Case C-657/11, Belgian Electronic Sorting Technology – does a domain name advertise?

Does the EU’s Misleading Advertising Directive 2006/114 mean that the concept of ‘advertising’ covers the domain name of a website or its metatags?

Facts

The parties in this case each design, make and sell sorting-machines which use laser technology. The claimant company, Belgian Electronic Sorting Technology, was set up in 1996. Its various machines were named: Helius, Genius, LS9000, and Argus. In 2008, it also registered the word BEST as a Benelux trade mark.

The defendant company was set up in 2004 and in 2007 registered the domain name www.bestlasersorter.com . The content of the website was identical to the content found on the company’s more usual websites of www.visys.be and www.visysglobal.be . However, in the metadata of the defendant’s websites were the words ‘Heliussorter, LS9000, Geniussorter, Best+helius, Best+genius, … Best nv,’.

On finding the trade marked word ‘best’ in the domain name and Helius, Genius, LS9000, and best in the defendant company’s website metadata – words that referred back to the claimant’s identity and products – the claimant sued the defendant for misleading advertising contrary to the 1991 Belgian Trade Practices Act.

Article 93(3) of the Belgian Trade Practices Act defines ‘advertising’ as ‘any representation which directly or indirectly aims to encourage the sale of products or services irrespective of the place or the means of communication used’. This provision of Belgian law has to be interpreted in accordance with Articles 1 and 2 of Directive 2006/114/EC that define the concepts of ‘advertising’, ‘misleading advertising’ and ‘comparative advertising’. But how were those provisions to interpreted in a world of websites?

According to the appellate judges, neither the registration nor the use of a domain name constituted ‘advertising’ for the purposes of the Belgian Act as there was no ‘representation’. This reasoning applied to the metatags in the website metadata too. A metatag was only ever a term incorporated into the programming language of a website that was recognised by a search engine. And metatags remained invisible to the user.

Question Referred

According to the Curia website, the Belgian Court of Cassation asked:

Is the term ‘advertising’ in Article 2 of Council Directive 84/450/EEC of 10 September 1984 relating to the approximation of the laws, regulations and administrative provisions of the Member States concerning misleading advertising and in Article 2 of Directive 2006/114/EC  of 12 December 2006 concerning misleading and comparative advertising to be interpreted as encompassing, on the one hand, the registration and use of a domain name and, on the other, the use of metatags in a website’s metadata?

Comment

Belgian Electronic Sorting Technology is one of a couple of references to the CJEU involving the linkages between the economic base of E-Commerce and the law’s concepts governing advertising and IP law.

Will the CJEU view the website through the lens of technology or will it view a website as a social construct. For whereas a website name is devised for humans to be able to remember a site, the website’s name masks a technological reality that a website’s address is merely a series of numbers designed for machine processing. So can a series of numbers embedded in the workings of a website, really be said to constitute advertising, and thus be capable of contravening the EU’s rules on misleading advertising? And does that reasoning apply by analogy to the equally-hidden metatags? If the CJEU views a website not in terms of technology but as a social construct then will its ruling in Belgian Electronic Sorting Technology set about a new evolution in the concepts of trade mark and advertising laws?

A similar tension between the economic base and the concepts in EU IP law arises in the case of Innoweb. Should a website owner be allowed to use a sui generis concept of EU (copyright) law to stop search-engines from copying insubstantial parts of a website? Here the technology of a website’s search-engine ‘translates’ a user’s search-commands in order that that search-engine can ‘talk’ to other search-engines so as to provide the user with a more efficient way of searching through information. If the CJEU views a website’s search engine as a social construct, then could this trigger a development of sui generis EU copyright law?

Updates
This case is scheduled to be heard by the Third Chamber on 24 January 2013.
The Opinion is due out on 21 March 2013.

Update of 25 March 2013
Currently, there is no English translation to Advocate General Mengozzi’s Opinion. Given its potential importance to other references currently before the CJEU, the Opinion is summarised below.

Advocate General Mengozzi opens his Opinion by setting the dispute in context. In the past twenty years, there has been a digital revolution. The Internet has profoundly changed the way in which companies sell goods and services. There has been a concomitant rise in the numbers of disputes surrounding the ways in which companies are exploiting the Internet for their commercial purposes. And this has caused a rift to emerge between the pace at which written law evolves, and the speed of technological development. The result is that the CJEU is increasingly required to apply legal concepts in ways other than those which had originally been intended by the (EU) legislature. Such disputes are also leading to questions about the scope of law’s traditional concepts. And the BEST case epitomises this, characterised as it is by the concept of ‘advertising’ found in two EU Directives and the question of whether this concept ought to be interpreted in relation, on the one hand, to the registration and use of a domain name; and on the other, the use of metatags in a website’s source code.

Having read the written observations made by Belgium, Estonia, Italy, Poland and the EU Commission, and having heard the oral submissions made by just the EU Commission and Belgium, Mengozzi AG advised the Court to reach the following conclusion:

The registration of a domain name is not advertising within the meaning of Article 2 of Council Directive 84/450/EEC of 10 September 1984 relating to the approximation of the laws, regulations and administrative provisions of the Member States concerning misleading advertising and of Article 2 of Directive 2006/114/EC of 12 December 2006 concerning misleading and comparative advertising.

The use of a domain name and the use of metatags in the source code of a website can constitute advertising within the meaning of those Directives. It is left to the referring court to determine whether the conditions relating to the definition of advertising in these Directives are fulfilled.

This proposed result rests on the following legal reasoning.

1 Advertising and the EU Directives
a) On the desirability of a particularly broad interpretation of advertising
Advertising was a concept found in the EU’s misleading advertising Directive 84/450/EEC and the EU’s comparative and misleading advertising Directive 2006/114/EC. These Directives defined advertising as the making of a representation in any form in connection with a trade, business, craft or profession in order to promote the supply of goods or services, including immovable property, rights and obligations. The definitions in the Directives were particularly broad.

There were three reasons justifying a particularly broad definition. First, a literal reading of the concept of ‘advertising’ expressed in the two Directives showed that its scope had not been limited by the legislature. Presumably, there was an intention to allow the concept to cover any situation where a representation had indeed been distributed. Equally, by dint of the fact that there was no limitation as to the form of the representation and its distribution, this meant that the definition also covered every conceivable form of distribution.

Second, interpreting the concept of advertising broadly would also be in keeping with the aims of the Directive as expressed in the Recitals; namely, the smooth functioning of the internal market; ensuring that consumers could make free and informed choices; consumer protection; and Recital 8 even expressly mentioned: ‘It is desirable to provide a broad concept of comparative advertising to cover all modes of comparative advertising.’

A third reason to justify a broad definition being given to the concept of advertising was that it would be coherent for EU law to do this, and consistent with the CJEU’s earlier case law. In Case C-68/92, Commission v France, and in Case C-112/99, Toshiba Europe the court had recognised that the Directives were to be interpreted in such a way as covering not only every form of comparative advertising but also the way in which the advertising was distributed.

b) Discrete elements to the concept of advertising
Keeping in mind those reasons for a broad interpretation to advertising, Mengozzi turned to the wording of the Directives. He noted that from the wording of the provisions, there were three elements to the concept of advertising: first, there had to be a representation in any form; second, the representation had to be distributed in connection with a trade, business, craft or profession; and third, it had to be in order to promote the supply of goods or services.

Whereas the last two criteria did not present any real problems, the case really turned on the first criterion, namely, the representation. The initial difficulty was the fact that the various language versions did not match. For example, the English version referred to ‘representation’ whereas the French and Spanish referred to ‘communication’. He recalled ‘settled case law’ that emphasised EU law had to be interpreted uniformly and applied in the light of every language version. Any discrepancies were to be interpreted in light of the design and aims of which the rule formed a part. Here, Mengozzi AG opined that the various language versions on the general concept of communication concerned an activity whereby signs and information were passed from one person to another. Further, the word ‘communication’ had been expressly used in various language versions of the Directives.

Recalling Harold D. Lasswell’s book of the 1940s, The Structure and Functions of Communication in Society (New York, 1948), Mengozzi AG noted that in communication theory, the concept of communication could be broken down into various components. Lasswell had identified five – each conveniently beginning with a ‘W’ and encapsulated with the phrase: ‘Who says What in What channel to Whom With what effects?’

Mengozzi AG identified 6 criteria, which he would later use to answer the question asked by the Belgian court. The six were: (i) the sender, namely, the system (object or person) that was passing on the message (ii) the receiver, namely, the addressee who received the information and absorbed it (iii) the channel, namely the medium used to transport or obtain the message (iv) the formal code, namely, the system of signs which enabled communication (v) the context, namely the situation in which the act of communication was embedded (and to where it referred); and finally (vi) the message itself, namely, the content which was communicated.

2) Answers to the three parts of the Belgian court’s question
With those criteria in mind, answers could be generated as to whether the 3 issues raised in the referring court’s question constituted communication falling within the concept of ‘advertising’ as laid down in the two Directives.

a) Registration of a domain name
Was this advertising within the meaning of the Directives? No. The registration of a domain name was nothing other than a formal act whereby a person approached an organisation running domain names and requested the registration of a domain name which he had chosen and probably intended to use. Once the conditions for registration were complied with and the money paid, the organisation was contractually obliged to include the domain name in its database and to link Internet users typing in the domain name to the IP address provided by the owner of the domain name. It was evident to Mengozzi AG that there mere act of fulfilling a formality, such as that outlined above, could not constitute an act of distributing communication for the purposes of promoting supply. Such a formality could not bring it within the concept of ‘advertising’ for the purposes of the two Directives.

b) Use of a domain name
However, when it came to whether the use of a domain name constituted advertising, he noted the vagueness of the referring court’s question, and the discussion which had arisen during the hearing. He noted that the most obvious form of use of a domain name was the making and putting online of a website that could be consulted on the basis of the IP address that was linked to the domain name. This form of use seemed relevant in the case currently before the court since Visys had included in its domain name the trading name of its competitor and putting online websites with addresses corresponding to various domain names.

Irrespective of the way in which the domain name was intended to promote the supply of goods or services it was necessary to determine whether the effect of putting a website online and the addresses constituted a form of advertising, there was a distribution in the sense of a communication within the definition of advertising that was found in the Directives.

He resolved this by referring back to his reasoning on the discrepancies between the various language versions of the Directives, and the six criteria that originated in communications theory.

Applied here, that meant the act of putting a website online could be teased out into: a sender, namely a person who puts the site online linked to the address of the domain name; a receiver, namely, the user which makes the link with the website when typing in the domain name into his browser; and a message, namely the content of the website which may or may not promote the supply of goods and services. The channel which is used to convey the message is the computer which makes the connection with the Internet. The formal code is formed by: written signs, visible or audible signs to convey the message via the website. The context depends on the particular situation. Furthermore, putting a website online was incontrovertibly a way of conveying a message that was not directed to a specific person but one that was directed to an unlimited number of people.

Therefore, the act of putting a website online linked to a domain name was a form of using the domain name which leads to the distribution of communications within the meaning of Directives 94/450 and 2006/114. Where this communication occurred in the context of exercising an economic activity which promotes the supply of goods or services, this would constitute advertising within the meaning of those Directives.

There were other situations too which could give rise to a domain name being used as a form of advertising. Thus, there was traditional advertising, like television adverts, that referred to a company’s website. Domain names could also be used as a means to increase supply – the dispute currently before the court being a case in point, namely, a website of www bestlaser com made a link that suggested the user would find the best sorting machines furnished with laser technology.

Depending on the way in which such a domain name was used, it could by itself constitute advertising. For example, a domain name could have features that promoted the goods or services of a company, and which were used on the web and were included in a search-engine’s database. If an internet user entered a search-command into a search-engine, the domain name included in the database would appear on the user’s screen. Using a domain name in this way would constitute advertising since there was a distribution of communication and the domain-name had the inherent aim of increasing supply. And in that case, it should be left to the referring court to determine whether the use of the domain name was communication promoting the supply of goods and services.

c) Use of metatags
In so far as the use of metatags was concerned, these were in effect key words introduced by the right holder of a website and incorporated into the source code so as to describe succinctly the content of his webpage. Metatags were recognised by search-engines in response to an Internet user typing in a search-command. In this way, metatags influenced search results since they pushed the website higher up the results that appeared on the user’s screen. Metatags were invisible to the user.

Again, Mengozzi AG believed that it should be left to the referring court to determine whether the use of metatags displayed the characteristics of communication distributed in the course of economic activity which promoted the supply of goods and services.

Nevertheless, he observed that here there was an identifiable sender because the person who incorporated the metatag in the source code to the website did so with the specific intention that it would be recognised by search-engines and thereby influence the results generated by the search-command.

He did however admit that it was more problematic to determine whether there could be said to be a receiver of information. This was because Internet users typing in search-commands did not always know the keyword that formed the metatag. The metatag was only recognised by the search-engine and was not communicated directly to the receiver. Nevertheless, if the concept of communication was to be understood broadly then it would be possible to assume that an internet user was an indirect receiver of the information contained within the keyword.

Turning to the other criteria to the concept of communication defined above, he remarked that in so far as the channel was concerned, this was formed by the linking of the computer with the internet and through the software that underpinned the search-engine. The formal code was the language in which the keyword was expressed, and the context depended on the facts and circumstances of the case – particularly, the search-command. The requisite distribution was also fulfilled by incorporating a metatag into the source code of a webpage which, in so far as it was understood to be a form of communication, was directed to an unlimited number of people – that is to say, to everyone who wished to perform a search-command with a search-engine using a keyword that forms the metatag.

In light of these considerations, if it could be said that the metatags were incorporated in the source code of a webpage in the pursuit of economic activity to promote the supply of goods or services, then Advocate General Mengozzi was of the opinion that this too could constitute a form of advertising for the purposes of the EU’s advertising law directives. However, he advised leaving this to the referring court to determine whether this was indeed the case here.

Comment
Advocate General Mengozzi has viewed the technology of the metatag as a social construct. The Third Chamber which is hearing this dispute has, in recent cases of copyright law, viewed the technology of both databases and satellites as social constructs. See further, ‘Airfield, Intermediaries and the Rescue of EU Copyright Law’
(2012) Intellectual Property Quarterly 311-325
.

Update – 26 March 2014
According to the EUR-Lex website, the operative part of the Third Chamber’s judgment reads:

Article 2(1) of Council Directive 84/450/EEC of 10 September 1984 concerning misleading and comparative advertising, as amended by Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 and Article 2(a) of Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising, must be interpreted as meaning that the term ‘advertising’, as defined by those provisions, covers, in a situation such as that at issue in the main proceedings, the use of a domain name and that of metatags in a website’s metadata. By contrast, the registration of a domain name, as such, is not encompassed by that term.