Elogicom became an affiliate of Tesco through a programme run by
internet firm TradeDoubler. Elogicom had two websites,
Avon4me.co.uk and Avonlady.co.uk, that carried ads for Tesco. Both
sites were approved by Tesco for participation in the affiliate
deal. So TradeDoubler tracked clicks on the ads and, when purchases
resulted, Tesco paid a 2% commission to Elogicom.
But TradeDoubler's system allowed an affiliate to register
additional domain names and list them under its account. So
Elogicom registered numerous domain names, such as tesco2u.com,
tesco2you.co.uk, tescojersey.com, tescodvd.co.uk, tescodiet.com,
tescodiet.co.uk, tesco-diet.co.uk and other variations.
These names did not take visitors to Elogicom’s websites.
Instead, they went directly to Tesco websites – and the traffic was
duly credited by TradeDoubler as being generated by Elogicom.
Accordingly, Elogicom was paid a cut of the sales.
Tesco was alerted when Elogicom's monthly commission entitlement
jumped from £75.42 in April 2005 to £26,688 in May 2005. The latter
sum was not paid out.
Tesco accused Elogicom of trade mark infringement and passing
off and sought a transfer of the domain names. It went to court
when Elogicom refused to comply. Elogicom counterclaimed, seeking
payment of the commission.
Mr Philip Sales, sitting as Deputy Judge in the High Court,
rejected the counterclaim on Wednesday. Instead, he granted Tesco a
summary judgment and an injunction.
The ruling
The judgment does not suggest any promotion of the unauthorised
domain names. Mr Sales reasoned that "Elogicom was seeking to
benefit from use of domain names which incorporated the word
'tesco' by 'fishing' for persons browsing the internet who might be
searching for goods or services provided by Tesco and, being unsure
of the precise address for a Tesco website, might by guesswork
enter in the address bars on their computers names closely
associated with Tesco in the hope that those addresses would take
them to the Tesco website they were searching for."
This so-called type-in traffic can be lucrative. Business 2.0
magazine profiled one domain name collector who claims to earn
$2 million a year in ad revenue generated by people who guess a
domain name rather than relying on a search engine. Marchex, a
Seattle-based start-up, reckons type-in traffic accounts for nearly
10% of the global paid search market, valued at $9 billion last
year.
Mr Sales ruled this week:
“By registering and making its 'tesco'
related domain names available as pathways on the internet to Tesco
websites with a view to generating income for itself in the form of
commission, Elogicom did use in the course of trade a series of
signs (those domain names) which were each similar to the trade
marks registered by Tesco and were each used in relation to
services (the provision of internet access to Tesco websites)
identical with or similar to those for which the trade marks were
registered, and in circumstances where there existed a likelihood
of confusion on the part of the public, including the likelihood of
association of Elogicom's service (the provision of internet access
to Tesco websites) with the trade marks.”
Although Elogicom had not used its ‘tesco’ domains to direct
consumers to websites competing with Tesco, and was not using them
to sell goods or services of its own, it had infringed upon Tesco's
trade marks.
“In my view, Elogicom took unfair advantage of the Tesco brand,
reflected in its trade marks,” said the Judge.
He found that “the situation which Elogicom brought about would
also fall to be regarded as detrimental to the distinctive
character or the repute of Tesco's trade marks”.
Mr Sales rejected defence arguments that Elogicom’s use of the
‘tesco’ domains simply enabled web users to access the Tesco
websites and that they were therefore used in order to identify
goods and services – a defence under the Trade Marks Act.
“The use by Elogicom of the 'tesco' related domain names was not
in accordance with honest practices in commercial matters and
without due cause took unfair advantage of the distinctive
character or repute of Tesco's trade marks,” he wrote.
He also rejected an argument that the dispute should have been
resolved by using internet domain name dispute resolution
procedures rather than by means of litigation. The dispute
resolution procedures were an alternative to court proceedings,
said Mr Sales, and did not exclude recourse to the courts.
Mr Sales then considered the issue of passing off – where a
business is misrepresented in such a way that could damage its
goodwill and reputation. He found:
“There is no doubt that Elogicom, by its
registration and use of the 'tesco' related domain names, has
sought to associate itself with and trade upon the considerable
goodwill which attaches to the name 'Tesco' for the benefit of
Tesco. There is also no doubt that Elogicom continues to threaten
to make use the Tesco name, so damaging Tesco's goodwill, both by
retaining those domain names with the option of starting to use
them again at some point in the future and by virtue of maintaining
their registration against Elogicom's name in the register.”
Finally Mr Sales dismissed Elogicom’s counterclaim for payment,
ruling that the traffic generated by the firm amounted to
‘Artificial Traffic’, which is prohibited under the TradeDoubler
affiliate agreement.
