that Argos UK will be ordered to pay our client’s costs of the appeal. Overall, it is most unfortunate that Argos UK has pursued our client in this way in relation to adverts which were removed by our client many years ago. However, our client, who is a US company, must be given a great deal of credit for placing their faith in the justice of the UK courts.”

A word from the client

Pekka Moilanen, President of Argos US

“The decision confirms that my company was merely conducting its business legitimately. As a relatively small company based in the US, being dragged into the High Court in London by Argos UK was obviously very chilling, but the team at Virtuoso Legal guided us through the procedure throughout and during trial in London. We are very pleased with the result and look forward to focusing upon our business in the years to come.”

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