Advertising and infringement: a comparative global overview

To provide a comparative overview of the permissable use of third-party trademarks in advertising, lawyers from regional DLA Piper offices (and partner firms) were asked to answer the following two questions:

• When is use of a third party’s mark in advertising fair use and at what point does it become infringing?
• What restrictions are there in advertising law that will affect brand positioning?

While there is no general fair-use defence in Australia, a mark must be used as a trademark in order to infringe another mark. Accordingly, use of registered trademarks as genuinely descriptive terms (eg, use of ‘scotch tape’ as a descriptive term) or for the purposes of comparative advertising (ie, advertising that makes price or other comparisons to a named alternative brand) is not infringing. However, comparative advertising must still be accurate and not contain misleading or deceptive representations that contravene the Australian Consumer Law. The High Court recently determined that Google did not act in a misleading or deceptive manner by allowing registered trademarks to be purchased by competitors for use as AdWords – it was merely acting as a conduit and did not endorse or approve such conduct. Accordingly, Google has significantly relaxed its policy in Australia and will not restrict or investigate the use of third-party marks as AdWords. However, this is very much a developing area of the law and rights holders still have recourse to pursue complaints against direct infringers via other avenues.

Elsewhere, following recent changes, all tobacco products offered for sale in Australia must be in plain packaging, with health warnings covering at least 90% of the back. Point-of-sale advertising of tobacco products to consumers online is allowed only in certain limited circumstances. Restrictions include a requirement that all products be displayed in the same standardised layout and font, with black text on a white background, so that no product is displayed more prominently than another. Whether these reforms will have a ripple effect in other heavily regulated industries, such as the fast-food and alcohol industries, is not yet known, but the situation is being closely monitored by brand owners.

Mel Upton is a partner at DLA Piper

The use of a third-party’s trademark without the prior consent of its owner is considered legal if certain conditions are fulfilled. Despite having no specific law prohibiting the use of a competitor’s mark in, for instance, a comparative advertising campaign, Brazil adheres to a code of self-regulation that provides guidance on the use of third-party brands in advertising.

Although the code has no binding legal force, it provides that comparative advertising is acceptable as long as there is no offence or attempt to mislead consumers over a competitor’s brand.

Products that are subject to comparative advertising must refer to the same class of product, as well as the same features or price.

While Brazilian law has no specific regulations on advertising in general, it does set out some limitations with regard to particular sectors. For instance, there is a ban on tobacco advertising, although retailers can display products in stores. However, this comes with the caveat that the product cannot be associated with sporting activities, sexual success, health or children or teenagers.

The tobacco industry is also obliged to display images and warning phrases on packaging and at the point of sale to alert consumers to the dangers of consuming tobacco products. There are also restraints on free distribution and prohibitions on tobacco brands sponsoring cultural or sporting events. A bill proposing plain packaging for tobacco products has been proposed and its discussion is pending in the Senate.

With regard to alcoholic beverages, those classed as ‘strong’ – such as whiskey, cachaça and vodka – can be advertised only between 9:00pm and 6:00am, and only during television programmes that are suitable for an adult audience. As with tobacco products, there can be no association between alcoholic beverages and sports, health activities or sexual success. Neither beer nor wine is subject to such restrictions.

Diego Mattos is a senior associate and Manoela Quintas Esteves an associate at Campos Mello Advogados

China has no national legislation specifying trademark fair use in advertising. In case law, ‘fair use’ refers to a necessary and honest indicative or communicative use of a third party’s mark to indicate the source or purpose of the user’s goods or services in good faith. Such indication should be true, honest, necessary and in good faith.

Unnecessary, dishonest or bad-faith indications – especially of a third party’s well-known mark – might constitute unfair competition, free riding on another’s goodwill or even trademark infringement. Examples from case law include a prominent portrait of a tote carrying the LV mark on a real estate billboard, which was ruled to be unfair competition, and the prominent use of the LENOVO mark on the signage, decoration, business cards and shipping lists of a computer repair and retail store, which was found to mislead consumers as to the store’s relationship with Lenovo and thus to infringe the LENOVO mark. Use of a third party’s mark in comparative advertising is not regarded as fair use, because China prohibits direct comparison with a third party’s goods or services in advertising.

Turning to restrictions that will affect brand positioning, the new Advertising Act – which came into effect on September 1 2015 – comprehensively bans tobacco advertising. Particular rules also govern advertising content and channels for certain goods and services, such as drugs, medical and therapeutic devices, healthcare food, alcohol, education and training, investment services, real estate, crop seeds and pesticides. In addition, ads for cosmetics, beauty services and certain online games are banned in media directed at children. The new law also requires online pop-up web ads to carry a prominent button, by which they can be closed in a single click.

Horace Lam is a partner at DLA Piper

A third party’s mark may be used in a number of situations. It may be used within comparative advertising if the comparison relates to comparable products and relevant features thereof, and does not lead to a risk of confusion between the advertiser and the third party, its products or its marks. Moreover, it may not take unfair advantage of the third party’s mark or denigrate the third party. A third party’s mark may also be used as an indication of the characteristics or properties of products, in particular their nature, quality, intended purpose, value, geographical origin or time of production. Finally, it may be used to indicate the intended purpose of a product, particularly as an accessory. Fair use requires that there be no:

• false implication of a business relation with the third party;
• exploitation of the distinctiveness or denigration of the third party’s mark; or
• presentation of the advertiser’s goods as an imitation of the goods protected under the third party’s mark.

Strict restrictions apply to tobacco and alcohol advertising, particularly in relation to wording, illustrations and the media in which the products are advertised, particularly to protect minors. Tobacco ads may take the form only of point-of-sale posters, ads shown in cinemas after 6:00pm or brand stretching. Laws on alcohol ads are more lenient, with the use of further media allowed; but there are also strict restrictions on wording (eg, it may not be suggested that alcohol has a therapeutic, stimulating, calming or conflict-resolving effect). Any advertising targeted at minors or for therapeutic products such as medicines is also tightly regulated in Germany; while general restrictions under unfair competition law (eg, no misleading or deceiving content and brand positioning) apply to all products.

Saskia Lais-Jansen is counsel and Max Wenger a senior associate at DLA Piper

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Hong Kong

A registered trademark is not infringed where its use is necessary to indicate the intended purposes of goods or services and the use accords with honest practices in industrial or commercial matters. The courts have found that use is ‘necessary’ where it is the only means of providing the public with comprehensible and complete information on the intended purpose of the goods or services. ‘Honest practices’ have been broadly interpreted as meaning that the third party has a duty to act fairly in relation to the rights holder’s legitimate interests. A key issue in assessing honesty is whether the use is understood by relevant consumers as indicating a link between the goods of the rights holder and the third party. Thus, if the use suggests a commercial connection or discredits or denigrates the trademark, or if the third party’s goods imitate or replicate those of the rights holder, this will likely be considered dishonest.

Hong Kong has no specific legislation governing advertising generally. While the Trade Descriptions Ordinance prohibits ads from being false or misleading, the advertising legislative framework is somewhat fragmented, so several other pieces of legislation may also apply. Rights holders should ensure that any ads they place are factually correct, are not misleading and could not cause offence or be considered obscene. They should seek legal advice before placing ads involving sensitive products, such as medical products, alcohol, tobacco and food supplements.

It is crucial that rights holders ensure that they position their products correctly and do not overstate or oversell particular attributes of their products in a way that could be considered false or misleading.

Edward Chatterton is a partner at DLA Piper

There is no fair-use exemption under Japanese trademark law and, in principle, any unauthorised use of a registered trademark for advertising other goods or services is considered to constitute trademark infringement. On the other hand, it is generally considered that trademark infringement will not be established in cases where the mark does not function as an indication of origin for goods or services. However, this can be difficult to ascertain.

In addition, there will be no trademark infringement if the use of a mark has no adverse effect on its functions – namely, its functions as an indication of origin and a guarantee of quality.

No legislation specifically restricts the use of a trademark for certain products, although the Unfair Competition Prevention Act and the Act against Unjustifiable Premiums and Misleading Representations set out general restrictions on unfair advertising, such as misleading advertising and false advertising.

Takeshi Hironaka is a partner and Seiro Hatano an associate at TMI Associates

In the Netherlands, advertisers may use third-party trademarks for several purposes. The most relevant is comparative advertising. In this respect, and in accordance with EU Directive 97/55/EC, Dutch law states that comparative advertising is legitimate provided that it is not misleading and could not be considered an unfair commercial practice. In addition, the comparison should be objective, comparing one or more essential, relevant, verifiable and representative features of the products and services. Only similar products and services can be compared and the comparison may not be denigrating towards the competitor.

Third-party brands may also be used in ads when prizes are being shown or in order to demonstrate the functionality of products – for example – “Buy product X and win product Y” or “Product A is compatible with product Y”. However, such brand use may not imply a commercial link between the two brands and may not take unfair advantage of the third party’s brand.

The main restriction in advertising law that will affect brand positioning results from self-regulation and advertising codes. The advertising industry has agreed to comply with the Dutch Advertising Code, which sets out rules on advertising. The most relevant of these is that advertising must not be misleading.

In addition, some industry sectors have made sector-specific advertising rules which have been integrated in different codes. For example, specific regulations are in place with regard to the travel, alcohol and food sectors, and the telemarketing industry. Tobacco advertising is prohibited in the Netherlands.

Richard van Schaik is a partner at DLA Piper

Comparative advertising is lawful unless it discourages customers from purchasing the goods or services of competitors by undermining their reliability. The use of a third party’s mark in comparative advertising is contrary to good custom and practice if the goodwill in the mark is unfairly exploited or discredited, or if creates a misleading impression about the existence of economic links between the owner of the mark and its user. Thus, lawful comparative advertising diminishes the legal protection enjoyed by the mark.

Case law indicates that trademark protection does not entitle the rights holder to prevent third parties from making commercial use of its mark where this is necessary to provide customers with information about the advertiser’s business or to indicate the purpose of the goods or services offered – in particular, of accessories and spare parts.

Turning to the online world, using a third party’s mark as a keyword in browser-related advertising does not constitute infringement, provided that the advertising does not affect any of the mark’s functions (eg, indication of origin or guarantee of the quality of products or services). A negative influence on the mark’s indication of the origin of goods or services is exerted where an ad displayed on the basis of a keyword makes it impossible or very difficult for an informed and attentive internet user to distinguish the goods or services of the rights holder or an economically related undertaking from those of its competitors.

Krystyna Szczepanowska is a partner at DLA Piper

In Russia, use of a third party’s trademark in advertising is possible when it refers to branded goods (or services) sold in or imported into Russia by the rights holder or with its consent. However, any such use must meet the following conditions:

• The trademarks are not used with regard to other goods or services;
• The use does not harm the rights holder;
• Any use or advertising is not misleading; and
• The use does not breach good business practice.

Third-party marks are commonly used by a distributer selling branded goods or a service provider which provides services related to the branded goods. For example, mentioning a car brand for a service provider that maintains such cars is permissible, but only in such a way that it is clear that the service provider does not brand its services with the third party’s trademark. So advertising stating “car maintenance for BMW automobiles” would be allowed, but simply using the BMW mark would likely constitute infringement. Each case must be handled individually, as there is no clear line set by the legislation.

Advertising using a third-party trademark is specifically prohibited where the ad:

• contains improper comparisons with goods that are produced or sold by another party;
• denigrates the honour, dignity or business reputation of another party;
• violates limitations for certain types of product in certain places or at certain times (eg, tobacco and alcohol, medicine, weapons, gambling);
• is concealed by advertising for other goods or services that are branded in the same way; or
• contains false or misleading information.

Ekaterina Golodinkina is an associate at DLA Piper

UAE trademark law does not recognise a fair use principle; nor does it define the circumstances in which the use of a third party’s mark might be permitted (eg, where the use is honest and not intended to deceive). However, the test for infringement focuses on counterfeiting, imitation and the unlawful use of a third party’s mark, which suggests that use of a third-party trademark which does not mislead may be permitted. Prospective comparative advertisers should also ensure that their material complies with the UAE Commercial Code and the rules applicable to advertising content. Moreover, the test for defamation is relatively easy to satisfy in the United Arab Emirates. Material which is critical of competitors may well be deemed by a UAE court to be defamatory. Unsurprisingly, comparative advertising is rare.

The main restriction to observe on brand positioning is the requirement for advertising content to comply with the United Arab Emirates’ cultural norms and beliefs, and to be respectful of its religious and political institutions. The advertising of alcohol, tobacco and pork is expressly prohibited, as is the advertising of gambling-related brands. Advertising standards also require that content be available in either standard Arabic or the local Emirati dialect (which typically appears alongside the English version).

Kate Montazeri is a partner at DLA Piper

Under UK (and EU) law, third-party marks can be used in advertising for certain purposes, provided that certain conditions are satisfied. They can in particular be used for the purposes of comparative advertising, provided that the use does not give rise to a likelihood of confusion and does not otherwise breach the requirements set out in the EU Comparative Advertising Directive (eg, the use makes fair and objective comparison and does not denigrate/take unfair advantage of a competitor’s mark). Cases show that use is particularly likely to infringe where it relates to imitation products (eg, the smell-alike products in L’Oréal v Bellure), but is unlikely to infringe where the use of the mark simply distinguishes products of the rights holder from those of the competitor responsible for the ad.

The most obvious constraints imposed by UK advertising law on brand positioning are in relation to specific sectors which are more highly regulated due to the perceived potential for consumer harm. Thus, tobacco products (as well as e-cigarettes which are the subject of specific advertising rules since November 2014), alcohol, food, pharmaceuticals, gambling and financial services are subject to specific rules. These rules place constraints (which vary according to the sector) on matters such as the media in which products can be advertised, the appearance of packaging and advertising, the times at which broadcast advertising can be scheduled and the claims that can be made about such products. In addition, more general rules apply to ads for all types of product, which require ads to be legal, decent, honest and truthful.

John Wilks is a partner at DLA Piper

United States

In the United States, courts have recognised the doctrine of nominative fair use as applying to the use of a third party’s mark in connection with comparative advertising. For this doctrine to apply:

• the product or service being referred to must not be readily identifiable without use of the third party’s mark;
• only so much of the third party’s mark may be used as is reasonably necessary to identify the product or service; and

the advertiser must do nothing that would suggest sponsorship or endorsement by the owner of the third-party mark.

As a general rule, it is advisable to use only the word version of the third party’s mark, without logos, designs or stylised versions, and to ensure that the third party’s mark is not more prominent than the advertiser’s mark.

Turning to restrictions in advertising law that will affect brand positioning, the main requirement is that advertising be truthful and not misleading. The advertiser must also have a reasonable basis (ie, substantiation) for any factual claims made about the advertised product or service – or, in the case of comparative advertising, about the third party’s product or service – before the claim is made. There are also restrictions on the use of certain types of offer, such as free or discount offers. In addition, certain products and services have specific rules and regulations that restrict or limit the types of claim that can be made about the product or service. Examples include alcohol, tobacco, food, pharmaceutical and healthcare-related products, financial products and services, and educational services.

Scott Pink is a partner at DLA Piper