Mercedes-Benz: Trademark use in online advertising

In its preliminary ruling of 3 March 2016, the European Court of Justice (ECJ) ruled that actions on trademark infringements in online advertising cannot be brought against a third party who is not in direct or indirect control of the act constituting the trademark use (Judgement C-179/15).

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Background of the case

Daimler AG, a German motor vehicle manufacturer, is the proprietor of the international figurative trademark “Mercedes-Benz”, No. 321168, as shown above. Együd Garage is a Hungarian company engaged in the retail sale of motor vehicles and parts and their repair and servicing.

In 2007, Együd Garage and Mercedes Benz Hunaria Kft, a subsidiary of Daimler, concluded an after-sale services contract where Együd Garage was entitled to use the “Mercedes-Benz” trademark and describe itself as “authorised Mercedes-Benz dealer” in its advertisements. The contract expired on 31 March 2012.

While the contract was still in force, Együd Garage ordered a company providing online advertisement services (MTT) to publish advertisements for the year 2011 to 2012 where Együd Garage would be named as an authorised Mercedes-Benz dealer.

Following the termination of the contract, Együd Garage asked MTT to amend the advertisement so that the public would not assume that there still was a contractual link between Együd Garage and Daimler. Együd Garage also wrote to operators of other websites requesting the removal of the online advertisement, which had been published without its consent. Despite the efforts, online advertisement containing references to Együd Garage as an “authorised Mercedes-Benz dealer” continued to be distributed online.

Daimler brought an action before the Municipal Court of Budapest seeking a declaration that Együd Garage infringed its “Mercedes-Benz” trademark by the references in the advertisements.

The Municipal Court of Budapest referred a question to the ECJ for preliminary ruling concerning the interpretation of art. 5 (1) of the Trademark Directive. In short, the question was whether the trademark proprietor could prevent a third party named in an advertisement on the internet from making use of the mark, even though the advertisement was not placed on the internet by the person featuring in it or even though the third party took all reasonable steps to have it removed, but did not succeed in doing so.

The decision of the Court

The Court first dealt with the question regarding the continued reference to Daimler in the advertisement published by MTT. The Court ruled that Együd Garage, as the advertiser, cannot be held liable for the acts or omissions of a provider who, intentionally or negligently, disregards the express instructions to stop the use of the mark. The Court was of the opinion that when MTT failed to comply with Együd Garage`s request to remove the reference to the mark in the advertisement, the publication of that reference can no longer be regarded as use of the mark by Együd Garage.

Secondly, the Court dealt with the question regarding the publication of the advertisement on other company referencing websites. The Municipal Court of Budapest explained that it is the common practice of some operators of such sites to take up advertisements published on other advertising sites, without the knowledge or consent of the advertiser, to promote the use of their own site, in order to suggest to potential paying users that they are dealing with a popular website with a solid basis.

The Court ruled that an advertiser cannot be held liable for the independent actions of other economic operators with whom it has no direct or indirect dealings and who do not act by order and on behalf of that advertiser, but on their own initiative and in their own name. The Court reasoned that the ordinary meaning of the word “use” involves active behavior and direct or indirect control of the act constituting the use. That is not the case if the act is carried out by an independent operator without the consent of the advertiser, or even against his express will.

In addition, the Court argued that the law cannot be interpreted in a way of allowing prohibition solely on the ground that the use could possibly provide a financial benefit to the advertiser. In cases like this, the advertiser is not effectively able to stop the use and the Court stated that it cannot legally oblige someone to do the impossible (impossiblium nulla obligation est). The Court thus ruled that under these circumstances Daimler was not entitled to take actions against Együd Garage on the grounds of Art. 5 of the Trademark Directive.

However, the Court does not rule out the possibility for the trademark proprietor to claim reimbursement of any financial advantage on the basis of national law, nor that of taking action against the operators of the referencing websites.