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Bulletins Story:
TESCO DEFEATS NOVEL DOMAIN NAME SCHEME: TESCO STORES LTD v
ELOGICOM LTD
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Date:
28.03.2006
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Tesco contracted with an internet firm to manage third party
websites (affiliates) in order to increase their internet sales.
Under this system affiliates earn commission based on sales on
Tesco's websites by the traffic driven there by the affiliate.
The defendant company, Elogicom Ltd, contracted to be an
affiliate and, as part of the process, registered with the
management company two websites: www.Avon4me.co.uk and
www.Avonlady.co.uk.
Tesco checked and approved both Elogicom and its two websites.
For some time all seemed to be going smoothly. Tesco was paying
Elogicom approximately £75 every month in commission until
suddenly, in May 2005, this commission jumped drastically to nearly
£27,000. Something was clearly amiss. Tesco reported their concerns
to the management company whose investigations revealed that
Elogicom was exploiting a loophole in their affiliate
system.
Unbeknownst to Tesco, Elogicom had registered a number of other
domain names linked with its Avon4me and Avonlady websites
which remained invisible to Tesco. Of particular concern to Tesco,
and the reason this became a trade mark dispute, is that these new
domain names incorporated the word "tesco" including www.tesco2u.com, www.tescodiet.com and
www.tescodiet.co.uk.
Elogicom directed the traffic received by these tesco
domain names not to Elogicom's own avon websites but
instead straight to Tesco's legitimate website. However, as all the
tesco domain names were registered to the affiliate
programme, Elogicom received the related commission.
Tesco's lawyers got involved once the scheme had been identified.
Attempts to settle failed and proceedings were issued for an order
requiring Elogicom and/or its managing director and shareholder Mr
Robert Ray to hand over the tesco domain names and to pay
damages. Elogicom counterclaimed for the unpaid £27,000 commission.
Earlier this month the court rejected Elogicom and Mr Ray's
defences and granted summary judgment in favour of Tesco.
The Issues
The novel aspect of this action was whether the defendants' use
of the tesco domain names amounted to use in the
course of trade which is a legal requirement if the court is
to find trade mark infringements. The defendants were not, after
all, using these domain names to direct traffic to their own
websites nor were they using them to sell their own goods or
services.
The defendants argued that as they were affiliates, they had
Tesco's consent. Whilst superficially appealing, the judge, who
recognised that the defendants honestly believed they were acting
lawfully, saw their activities for what they were describing them
as "fishing" for persons browsing the internet who might be
searching for goods or services provided by Tesco.
The judge went further. He held that: "the use of internet
domain names is itself a service offered to the public" and
"allowing speedy access to ... [a] website is itself a
"service" in the form of provision of "assistance" relating to
viewing and purchasing of goods on [the internet]".
The judge found that Elogicom and Mr Ray were taking unfair
advantage of the Tesco brand reflected in its registered trade
marks with the object of earning commission in the process.
He rejected the defence that they were merely engaged in a form of
comparative advertising by enabling individuals to have direct
access to Tesco's own website because he found that "trading
without Tesco's consent on Tesco's own goodwill and by reference to
Tesco's own trade marks in order to generate business for itself,
and commission payments to it from Tesco" was not an honest
practice (a legal requirement for comparative advertising).
Conclusions
This interesting case gives rise to the following thoughts:
1. Unauthorised use of a trade mark within a domain name can
amount to a service offered to the public and therefore meets the
use in the course of trade requirements for trade mark
infringement.
2. Unauthorised fishing for "type-in" internet traffic with a
view to generating income (whether commission or not) also amounts
to use in the course of trade.
3. The otherwise efficient domain name dispute resolution
services offered by various bodies including WIPO and Nominet are
not always appropriate. This case was about more than just the
transfer of the tesco domain names, a remedy available in the
non-judicial dispute resolution systems. Importantly, Tesco also
required injunctive relief, damages for trade mark infringement and
for passing off and an order that its legal costs be paid: none of
which is available in the dispute resolution systems.
4. This case also highlights the importance of the sensible and, as
far was possible, consensual approach by Tesco. Their lawyers
allowed the defendants a decent period to respond to their initial
demands and then encouraged pre-action settlement going so far as
to offer to accept that the defendants transfer all of the tesco
domain names on a drop hands basis with Tesco offering to pay the
registration costs of £170. Although not clear from the judgment it
is likely that the defendants' failure to agree to this sensible
proposal will cost them heavily in costs.
Tom Cowling
Advertising & Marketing / Digital Media
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