Neutral Citation Number: [2006] EWHC 534 (Ch)

Case No: HC04C02776
Case No: HC04C03779
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 23/03/2006

Before :

MR JUSTICE LEWISON
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Between :

	(1) O2 HOLDINGS LIMITED
(2) O2 (UK) LIMITED	Claimants	
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	HUTCHISON 3G LIMITED	Defendant	

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Mr Richard Arnold QC and Mr Mark Vanhegan (instructed by Wragge & Co for the Claimants
Mr Geoffrey Hobbs QC and Ms Emma Himsworth (instructed by   Lewis Silkin      for the Defendant

Hearing dates: March 2nd, 3rd 6th 8th 9th 
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Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

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Mr Justice Lewison: 

Introduction
Brands
Launch of O2
O2’s advertising
Use of the trademarked bubbles
Technical
Fizz
Relax
Continuous
Monochrome reproductions
O2’s television advertising
The success of the advertising
Customer numbers
Industry recognition
Press comment
O2’s protection of its brand
H3G
Toil and trouble
Toil: H3G’s campaign
Trouble: the offending advertisement
The success of H3G’s campaign
The proceedings so far
Interim injunction refused
Reference to ECJ refused
Survey evidence
The issues:
The legal framework
The Trade Marks Directive
The Trade Marks Act 1994
Invalidity: burden of proof
A short digression
Distinctiveness
Use in conjunction with other identifiers
Significance of the form of the registration
Device marks and moving images
What kind of use counts as infringement?
The ingredients of infringement under article 5 (1) (b) (section 10 (2))
Mark for sign?
Identity of services
Likelihood of confusion
The ingredients of infringement under Article 5 (2) (section 10 (3))
Reputation
Misuse of the sign
Without due cause
Takes unfair advantage
Detriment
The Comparative Advertising Directive
Must comparative advertising comply with the Directive?
Is compliance with the Directive restricted to registered marks?
What is indispensable?
Section 10 (6)
Validity of registration
Inherent distinctiveness
Acquired distinctiveness
The use of bubbles in brand recognition
The experts
Common ground between the experts
Are H3G’s bubbles confusingly similar to O2’s?
Are H3G’s bubbles similar to bubble marks with a reputation?
The bubble reputation
Are H3G’s bubbles similar to Relax?
O2’s criticisms of H3G’s advertisement
Summary
Confusion
Denigration
Erosion of distinctiveness
Piggy-backing
Was the use of the bubbles indispensable?
In the round
Actualities not risks or likelihoods
The Comparative Advertising Directive checklist
Is it misleading?
Does it compare goods or services meeting the same needs or intended for the same purpose?
Does it objectively compare prices?
Does it create confusion in the market place between the advertiser and a competitor?
Does it discredit the trade marks or services of O2?
Does it take unfair advantage of the reputation of O2 or O2’s trade marks?
Result
Introduction
1.	This is a case about bubbles. The claimants, O2 Holdings Ltd and O2 (UK) Ltd (collectively “O2”), are providers of telecommunications services, especially mobile phones. So is the Defendant, Hutchison 3G UK Ltd (“H3G”). During the summer of 2004 H3G ran a series of advertisements on national television and radio to promote the launch of its new pay-as-you go service “ThreePay”. The advertisements compared the pay-as-you-go services offered by H3G to those of its competitors, including O2. It is accepted, for the purposes of this action, that the text and soundtrack of the advertisements (including a reference to O2’s registered trade mark “O2”) was lawful, in the sense of being permitted comparative advertising both under domestic law and under European law. However, O2 complains that in the course of the television advertisement H3G infringed four of its trade marks by showing bubbles.
2.	O2 regard this case as important for the protection of their brand identity. They have invested a great deal in establishing the brand. They say that H3G is not entitled to use for the purpose of comparative advertising signs which they say are confusingly similar to O2’s registered trade marks when (a) that use is gratuitous and unnecessary (b) it enables H3G to take advantage of the distinctiveness and reputation of the marks to grab consumers’ attention and enhance the reputation of H3G’s brand (c) the use involves distorting the marks to the detriment of O2’s brand image and (d) the use blurs the distinctiveness of the marks. Mr Arnold QC, who appears with Mr Vanhegan on behalf of O2, says this case is about whether, and if so in what circumstances, it is acceptable for an advertiser to use a competitor’s brand imagery, rather than simply its brand name, in comparative advertising.  He says that it is unnecessary to use competitors’ brand imagery, and doing so presents a significantly greater risk that the advertisement will take unfair advantage of the reputation of the competitor’s brand. Furthermore, use of a competitor’s brand imagery leads to a blurring of the distinctions between the brands which undermines the functions of the marks both as origin indicators and as carriers of the brand’s cachet. This is particularly so if what is used is not the exact brand imagery used by the competitor but a distorted version of it. This is damaging to brand owners who invest large sums in building up distinctive brands, and it is contrary to the interests of consumers who depend upon well-differentiated brands for making informed choices.
3.	For its part H3G, appearing by Mr Hobbs QC and Ms Himsworth, say that they have done nothing unlawful; and in any event they say that the bubble trade marks on which O2 relies should not have been registered at all, because they lack distinctiveness.
Brands
4.	Brands are big business. They can be worth many millions of pounds. The value of the Coca Cola brand has been said to be worth sixty per cent of the market capitalisation of the Coca Cola Corporation. Defining a brand is not easy. A lawyer would tend to think of goodwill, trade marks and so on. But a brand includes more elements; such as image and reputation; the values that the brand owner tries to inculcate in the buying public. A brand is what customers choose to buy. Many decisions about brands are made by customers emotionally or intuitively rather than rationally. Successful brands create a relationship of trust between the customer and the brand. 
5.	Important to all this is the overall idea of the “brand image”. The brand image can be created in a variety of ways: personal experience; word of mouth; how the brand is presented in stories in the media; packaging; point of sale display; retail staff; and, of course, advertising. The value of a brand lies in brand awareness; perceived quality; brand association and brand loyalty. The distinctiveness of a brand is of particular importance where the product offered by competitors in a given field of activity has few substantive differences. The provision of mobile phone services is one such field. Car insurance is another.
6.	A brand that customers can call to mind easily is called a “salient” brand. Many brands have readily recognisable images which are almost indelibly associated with the brand. Sometimes this is packaging (for example, a Perrier bottle). Sometimes it is an image associated with advertising (such as the Dulux dog). Sometimes it is a combination of elements (for example, the Coca Cola bottle, the distinctive font for the logo and the colour red). (It has been said that the reason that Father Christmas is represented in red, rather than in his original green, is because of the influence of Coca Cola’s branding).
7.	English law does not, however, protect brands as such. It will protect goodwill (via the law of passing off); trade marks (via the law of trade mark infringement); the use of particular words, sounds and images (via the law of copyright); shapes and configurations of articles (via the law of unregistered design right) and so on. But to the extent that a brand is greater than the sum of the parts that English law will protect, it is defenceless against the chill wind of competition.
Launch of O2
8.	What ultimately became O2 started life trading as BT Cellnet, part of British Telecom. In November 2001 it demerged from British Telecom. It then traded as mmO2. In May 2002 it launched the O2 brand; and that brand name has been used ever since in the UK, Germany, Ireland and Austria. It has, more recently, been taken over by Telefonica, a Spanish telecommunications company. In preparation for the launch of the O2 brand, O2 commissioned Lambie Nairn, a firm of designers, to devise the brand. What O2 wanted was a brand that would be distinctive and recognisable. It had to be simple, and capable of being consistently applied.  Lambie Nairn devised the brand O2. It was based on the concept of oxygen. It was to have four key identifiers:
i)	The O2 name;
ii)	The logo “O2” which represents the chemical symbol for oxygen;
iii)	Bubble imagery; and
iv)	A blue graduated background with the lighter portion of the graduation at the bottom.
9.	This concept was taken to Abbott Mead Vickers, an advertising agency. Although they came up with an advertising strategy, O2 did not like it as it had not carried forward Lambie Nairn’s design concept. So they went to a new agency that became VCCP. 
O2’s advertising
10.	Since the launch of the O2 brand in May 2002 O2 has spent heavily on advertising. In the UK alone, it spent about £320 million between May 2002 and August 2004. The brand was promoted on television and in the press; on advertising hoardings; on shop fronts; on packaging; in leaflets; in the tube and on taxis. Between May 2002 and November 2004 O2 also advertised on the internet. O2 has also promoted the brand by sponsorship. The best known examples of sponsorship are Arsenal FC (who have O2 on their shirts); the England Rugby team (who also have O2 on their shirts); and the television reality show Big Brother. 
11.	The advertising campaign has used all four of the identifiers I have set out above, although not necessarily all simultaneously. The brand guidelines, issued in July 2003, divide the various elements into two categories: “constants” and “flexibles”. The constants are said to act like glue across all communications, whereas the flexibles can be used to reinforce and enhance communications as necessary. The constants are not the same as the four key identifiers in the initial brand concept. In the brand guidelines they are: the logo, the colours (primarily indigo and white) and three typefaces. The logo was the anchor for all communications by O2. The bubbles were mainly used in a supporting function. The flexibles include various depictions of the bubbles. The bubbles appear on a blue background, running from lighter blue at the bottom to darker blue at the top. The brand guidelines instruct designers:
“You can enlarge and crop into properties but you can not distort, rotate or flip them vertically i.e. the dark blue always appears at the top.”
12.	The guidelines go on to explain how the images should be used. The emphasis is on O2 as a fresh open brand. The guidelines also deal with TV advertising. The key concept of the TV advertising is that it features a “blue world”. In relation to bubbles the guidelines say:
“Bubbles can be presented and used in many different ways in our TV world. They are a symbol of our presence. They should be used to enhance something visual or the communication itself, rather than just being “plonked on”. Bubbles can be big, small, they can move slowly or quickly. However, they appear, they should always look natural and be an integral part of the action.”
13.	Consistently with these guidelines, much of O2’s advertising material has used images of bubbles. It has used images of different types and configurations of bubbles. They have been applied to top up cards, SIM cards, envelopes, file dividers, business cards and even umbrellas. The bubbles have been used in advertising both in static media (e.g. press advertising and hoardings); and also in dynamic media (e.g. TV and cinema advertisements). In the latter case the bubbles are themselves presented as moving images. I was not shown an example of an advertisement in which the bubbles were used on their own.  They were always used in conjunction with one or more of the other key identifiers. (It would not have been possible, within the brand guidelines, to have used bubbles except in conjunction with the four constants). However, bubbles do appear in most of O2’s communications. O2’s aim was to ensure that all four key identifiers of the brand saturated the mobile communications market, so that anyone exposed to any one of the four key identifiers would know that they were encountering an O2 communication. 
14.	In addition O2 has registered a number of trade marks. In all, eleven depictions of bubbles were registered as trade marks. O2 say that they consider that each has individuality; but that, collectively, they are a “family”. In almost all the cases that I was shown in static media the representations of bubbles were cropped portions of one or more of the trademarked bubbles. However, in the case of static media the depictions of bubbles that I was shown were invariably taken from the trademarked images. Four in particular have featured in this case. The four are:
i)	2,360,558 (“Technical”);
ii)	2,298,347 (“Fizz”);
iii)	2,298,346 (“Relax”) and
iv)	2,298,339 (“Continuous”).
15.	The trade marks are registered in relation to classes 9 (telecommunications apparatus) and 38 (telecommunications services) among others. All are representations of bubbles, or oxygenated water. Each is a static image. In the case of “Technical” there are two images, the first in colour and the second in monochrome. They are registered as part of a series. The colour blue is claimed as part of the first mark; but not the second. In each of the other cases the colour blue has been claimed as part of the mark. Each mark was put forward and accepted for registration on the basis that it was a “device mark”. The relevant application form in each case characterised the mark as a “picture”. I have reproduced them below.

1 Technical

2 Fizz

3 Relax

4 Continuous
16.	Mr Thomas Sutton is the Head of Consumer Brand and Marcomms for O2 (“Marcomms” means marketing communications). Mr Sutton’s view was that the range of trademarked bubbles gave the designers options for different circumstances. He did not consider that consumers would differentiate between the different versions of the bubbles; but would recognise the family of bubbles, generally. Accordingly, although O2 itself might consider that the bubbles have individuality, Mr Sutton’s evidence points towards the conclusion that this view would not be shared by the average consumer. His view was that the use of bubbles and what they represent was clear to consumers, irrespective of the different marks. The particular characteristics that he had in mind were that the bubbles were beautiful, clear, and blue; and that they refracted light.
Use of the trademarked bubbles
17.	Technical and Fizz were the trademarked bubbles nominated for the purposes of the claim for infringement on the ground of similarity giving rise to a likelihood of confusion. Relax and Continuous were the trademarked bubbles nominated for the purpose of the claim for infringement on the ground of marks with a reputation. I was shown instances of the use of each.
Technical
18.	The instances of Technical that I was shown were all cropped versions of the registered mark. Cropped versions of the mark were used on handsets, campaign posters, product and display boxes in O2 shops, and user manuals. I was not shown an example of O2’s use of the monochrome mark.
Fizz
19.	The instances of Fizz that I was shown were, again, all cropped versions of the registered mark. Cropped versions of the mark were used on brochures, top up cards, packaging, file covers, flags, certificates of accreditation, SIM cards, mousemats, mobile phone screens and postcards.
Relax
20.	On a few occasions Relax appeared in an uncropped (or only marginally cropped) form on advertisements and file dividers. For the most part, however, Relax was also used in cropped form. Where it was used in cropped form the distinctive shape of the main bubble was featured. It was used on brochures, posters, top up cards, banners, business cards, billboards, envelopes, petrol pump nozzles, handset packaging, mousemats, key-rings, mugs, SIM cards, invitations, and screensavers. Of all the bubbles, this was, to my mind, both the one that was the most memorable for its mushroom or jellyfish shape, and the one that was most used.
Continuous
21.	Continuous was, once again, almost entirely used in cropped versions. It was used on posters, shop displays, envelopes, handsets, user guides, packaging, banners and promotions.
Monochrome reproductions
22.	Although, as I have said, I was not shown a use of Technical in its monochrome version, I was shown monochrome versions of others of the marks. These were not in material that O2 itself distributed, but appeared for example in advertisements and features in newspapers which were not printed in colour. These monochrome representations of the marks included Relax, in relation to which the colour blue was part of the claim. Strictly speaking, therefore, these representations should be called “signs”.
O2’s television advertising
23.	As one might expect, O2 advertised heavily on TV. I was shown a selection of O2’s TV advertisements. No one suggested that they were unrepresentative. In each case the advertisement featured a voice-over by Sean Bean.  As well as being (obviously) male, Sean Bean’s voice-over is delivered in a relative monotone, designed to feel reassuring and calm. At the material time, O2 did not use any female voice-over. In all the cases I saw, the advertisements featured bubbles. In three cases, the advertisement ended with a representation of Relax. But apart from that, the bubbles came in all shapes, sizes, and configurations. They were not necessarily taken from, or animated versions of, the trademarked images. It was possible to say that in many cases the general movement of the bubbles was upwards. But in two cases (one featuring a flag of the EU and one featuring the surface of water) the movement of the bubbles was almost horizontal and in another (featuring a free Atari computer game) the bubbles appeared to rush towards the viewer. In at least one case (featuring trains) the bubbles filled the screen. In all cases the bubbles, and the medium in which they appeared, were blue, in the same gradations that were described in the brand guidelines.
The success of the advertising
Customer numbers
24.	In 2004 O2 had a customer base of 13 million people. By November 2005 this had increased to 15 million in the UK alone.
25.	Customers fall into two groups. One group consists of customers who enter into contracts with O2. The other group make pre-paid phone calls on a “Pay-As-You-Go” basis. Pre-pay customers buy top up cards with which to pay for calls. Top up cards are branded with the “O2” logo and bubbles on a blue background. The background may be either graduated or non-graduated. O2 has three tariffs for pre-pay customers: Talkalot; Talkalotmore and Original. O2’s primary market for pay-as-you-go services is among 16 to 34 year olds. This age group tends to include more high value customers than other age groups. A high value customer is someone who uses a mobile phone a lot. They tend to be style conscious.
26.	Both account customers and pre-pay customers also buy SIM cards. These are branded in the same way as top up cards. O2 has sold millions of each.
27.	The mobile phone business experiences a high level of “churn”. The “churn rate” describes the level activity of customers leaving the network. O2 sees its brand as significantly reducing its churn rate. 
28.	In the case of contract customers, the churn rate is relatively easily established. A customer decides not to renew a contract. However, in the case of pay-as-you-go customers establishing the churn rate is difficult. There is no commonly accepted point at which the industry regards a pay-as-you-go customer as having left the network. However, O2 estimates that its churn rate among pre-pay customers was of the order of 31-33 per cent between 31 March 2002 and 31 March 2004, rising to 37 per cent in the year to 31 March 2005.
Industry recognition
29.	The Superbrands organisation describes itself as an “independent arbiter” on branding. It has a council which consists of experts in marketing and advertising. In the awards for 2003-4 awarded by the Superbrands organisation O2 was awarded the accolade of “Business Superbrand”. It was one of 109. The award specifically noted that since its launch O2:
 “ran a high-profile brand building campaign, centred upon the theme “a new current in mobile communications”. It was during this initial period, that the company used, for the first time, visually striking oxygen bubbles in blue water image that has become its trademark symbol”. 
30.	In 2004 O2 was again awarded superbrand status. It was one of 60. The Superbrand organisation also makes awards for “Cool Brands”. O2 was awarded “Cool Brand” status in 2004. It was one of 64.  Given its target customers, this was a particularly important award for O2 to achieve. The Cool Brand citation included the following:
“At launch in May 2002, it began its high profile brand building campaign, using the visually striking oxygen bubbles in blue water image that has become its trademark symbol. By the end of the launch phase, which involved advertising across TV, print and poster media supported by direct marketing, O2 had become a well-known brand, achieving levels of recognition on a par with its rivals.”
31.	In November 2004 O2 won the Grand Prix at the IPA Effectiveness Awards. The judges praised O2 for having transformed the lacklustre BT Cellnet into a “vibrant brand and thriving business.” It praised O2’s integrated communications strategy. In the course of the review, the citation said that O2’s:
“level of cut-through has undoubtedly been driven by the consistent and instantly recognisable use of blue and bubbles across all O2 activity.”
32.	The judges considered that this visibility greatly affected brand awareness.
Press comment
33.	Mr Arnold also showed me a number of press articles commenting on O2’s brand. I quote some examples:
“The visual style [of Vodafone] stands apart from … the clinical blue beauty of the O2 underwater bubbles.” Marketing 9 January 2003
“The trademark O2 “bubble” became a transparent tent that people could walk around listening to records on a headset…” Marketing 8 September 2004
“Mobile phone group O2 used TV press and outdoor advertising alongside sports sponsorship to raise brand awareness in 2003 and 2004 to the extent that most people now recognise the blue water with bubbles immediately as its corporate identity.” Evening Standard 18 March 2005
“O2 … has been reinvigorated by ditching its old-fashioned name and creating a modern identity, with the distinctive bubbles theme.” Marketing Week 7 April 2005
O2’s protection of its brand
34.	Mr Sutton regards the use of bubbles as being a crucial part of O2’s brand. So much does he regard them as part of O2’s brand that he would like to suppress the use of bubbles in marketing by anyone other than O2 as far as he legally can.  With the exception of “Aero”, the well-known chocolate bar, whose use of bubbles Mr Sutton regarded as acceptable to him, and one or two other categories (such as fizzy drinks) where bubbles appeared naturally, Mr Sutton regarded the use of bubbles by advertisers as unacceptable. He referred to the use of bubbles by Nationwide (a picture of an effervescent tablet dissolving in blue water with a slogan proclaiming that Nationwide was the current account cure); the use of bubbles by the Oral B sonic toothbrush (depicted in blue water) and the use of bubbles by Davidoff to promote a men’s fragrance called “Cool Water”. Indeed he went so far as to say that legal action had been threatened (or at least complaints had been made) about all these advertisements. He did not know the results of the threats.
35.	Mr Sutton regarded the use of bubbles in comparative advertising as being especially unacceptable. It would have been unacceptable to him whether the bubbles depicted were the trademarked bubbles against a blue background, or bubbles of some other kind; and no matter how fair and accurate the comparison might be.
H3G
36.	H3G is a relatively new entrant in the market for the provision of telecommunication services. It launched in the UK in March 2003. It was one of the first operators in third generation (“3G”) technology, having bid successfully for a 3G licence in 2000. The brand name under which it operates is “3”. In March 2004 H3G launched its own pre-pay service under the name “ThreePay”.
Toil and trouble
Toil: H3G’s campaign
37.	HG3’s advertising is handled by WCRS Ltd, an independent advertising agency. Mr Julian Hough, a director of that company but currently on secondment to H3G, is in overall charge of the marketing strategy. Shortly after the launch of ThreePay, in May 2004 Mr Hough and Mr Leon Jaume of WRCS’ creative department discussed the possibility of a comparative advertising campaign which would compare ThreePay’s pay-as-you-go prices with those of its competitors. At the time the other serious players in the market were Vodafone, Orange, O2 and T-Mobile.  The idea was developed during the course of regular marketing management meetings and operations management meetings.  The goal was to have TV advertisements broadcast by July 2004, which in the advertising world is a tight timetable. Mr Hough described his key objectives for the campaign as being to raise “3”’s profile in the market by increasing spontaneous brand awareness; and to highlight to consumers H3G’s money saving deals compared to other networks. His intention was, he said, to make the comparisons in “a robust but fair way”.  The tone of the advertisements was to be cheeky, confident, upbeat, youthful and stylish. The idea was for the advertisements to feature an animated version of the logo “3” as the main character. The comparisons would be made, not only with O2, but with the other main players as well. Mr Hough was aware that comparative advertising is a sensitive area. He was also aware that it would be necessary to comply with legal and regulatory requirements. The creative brief given to WCRS included the following:
“Who must it influence?
Existing pay-as-you-go customers on other networks who spend £15 or more per month. Aged mainly 16-34 they’re out and about the whole time, as are their mates/colleagues, so they call mobile to mobile – which is a pain as this is where the existing networks can really rip you off. They don’t know what they’re paying but they DO know it can and often does cost a fortune to call another network. Currently they’re fairly satisfied with their existing network, and haven’t really thought about or heard of 3 – all most of them know is that it’s some sort of video phone which isn’t really what they’re looking for as they just want to talk and text.
What can we tell them that will make them believe us?
•	3’s next generation network means that talk time costs you less -  just 5p per minute on ThreePay to call any network, any time
•	This compares with Orange & O2 where calling another network on pay-as-you-go costs 40p, and on Vodafone and Virgin where it costs you 35p and on T-Mobile where it costs you 10p.
•	It’s not that 3 is cheap; it’s that 3 is better. Try as they might, the other networks with their old generation technology simply can’t touch the value you get with 3.
What do we want people to think, feel or do as a result of seeing this advertising?
We need this campaign to at least double spontaneous awareness of 3 as a mobile network (currently only 17% of people list it as a mobile network when asked). …
How do we believe the advertising will work to achieve this?
We will grab their attention by telling how their existing provider is giving them a bad deal. It will contrast this with what 3 have on offer, and it will tell them that 3 is a new sort of mobile network – like their existing provider, but inherently much better. …
Practical considerations
•	Simple integrated idea to work across all media
•	…
•	These ads need to be brilliantly branded – there needs to be absolutely no mistake that these ads are from 3 and that we’re a mobile network, rather than just the logo appearing out of the blue at the end … The logo has great potential to become an animated character/hero in the ads (see attached DVD/CD-R). Also consider aural properties and synergy (music sonic brand trigger, v/o).
•	Needs to be clear that this is a PAY-AS-YOU-GO offering from 3 called ThreePay.”
38.	It is clear from the brief that H3G’s target was the same group of consumers who made up O2’s market: namely users of mobile phone services, especially pay-as-you-go customers, predominantly in the age group 16-34. 
39.	On 24 May 2004 Mr Robert Tauscher sent a sample script to the BACC for clearance. Mr Tauscher was, in effect, the team leader for the detailed working up of the campaign in question. The BACC is an industry organisation (the Broadcast Advertising Clearance Centre) which advises advertisers whether advertisements comply with the industry television advertising code. It is owned by ITV and funded by commercial broadcasters. The BACC provided some feedback on the sample scripts. Its main concern was that the price comparisons had to be “absolutely true” with “very firm backup”. It also said that competitors’ logos could not be used without their permission.
40.	From a fairly early stage in the planning Mr Jaume had suggested, and Mr Hough approved, the use of visual imagery to support the aural and on-screen references to H3G’s competitors. Mr Hough was concerned that simply to use the competitors’ word marks might be a breach of copyright and might cause confusion. The decision was therefore taken that for Orange they would use a spinning orange square; for Vodafone floating abstract shapes resembling inverted commas; for T-Mobile a pink triangle; and for O2 bubbles.
41.	Market testing was carried out by BASIS in May 2004.  At the stage when the market testing was carried out, there was a story board in existence for the Orange comparative advertisement, but not for O2. The visual depiction of bubbles had not been developed. The interviewees were simply read the scripts. The researchers noted that
•	Some interviewees had some concern that the dissolve from competitive networks to 3 could be interpreted as a merger or re-brand;
•	Although in general the interviewees recognised the brand symbols for other brands, there was isolated concern that some did not recognise the symbols immediately.
42.	In the light of the first of these concerns, BASIS recommended that careful thought be given to the transition from one logo to another. In the light of this recommendation Mr Hough was concerned to emphasise the separation between 3 and the network it was comparing. Mr Hough accepted that the interviewees understood that bubbles referred to O2. The principal area of confusion about the identifiers of other brands was between Vodafone and Virgin. In the end, Virgin was dropped from the competitors whose offerings would be compared with 3’s.
43.	Mr Tauscher was in regular contact with the BACC and took on board all their comments. One comment was that the BACC were very uneasy about the script of an early version of the advertisement which asked whether the rival’s charge was “fair”. The BACC were worried that this might imply that the whole pricing structure was unfair. The question was dropped from later iterations. In the main the BACC’s comments were restricted to the scripts of the advertisements. Indeed it seems likely that they were only shown the scripts themselves. Mr Tauscher and Mr Hough described the evolution of the visual imagery and accompanying soundtrack as follows. They were aware of the potential legal problems in using bubble imagery that was too close to the imagery used by O2 itself. So the creative team were asked to devise bubble imagery that differed from that used by O2. Mr Hough described O2’s bubble imagery as “relatively few unusually shaped bubbles slowing rising”. In contrast the WCRS creative team devised “a large number of fast moving, smaller, regularly shaped bubbles bursting out from a central point as viewed from above.” For the same reason (i.e. to differentiate H3G) the background was changed from blue to black, despite the preference of some members of the creative team for staying with blue. Mr Hough explained that in the light of the feedback from the market research the decision was taken that in all the finished advertisements, the screen would fade to white between the depiction of the competitor and the depiction of ThreePay. Mr Tauscher said that the soundtrack was also intended to differentiate H3G from O2. This was to be achieved by creating a moody tone when referring to O2. The means adopted was to use a soundtrack which was a mix of music and sound effects that sounded like flowing water. After that, the soundtrack would move into a more upbeat tone. That part of the soundtrack would accompany images of H3G’s animated logo moving about the screen. These elements of the advertisement were developed through July 2004 and on into early August. In addition, during this period, the script of the advertisement evolved, particularly in the light of some consumer feedback received during the course of the market testing. 
44.	On 12 August 2004 the BACC asked for confirmation that the advertisements would not infringe O2’s trade marks. WCRS arranged for Lewis Silkin, their solicitors, to provide a half page e-mail confirming this. The e-mail was provided on 20 August. BACC cleared the advertisement for transmission.
Trouble: the offending advertisement 
45.	H3G ran comparative advertisements, targeting O2, in the summer of 2004. The advertisements included press advertisements, a radio advertisement and a TV advertisement. The O2 comparative TV advertisement was first broadcast on 21 August 2004. It was one of (and the last in) a series of comparative advertisements comparing ThreePay with its competitors. The advertisement lasts for 20 seconds. The first 8.5 seconds deal with O2’s offer. The screen is then cleared for about 1.2 seconds. The remainder of the advertisement describes 3’s offer. It is not easy to describe in words the overall effect of the combination of simultaneous visual and aural aspects of the advertisement. O2 prepared an analysis of the advertisement which I reproduce, with some adaptations. 
Time
(Secs)	Event	
0.0	A concentrated mass of white bubbles appears in a circular shape on a black screen. The bubbles start to expand in size	
0.7	As the bubbles continue to expand a male voice over begins. The male voice speaks in a relative monotone. The spoken words are: “On 02 pay as you go the first three minutes peak call rate each day could cost you seventy five p.” The words “seventy five p” are emphasised. The voice-over lasts until 8 seconds into the advertisement	
3.0	As the bubbles continue to expand a soundtrack of bubbling noises begins	
4.0	The bubbling noises continue. The bubbles now fill the screen. Individual bubbles have expanded and have become discernible against the background mass of bubbles. The individual bubbles are circular in shape, and appear against the mass of much smaller bubbles.	
6.7	As the bubbles continue to expand a caption (or “super”) appears at the bottom of the screen. It is in black lettering, in contrast to the white bubbles. It reads: 
“O2 Talkalot & Talkalotmore 5p per minute thereafter. Based on a £25 VideoTalk voucher with a 30 day validity period. Certain calls excluded. See three.co.uk”	
8.0	The voice-over ends simultaneously with the bubbling noises. An upbeat jingle fades in. The jingle lasts until the end of the advertisement.	
8.5	A large circular bubble sweeps across the screen. It is seen against the mass of smaller bubbles. The screen clears quickly from the centre, leaving the caption on a white screen. The jingle is continuing.	
9.7	A stylised and animated “3” appears on the screen. It enters stage right with a fizzing tail and performs a journey to stage front. It spins and twists as it goes, and at one point appears to rush out of the screen towards the viewer. The fizzing tail consists of grey flow lines and a variety of green shapes.	
10.9	A second voice-over begins. The voice-over is a female voice, in a brighter and upbeat tone. The spoken words are: “Or with ThreePay, that exact same call could cost you fifteen p”. This voice-over lasts until 15 seconds into the advertisement. Meanwhile the jingle continues, and the caption remains on screen. The stylised “3” continues to move about the screen, changing colour from red to blue to green. It then rotates on the spot. 	
14.5	As the voice-over continues and the caption remains on the screen, the stylised “3” stops moving. It changes colour to yellow and then to green; and the fizzing tail fades. The stylised “3” remains in the middle of the screen until the end of the advertisement.	
15.1	The second voice-over ends. The stylised “3” is still on screen and changing colour. The caption remains on screen.	
15.6	The caption disappears.	
16.7	A third voice-over begins. This is in the same female voice as the second voice-over. The spoken words are: “ThreePay - Pay as you go from 3”	
17.0	While the voice-over continues, the stylised “3” continues to change colour (green to blue to turquoise to purple). A second caption appears on screen. It reads: “ThreePay - Pay as you go from 3”	
19.1	The third voice-over ends. The jingle ends. The caption fades. The stylised “3” is still on screen and changing colour	
20.0	The advertisement ends, with the stylised “3” still on screen.	

46.	Mr Wallace, a trade mark attorney, saw the advertisement on television on 23 August 2004. He is a partner in a firm of trade mark attorneys who act for O2. He noticed that the advertisement began with a stream of bubbles being dispersed. It caught his attention because he was aware that one of his partners was a trade mark attorney who acted for O2; and they had previously had discussions about matters of filing, protection and similar matters relating to the bubbles. His overall impression was that the advertisement was either advertising a joint venture between O2 and someone else; or that it heralded O2’s entry into the third generation phone market. However, having recognised the theme of bubbles and made the link with O2, he had not paid much attention to the remainder of the advertisement. I do, of course, take into account Mr Wallace’s evidence when assessing the likelihood of confusion. But I cannot regard a trade mark attorney, who was familiar with the work that his firm was doing on behalf of O2, as being the paradigm of an ordinary consumer.
The success of H3G’s campaign
47.	H3G’s advertising during 2004 (which included the offending advertisement) had its own success. It greatly increased subscriber numbers. During 2004 H3G’s share of the market (according to its own figures) rose from about 5 per cent to a little short of 25 per cent. By December 2004 it had 2.5 million subscribers.
48.	In early 2005 it entered the competition for industry awards, under the auspices of the Marketing Society, based on its advertising campaigns during 2004. The comparative advertising campaign was specifically mentioned in its submission to the panel of judges. One of the judging panel was Mr Hugh Burkitt, of whom more later, and another was the marketing director of O2 itself. H3G won the award in the category: New Brand. The citation included:
“The campaign was aimed at creating a clear distinction between 3 and its rivals, as well as promoting the launch of its pay-as-you-go proposition aimed at the 50%-60% of the market which wants the flexibility of such a scheme….
An advertising campaign positioned the 3 brand around a playful attitude to high technology, as well as aggressively highlighting its value compared with other networks.”
49.	Mr Burkitt gave a quotation, which appeared in H3G’s press release announcing the award. Mr Burkitt commended H3G as being “a deserving winner in a very competitive category”. Within both WCRS and H3G the comparative advertising campaign was also regarded as “aggressive”.
50.	I should also note that complaints in relation to the text of advertisements relating to two other competitors were upheld by the Advertising Standards Authority. No complaint, so far as I am aware, was made in relation to the visual presentation of those advertisements.
The proceedings so far
Interim injunction refused
51.	On 26 August 2004 O2 applied to the Court for an injunction. The complaint related both to the text of the advertisement and also to the visual imagery and soundtrack. Complaints were also made about press and radio advertisements. Pumfrey J [2005] ETMR 61 held that there was no triable issue as regards the text of the TV advertisement. But he held that there was a triable issue as regards infringement of O2’s bubble trade marks. However, he concluded that the balance of convenience did not favour the grant of an injunction; so he dismissed the application on 9 November 2004. In the course of his judgment Pumfrey J made observations on which O2 particularly rely:
“First, the comparative advertising defence, if that is the correct way to refer to it, centres on an objective comparison. That objective comparison must be an objective comparison for which the use of the trade mark in question is, to use the words of the recitals, indispensable. This has particular relevance to the question of the infringement of the Bubbles trade marks since if the case on infringement is otherwise arguable, the impact of the comparative advertising defence may be different from its impact on the use of the O2 mark, since the use of the bubbles sign in the advertisement is certainly gratuitous and I think it would be stretching it to describe it as indispensable to the making of the comparison which the advertisement makes.”

“I turn to the question of the Bubble marks. This is a more difficult question. I leave the question of arguable infringement on ordinary principles to be dealt with after I have considered whether they can take advantage of what for conciseness I call the comparative advertising defence. This I think is a matter for an appreciation of the advertisement as a whole. When one watches the advertisement, the voice-over associates the word or words "O2" with the bubbles almost immediately. It is right that bubbles, although bubbles by no means identical to the bubbles in this advertisement, have been used extensively by the claimants and I am left with what may only be a lawyer's strong suspicion that the defendant have used the bubbles as a way of emphasising the unfavourable nature of the comparison which is being made, an impression which is reinforced by the fact that the bubbles appear in black and white, or more accurately in shades of dark grey, rather than the rather more cheerful blue colour of the claimants' own advertisements.” (Emphasis added)
52.	In the light of the conclusions of Pumfrey J O2 reconsidered its particulars of claim and substantially amended them on 15 November 2004. O2 abandoned any claim for infringement of the word marks. It also abandoned its claim for passing off and for infringement of the bubble marks by the newspaper and radio advertisements. Consequential amendments were made by H3G to its defence in which it averred that each of the contentions of European law advanced by O2 in its amended particulars of claim was wrong. O2 then amended its reply. The amended statements of case have been consolidated with those served in connection with a second claim issued by O2 on 3 December 2004.
Reference to ECJ refused
53.	 On 21 December 2004 O2 applied for an order for reference of various questions to the ECJ under Article 234 of the EC Treaty.  Twelve questions were put forward as identifying issues that needed to be referred.  Morritt V-C refused the application [2005] ETMR 62; and said that any reference should await the outcome of the fact-finding exercise. In fact O2 now accept that three of the twelve questions have become redundant. In the order of the Vice-Chancellor O2 accept and acknowledge “that it is to be assumed for the purposes of this action only that the price comparison in the TV Advertisement was true and not misleading”. Mr Arnold QC stresses that this assumption is to be made for the purpose of this action only; and does not preclude O2 from raising complaints elsewhere. Mr Sutton, however, still holds the view that the price comparison is “an extreme and unfair one”. The Vice-Chancellor’s order also required O2 to nominate two of its bubble trade marks to go forward for trial on the basis of their claim for infringement under section 10 (2) of the Trade Marks Act 1994 and two to go forward for trial on the basis of their claim for infringement under section 10 (3). This resulted in the nomination of the four trade marks I have described. Technical and Fizz are relied on under section 10 (2); and Relax and Continuous are relied on under section 10 (3).
54.	Thus O2’s claim has been extensively repleaded since the initial application before Pumfrey J; and it has changed its legal team. In addition, H3G has brought a counterclaim for revocation of the trade marks. Mr Hobbs describes it as “defensive”.
Survey evidence
55.	There is one particular procedural matter I should refer to: that of survey evidence. The question of survey evidence was raised at the end of the application before Pumfrey J. Pumfrey J made an order that no survey evidence should be admitted without the permission of the court; but he said that O2 could carry out a “first shot survey” and then “come back with the results”. Very shortly before trial O2 applied to Master Bragge for permission to conduct a full-blown survey. He refused permission. O2 did not appeal against the refusal.
56.	Nevertheless, O2 served witness statements from the market researcher who had carried out the “first shot” survey and from a number of interviewees. H3G objected to the admission of the evidence. At the beginning of the trial, I ruled in H3G’s favour and excluded the evidence.
The issues:
57.	The main issues that I have to decide are the following:
i)	Are the nominated bubbles trade marks validly registered as trade marks?
ii)	If so, is there a prima facie case of infringement under article 5 (1)(b) of the Trade Marks Directive/section 10 (2) of the Trade Marks Act 1994;
iii)	If the registrations are valid, is there a prima facie case of infringement under article 5 (2)/section 10 (3) of the 1994 Act;
iv)	If there is a prima facie case of infringement on either ground, does H3G have a defence under the Comparative Advertising Directive;
v)	Alternatively, does H3G have a defence under section 10 (6)?
The legal framework
The Trade Marks Directive
58.	The applicable law derives from the Trade Marks Directive which has been transposed into domestic law by the Trade Marks Act 1994. The relevant provisions of the Directive are as follows:
“[Recital 9]
Whereas it is fundamental, in order to facilitate the free circulation of goods and services, to ensure that henceforth registered trade marks enjoy the same protection under the legal systems of all the Member States; whereas this should however not prevent the Member States from granting at their option extensive protection to those trade marks which have a reputation
[Recital 10]
Whereas the protection afforded by the registered trade mark, the function of which is in particular to guarantee the trade mark as an indication of origin, is absolute in the case of identity between the mark and the sign and goods or services; whereas the protection applies also in case of similarity between the mark and the sign and the goods or services; whereas it is indispensable to give an interpretation of the concept of similarity in relation to the likelihood of confusion; whereas the likelihood of confusion, the appreciation of which depends on numerous elements and, in particular, on the recognition of the trade mark on the market, of the association which can be made with the used or registered sign, of the degree of similarity between the trade mark and the sign and between the goods or services identified, constitutes the specific condition for such protection; whereas the ways in which likelihood of confusion may be established, and in particular the onus of proof, are a matter for national procedural rules which are not prejudiced by the Directive
Article 3
Grounds for refusal or invalidity
1. The following shall not be registered or if registered shall be liable to be declared invalid:
(a) signs which cannot constitute a trade mark;
(b) trade marks which are devoid of any distinctive character…;
3. A trade mark shall not be refused registration or be declared invalid in accordance with paragraph 1 (b), (c) or (d) if, before the date of application for registration and following the use which has been made of it, it has acquired a distinctive character. Any Member State may in addition provide that this provision shall also apply where the distinctive character was acquired after the date of application for registration or after the date of registration.
Article 5
Rights conferred by a trade mark
1. The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:
(a) …; 
(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.
2. Any Member State may also provide that the proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade any sign which is identical with, or similar to, the trade mark in relation to goods or services which are not similar to those for which the trade mark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
3. The following, inter alia, may be prohibited under paragraphs 1 and 2:
(a) …
(b) …
(c)  …
(d) using the sign on business papers and in advertising.
Article 6
Limitation of the effects of a trade mark
1. The trade mark shall not entitle the proprietor to prohibit a third party from using, in the course of trade,
(a) …
(b) indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of the service, or other characteristics of goods or services; 
(c) the trade mark where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts; provided he uses them in accordance with honest practices in industrial or commercial matters.”
The Trade Marks Act 1994
59.	The relevant provisions of the Trade Marks Act 1994, which is the applicable domestic legislation, are the following:
“1 (1) In this Act a “trade mark” means any sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings.  
    A trade mark may, in particular, consist of words (including personal names), designs, letters, numerals or the shape of goods or their packaging
3 (1) The following shall not be registered—  
   (a)   signs which do not satisfy the requirements of section 1(1), 
   (b)  trade marks which are devoid of any distinctive character…
Provided that, a trade mark shall not be refused registration by virtue of paragraph (b), (c) or (d) above if, before the date of application for registration, it has in fact acquired a distinctive character as a result of the use made of it.
9 (1)   The proprietor of a registered trade mark has exclusive rights in the trade mark which are infringed by use of the trade mark in the United Kingdom without his consent.  
    The acts amounting to infringement, if done without the consent of the proprietor, are specified in section 10.  
 (2)   References in this Act to the infringement of a registered trade mark are to any such infringement of the rights of the proprietor.
10 (2) A person infringes a registered trade mark if he uses in the course of trade a sign where because—  
   (a)    the sign is identical with the trade mark and is used in relation to goods or services similar to those for which the trade mark is registered, or  
   (b)    the sign is similar to the trade mark and is used in relation to goods or services identical with or similar to those for which the trade mark is registered,  
there exists a likelihood of confusion on the part of the public, which includes the likelihood of association with the trade mark.
10 (3) A person infringes a registered trade mark if he uses in the course of trade, in relation to goods or services, a sign which—  
   (a)    is identical with or similar to the trade mark, . . .  
   (b)    . . .  
 where the trade mark has a reputation in the United Kingdom and the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.
10 (4) For the purposes of this section a person uses a sign if, in particular, he—  
   (a)    …
   (d)    uses the sign on business papers or in advertising.
10 (6) Nothing in the preceding provisions of this section shall be construed as preventing the use of a registered trade mark by any person for the purpose of identifying goods or services as those of the proprietor or a licensee.  
    But any such use otherwise than in accordance with honest practices in industrial or commercial matters shall be treated as infringing the registered trade mark if the use without due cause takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark.
11 (2) A registered trade mark is not infringed by—  
   (a)    …
   (b)    the use of indications concerning the kind, quality, quantity, intended purpose, value, geographical origin, the time of production of goods or of rendering of services, or other characteristics of goods or services …
41 (2) A series of trade marks means a number of trade marks which resemble each other as to their material particulars and differ only as to matters of a non-distinctive character not substantially affecting the identity of the trade mark. 
47 (1) The registration of a trade mark may be declared invalid on he ground that the trade mark was registered in breach of section 3 or any of the provisions referred to in that section (absolute grounds for refusal of registration).  
    Where the trade mark was registered in breach of subsection (1)(b), (c) or (d) of that section, it shall not be declared invalid if, in consequence of the use which has been made of it, it has after registration acquired a distinctive character in relation to the goods or services for which it is registered.
72 In all legal proceedings relating to a registered trade mark (including proceedings for rectification of the register) the registration of a person as proprietor of a trade mark shall be prima facie evidence of the validity of the original registration and of any subsequent assignment or other transmission of it.”  
60.	It is common ground that the domestic legislation enacts the provisions of the Trade Marks Directive, including those parts of it that were optional. So argument for the most part concentrated on the words of the Directive, rather than those of the Act. 
Invalidity: burden of proof
61.	The bubbles trade marks have in fact been registered as trade marks. So, according to section 72 of the 1994 Act, that is prima facie evidence of the validity of the original registration. It follows that the burden of establishing invalidity lies on H3G. 
A short digression
62.	Before embarking on a consideration of the relevant case law, I digress a little. Section 3 of the European Communities Act 1972 says that:
(1)   For the purposes of all legal proceedings any question as to the meaning or effect of any of the Treaties, or as to the validity, meaning or effect of any Community instrument, shall be treated as a question of law (and, if not referred to the European Court, be for determination as such in accordance with the principles laid down by and any relevant decision of the European Court or any court attached thereto).  
 (2)   Judicial notice shall be taken of the Treaties, of the Official Journal of the Communities and of any decision of, or expression of opinion by, the European Court or any court attached thereto on any such question as aforesaid; and the Official Journal shall be admissible as evidence of any instrument or other act thereby communicated of any of the Communities or of any Community institution.”
63.	It follows that an English judge must decide a case in the national court, where the decision turns on the meaning of a Community instrument such as a directive, in accordance with the principles laid down by the European Courts. This includes not only the ECJ but also the CFI.  I mention this perhaps obvious proposition because the editors of the current edition of Kerly on Trade Marks are very critical of the reasoning of the CFI and, on occasion, of the ECJ itself. However well-founded their criticisms may be, it is for the European Courts, and not a national judge, to respond to them.
64.	Mr Hobbs showed me an interesting article by Professor Thomas McCarthy discussing from the perspective of both Europe and the USA the concept of dilution of a trade mark (Dilution of a Trademark: European and United States Law Compared Vol. 94 TMR 1163). The author suggests that ECJ has misunderstood the concept of dilution and had misapplied it in its most recent case law. Professor McCarthy is, of course, entitled to his own opinion; and he may well be right. But that is beside the point. My job is to apply the law as laid down by the ECJ and the CFI.
Distinctiveness
65.	The plea of invalidity is not based on section 3 (1) (a). It is not, therefore, said that the bubbles are incapable of being represented graphically; nor that they are incapable of distinguishing goods or services of one undertaking from those of another undertaking. The attack is based on lack of distinctiveness under section 3 (1) (b).
66.	In order for a mark to pass the test imposed by section 3 (1) (b) the mark must be capable of enabling the relevant public to identify the origin of the goods or services in question and to distinguish them from those of other undertakings. This is the fundamental purpose of a trade mark.  As Lord Nicholls of Birkenhead said in R v. Johnstone [2003] 1 WLR 1736:
“But the essence of a trade mark has always been that it is a badge of origin. It indicates trade source: a connection in the course of trade between the goods and the proprietor of the mark. That is its function.”
67.	If the sign is capable of doing that job, it ought not to fail as a trade mark for lack of distinctiveness. As the law has developed the distinctiveness of a mark may be inherent or acquired. (Unlike greatness as described by Malvolio, distinctiveness cannot, it seems, be thrust upon it). 
68.	Whether a mark is distinctive (either inherently or through acquisition of distinctiveness) may depend on the level of generality at which the question is asked. Mr Arnold submitted that the question is not whether bubbles are distinctive; but whether the particular images of bubbles registered as trade marks are capable of distinguishing the services offered by one provider of telecommunications services from those of another. I agree.
69.	In Yakult Honsha KK’s Trade Mark Application [2001] RPC 39 Laddie J said of inherent distinctiveness:
“Where inherent distinctiveness is concerned, the Registry has to find that the mark performs the function of identifying origin even before the public is educated that it is so used for that purpose.”
70.	In Linde AG v. Deutches Patent-und Markenamt [2003] ECR I-3161 the ECJ said:
“40 For a mark to possess distinctive character within the meaning of that provision it must serve to identify the product in respect of which registration is applied for as originating from a particular undertaking, and thus to distinguish that product from products of other undertakings (see Philips, paragraph 35).
41 In addition, a trade mark's distinctiveness must be assessed by reference to, first, the goods or services in respect of which registration is sought and, second, the perception of the relevant persons, namely the consumers of the goods or services. According to the Court's case-law, that means the presumed expectations of an average consumer of the category of goods or services in question, who is reasonably well informed and reasonably observant and circumspect (see Case C-210/96 Gut Springenheide and Tusky [1998] ECR I- 4657, paragraph 31, and Philips, paragraph 63).”
71.	As Mr Arnold submitted the question of distinctiveness must be applied in the context of the category of goods for which the marks are registered. What may be distinctive in one context may not be distinctive in another. I will avoid resort to the trade mark lawyer’s favourite example of “soap”, because Mr Arnold gave a much better one. It is well known that there is a credit card called “Goldfish”. “Goldfish” is an ordinary English word; and if registration of that word were sought in relation to a pet, it might not pass the test. But in the context of a credit card, it has distinctiveness. Accordingly, the question for consideration in this case is whether the trademarked bubbles are capable of distinguishing the telecommunication services and equipment offered by one undertaking from those offered by another, before the public has been educated that the marks are used for that purpose. In considering that question, the court must assume that normal use of the marks will be made. In the case of goods, that is a relatively easy concept, since the mark can be envisaged as being applied to packaging and the like. In the case of services, it is not so easy. However, in the present case the marks were registered for both goods and services. 
72.	In considering the question of acquired distinctiveness, the ECJ held in Windsurfing Chiemsee Produktions und Vertriebs GmbH v Boots- und Segelzubehor Walter Huber [2000] Ch 523:
“51. In assessing the distinctive character of a mark in respect of which registration has been applied for, the following may also be taken into account: the market share held by the mark; how intensive, geographically widespread and long-standing use of the mark has been; the amount invested by the undertaking in promoting the mark; the proportion of the relevant class of persons who, because of the mark, identify goods as originating from a particular undertaking; and statements from chambers of commerce and industry or other trade and professional associations.

52. If, on the basis of those factors, the competent authority finds that the relevant class of persons, or at least a significant proportion thereof, identifies goods as originating from a particular undertaking because of the trade mark, it must hold that the requirement for registering the mark laid down in article 3(3) of the Directive is satisfied. However, the circumstances in which that requirement may be regarded as satisfied cannot be shown to exist solely by reference to general, abstract data such as predetermined percentages.” 
73.	The acid test, therefore, as regards acquired distinctiveness is whether as a result of the use of the mark, a significant proportion of the relevant class of persons identifies the goods or services in question as originating from a particular undertaking. In the present case the relevant class of persons consists of users or potential users of mobile phone services. There is one gloss on this that is needed (and it applies both to inherent distinctiveness and acquired distinctiveness). It is not necessary for the average consumer to be able to identify the goods or services as originating from a particular undertaking in the sense of being able to name the undertaking concerned. It is enough that the average consumer knows that some statement about trade origin or quality of goods or services is being made.
Use in conjunction with other identifiers
74.	The bubbles have not often been used on their own to identify telecommunication services as emanating from O2. Moreover they have rarely been used in the full form in which they are registered. For the most part, images of bubbles have been cropped. They have been used in conjunction with other identifiers, including other trade marks, principally the logo O2. Mr Arnold submits that this does not prevent the bubbles from having acquired the necessary distinctiveness. He relies on the decision of the ECJ in Case C-323/03 Société des Produits Nestlé SA v. Mars UK Ltd [2005] ETMR 96. Nestlé were the proprietors of the registered trade marks “KIT KAT” and “HAVE A BREAK HAVE A KIT KAT”.  The question was whether they were entitled to register “HAVE A BREAK” as a separate trade mark.  In paras 29 and 30 of their judgment the ECJ said:
“29 The expression "use of the mark as a trade mark" must therefore be understood as referring solely to use of the mark for the purposes of the identification, by the relevant class of persons, of the product or service as originating from a given undertaking.
30 Yet, such identification, and thus acquisition of distinctive character, may be as a result both of the use, as part of a registered trade mark, of a component thereof and of the use of a separate mark in conjunction with a registered trade mark. In both cases it is sufficient that, in consequence of such use, the relevant class of persons actually perceive the product or service, designated exclusively by the mark applied for, as originating from a given undertaking.”
75.	I accept Mr Arnold’s submission that use of a sign as part of a composite whole is not use which is disqualified in determining whether the sign has acquired the necessary distinctiveness to qualify as a trade mark. However, the question is not whether the composite whole has the requisite distinctiveness. Nor is it whether the sign has distinctiveness as part of the composite whole. Rather it is whether, as a result of use as part of a composite whole, the relevant class of persons actually perceive the product or service, designated exclusively by the mark applied for, as originating from a given undertaking.
76.	It seems to me therefore that the question I must answer is: Does a significant proportion of the class of mobile phone users or potential mobile phone users identify mobile phone services as coming from a particular source as a result of the trademarked bubbles on their own?  
Significance of the form of the registration
77.	Mr Hobbs draws attention to three features of the registrations. First, with one exception, the colour blue is claimed as an element of the mark. Mr Hobbs says that a colour claim confirms that the graphically represented colour or colour scheme is an integral part of the trade mark to which the claim relates.  The absence of a colour claim or limitation effectively makes it a requirement that no particular colouring is necessary for the graphically represented mark to possess a distinctive character:  Cases T-128/00 and T-129/00 Procter & Gamble Company v. OHIM [2001] ECR II-2793 para 55.  
78.	Second, Mr Hobbs draws attention to the fact that the two images in the “Technical” trade mark are registered as a series. He says that a relatively high degree of homogeneity is required in order to satisfy the statutory criteria for protection by registration in series.  The wording of Section 41(2) requires iteration of the material particulars of a trade mark with nothing more than variations of a non-distinctive character not substantially affecting the identity of the trade mark reiterated within the series: Digeo Broadband Inc’s TM Application [2004] RPC 32, at 638.  Thus the difference between blue and monochrome, at least in the case of Technical, must be regarded as immaterial to its distinctiveness. I agree.
79.	Third, Mr Hobbs refers to the fact that each mark is registered as a device or picture. He accepts that subject to compliance with the requirements for graphical representation and legal certainty, it is possible to obtain protection by registration for moving image marks. The normal practice in such cases is that movement marks are represented by a series of still images, and it is made clear that the mark is a moving image, what the image depicts, how many images are involved, their order and the fact that there is a single sequence of movement: Kerly on Trade Marks (14th ed) para 2-063. However, where an image is registered as a static “device mark” only, he says that it is an unsuitable basis for claiming protection either in respect of or against a moving image.
80.	It is common ground that the mark as registered is a fixed point of reference by which infringement is to be judged. The registered mark must be considered in the precise form in which it is registered. As Mr Hobbs put it the task of the court is metaphorically to have the registered mark in one hand, and the allegedly infringing sign in the other; and then compare the two. The proprietor of the mark cannot extend the scope of what is protected by using signs which are similar to the mark. Mr Hobbs relied on the following passage from the judgment of the CFI in Case T-147/03 Devinlec Développement Innovation Leclerc SA v OHIM:
“66	It is important to note that, under the provisions of Regulation No 40/94 governing examination of opposition to registration of a Community trade mark, the purpose of demonstrating genuine use of an earlier national mark is to provide a means for its proprietor, at the express request of the Community trade mark applicant, to furnish proof that during the period of five years preceding the date of publication of the Community trade mark application its mark has been put to actual and genuine use on the market. In accordance with Article 15(2)(a) and Article 43(2) and (3) of Regulation No 40/94, that proof also applies where the sign used differs from the earlier mark as it was registered in elements which do not alter the distinctive character of the mark. In the absence of such demonstration, in particular if the elements used alter the distinctive character of the earlier mark, or in the absence of demonstration of justifiable grounds for lack of use, the opposition must be dismissed. Accordingly, demonstration of genuine use of an earlier mark in connection with opposition proceedings has neither the aim nor the effect of granting its proprietor protection for a sign or elements of a sign which have not been registered. Accepting the opposite argument would lead to unlawful extension of the protection enjoyed by the proprietor of an earlier mark which is the basis of an opposition to registration of a Community trade mark.
67     In this case, since the applicant registered only the earlier mark as reproduced in paragraph 5 above, which is the basis of the opposition on which the Board of Appeal was asked to rule in the contested decision, only that mark enjoys the protection accorded to earlier registered trade marks.” (Emphasis added) 
81.	 Mr Arnold agreed with Mr Hobbs’ proposition as far as it went; and so (for what it is worth) do I. But as Mr Arnold rightly said, this does not mean that an infringement must replicate the registered mark. Although protection is given to the registered mark alone, that protection extends not only to use of an identical sign, but also to similar signs.
Device marks and moving images
82.	The lynch-pin of Mr Hobbs’ submission on the unsuitability of a device mark to give protection against a moving image was the decision of the High Court of Australia in Shell Company of Australia Ltd v Esso Standard Oil (Australia) Ltd (1963) 109 CLR 407. The evidence in that case proved a few instances, spread over twenty years or so, of the use in advertisements by various oil companies of an oil drop drawn out at the top as if to indicate viscosity, and “humanized” by the suggestion of facial features and by the addition of legs, either with or without a body. Esso had registered a trade mark of that kind. It was a static device mark. Shell produced a TV advertisement which showed a similar cartoon figure. The advertisement was described as follows:
“In each film a “humanized” oil drop is made to personify the appellant's “Shell” petrol, and to perform a series of exuberant antics designed, in conjunction with some letterpress and the spoken word, to create in the minds of viewers a feeling of pleasure at recognizing desirable attributes in Shell petrol. In the course of his merry pranks, the Shell Eulenspiegel constantly changes in shape and expression. He always has a head the shape of an oil drop drawn to a peak at the top, and generally the head is supported, without a neck, by a body bifurcated to indicate short legs with feet turned outwards. Arms and hands take up varying positions, and what passes for a face expresses varying emotions. On some occasions the figure, in the course of its mutations, approaches fairly closely in appearance to the respondent's trade marks; but the name “Esso” is never seen, and the changes of appearance follow one another so swiftly that the viewer can hardly gain more than a general impression of a Protean creature who could be, having regard to some of his manifestations at least, the man whom the respondent has registered as its trade mark, but could equally be another member of the same tribe. It may be assumed for present purposes, however, that in the course of each film the figure takes on, at least for a moment or two now and then, an appearance substantially identical with that of the trade marks.”
83.	The majority held that there was no infringement of Esso’s trade mark. Kitto J gave the leading judgment. He said:
“At every point of the exhibition, whether the resemblance to the respondent’s trade marks be at the moment close or remote, the purpose and the only purpose that can be seen in the appearance of the little man on the screen is that which unites the quickly moving series of pictures as a whole, namely the purpose of conveying by a combination of pictures and words a particular message about the qualities of Shell petrol. This fact makes it, I think, quite certain that no viewer would ever pick out any of the individual scenes in which the man resembles the respondent's trade marks, whether those scenes be few or many, and say to himself: “There I see something that the Shell people are showing me as being a mark by which I may know that any petrol in relation to which I see it used is theirs.” And one may fairly affirm with even greater confidence that the viewer would never infer from the films that every one of the forms which the oil drop figure takes appears there as being a mark which has been chosen to serve the specific purpose of branding petrol in reference to its origin. No doubt if, later, the viewer were to come across the respondent’s trade mark used in relation to petrol his recollection of the films might lead him to think that the appellant, taking advantage of a reputation created for the oil drop figure by means of the films, had adopted the figure, in one of its forms, as a mark for its petrol. But that would be quite a different matter from inferring, while sitting in front of his television set, that the figure in one or more, some or all, of its exhibited forms was being placed before him there as a trade mark for Shell petrol.”
84.	In agreeing with Kitto J, Taylor J (with whom Owen J also agreed) said:
“I desire to add for myself that I doubt whether it can properly be said, in the circumstances of the case, that the animated figure or device, if it may be so described, as used by the appellant constituted, as the learned trial judge found, a mark deceptively similar to the respondent's mark. The problem presents difficulty because it involves a comparison between a static device and an animated figure which is constantly moving and changing its expressions and attitudes. I do not doubt that the rights of the proprietor of a trade mark may be infringed by television displays of this character but when the question is whether the device which is used is deceptively similar to a registered mark it cannot be resolved without considering the effect which the display in its entirely would be calculated to produce. To my mind, there is much to be said for the proposition that this question cannot be answered in favour of the registered proprietor where - as is the case here - it is impossible to perceive any resemblance between the moving figure and the device the subject of the mark except for a few fleeting moments on one or two occasions.”
85.	Mr Hobbs placed special reliance on the observations of Taylor J.  However, I cannot extract from these observations the proposition that a moving image cannot infringe a static device mark. It must all depend on the circumstances. One example that was discussed was the figure of “Tony the Tiger” used as part of the brand of the breakfast cereal “Frosties”. If a rival trader produced an animated version of “Tony the Tiger” of which no single frame was the same as a static trade mark (assuming that “Tony the Tiger” is a static device mark), I see no reason why that should not amount to infringement if the animation was recognisable as (or deceptively similar to) Tony the Tiger. I therefore reject Mr Hobbs’ broad proposition that a device mark is necessarily a poor basis for challenging an animation as amounting to a trade mark infringement. On the other hand, I accept his submission that the question of deceptive similarity between a static device mark and a moving image is not to be decided by freezing an individual frame of a moving image and comparing it to the registered mark, if the average consumer would not in practice perceive the frozen frame individually. The task, in my judgment, is to compare the moving image as a whole with the registered mark.
What kind of use counts as infringement?
86.	Article 5 says that the kind of use that counts as infringement is use in the course of trade. However, article 6 says that use to identify characteristics of the goods or services is permitted. Mr Arnold was disposed to accept as accurate the following summary in Kerly on Trade Marks:
“In order to establish infringement under s. 10(1)-(3) a claimant must therefore prove that the defendant is using the sign in issue in a trade mark sense, that it to say as an indication of origin or so as to create the impression that there is a material link in the course of trade between the goods or services in issue and the trade mark proprietor.  Purely descriptive use cannot infringe.  If the sign is used in such a way that it both denotes origin and acts as a description – the no man’s land identified by Lord Walker – then, it is submitted, such use will also infringe if the use is liable to jeopardise the guarantee of origin which constitutes the essential function of a trade mark.”
87.	There is, however, an ambiguity in the phrase “an indication of origin”. An indication of origin of what? Mr Arnold and Mr Hobbs gave diametrically opposed answers to this question. Mr Arnold submitted that anything that made a statement about the origin of goods was covered. In order to escape from infringement, the use of a sign had to be neutral about the origin of the goods or services in connection with which it was used. Any assertion about the origin of goods, whether express or implied, or whether positive or negative violates that neutrality. Permitted use of a mark or sign had to be purely descriptive, in the sense of doing no more than identifying or alluding to some characteristic of the goods or services in question. Thus if a third party used the mark to identify goods or services as coming from the trade mark proprietor himself, that counted as use for this purpose.
88.	Mr Hobbs on the other hand submitted that use of a sign would only infringe a trade mark if it attempted to attribute the origin of goods or services to someone other than the trade mark owner. 
89.	Take a concrete example. Suppose that a retailer of mobile phones offers to sell handsets to customers, and offers the customer the opportunity to connect to a variety of different networks (say, O2, Orange, Vodafone and T-Mobile). Suppose he creates a chart showing the different tariffs charged by each network. Can he, without getting permission, use the logo of each network to indicate which tariff goes with which network? Mr Hobbs says “yes”, because such a use does not fall within article 5 at all. Mr Arnold says such use falls within article 5 in principle, but that in most cases the retailer would have a defence either under article 6 or, more probably, under article 7. So in this example, Mr Arnold’s answer is also “yes”, but for very different reasons.
90.	In British Sugar plc v James Robertson & Sons Ltd [1996] RPC 281, 290 it was argued that sections 9 and 10 of the 1994 Act implicitly limited infringing use to use as a trade mark. Mr Hobbs repeated this argument before me. But Jacob J rejected it. He said:
“I can see no reason so to limit the provisions of section 10. That is not to say a purely descriptive use is an infringement. It is not, but not because it does not fall within section 10 but because it falls within section 11(2). I see no need to put any gloss upon the language of section 10. It merely requires the court to see whether the sign registered as a trade mark is used in the course of trade and then to consider whether that use falls within one of the three defining subsections.”
91.	Has the law changed? In Arsenal Football Club v Reed [2003] Ch 454, the ECJ said:
51. ... the exclusive right under article 5(1)(a) of the Directive was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions. The exercise of that right must therefore be reserved to cases in which a third party's use of the sign affects or is liable to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods.
52. The exclusive nature of the right conferred by a registered trade mark on its proprietor under article 5(1)(a) of the Directive can be justified only within the limits of the application of that article...
54. The proprietor may not prohibit the use of a sign identical to the trade mark for goods identical to those for which the mark is registered if that use cannot affect his own interests as proprietor of the mark, having regard to its functions. Thus certain uses for purely descriptive purposes are excluded from the scope of article 5(1)(a) of the Directive because they do not affect any of the interests which that provision aims to protect, and do not therefore fall within the concept of use within the meaning of that provision...”
92.	In R v. Johnstone Lord Nicholls of Birkenhead summarised this by saying that the ECJ had held that “the scope of this right is coterminous with the function of registered trade marks.”
93.	When Arsenal Football Club v Reed came back to the Court of Appeal [2003] RPC 39 Aldous LJ analysed the judgment of the ECJ. He said:
“The ECJ looks at the function of a trade mark not whether the use is trade mark use. Unchecked use of the mark by a third party, which is not descriptive use, is likely to damage the function of the trade mark right because the registered trade mark can no longer guarantee origin, that being an essential function of a trade mark.”
94.	However, in R v. Johnstone Lord Nicholls said that “Non-trade mark use is not within section 10 (1) to 10 (3)”. Lord Walker of Gestingthorpe added that:
“"Trade mark use" is a convenient shorthand expression for use of a registered trade mark for its proper purpose (that is, identifying and guaranteeing the trade origin of the goods to which it is applied) rather than for some other purpose.”
95.	These statements of principle do not, however, in my judgment answer the real question that divides the parties. What is (or are) the function(s) of a trade mark with which the rights given by article 5 are coterminous? Mr Hobbs submitted that the function of a trade mark was to guarantee trade origin. Consequently if the trade mark was used on the genuine goods, even if used by a third party without the trade mark owner’s consent, it could not be a use that impaired the function of a trade mark and did not, therefore, fall within article 5.
96.	I do not consider that I need to resolve what might be no more than a difference of emphasis between Aldous LJ and Lord Nicholls. Suffice it to say that these descriptions of “trade mark use” deal quite generally with the use of a trade mark as being indicative of trade origin. So, in my judgment, does the formulation of the ECJ in Case C-299/99 Koninklijke Philips Electronics NV v. Remington Consumer Products Ltd [2002] ECR I-5475, para. 30 (to which Mr Hobbs redirected my attention after the circulation of a draft of this judgment). They do not explicitly confine “trade mark use” to use by a third party to indicate a trade origin other than that of the proprietor of the mark.
97.	However, Mr Hobbs relied heavily on Case C-245/02 Anheuser-Busch Inc v. Budĕjovický Budvar, národní podnik [2005] ETMR 27, a decision of the ECJ. In paragraphs 59 to 62 of their judgment the court said:
“59.	First, with respect to Directive 89/104, it follows from the Court’s case-law on the definition of use by a third party, for which provision is made in Article 5(1) of that directive, that the exclusive right conferred by a trade mark was intended to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions and that, therefore, the exercise of that right must be reserved to cases in which a third party’s use of the sign affects or is liable to affect the functions of the trade mark, in particular its essential function of guaranteeing to consumers the origin of the goods (see Case C‑206/01 Arsenal Football Club [2002] ECR I‑10273, paragraphs 51 and 54). 
60.	That is the case, in particular, where the use of that sign allegedly made by the third party is such as to create the impression that there is a material link in trade between the third party’s goods and the undertaking from which those goods originate. It must be established whether the consumers targeted, including those who are confronted with the goods after they have left the third party’s point of sale, are likely to interpret the sign, as it is used by the third party, as designating or tending to designate the undertaking from which the third party’s goods originate (see, to that effect, Arsenal Football Club, cited above, paragraphs 56 and 57). 
61.	The national court must establish whether that is the case in the light of the specific circumstances of the use of the sign allegedly made by the third party in the main case, namely, in the present case, the labelling used by Budvar in Finland. 
62.	The national court must also confirm whether the use made in the present case is one ‘in the course of trade’ and ‘in relation to goods’ within the meaning of Article 5(1) of Directive 89/104 (see, inter alia, Arsenal Football Club, paragraphs 40 and 41).” (Emphasis added)
98.	Mr Hobbs submitted that there was a clear change of direction. The ECJ in Anheuser-Busch was confining objectionable use to use which tended to designate the goods or services as emanating from the third party’s undertaking. That, he said, meant that if the trade mark was used to attribute the origin of the goods or services to the trade mark proprietor’s undertaking (i.e. used honestly and fairly in relation to the genuine goods or services) that was not an infringing use. If this were not the case, said Mr Hobbs, where was the “genuine goods or services defence” which must be a feature of any rational system of trade mark protection?
99.	I was strongly attracted to Mr Hobbs’ simple and persuasively argued proposition, but in the end I cannot accept it. Mr Arnold pointed out, in my judgment correctly, that if Mr Hobbs’ proposition was correct, then the whole of the law that has developed in relation to parallel imports from outside the EEA had developed on a false premise.  In all these cases the mark is found on genuine goods bought outside the EEA and, what is more, the mark has been placed on the goods by the proprietor of the mark himself or with his consent. Yet the proprietor of the mark is entitled to prevent the import and sale of those genuine goods within the EEA by relying on his right to prevent infringement of his mark. This seems to me to be fundamentally inconsistent with Mr Hobbs’ submission. Second, Mr Arnold relied on the decision of the ECJ in Case C-337 Parfums Christian Dior SA v Evora BV [1997] ECR I-1603. Dior owned registered trade marks for certain perfumes, which it sold at the top end of the market. Evora owned a chain of chemist’s shops in which they sold Dior products. The products in question were parallel imports, but it was not suggested that they had been unlawfully acquired. Evora advertised some of these products as part of a Christmas promotion. During the promotion it depicted in advertising leaflets the packaging and bottles of some of them. Each depiction of the packaging and bottles related clearly and directly to the goods offered for sale and the advertising was carried out in a manner customary to retailers in this market sector. Dior took exception to the form of advertising, because it did not conform to the luxurious and prestige image that Dior wanted to present; and brought proceedings for trade mark infringement. The ECJ said that article 5 gave the proprietor of the mark the right to prevent its use by others in the course of trade. But they also pointed out that article 7 provides that a trade mark does not entitle its proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by its proprietor or with his consent. Interpreting the two articles together, in the light of the objectives of the internal market, the court held that even if the right to make use of a trade mark in order to attract attention to further commercialisation were not exhausted in the same way as the right of resale, the latter would be made considerably more difficult and the purpose of the “exhaustion of rights” rule laid down in article 7 would thus be undermined. The court summarised its conclusion on this question as follows:
“38	It follows that the answer to be given to the second question must be that, on a proper interpretation of Articles 5 and 7 of the Directive, when trade-marked goods have been put on the Community market by the proprietor of the trade mark or with his consent, a reseller, besides being free to resell those goods, is also free to make use of the trade mark in order to bring to the public's attention the further commercialization of those goods.”
100.	In my judgment this approach is consistent with Mr Arnold’s submission. The ECJ decided that in principle the use complained of fell within article 5 (even though the mark was being used to advertise the genuine goods) but could be saved from infringement because of article 7. The court went on to consider the particular complaint; and did so in a way that is germane to the question I am considering. The court began by explaining that the “exhaustion of rights” rule does not apply where the proprietor of the mark has legitimate reasons for opposing further commercialisation of the mark. They then continued:
“43	The damage done to the reputation of a trade mark may, in principle, be a legitimate reason, within the meaning of Article 7(2) of the Directive, allowing the proprietor to oppose further commercialization of goods which have been put on the market in the Community by him or with his consent. According to the case-law of the Court concerning the repackaging of trade-marked goods, the owner of a trade mark has a legitimate interest, related to the specific subject-matter of the trade mark right, in being able to oppose the commercialization of those goods if the presentation of the repackaged goods is liable to damage the reputation of the trade mark (Bristol-Myers Squibb, cited above, paragraph 75). 
44		It follows that, where a reseller makes use of a trade mark in order to bring the public's attention to further commercialization of trade-marked goods, a balance must be struck between the legitimate interest of the trade mark owner in being protected against resellers using his trade mark for advertising in a manner which could damage the reputation of the trade mark and the reseller's legitimate interest in being able to resell the goods in question by using advertising methods which are customary in his sector of trade. 
45		As regards the instant case, which concerns prestigious, luxury goods, the reseller must not act unfairly in relation to the legitimate interests of the trade mark owner. He must therefore endeavour to prevent his advertising from affecting the value of the trade mark by detracting from the allure and prestigious image of the goods in question and from their aura of luxury. 
46 	However, the fact that a reseller, who habitually markets articles of the same kind but not necessarily of the same quality, uses for trade-marked goods the modes of advertising which are customary in his trade sector, even if they are not the same as those used by the trade mark owner himself or by his approved retailers, does not constitute a legitimate reason, within the meaning of Article 7(2) of the Directive, allowing the owner to oppose that advertising, unless it is established that, given the specific circumstances of the case, the use of the trade mark in the reseller's advertising seriously damages the reputation of the trade mark. 
47 	For example, such damage could occur if, in an advertising leaflet distributed by him, the reseller did not take care to avoid putting the trade mark in a context which might seriously detract from the image which the trade mark owner has succeeded in creating around his trade mark.” 
101.	It seems to me that the ECJ is recognising that a trade mark may have functions beyond simply guaranteeing a trade origin. The position occupied by the mark within the relevant product market (for instance, as in Dior, by suggesting luxury or prestige) is a legitimate object of protection. As the ECJ recognised in the last quoted paragraph the “image” of a trade mark is something that the proprietor is entitled to protect. The limit of the protection is a different question. However, the analysis of the court seems to me to point clearly to the conclusion that in some circumstances, even where the goods have been placed on the market with the consent of the proprietor of the mark, he is able to complain about the use of his mark by a third party to advertise those very same goods. If Mr Hobbs’ submission was correct, this conclusion would be impossible.
102.	Mr Hobbs also referred to the statement of Ruiz-Jarabo Colomer A-G in Arsenal Football Club v. Reed in paragraph 41 of his opinion that:
“To state that a registered proprietor may prevent a third party from using "the trade mark as a trade mark" is as good as saying nothing at all. It is therefore necessary to give substance to that indeterminate legal concept and, in doing so, to keep the functions of a trade mark very much in mind.”
103.	This was, I think, a slightly dangerous reference for him, because the Advocate General also said in paragraph 46 of his opinion:
“It seems to me to be simplistic reductionism to limit the function of the trade mark to an indication of trade origin.”
104.	He said that a mark also protected the quality of the goods, the reputation or renown of the producer, as well as serving an advertising function: see para. 43. The same point is made in Kerly’s Law of Trade Marks and Trade Names (14th ed.) para. 2-006.
105.	In the end, therefore, I reject Mr Hobbs’ submission; and hold that use can count as infringing use even if the trade mark in question is used to indicate that the origin of the goods or services in question is the proprietor of the mark. In other words, use of the mark on the genuine goods is capable of amounting to an infringement.
The ingredients of infringement under article 5 (1) (b) (section 10 (2))
106.	O2 allege that:
i)	The mark and the sign are similar;
ii)	The sign is used in relation to services identical with those for which the trade mark is registered; and
iii)	There exists a likelihood of confusion on the part of the public which includes the likelihood of association between the sign and the trade mark.
Mark for sign?
107.	In dealing with the question of similarity, it is necessary to address the question: what is being compared? Mr Arnold submits that the relevant comparison is mark for sign. This is shorthand for saying that the two comparators are, on the one hand, the registered trade mark and, on the other, the allegedly infringing sign, without recourse to any extraneous material. Thus, for example, it is an infringement of the Rolex trade mark to sell watches described as imitation Rolexes. The fact that they are described as imitations (thereby proclaiming that their origin is not the same as a genuine Rolex) does not prevent infringement: Rolex Internet Auction [2005] ETMR 25 (a decision of the Bundesgerichtshof).
108.	Under the Trade Marks Act 1938 the law as stated by the Court of Appeal in Saville Perfumery Ltd v. June Perfect Ltd and F.W. Woolworth Ltd (1941) 58 R.P.C. 147, 161 was that:
“the statutory protection is absolute in the sense that once a mark is shown to offend, the user of it cannot escape by showing that by something outside the actual mark itself he has distinguished his goods from those of the registered proprietor.”
109.	In British Sugar Jacob J held (at 293) that the law under the 1994 Act was essentially the same. One recent illustration of Mr Arnold’s proposition is the decision of the Court of Appeal of Northern Ireland in BP Amoco plc v. John Kelly Ltd [2002] FSR 5. BP sued for infringement of trade mark and passing off. The claim was based on their corporate colour, a particular shade of green, which was applied to the canopy, signage and petrol pumps of roadside filling stations. The colour green was registered as a trade mark. The defendant also operated a chain of filling stations, similarly coloured green; but whereas BP’s stations bore the logo “BP”, the defendant’s filling station bore the logo “TOP”. BP complained that a motorist, driving at speed, would not see the defendant’s logo, and might be enticed by the green colouring to pull over to buy petrol. Once he had slowed down, he would be inclined to continue his manoeuvre, even though he had seen that the filling station was not a BP station. In these circumstances, the Court of Appeal of Northern Ireland held that the tort of passing off had not been made out, because at the point of sale the customer would have realised that he was not buying BP petrol. However, they held that trade mark infringement had been made out. In dealing with the relevant comparison, the Court of Appeal of Northern Ireland said this:
“41 The second issue is whether a defendant who uses another's registered mark can rely by way of defence to proceedings for infringement on the fact that he is using other material with the mark which serves to distinguish it from the mark as used by the proprietor. Specifically, in the present case it was submitted on behalf of the respondents that even if they use a shade of green which is protected by registration, the fact that the logo "TOP" is used in conjunction with it has to be considered in determining whether any likelihood of confusion exists.

42 Under the 1938 Act it was settled law that once a mark is shown to offend, the user of it cannot escape by showing that by something outside the actual mark itself he has distinguished his goods from those of the registered proprietor: see Saville Perfumery Ltd v. June Perfect Ltd (1941) 58 R.P.C. 147 at p. 161, per Greene M.R. The same conclusion has been reached in a number of cases under the 1994 Act. In Origins Natural Resources Inc v. Origin Clothing Ltd [1995] F.S.R. 280 at 284 Jacob J. said that section 10 of the 1994 Act:
 
“requires the court to assume the mark of a plaintiff is used in a normal and fair manner in relation to the goods for which it is registered and then to assess the likelihood of confusion in relation to the way the defendant uses its mark, discounting external added matter or circumstances. The comparison is mark for mark...”

or, as Robert Walker J. observed in United Biscuits (UK) Ltd v. Asda Stores Ltd [1997] R.P.C. 513 at 535, mark for sign. Several other judges experienced in this field sitting at first instance have reached the same conclusion: we were referred to the decisions of Laddie J. in Wagamama Ltd v. City Centre Restaurants plc [1995] F.S.R. 713 at pp. 731-732, Neuberger J. in Premier Brand UK Ltd v. Typhoon Europe Ltd [2000] F.S.R. 767 at p. 778 and Pumfrey J. in Decon Laboratories Ltd v. Fred Baker Scientific Ltd [2001] R.P.C. 17.
43 There is no contrary authority at any level in the United Kingdom and counsel were unaware of any case in which a reference had been made on the issue to the ECJ. If the decision in Levi Strauss & Co v. Shah [1985] R.P.C. 371 remains good law, as the judge concluded, then it would follow that use of a registered mark with additions, whether by the proprietor or the offender, is to be regarded as use of the mark. We can see no compelling reason in principle why it should not be, and a conclusion to the contrary would deprive the proprietor of a registered mark of much of the protection which he should receive in consequence of registration. We consider that this is not only consistent with the wording of Article 5(1) of Directive 89/104, but that that wording, "the registered trade mark shall confer on the proprietor exclusive rights therein", points positively towards the conclusion that added matter or circumstances should be discounted in a case such as the present. We therefore do not propose to make a reference to the ECJ for a preliminary ruling on the interpretation of the Directive.”
110.	Mr Arnold submitted that in the light of this principle my task was to compare the registered mark relied on with the bubbles as they appeared in H3G’s advertisement. For this purpose I must strip away the voice-over, the super, the soundtrack and the second half of the advertisement. The only context that was permissible to take into account was the context that the bubbles were being used (somehow or another) in relation to mobile telecommunications services (and perhaps, although Mr Arnold was cautious about this, that they were used in a television advertisement). 
111.	Mr Hobbs submitted vigorously to the contrary. He submitted that Mr Arnold had illegitimately conflated two distinct propositions. The first (which Mr Hobbs accepted as being correct) was that a third party using the mark could not escape liability for infringement if he used the mark with additions. This proposition was summed up by Rattee J in AB Volvo v Heritage Leicester Ltd [2000] FSR 253:
“In my judgment, in the case of a word trade mark such as that in the present case, all that is necessary to constitute prima facie infringement under section 10(1) is use of the identical word in the course of trade as a distinct word, whether with or without other words or material added to it.”
112.	The key to this proposition was use of the mark as a discrete element in the sign. This was the argument that the Court of Appeal of Northern Ireland accepted in BP Amoco. In that case there were two marks (the colour and the logo) in the same field of vision. But the colour mark operated at a greater distance than the logo. Hence the presence of the logo on the defendant’s filling stations did not prevent infringement of BP’s colour mark.
113.	Mr Hobbs said that the second proposition, which Mr Arnold had illegitimately bolted on to the first, was that the “added matter” doctrine means that an acontextual examination of the sign is what is required. This, he said, was fundamentally wrong. The question of identity between mark and sign came before the ECJ in Case C-291/00 SA Société LTJ Diffusion v Sadas Vertbaudet [2003] ECR I-2799 (“Arthur” and “Arthur et Félicie”). Although the guidance given by the court has been described as “opaque”, it was explained by Jacob LJ in Reed Executive plc v Reed Business Information Ltd [2004] RPC 40. Jacob LJ said:
“Of importance here is the recognition that an addition in the defendant's sign to a registered mark may take the case outside one of "identity" (see para.[51]). This is obviously sensible--one word can qualify another so as to change its impact, "Harry" qualifies "Potter" and vice versa, for instance. It is particularly in the recognition that additions can change identity that the ECJ has moved on from the rather rigid view taken under the old UK law.”
114.	The rigid view taken under the old UK law was that exemplified by June Perfect. It is from that that the ECJ has moved on.
115.	Later in his judgment Jacob LJ stressed the need to identify the defendant’s sign before making the comparison. Mr Hobbs also relied on the observations of the ECJ in Anheuser Busch. I have already quoted them in a different context, but for ease of understanding I do so again, with different emphasis:
“It must be established whether the consumers targeted, including those who are confronted with the goods after they have left the third party’s point of sale, are likely to interpret the sign, as it is used by the third party, as designating or tending to designate the undertaking from which the third party’s goods originate.” (para. 60, emphasis added)
“The national court must establish whether that is the case in the light of the specific circumstances of the use of the sign allegedly made by the third party in the main case, namely, in the present case, the labelling used by Budvar in Finland.” (para. 61, emphasis added)
116.	Mr Hobbs also appealed to common sense. You cannot, he said, determine whether the mode of use is descriptive; whether it conforms to honest practices in industrial or commercial matters, or whether it makes a statement about the interchangeability of goods or services without seeing how the sign has been used in its overall context.
117.	Appeals to common sense are always seductive, and sometimes dangerous. In this field both counsel agree that the starting point for the comparison is the registered mark and that the comparison must be made through the eyes (and sometimes ears) of the average consumer. The average consumer is a legal construct and, in a case like the present, in which the trade mark proprietor has consistently used cropped versions of his mark, will never (or hardly ever) have seen the registered mark as a whole. To that extent, therefore, the comparison is not a “real world” comparison.
118.	Nevertheless, I accept Mr Hobbs’ submission on this point. He is, in my judgment, supported by the latest jurisprudence of the ECJ; and his appeal to common sense has force. It seems to me to be highly artificial to compare the mark and the sign through the eyes of the average consumer without considering what impact the overall use of the sign in context would have upon him. Moreover, as appears from the summary of the principles applicable to assessing the likelihood of confusion that follows, likelihood of confusion must be assessed “globally”. Similarity and likelihood of confusion are intimately bound together. It would be illogical for a quite different approach to be taken to the question of similarity. In addition Mr Arnold submitted that compliance with the Comparative Advertising Directive was necessary in order to escape liability for trade mark infringement. He accepted (indeed asserted) that in considering compliance with the Comparative Advertising Directive it was necessary to consider the advertisement as a whole, and not to denude it of its voice-over, soundtrack, etc. Again it seems to me to be illogical for a quite different approach to be taken to compliance with the Comparative Advertising Directive if, as Mr Arnold submits, it is part of a complete code. I conclude therefore that I should look at the advertisement as an integrated audio-visual presentation. This is, after all, how it was designed. In this respect it differs, for example, from Mr Reed’s sign on his stall that the scarves and hats he sold were not official Arsenal products. Once a buyer had left the point of sale, the sign had no further effect. By contrast in the present case no one could see the bubbles alone. Even if the volume of a TV set had been turned down, the super would still have been visible.
119.	Since this judgment was circulated in draft, Mr Arnold drew my attention to the very recent decision of Kitchin J in Julius Samann Ltd v. Tetrosyl Ltd [2006] EWHC 529 (Ch) (17 March 2006). In paragraph 48 of his judgment Kitchin J said that article 5 requires a comparison of mark for sign. In paragraph 52 he said:
“There is one further general principle which is important to have in mind at the outset in considering infringement. The court must consider the likelihood of confusion arising from the use by the defendant of the offending sign, discounting added matter or circumstances. If the sign and the mark are confusingly similar then the defendant cannot escape by showing that by something outside the actual mark itself he has distinguished his goods from those of the proprietor.”
120.	That case involved an allegation of trade mark infringement in relation to tree-shaped air fresheners for cars. In comparing the mark and the sign Kitchin J ignored the packaging in which the allegedly infringing product was sold. However, when carrying out the comparison (paras. 55 and 56) he did not ignore additional trade mark material on the allegedly infringing product itself; or colours and decoration applied to it. I do not consider that this case should compel me to change my mind.
Identity of services
121.	There is no dispute about this ingredient.
Likelihood of confusion
122.	Both Mr Arnold and Mr Hobbs agreed on the approach that the court should take in assessing the likelihood of confusion. They each subscribed to the following propositions, which I accept as accurately summarising the law:
i)	the likelihood of confusion must be appreciated globally, taking account of all relevant factors; Sabel BV v. Puma AG [1997] ECR I-6191, paragraph 22;
ii)	the matter must be judged through the eyes of the average consumer of the goods/services in question; Sabel BV v. Puma AG, paragraph 23; who is deemed to be reasonably well informed and reasonably circumspect and observant  - but who rarely has the chance to make direct comparisons between marks and must instead rely upon the imperfect picture of them he has kept in his mind; Lloyd Schuhfabrik Meyer & Co. GmbH v. Klijsen B.V. [1999] ECR I-3819 paragraph 27;
iii)	the average consumer normally perceives a mark as a whole and does not proceed to analyse its various details; Sabel BV v. Puma AG, paragraph 23;
iv)	the visual, aural and conceptual similarities of the marks must therefore be assessed by reference to the overall impressions created by the marks bearing in mind their distinctive and dominant components; Sabel BV v. Puma AG, paragraph 23;
v)	a lesser degree of similarity between the marks may be offset by a greater degree of similarity between the goods/services and vice versa; Canon Kabushiki Kaisha v. Metro-Goldwyn-Mayer Inc[1998] ECR I-5507, paragraph 17;
vi)	there is a greater likelihood of confusion where the earlier trade mark has a highly distinctive character either per se or because of the use that has been made of it; Sabel BV v. Puma AG, paragraph 24
vii)	mere association, in the sense that the later mark brings the earlier mark to mind, is not sufficient; Sabel BV v. Puma AG, paragraph 26;
viii)	further, the reputation of a mark does not give grounds for presuming a likelihood of confusion simply because of a likelihood of association in the strict sense; Marca Mode CV v. Adidas AG [2000] ECR I-4881, paragraph 41;
ix)	but if the association between the marks causes the public to wrongly believe that the respective goods/services come from the same or economically linked undertakings, there is a likelihood of confusion; Canon Kabushiki Kaisha v. Metro-Goldwyn-Mayer Inc, paragraph 29.
123.	I need to expand a little on three parts of this summary. First, conceptual similarity or the idea of the mark (para (iv)). This is summarised in Kerly (14th ed. para. 17-028 ff) as follows:
“Two marks, when placed side by side, may exhibit many and various differences, yet the main idea left on the mind by both may be the same. A person acquainted with one mark, and not having the two side by side for comparison, might well be deceived, seeing the second mark on other goods, into a belief that he was dealing with goods which bore the same mark as that with which he was acquainted…. When the question arises whether a mark so resembles another mark as to be likely to deceive or cause confusion, it should be determined by considering the leading characteristics of each.” 
124.	Second, the notion of “association” (para (viii)). In Sabel the ECJ identified three types of “association”:
“(1) where the public confuses the sign and the mark in question (likelihood of direct confusion); (2) where the public makes a connection between the proprietors of the sign and those of the mark and confuses them (likelihood of indirect confusion or association); (3) where the public considers the sign to be similar to the mark and perception of the sign calls to mind the memory of the mark, although the two are not confused (likelihood of association in the strict sense).”
125.	The first kind of confusion takes place where the public considers that the sign and the mark denote a common origin of the goods and services in question. The second kind of confusion arises where the public consider that there is an economic link or association between the proprietor of the mark and the proprietor of the sign. The third kind of association is where the mark merely calls the mark to mind, without making any linkage between the goods or services offered under the mark and the sign respectively; or without making any economic linkage between the proprietor of the mark and the sign respectively. As regards the third category the ECJ held:
“The answer to the national court's question must therefore be that the criterion of 'likelihood of confusion which includes the likelihood of association with the earlier mark' contained in Article 4(1)(b) of the Directive is to be interpreted as meaning that the mere association which the public might make between two trade marks as a result of their analogous semantic content is not in itself a sufficient ground for concluding that there is a likelihood of confusion within the meaning of that provision.”
126.	Association in the third category does not therefore amount to infringement. This was taken further by the ECJ in Canon. In paragraph 30 of his opinion Jacobs A-G said:
“It follows that if, in the present case, there is no likelihood of the public assuming that there is any sort of trade connection between the marks "CANON" and "CANNON", there is no likelihood of confusion within the meaning of Article 4(1)(b) of the Directive. The Commission suggests however that the question refers to the attribution of goods or services to different "places of origin"; and that concept may reflect the importance attached by the previous German trade-mark law to the place of manufacture of the goods in question. In that respect it should be noted that it is not sufficient to show simply that there is no likelihood of the public being confused as to the place in which the goods are manufactured or the services performed: if, despite recognising that the goods or services have different places of origin, the public is likely to believe that there is a link between the two concerns, there will be a likelihood of confusion within the meaning of the Directive.”
127.	In its judgment the court said:
29. Accordingly, the risk that the public might believe that the goods or services in question come from the same undertaking or, as the case may be, from economically-linked undertakings, constitutes a likelihood of confusion within the meaning of Article 4(1)(b) of the Directive (see SABEL, paragraphs 16 to 18). Consequently, as the Advocate General states at point 30 of his Opinion, in order to demonstrate that there is no likelihood of confusion, it is not sufficient to show simply that there is no likelihood of the public being confused as to the place of production of the goods or services.
30. The answer to be given to the second part of the question must therefore be that there may be a likelihood of confusion within the meaning of Article 4(1)(b) of the Directive even where the public perception is that the goods or services have different places of production. By contrast, there can be no such likelihood where it does not appear that the public could believe that the goods or services come from the same undertaking or, as the case may be, from economically-linked undertakings.
128.	The contrast, therefore, is between an association which gives rise to the impression that there is a trade linkage or connection between two undertakings as a result of the use of the sign; and an association engendered by the use of the sign which merely brings the mark to mind, without suggesting either a common origin of the goods or services, or an economic link between undertakings.  The former, but not the latter, may amount to infringement.
129.	Third, the question what are “the respective goods” (para (ix))? Paragraph (ix) of the summary is not quite an accurate paraphrase of the cited paragraph of the judgment of the ECJ in Canon. What the court in fact said in para 29 of its judgment was:
“Accordingly, the risk that the public might believe that the goods or services in question come from the same undertaking or, as the case may be, from economically linked undertakings, constitutes a likelihood of confusion within the meaning of art 4(1)(b) of the directive.”
130.	Thus whereas the summary has “the respective goods/services”, the court spoke of “the goods or services in question”. The phrase “the respective goods or services” may direct attention to the goods of the registered proprietor of the trade mark on the one hand and those of the third party on the other. The phrase “the goods or services in question” directs attention to the goods or services bearing the mark on the one hand and the goods or services bearing the sign on the other. It is the latter sense in which, in my judgment, the ECJ must be understood. Allied to this is the question: what is confusion? In particular, does it require that an assumed link between the goods bearing the mark and the goods bearing the sign (i.e. that they emanate from the same undertaking or economically linked undertakings) must be wrong? Can you be confused if the use of the mark or sign tells you the truth about the origin of the goods or services? Given that I have concluded that the application of the mark to the genuine goods may be an infringement, absent a defence (as in the case of parallel imports), the answer must, in my judgment, be that you can be confused even if the use of the mark or sign tells the truth.  If there can be infringement where there is identity of both mark and goods without any misrepresentation about the origin of the goods, there ought surely to be infringement where there is identity of goods and similarity of mark (or identity of mark and similarity of goods) without any such misrepresentation. This, I think, is a reasoning process which does not differ in kind from the decision of the ECJ in Case C-292/00 Davidoff et Cie v. Gofkid Ltd [2003] ECR I-326 that dissimilar goods and service can mean either goods and services that are similar or goods and services that are dissimilar, on the ground that it would be irrational for similar goods or services to be given less protection than is given to dissimilar goods and services.
The ingredients of infringement under Article 5 (2) (section 10 (3))
131.	O2 allege that:
i)	The sign is similar to the mark;
ii)	The trade mark has a reputation in the United Kingdom;
iii)	The use of the sign, without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or reputation of the mark.
Reputation
132.	In General Motors Corp v Yplon SA [1999] ECR I-5421 the ECJ held that in order to have a reputation a trade mark had to satisfy a “knowledge threshold”. They described this as follows:
“26 The degree of knowledge required must be considered to be reached when the earlier mark is known by a significant part of the public concerned by the products or services covered by that trade mark.
27 In examining whether this condition is fulfilled, the national court must take into consideration all the relevant facts of the case, in particular the market share held by the trade mark, the intensity, geographical extent and duration of its use, and the size of the investment made by the undertaking in promoting it.”
Misuse of the sign
133.	At this point I must notice a difference in language between the Trade Marks Directive and the Trade Marks Act. Article 5 (2) describes infringement: “where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark”. Section 10 (3) describes it as: “the use of the sign, being without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the trade mark.” The former use of language suggests that the use of the sign must both be without due cause and must also take unfair advantage of the mark. The latter form of language suggests that if the use of the sign is without due cause, it follows that it takes unfair advantage of the mark.
134.	In General Motors Jacobs A-G said in paragraph 42 of his opinion:
“Above all, it is necessary to give full weight to the provisions of Article 5(2) as a whole. Thus the national court must be satisfied in every case that the use of the contested sign is without due cause; and that it takes unfair advantage of, or is detrimental to, the distinctive character or the repute of the mark. These requirements, properly applied, will ensure that marks with a reputation, whether or not the reputation is substantial, will not be given unduly extensive protection.”
135.	This, to my mind, treats the language as requiring satisfaction of two conditions; viz. that the use of the sign is without due cause and that it takes unfair advantage of the mark. The ECJ itself did not deal with this question. In Premier Brands UK Ltd v Typhoon Europe Ltd [2000] FSR 767 Neuberger J approached this question on the basis that two conditions needed to be satisfied. I will do the same. Although this requires a strained interpretation of section 10 (3), that interpretation is necessary to give effect to article 5 (2) of the Trade Marks Directive. It is another example of unnecessary draftsman’s changes in transposing the Trade Marks Directive into domestic law.
136.	It is common ground that it is not necessary to establish confusion or the likelihood of confusion in order to establish infringement under this head. It is sufficient for the degree of similarity between the mark with a reputation and the sign to have the effect that the relevant section of the public establishes a link between the sign and the mark: Adidas-Salomon AG v Fitnessworld Trading Ltd [2004] Ch 120, ECJ para. 31. As I have said, in Sabel the ECJ distinguished between three types of association. The first they called “direct confusion”; the second “indirect confusion”. Given that infringement under article 5 (2) does not require any likelihood of confusion, these types of association are not required. That, therefore, leaves the third kind of association referred to in Sabel, viz. that the perception of the sign calls to mind the memory of the mark, although the two are not confused (likelihood of association in the strict sense). It seems to me to follow that it was this kind of association to which the ECJ referred in Adidas as being a sufficient link for the purposes of article 5 (2). It was, however, common ground that the link must be such as to affect the economic behaviour of consumers.
Without due cause
137.	The words “without due cause” govern both the use of the sign, and the taking of unfair advantage: Premier Brands at 790. Quite what amounts to due cause is not easy to identify. But in Premier Brands Neuberger J said that the issue was not whether the defendant could be said to be acting “in good faith” or “for good and honest commercial reasons”. He cited with apparent approval a statement by the Benelux Court to the following effect:
“What this requires, as a rule, is that the user (of the mark) is under such a compulsion to use this very mark that he cannot honestly be asked to refrain from doing so regardless of the damage the owner of the mark would suffer from such use, or that the user is entitled to the use of the mark in his own right and does not have to yield this right to that of the owner of the mark ....”
Takes unfair advantage
138.	The first point to make is that this category of infringement is concerned with actual effects; not with risks or likelihoods: Daimlerchrysler AG v Alavi [2001] RPC 42. Second, it is not enough that use of the sign takes advantage of the mark. The advantage must be unfair. The most comprehensive description of what constitutes unfair advantage is that of the First Board of Appeal of OHIM in Case R 308/2003-1 in Mango Sport System Srl Socio Unico Mangone Antonio Vincenzo v Diknak [2005] ETMR 5 at [19]:
“As to unfair advantage, which is in issue here since that was the condition for the rejection of the mark applied for, that is taken when another undertaking exploits the distinctive character or repute of the earlier mark to the benefit of its own marketing efforts. In that situation that undertaking effectively uses the renowned mark as a vehicle for generating consumer interest in its own products. The advantage for the third party arises in the substantial saving on investment in promotion and publicity for its own goods, since it is able to "free ride" on that already undertaken by the earlier reputed mark. It is unfair since the reward for the costs of promoting, maintaining and enhancing a particular trade mark should belong to the owner of the earlier trade mark in question.”
139.	The notion of taking unfair advantage in this sense is that the third party is unfairly using the registered mark to enhance his own business. Thus in the Mango case itself the Board considered that the registration of the trade mark “Mango” for crash helmets might take unfair advantage of the registered mark “Mango” in relation to ladies clothing aimed at fashionable young women. The mischief clearly was that the manufacturer of crash helmets would increase his sales by feeding on the reputation acquired by the manufacturer of clothing. In other words, the one mark supports (or would support) the other. This does not fit easily into comparative advertising, where it is the contrast between some feature of the advertiser’s business and that of his competitor which constitutes the enhancement. I must, I think, be careful not to take general statements out of context.
Detriment
140.	Mr Arnold drew my attention to the description of detriment in the decision of the Third Board of Appeal of OHIM in Case R 1127/2000-3 Elleni Holding BV v Sigla SA [2005] ETMR 7 at [40]:
“40 … it has to be noted that the trade mark works not only as an indication of origin, but also serves as a communication tool which must be protected as well.
41 The message incorporated into the trade mark, whether it is informative or symbolic, may refer to the product's qualities, or indeed to intangible values such as luxury, lifestyle, exclusivity, adventure, youth, etc. It may result from the qualities of the product or service for which it is used, but also from its proprietor's reputation or other elements based on the particular presentation of the product or service or on the exclusivity of sales networks….
42 Hence, once an image associated with a trade mark which has a reputation has been shown to exist, the fact that the contested sign is detrimental to this image, must still be demonstrated.

43 It must, therefore, be shown that the trade mark is sullied or debased by its association with something unseemly. This may happen when the applied for trade mark, to which the mark with reputation may be associated, is used, on the one hand, in an unpleasant, obscene or degrading context or, on the other hand, in a context which is not inherently unpleasant but which proves to be incompatible with the trade mark's image. In all cases, there is a comparison which is injurious to the trademark's image and what is known in English as dilution by tarnishment.”
141.	In addition to dilution by tarnishing, it is also recognised that a trade mark may suffer detriment through blurring of its distinctiveness: see Premier Brands. In Daimlerchrysler Pumfrey J also said:
“Detriment can take the form either of making the mark less attractive (tarnishing, to use Neuberger J's word) or less distinctive (blurring).”
142.	In Adidas Jacobs A-G described it (para. 38) as:
“the concept of detriment to the repute of a trade mark, often referred to as degradation or tarnishment of the mark, describes the situation where …the goods for which the infringing sign is used appeal to the public's senses in such a way that the trade mark's power of attraction is affected.”
143.	This kind of damage has also been described as dilution, which Kerly summarises (14th ed. para 9-118) as follows:
“the essence [of dilution] is the burring of distinctiveness of a mark such that it is no longer capable of arousing an immediate association with the goods or services for which it is registered and used.”
144.	Whether or not Mr Hobbs is right about the misunderstanding of US law that has crept into our law, these concepts must, I think, be taken to be part of our law.
145.	Once again, however, one must be cautious about taking general statements like these out of context. The usual context in which the question of detriment arises is where the third party promotes his own goods or services (or wishes to do so) under a mark that tarnishes (or would tarnish) the registered mark. One well-known example is the potential association of gin and cleaning fluid by use of an aurally similar mark. The case of comparative advertising is not quite the same. It is to be expected that in robust competition competitors will not be over-sensitive to their competitors’ marks. As Laddie J put it in Barclays Bank plc v. RBS Advanta [1996] RPC 307, 315:
“The fact that the advertising pokes fun at the proprietor's goods or services and emphasises the benefits of the defendant's is a normal incidence of comparative advertising. Its aim will be to divert customers from the proprietor. No reasonable observer would expect one trader to point to all the advantages of its competitor's business and failure to do so does not per se take the advertising outside what reasonable people would regard as “honest”. Thus mere trade puffery, even if uncomfortable to the registered proprietor, does not bring the advertising within the scope of trade mark infringement. Much advertising copy is recognised by the public as hyperbole.”
The Comparative Advertising Directive
146.	Comparative advertising is regulated by the Comparative Advertising Directive (97/55 EC). The relevant parts of it are the following:
“(13) Whereas Article 5 of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (8) confers exclusive rights on the proprietor of a registered trade mark, including the right to prevent all third parties from using, in the course of trade, any sign which is identical with, or similar to, the trade mark in relation to identical goods or services or even, where appropriate, other goods;
(14) Whereas it may, however, be indispensable, in order to make comparative advertising effective, to identify the goods or services of a competitor, making reference to a trade mark or trade name of which the latter is the proprietor;
(15) Whereas such use of another's trade mark, trade name or other distinguishing marks does not breach this exclusive right in cases where it complies with the conditions laid down by this Directive, the intended target being solely to distinguish between them and thus to highlight differences objectively…”
147.	It goes on to insert a new article 3a into the Misleading Advertising Directive in the following terms:
“1. Comparative advertising shall, as far as the comparison is concerned, be permitted when the following conditions are met:
(a) it is not misleading according to Articles 2 (2), 3 and 7 (1);
(b) it compares goods or services meeting the same needs or intended for the same purpose;
(c) it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price;
(d) it does not create confusion in the market place between the advertiser and a competitor or between the advertiser's trade marks, trade names, other distinguishing marks, goods or services and those of a competitor;
(e) it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of a competitor;
(f) for products with designation of origin, it relates in each case to products with the same designation;
(g) it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products. 
(h) it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name.”
148.	“Comparative advertising” is defined as:
“any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor.”
149.	This directive has been transposed into domestic law by The Control of Misleading Advertisements (Amendment) Regulations 2000. That inserts a new regulation 4A into the Control of Misleading Advertisements Regulations 1988. However, contravention of regulation 4A does not itself give rise to a civil remedy. This method of implementation was open to the United Kingdom under the terms of the Directive.
Must comparative advertising comply with the Directive?
150.	Mr Arnold submits that, in order to be non-infringing under trade marks legislation, comparative advertising must comply with the Comparative Advertising Directive. Mr Hobbs submits that it need not. He submits that if an advertisement complies with the Directive then it is undoubtedly lawful. But it does not follow that if the advertisement is non-compliant with the Directive it is necessarily unlawful.
151.	In British Airways plc v. Ryanair Limited [2001] FSR 32 Jacob J took the view that the Trade Marks Directive did not, of itself, prohibit honest comparative advertising. His reasoning was based on two strands. First, if it did, then section 10 (6) of the Trade Marks Act 1994 would have been a non-permitted derogation from the Trade Marks Directive; and that had never been suggested. Second, by not amending the Trade Marks Directive, the Comparative Advertising Directive recognised that use of a trade mark in comparative advertising did not necessarily amount to an infringement. As Jacob J put it:
“If in 1997 it was thought that the Trade Marks Directive did not permit any comparative advertising however fair, then the 1997 Directive would surely have amended the Trade Marks Directive as well as the 1984 Directive. But there was no amendment of the Trade Marks Directive. None was called for.”
152.	The ECJ considered the scope of the Comparative Advertising Directive in Case C-44/01 Pippig Augenoptik GmbH & Co KG v Hartlauer Handelsgesellschaft mbH [2003] ECR I-3095. The case concerned a comparative advertisement for spectacles. In preparation for the advertisement the advertiser made a test purchase of a pair of spectacles. The subsequent advertisement not only compared the prices of spectacles but also contained a photograph of the comparator’s logo and shop front, and, according to the complainant, showed the advertiser “standing triumphantly” outside it. The ECJ plainly considered that comparative advertising was, in general, in the interests of consumers, as it helps consumers make informed choices. That is why it said that the conditions required of comparative advertising must be interpreted in the sense most favourable to it (para. 42). It also concluded (para 44) that:
“Directive 84/450 carried out an exhaustive harmonisation of the conditions under which comparative advertising in Member States might be lawful. Such a harmonisation implies by its nature that the lawfulness of comparative advertising throughout the Community is to be assessed solely in the light of the criteria laid down by the Community legislature. Therefore, stricter national provisions on protection against misleading advertising cannot be applied to comparative advertising as regards the form and content of the comparison.” (Emphasis added)
153.	The ECJ speak in terms of harmonisation; not approximation. The statement that the harmonisation was “exhaustive” certainly suggests, to my mind, that the criteria laid down in the Directive are the only criteria that should be applied. So, too does the statement that the lawfulness of comparative advertising is to be judged “solely” by those criteria. This impression gains added force from the terms of the fifteenth recital, which says that comparative advertising does not infringe the rights of a trade mark proprietor “in cases where it complies with” the conditions of the Directive.  Mr Arnold also relies on the decision of the ECJ in Case C-228/03 Gillette Co v. LA-Laboratories OY [2005] ECR I-2338. In that case the court described the criteria required to fulfil the requirements of “honest practices” under article 6 of the Trade Marks Directive, and did so in terms plainly derived from the criteria set out in the Comparative Advertising Directive. Although this is only inferential, it does, to my mind, support Mr Arnold’s submission.
154.	In my judgment, therefore, Mr Arnold is correct in submitting that in order to avoid trade mark infringement by a comparative advertisement, the advertisement must comply with the Comparative Advertising Directive. Necessarily, this means that I am not following Jacob J in British Airways. However, I say in my defence that:
i)	Jacob J did not have the benefit of the decisions of the ECJ in Pippig or Gillette;
ii)	At the time of Jacob J’s decision the Comparative Advertising Directive was not in force;
iii)	Strictly speaking Jacob J was addressing the effect of section 10 (6) of the Trade Marks Act 1994, rather than the provisions of the Trade Marks Directive, which do not contain an explicit equivalent of section 10 (6).
155.	This conclusion leads on to a further question raised by Mr Arnold viz.: how can the Comparative Advertising Directive be fitted into “the complete code” laid down by articles 5 to 7 of the Trade Marks Directive? Mr Arnold said that the way to do it was by reference to article 6. A defence to infringement is potentially available under article 6 (1) (b) of the Trade Marks Directive. In order for this defence to be available:
i)	The use of the mark must be use to indicate the characteristics of the goods or services in question;
ii)	That use must be use in accordance with honest practices in industrial or commercial matters;
iii)	Use will not accord with honest practices in industrial or commercial matters unless it complies with the Comparative Advertising Directive.
156.	I am not convinced that it is necessary to shoehorn the Comparative Advertising Directive into the “complete code”. The recitals to the Comparative Advertising Directive make it clear that if its criteria are complied with, there will be no infringement of trade mark rights. Whether this makes a breach in the complete code does not seem to me to matter: the legislative intent is clear (compare, in a very different context, British and American Cattle Co v. Caribe Farm Industries Ltd [1998] 1 WLR 1529). Moreover, there is a danger that if the Comparative Advertising Directive is shoehorned into the Trade Marks Directive, that process will require the addition of further ingredients before a comparative advertisement can be considered to be lawful. I suspect that this is what lay behind the first of Mr Arnold’s propositions I have summarised in the preceding paragraph. In my judgment if a comparative advertisement complies with the Comparative Advertising Directive, it will not infringe rights given by a registered trade mark.
Is compliance with the Directive restricted to registered marks?
157.	Mr Arnold submitted that in order to comply with the Comparative Advertising Directive, an advertiser was restricted to use of his competitor’s registered mark. He was not entitled to use a sign that was similar to the registered mark but not identical. His reasons were as follows.
158.	First, the fourteenth recital to the Directive limited use of the competitor’s mark to cases in which it was “indispensable” to use it. Thus it may be necessary to use the competitor’s mark to identify the competitor, but it is difficult to see how it could ever be indispensable to use a sign other than the trade mark itself. I disagree. In the first place the competitor’s own use of his mark may have evolved through time; so that some variation from the registered mark may be necessary for effective identification. In the second place, it seems clear that use of signs other than the registered mark is permitted. O2 itself used neon to identify its competitors when undertaking comparative advertising. It may fairly be said that these neon representations were not confusingly similar to registered marks, but all the same they were not registered marks. In the third place the registered mark may, as in the present case, include a colour claim. It is apparent from the case papers that monochrome versions of some of the marks have been used in monochrome newspapers, particularly in articles about O2. If Mr Arnold is right, no competitor produce a monochrome version of any of the trade marks (except Technical) to identify O2 in an otherwise unobjectionable comparative advertisement. I cannot see any reason why that should be unlawful.
159.	Mr Arnold’s second reason was that the fifteenth recital is explicit that it is use of the trade mark itself that does not infringe the proprietor’s rights if the criteria in the Directive are complied with. Again, I disagree. The thirteenth recital identifies the rights with which the Directive is concerned. Specifically it is the right of a proprietor of a registered mark to prevent the use of identical or similar signs. The fifteenth recital explains that “this exclusive right” (i.e. the right of a trade mark proprietor) is not breached by use of his trade mark, trade name or other distinguishing marks. It follows therefore that use of distinguishing marks that are not trade marks does not breach the registered proprietor’s trade mark rights. Mr Arnold submitted that the reference to “other distinguishing marks” was intended to refer to a case in which the competitor had no registered trade mark. However, if that is so, I cannot see why the recitals refer to the use of distinguishing marks in the context of negating a breach of trade mark rights.
160.	Mr Arnold’s third point was that the Comparative Advertising Directive inserted a new article 3a into the Misleading Advertising Directive. The various sub-paragraphs tightly circumscribe the conditions under which an advertiser may use his competitor’s trade marks and other indicia. But as Mr Arnold recognised, article 3a is not restricted to the use of trade marks as opposed to similar signs. I see no reason to give it a narrow construction, especially in view of the statement in Pippig (para. 42) that that the conditions required of comparative advertising must be interpreted in the sense most favourable to it.
161.	Lastly Mr Arnold submitted that although article 6 (1) (b) of the Trade Marks Directive referred to “indications” rather than trade marks, article 6 (1) (c) was restricted to trade marks. The two articles should be consistently interpreted. Since the two provisions are framed in entirely different language I do not see why this should lead to a narrowing of article 6 (1) (b) especially in the light of the statement in Pippig to which I have just referred.
162.	The fourth of the questions considered by the court in Pippig was whether a comparative advertisement could reproduce the competitor’s logo, in addition merely to citing his name. The court expressed its conclusion on that question as follows:
“83 	As for the second part of the question, concerning the reproduction in the advertising message of the competitor's logo and a picture of its shop front, it is important to note that, according to the 15th recital in the preamble to Directive 97/55, use of another's trade mark, trade name or other distinguishing marks does not breach that exclusive right in cases where it complies with the conditions laid down by the directive.

84 	Having regard to the above considerations, the answer to the fourth question must be, first, that a price comparison does not entail the discrediting of a competitor, within the meaning of Article 3a (1)(e) of Directive 84/450 either on the grounds that the difference in price between the products compared is greater than the average price difference or by reason of the number of comparisons made. Secondly, Article 3a(1)(e) of Directive 84/450 does not prevent comparative advertising, in addition to citing the competitor's name, from reproducing its logo and a picture of its shop front, if that advertising complies with the conditions for lawfulness laid down by Community law.”
163.	It does not appear that the shop front was itself a registered trade mark. But the court appears to have considered that its depiction was lawful, on the basis that although it was not a trade mark it was an “other distinguishing mark”. It is also clear from this decision that a comparative advertiser is not confined to merely mentioning the name of the competitor; or confined to reproducing merely his logo. The court appears to have sanctioned the depiction of the shop front (and they did not specifically condemn the depiction of the triumphant figure outside it). This, as it seems to me, is inconsistent with Mr Arnold’s submission. Moreover, implicit in Mr Arnold’s submission is the proposition that a comparative advertiser may use (a) the registered mark, exactly as registered; or (b) a sign which bears no similarity to the registered mark, but nothing in between. I cannot see the rationale for this. Moreover, there are no doubt many cases (of which the present case is one) in which the proprietor himself does not use the mark precisely in its registered form. I cannot see why a replication of the form in which the registered proprietor chooses to brand himself should be prohibited.
164.	Accordingly, I hold that an advertiser may comply with the Comparative Advertising Directive even though he uses a sign or other distinguishing mark which is not identical to a registered trade mark.
What is indispensable?
165.	Mr Arnold relied on the observations of Pumfrey J at the time of the initial application for an interim injunction. He described the use of the bubbles as “certainly gratuitous” and said that it would be “stretching it to describe it as indispensable to the making of the comparison which the advertisement makes.” In my judgment, with all respect, the question is not whether the use of bubbles is indispensable to making the comparison. The question, in the words of the recital to the Comparative Advertising Directive, is whether it is indispensable in order to make comparative advertising effective. In accordance with the statement in Pippig (para. 42) this requirement must also be interpreted in the sense most favourable to comparative advertising.
166.	In considering what is indispensable to make comparative advertising effective, it is necessary, in my judgment, to pay attention to the medium in which the advertisement appears. What may be indispensable to make a TV advertisement effective may not be indispensable to make a radio advertisement effective. Similarly, what may be indispensable to make a press advertisement effective may not be indispensable to a TV advertisement; and so on. In order to be effective as a TV advertisement, the advertisement must have some visual impact. Within the limits of the Comparative Advertising Directive, it seems to me that the advertiser must be free to choose what visual imagery to present. Moreover, no advertiser is likely to produce a comparative advertisement unless he comes out of the comparison more favourably than his competitor. A comparison which complies with the central thrust of the Comparative Advertising Directive (not misleading, fair and objective etc) is bound to carry a sting simply by virtue of the comparison itself. Where the overall message of the advertisement is thus compliant, the court should not, in my judgment, be astute to curtail the use of subsidiary means of persuasion which give additional impact to that lawful message.
167.	Mr Hobbs also submitted that all questions of infringement must pay due regard to commercial freedom of expression, which was one of the fundamental rights and freedoms enshrined in the European Convention on Human Rights and Fundamental Freedoms, which itself underpins community law. He referred in particular to the decision of the ECJ in Case C-71/02 Herbert Karner Industrie-Aultionen GmbH v Troostwijk GmbH [2005] ETMR 59 in which the court said (para 48):
“Regarding Troostwijk's second argument with regard to the compatibility of the legislation in question with freedom of expression, it should be recalled that, according to settled case law, fundamental rights form an integral part of the general principles of law the observance of which the Court ensures. For that purpose, the Court draws inspiration from the constitutional traditions common to the Member States and from the guidelines supplied by international treaties for the protection of human rights on which the Member States have collaborated or to which they are signatories. The ECHR has special significance in that respect…”
168.	However, the court went on to say (para 51):
“It is common ground that the discretion enjoyed by the national authorities in determining the balance to be struck between freedom of expression and the abovementioned objectives varies for each of the goals justifying restrictions on that freedom and depends on the nature of the activities in question. When the exercise of the freedom does not contribute to a discussion of public interest and, in addition, arises in a context in which the Member States have a certain amount of discretion, review is limited to an examination of the reasonableness and proportionality of the interference. This holds true for the commercial use of freedom of expression, particularly in a field as complex and fluctuating as advertising.”
169.	In my judgment the argument based on freedom of expression, as applied to a field as complex and fluctuating as advertising, does not add anything of significance to the statement of the court in Pippig that the requirements of the Directive must be interpreted in the sense most favourable to comparative advertising
Section 10 (6)
170.	I have concluded that the ECJ have held that that Directive “exhaustively” harmonises the circumstances in which comparative advertising is permitted, and that whether comparative advertising is lawful is to be determined “solely” in accordance with the Directive. Bearing in mind my conclusions so far, it seems to me that, whatever may have been the position before the coming into force of the Comparative Advertising Directive and the domestic regulations made under it, section 10 (6) must be interpreted as permitting comparative advertising, so long as it is conducted in accordance with honest practices, as those practices have been defined for the purposes of the Comparative Advertising Directive. Accordingly, in my judgment the defence under section 10 (6), in the case of comparative advertising, is the same defence as the defence under the Comparative Advertising Directive itself.
Validity of registration
Inherent distinctiveness
171.	Bubbles have nothing obvious to do with mobile phones or telecommunications. The nearest one can get is a so-called “speech bubble”. But the trademarked bubbles are images of apparently real bubbles, rather than simply stylised circles designed for the enclosure of words. If an average consumer were to see the trademarked bubbles applied to, say packaging of mobile phones, or advertisements for mobile phone services, he would, I think consider that the images were being used as a badge of trade origin. In my judgment, therefore, the four trademarked bubbles have inherent distinctiveness in relation to the class of goods and services in question. 
Acquired distinctiveness
172.	Assuming that I am wrong about inherent distinctiveness, I have no doubt that the four trademarked bubbles have acquired distinctiveness.
The use of bubbles in brand recognition
173.	O2 does not have, and does not claim to have, a monopoly on the use of bubbles in advertising or in brand recognition. For example the well-known chocolate bar “Aero” has been advertised for years with the use of bubbles. Other products that featured in the evidence as being advertised with the aid of bubbles included: the Oral-B Sonic toothbrush; Colgate Oxygen toothpaste; British Airways flights; Microsoft Office and Sony Vaio laptop computers. Bubbles have also been used in connection with mobile phones. One example that I was shown was a TV advertisement for a Sony Ericsson handset. The advertisement showed a fish swimming in a medium in which there were spheres, including spheres emanating from its mouth. Mr Arnold suggested that these spheres represented drops of fluid. Given that the advertisement represented a swimming fish, I consider that any viewer would have interpreted the spheres as representing bubbles. The humour of the image was that the fish appeared to be swimming in air and the spheres were in the shape of drops of fluid. But this was, so to speak, the image of the negative. A viewer would have interpreted it as a positive image, in which the spheres would have been interpreted as bubbles.
The experts
174.	O2’s expert was the same Mr Hugh Burkitt who had served on the judging panel of the industry awards for 2005; and had specifically commended H3G as a deserving winner. The form of his report suggested that he had strayed outside his field of expertise in advertising into the assessment of the motives and intentions of H3G’s advertising team. However, in cross-examination he accepted that he had not meant to attack the integrity or motives of H3G’s team; and he agreed that H3G’s agency (WCRS) was an agency of high repute.
175.	H3G’s expert was Mr Anthony Kingsbury, a former Controller of the BACC. He is experienced in the regulation of TV advertisements.
Common ground between the experts
176.	It is common ground between the experts that:
i)	Comparative advertising is an acceptable and widely used method of advertising in a number of sectors, including telecommunications. Acceptable comparative advertising will objectively compare one or more material, verifiable, and representative features of the products being compared. It will not create confusion between products. It is unacceptable for one trader to denigrate the product of his rival. Nor should an advertiser take unfair advantage of the reputation of trade marks.
ii)	Comparative advertising is in the public interest, provided that it is not misleading.
iii)	In assessing a comparative advertisement it is important to look at the audio-visual presentation as a whole, and not to concentrate on one element alone to the exclusion of the others. If the advertisement is played without the sound, it has a very different feel.
iv)	Anyone making and screening a TV advertisement will work on the assumption that a viewer will watch the whole advertisement from beginning to end; and it would not be right to dissect an advertisement; still less to analyse it as a series of still frames.
Are H3G’s bubbles confusingly similar to O2’s?
177.	There is no doubt that the use of bubbles was intended to help to identify O2. Bubbles would not, for example, have been used in an advertisement comparing ThreePay’s offering with Vodafone’s. It must not be forgotten however, that the advertisement did not use bubbles alone. The visual image of bubbles was accompanied by the voice-over which explicitly referred to O2. The bubbles were on screen alone without the voice-over for less than a second.  However, it is plain that the package of effects in the first half of the advertisement was designed to identify (and would have identified) mobile phone services provided by O2. To that extent, therefore, the bubbles were used to distinguish the provenance of services, albeit that they were used in conjunction with other means of identification. For that reason, they were used in a trademark sense.
178.	However, the question is not whether bubbles merely evoke O2; but whether H3G’s bubbles were similar to O2’s particular trademarked bubbles Technical and Fizz. Mr Sutton gave apparently unequivocal evidence on this question. He said:
“I do not think that the style of bubble is similar, I do not think the colour of bubbles is similar, I do not think the way it emanates on screen is similar.
Q. Similar to what?
A. To the bubbles as used in similar (a) to my trade marks and (b) to the way we use them consistently through our television advertising.”
179.	Mr Arnold drew attention to a statement in Mr Sutton’s witness statement in which he said:
“[H3G] has also tried to damage our brand image by using bubbles which, whilst similar to the Bubbles Trade Marks, are presented in an unattractive manner.”
180.	Like many of Mr Sutton’s statements, the allegation that H3G had tried to damage O2’s brand is hyperbolic. Moreover, I regard his evidence in cross-examination as a significant departure from his statement. Nevertheless, I must bear in mind that Mr Sutton is intimately acquainted with O2’s use of bubbles. To that extent he is not an average consumer, and he may well be more sensitive to differences between the trademarked bubbles and H3G’s bubbles than the average consumer. Although superficially his answers in cross-examination significantly damaged O2’s case, I think that they were the answers of a specialist rather than an average consumer; and that I must discount (although not completely ignore) them.
181.	Mr Kingsbury’s evidence was similar to Mr Sutton’s evidence in cross-examination.  Part of his cross-examination went like this:
“Q. When you watched the four advertisements you understood that the spinning orange square symbolised Orange, the red speech marks symbolised Vodafone, the pink T symbolised T-Mobile and the bubbles symbolised O2?
A. In the context of the advertisements where the brands were being compared were also named, it had the effect of concentrating the mind on the visuals and as a consequence of that, yes, one could see that there [was], what we used to call at the BACC, a nodding acquaintance with other people’s advertising.
Q. They were using imagery which was associated with the competitors?
A. Yes.
Q. And you recognised the imagery that they were using?
A. I recognised it in the context of being reminded, having been told that the comparison was with, in this case, O2 that we were seeing bubbles in the 3 advertisement and, yes, that prompted me to be reminded that O2 used bubbles in their own advertising.”
182.	Mr Kingsbury added that in his view what was being used was not O2’s imagery, but something reminiscent of it.
183.	Mr Burkitt had not considered O2’s trademarked bubbles. Indeed, he was unaware that O2 had been required to nominate (and had nominated) four particular marks to go forward to trial. 
184.	Mr Wallace lost interest in the advertisement after the first few seconds during which he had made the link with O2. I cannot conclude that he made the link on the strength of the bubbles alone, since the bubbles on screen were accompanied by a soundtrack and super which unequivocally identified O2. Moreover, as a trade mark attorney whose firm was retained by O2, he also does not strike me as an average consumer.
185.	In the end, however, the question of similarity is one for me, having informed myself of the matters which an average consumer is likely to know. So I think that I must decide this question on the basis of my own attempt to replicate the mindset of an average consumer, comparing the registered marks Technical and Fizz on the one hand and the H3G advertisement on the other. However, in so doing I must not make a direct comparison, because the average consumer does not make a direct comparison, as he has only an imperfect recollection of the registered mark. Before coming to the degree of similarity it must be observed that:
i)	The services in question are identical. That was the whole point of the comparative advertisement. Identity between services may offset a lower degree of similarity between mark and sign;
ii)	In the context of mobile phone services, O2’s use of bubbles in general was highly distinctive and recognised as such by the mobile phone world;
iii)	But according to Mr Sutton (whose evidence I accept as regards Technical and Fizz) an average consumer is unlikely to have distinguished between the particular marks on the one hand and the general theme of bubbles on the other;
iv)	The bubbles were used in the first part of a TV advertisement. This is not a circumstance in which a consumer is called upon to make a direct decision which results in cash expenditure, so that he is less likely to pay attention to the precise details of the sign in question.
186.	The idea of the sign (bubbles used in connection with the provision of mobile phone services) is identical or very similar to the idea of the mark. The small, concentrated but rapidly expanding bubbles in the first part of the advertisement dealing with O2 do bear a marked degree of resemblance to the Fizz mark (or at least to the top part of it). They are represented in white against a black background (rather than blue against blue). This is not a case in which it is necessary to freeze an individual frame to receive this impression. The large circular bubbles in the second part of that part of the advertisement dealing with O2 sweeping across the screen against a background of much smaller bubbles do bear a marked resemblance to the Technical mark. Since one of the versions of Technical is itself monochrome, the black and white presentation of the bubbles in the TV advertisement is not a relevant distinction for this purpose. Again, it is not necessary to freeze a frame to receive this impression. The two representations of bubbles in the TV advertisement follow in sequence, and I must look at them globally. I must guard against any temptation to be over-analytic or to concentrate too hard on what I now know to be the issues in the case. The average consumer does not know what (if any) the issues are. Taking all these factors into consideration, I conclude that the use of bubbles in the first part of the H3G TV advertisement did use signs that were confusingly similar to the two trademarked bubbles Technical and Fizz.
187.	The likelihood of confusion is, in my judgment, exacerbated rather than diminished by the addition of the soundtrack and the super (which reinforce the identification of the bubbles with O2). Nor, in my judgment, does it make any difference that the advertisement taken as a whole differentiated between O2’s services and H3G’s. The point is that the bubbles (and the accompanying soundtrack and super) were intended to and did identify O2’s services. Thus the use of the bubbles (and the accompanying soundtrack and super) would have led the average consumer to believe that the services identified by the sign emanated from the same undertaking as the services identified by the mark (as in fact they did).
188.	Subject, therefore, to any possible defences, in my judgment, and on the basis of my understanding of the law, infringement under article 5 (1) (b) (section 10 (2)) is made out.
Are H3G’s bubbles similar to bubble marks with a reputation?
The bubble reputation
189.	The first ingredient of a claim for infringement under article 5 (2) (section 10 (3)) is that the registered marks have a reputation. The marks relied on under this head are Relax and Continuous. The question under this head is not whether bubbles generally have acquired a reputation as identifiers of O2, but whether these particular trade marks have. I have no doubt that, as a result of O2’s customer numbers, market share, expenditure on advertising and consistent use of bubbles in their advertising (including TV advertising), the theme of blue bubbles had acquired a reputation. The citations from Superbrands and Cool Brands, together with the press articles, are ample confirmation of this. However, I did not have quantitative evidence of the use of either Relax or Continuous, although my impression (as noted above) was that Relax was the most frequently used of the trademarked bubbles. If my impression is correct, it would not be surprising, since Relax is the most visually striking and memorable of the trademarked bubbles. Nor did I have evidence specifically directed to the reputation of these particular marks, as opposed to the reputation of bubbles generally. None of the industry awards or press comments singled out any particular mark for special mention. Mr Burkitt did not direct his attention to particular marks. Mr Sutton’s evidence was that consumers would not differentiate between the different versions of the bubbles; but would recognise the family of bubbles, generally.
190.	Should I nevertheless infer the existence of a reputation on the part of one or both of these marks? The test here is not whether the mark is well-known, but that it must be known by a significant section of the relevant public. There is no doubt that O2 spent a lot of money in promoting itself through the medium of bubbles; and the bubbles in various forms were virtually ubiquitous on its advertising and promotional materials. I have hesitated over my conclusion, particularly in the light of Mr Sutton’s evidence. However, bearing in mind the visual distinctiveness of Relax, and my impression that it was the most frequently used of the bubble marks, I am prepared to infer, by a narrow margin, that it enjoyed a reputation at the time of H3G’s advertisement. However, I am not prepared to draw the same inference in relation to Continuous.
Are H3G’s bubbles similar to Relax?
191.	The question under this head is not whether H3G’s bubbles were confusingly similar to Relax. In my judgment they were not. The question is whether they would have brought Relax to mind. I frame the question in this way because in my judgment I must concentrate on the bringing to mind of Relax, rather than O2’s bubbles generally, to the average consumer. 
192.	As I have said, Mr Burkitt did not apply his mind to the individual marks. Mr Wallace did not say that he made an association with Relax rather than bubbles generally. Mr Kingsbury said that the bubbles recalled O2’s imagery generally. I have already referred to Mr Sutton’s evidence on this topic. My own impression (having watched the advertisement several times) is that the average consumer would not have made a connection between H3G’s bubbles and Relax. Relax is too distinctive an image for that. The visually striking feature of Relax is the mushroom or jellyfish shape of the main bubble. Nothing like that appears in the impugned advertisement. Here I think that I can take into account the fact that the advertisement depicts a moving image of bubbles. The nature of the movement is fast and expanding. The depiction of Relax, as its name suggests, is of a bubble which, if transposed to motion, would rise languidly to the surface. The advertisement would not, in my judgment, have called that to mind.
193.	Accordingly, in my judgment infringement under article 5 (2) (section 10 (3)) is not made out.
O2’s criticisms of H3G’s advertisement
Summary
194.	Apart from his general complaint about the use of bubbles in comparative advertising at all, Mr Sutton’s more specific complaint about the use of bubbles in H3G’s advertisement was that they were not beautiful. They did not have the same standard, quality or tonal values as O2’s bubbles. That, combined with the fact that they were not blue, meant that they gave an unfair representation of O2’s marks. Mr Arnold summarised O2’s complaints as follows:
i)	The bubbles were presented in black and white, rather than in blue;
ii)	The bubbles were mechanical rather than naturalistic;
iii)	The bubbles were not iridescent;
iv)	The bubbles did not stream (either vertically or horizontally) but dispersed radially from a cluster and popped;
v)	The bubbles were shown in conjunction with dank bubbling or dripping sounds;
vi)	The bubbles were shown in conjunction with a downbeat voice-over;
vii)	There was a striking contrast with the bright and upbeat section of the advertisement that presented 3.
Confusion
195.	Mr Burkitt’s report criticised the advertisement as being confusing. He pointed out that the first part of the advertisement used bubbles without O2’s distinctive logo or name; although he considered that the bubbles were plainly used to identify O2. The bubbles then fade into a white screen from which the “3” logo emerges. Mr Burkitt said that some viewers might interpret this as suggesting that O2 had become 3 either by rebranding or by some sort of merger. It will be recalled that Mr Wallace said that he had been left with the impression that there might have been a merger or rebranding of O2. However, Mr Burkitt accepted that he was not an expert in consumer confusion; and that he was only expressing his own personal opinion. In addition, this complaint is inconsistent with the next complaint that Mr Burkitt made.
196.	As I have said, Mr Wallace lost interest in the advertisement after the first few seconds during which he had made the link with O2. Had he watched the remainder of the advertisement he would, in my judgment, have been left in no real doubt that the advertiser was 3. It will be recalled that the brief to WCRS emphasised that “there needs to be absolutely no mistake that these ads are from 3”. Had the advertisement left an average viewer confused, this highly regarded agency would have failed in its task. The very success of the campaign strongly suggests that they did not. As the Marketing Society award recognised, H3G’s campaign had created a clear distinction between 3 and its rivals and had aggressively compared its value for money compared to that of its competitors. Viewed as a whole (both in terms of content and duration) the advertisement is not, in my judgment, at all confusing. I reject the allegation that the advertisement, taken as a whole, was confusing. 
Denigration
197.	In his report Mr Burkitt also considered that the advertisement denigrated O2’s brand. He gave a number of reasons for this conclusion, which can be summarised as follows:
i)	At the beginning of the advertisement the screen is black (a negative colour) as opposed to O2’s distinctive blue;
ii)	The bubbles spread out from a white circle in the form of a confused mass of bubbles to fill the screen, in contrast to O2’s bubbles which are presented in a “silvery manner”;
iii)	The bubble soundtrack does not use any of the music that O2 had used;
iv)	The voice-over is a sombre male voice, giving negative information about O2, which he mentions by name;
v)	As the male voice-over continues to present negative information about O2, the bubbles “become highly agitated” and fill the screen. Eventually they fade away;
vi)	Thus the depiction of the bubbles is “visually and aurally gloomy”, giving rise to negative associations with O2 in the mind of the viewer.
198.	Mr Burkitt’s report characterised this as “brand sabotage”. In contrast to the negative depiction of O2, Mr Burkitt pointed in his report to the positive depiction of 3:
i)	The 3 logo appears out of a bright screen in contrast to the black screen out of which the bubbles appeared;
ii)	The 3 logo is highly coloured and changes its appearance constantly, whereas the bubbles are in black and white;
iii)	The voice-over is the bright voice of a woman, in contrast to the sombre male voice-over describing O2;
iv)	3’s logo is presented in the form in which it was registered as a trade mark, whereas O2’s bubbles are not;
v)	The 3 logo “moves purposefully” in contrast to the chaos of bubbles used to depict O2;
199.	Overall, therefore, in his report Mr Burkitt considered that by means of sound, light, colour and animation the advertisement created the impression that O2’s offering was of poor quality compared to H3G’s.
200.	It seems to me that this conclusion of Mr Burkitt is inconsistent with his conclusion that the viewer would be left in a state of confusion. All these points serve to underline the contrast that the advertisement makes between O2 on the one hand and 3 on the other. It is only possible for a viewer to be in any state of confusion if either (a) he (or she) ignores the voice-over and super or (b) (like Mr Wallace) pays attention only to the first half of the advertisement. Mr Burkitt’s description of the advertisement as “brand sabotage” is not an allegation that can be taken seriously. As Mr Burkitt himself acknowledged in cross-examination it is the job of an advertising agency to present its client in the best possible light. In any comparative advertisement that is done by extolling one’s own virtues compared to the comparator. To the extent that there is deliberate undermining of a competitor’s brand, that is inherent in comparative advertising. Any fair and objective comparison which shows the advertiser in a better light than his competitor is bound to undermine the competitor. In the end, Mr Burkitt accepted that a more reasonable interpretation of his allegation of “brand sabotage” was that WCRS had done a good job for their client. The negativity that Mr Burkitt perceived was what he described as a warning about O2. As he put it:
“I see the problem that in the first part of this commercial there is a warning going on about O2. First of all, the commercial is – much of which is in the style one is used to of O2, but subtly downgraded rather than denigrated and a significant warning is given out about some sort of problem with O2. All of a sudden that nice brand that I knew before as O2 has this problem with it, that in certain situations it is very high priced.”
201.	But the warning is the price comparison. Once it is accepted, as it is for the purposes of this case, that the price comparison is both accurate and fair, this ground of objection disappears.
202.	Mr Burkitt was also unaware that H3G had advertised on the radio, using more or less the same script, voice-overs and soundtrack. Although O2 had originally complained about the radio advertisements, these complaints have been abandoned. There may be slight differences between the script, voice-over and soundtrack in the radio and TV advertisements respectively; but no one suggested that any difference was material. It must be taken, therefore, that the radio advertisements were acceptable comparative advertisements. 
203.	So far as Mr Sutton is concerned, his belief is that the price comparison itself was misleading and unfair. He adhered to his view, despite the fact that it was accepted by O2, for the purposes of this action, that the price comparison was both fair and objective. This, to my mind, coloured the whole of his evidence about the damage done to O2 by the offending advertisement. I do not accept it.
204.	Dealing more specifically with Mr Burkitt’s points I comment as follows. Given that one of O2’s registered marks (Technical) was registered as a monochrome mark, and that monochrome representations of other trademarked bubbles (including Relax) had appeared in the national press, I do not consider that the complaint that the use of black and white bubbles denigrated the mark is fair one. (I ignore the possibility that some people may have black-and-white televisions). It is true that the brand guidelines said that O2’s world on television was to be a “blue world”. But despite its etymology the word “denigrate” is a strong word to apply simply to the depiction in black and white of a mark that is usually depicted in blue. Moreover, even if O2’s trademarked bubbles had been faithfully reproduced in blue in the TV advertisement, there would still have been a contrast between them and 3’s logo which changed colour constantly. The change of colour was partly referable to the fact that H3G’s logo “3” was itself used in a variety of colours. Although Mr Burkitt asserted that H3G’s logo was presented in the form in which it was registered as a trade mark, I am by no means convinced that this is the case. The precise form in which “3” was registered was not explored at trial, but it was not, I think, suggested that it was registered in constantly changing colours. The “3” twirls and spins and at one point appears to fly out of the screen in the direction of the viewer. This does not suggest to me a purposeful (as opposed to energetic) movement. So far as the movement of the black and white bubbles is concerned, it is noteworthy that O2’s brand guidelines are not prescriptive about the size of shape of bubbles in TV advertising (“Bubbles can be big, small, they can move slowly or quickly”); and say nothing about direction of movement. The contrast between the male and the female voice-overs served to emphasise the contrast between the two services, which is part of the point of a comparative advertisement.  It is a matter of judgment whether the relative monotone of the male voice is denigratory or not. Bearing in mind that O2’s own voice-overs were presented in a relative monotone by a male voice, I do not consider that it was. One must, I think, expect a certain degree of robustness in comparative advertising, particularly in the case of a relative newcomer taking on a powerful and established incumbent.
Erosion of distinctiveness
205.	Mr Burkitt also said that the H3G’s use of bubbles eroded the distinctiveness of O2’s bubbles. His criticisms can be summarised as follows:
i)	The distinction between O2’s very distinctive bubbles is blurred by the way in which the bubbles in the advertisement transform themselves into a “fizzing trail” behind the 3 logo. Thus O2’s bubbles have been linked with 3’s own logo;
ii)	The use of the bubbles in the advertisement is not consistent with O2’s consistent use of bubbles in its own advertising. Thus H3G’s use of bubbles erodes the clear brand identity and awareness that O2 had established; and
iii)	The bubbles used by H3G are less attractive than O2’s bubbles in terms of colour, style, animation and sound. Thus the image associated with the bubbles is negative.
206.	The first of these complaints (the “fizzing trail”) was one that O2 had originally made, alleging that the fizzing trail was confusingly similar to O2’s bubbles, but subsequently abandoned. Mr Burkitt was unaware of that. The reformulated complaint was that the effect of H3G’s use of O2’s “bubble imagery” blurred the distinction between the bubble trademarks and H3G’s trade marks. However, in my judgment that complaint is too widely formulated, because O2 cannot lay claim to a monopoly of bubbles generally. Moreover, in relation to H3G’s own trade mark (the “3”) the fizzing trail is a very subsidiary part of the overall visual impression. So far as the second complaint is concerned, Mr Burkitt agreed in cross-examination that it was very difficult to find a benchmark against which to assess the proposition that H3G had altered O2’s bubble imagery. Mr Burkitt had looked at bubble imagery as a whole and had not focussed on the four selected trademarked bubbles. Indeed he was unaware of the Vice-Chancellor’s order requiring O2 to nominate the four trade marks. In addition I have also held that compliance with the Comparative Advertising Directive extends to signs that are similar to (or indeed dissimilar from) the competitor’s registered trade marks. The third of these complaints has echoes of the complaint that H3G denigrated O2’s brand. But as Mr Burkitt recognised, this is inherent in comparative advertising. I was also shown advertisements in which rivals’ offerings were treated with some disparagement, none of which Mr Burkitt found unacceptable.
207.	The usual circumstances in which erosion of distinctiveness is alleged are where the third party applies or wishes to apply a sign similar to the mark to his own goods or services. Thus it is said that if the third party is allowed to do that the exclusiveness of the mark in applying to the proprietor’s goods or services will be blurred. That is not this case. In this case the bubbles in H3G’s advertisement are used to identify O2’s services. Bubbles remain firmly identified with O2. It might alternatively be said that the bubbles used in H3G’s advertisement blur the particular characteristics of the two trademarked bubbles relied on under this head (viz. Relax and Continuous). However, in my judgment this argument fails also. First, O2 itself crops the images of the trademarked bubbles in such a way as to make it hard to recognise their provenance from any particular trade mark. Second, O2 has itself used different images of bubbles (including the remaining nine trademarked bubbles). Furthermore, in addition to the trademarked bubbles O2 has itself used other forms of bubbles, particularly in TV advertising.  So there has already been a significant erosion of the distinctiveness of the trademarked bubbles relied on under this head.
Piggy-backing
208.	Mr Burkitt said that H3G’s advertisement took unfair advantage of O2’s bubbles by “piggy-backing”. Mr Burkitt said that public awareness of O2’s brand in the summer of 2004 was far greater than public awareness of “3”. Consequently, by beginning the advertisement with references to O2 viewers were enticed to watch the advertisement, or at least stay watching. This, he said, had the effect of increasing the authority of the message on the back of O2’s profile; and had the effect of drawing the viewers in on the back of that profile, before diverting them to H3G’s own service. Moreover, the negative treatment of O2’s brand ensured that O2 did not derive any secondary benefit from having been featured in a competitor’s advertisement. Thus Mr Burkitt concluded that by leading with the better known O2 brand at the beginning of the advertisement, rather than its own brand, H3G attracted customer attention and then diverted it to their own brand, thereby “piggy-backing” on O2’s more distinctive reputation. Mr Burkitt also said that viewers would also have been given the impression, through the use of the bubbles, that O2 and H3G (or their offerings) were of the same quality and stature. However, he accepted in cross-examination that this was a legitimate and sensible competitive thing for H3G to do. It was also common ground that comparative advertising was a legitimate way for a newcomer to break into a market. So far as the lack of secondary benefit to O2 is concerned, it seems to me to be inherently unlikely that a comparative advertisement which unfavourably compares a competitor’s offering to that of the advertiser is likely to bring much (if any) secondary advantage to the competitor. I cannot see that there is any substance in this complaint.
209.	So far as the order of presentation is concerned, Mr Burkitt agreed that there was no industry rule to the effect that the advertised brand must be the first to be shown. Mr Kingsbury was of the same view. He said that there was no norm. He considered that to start with the competitor’s offering was “a perfectly legitimate way of opening a comparative ad”. I was shown a comparative advertisement produced on behalf of Tesco in which three of its rivals (Sainsbury, ASDA and Morrisons) were all featured first. Mr Burkitt did not consider that advertisement to be unacceptable. I was shown another in which, although both brands were simultaneously in view (BT and One-Tel), the action began with the rival’s offering. The key, from the point of view of the advertiser, is that his brand should be firmly identified at the end of the advertisement, so that the message the viewer takes away is that of the advertised brand rather than the competitor’s. If there is an advantage to a new entrant into the market in leading with his competitor’s brand, I do not consider that, in the context of a fair and accurate price comparison, that advantage can be characterised as “unfair”. I do not consider that this complaint is justified.
Was the use of the bubbles indispensable?
210.	Mr Burkitt said that the use of the bubbles in the advertisement was not necessary. He put the point in two ways. First, he said, it was not necessary to use bubbles at all. H3G could have used O2’s name or logo alone to identify O2. Second, he said, if bubbles were to be used at all, there was no need to change the bubbles in fact used by O2. If a competitor is to be identified by imagery that it uses, it is only fair to replicate that imagery. It is not fair to alter it, particularly where the alterations give negative connotations to the competitor’s offer. I have already dealt with the complaint that the bubbles were altered.
211.	However, the first of these complaints in my judgment proves too much. The point at issue is trade mark infringement. O2’s logo is a trade mark. Why should it be acceptable for H3G to have used one of O2’s trade marks in a comparative advertisement, but not another? In addition this complaint depends on a narrow interpretation of what is “indispensable”. I have rejected that interpretation. 
212.	Finally, it must not be forgotten that the series of comparative advertisements (including the offending advertisement) was part of the body of work for which the Marketing Society awarded H3G its 2005 award. As Mr Burkitt accepted, the Marketing Society would not have made an award to a brand that had been built on practices that were not honest and fair in commercial and industrial matters.
In the round
213.	Although I have dealt with the various complaints individually, I must also consider the advertisement taken as a whole. This includes the entirety of the audio-visual presentation. When I do so, I cannot find that it is anything other than a fair and objective price comparison which does not take unfair advantage of or denigrate O2’s trade marks or brand. As I have said comparative advertising is necessarily robust; and within the confines of the Comparative Advertising Directive, advertisers should, in my judgment be permitted to do what is needed to make the comparative advertisement effective. 
Actualities not risks or likelihoods
214.	The final point that I should make under this head is that in my judgment O2 have not established that the use of the bubbles (as opposed to the hard-hitting but fair and accurate price comparison) has caused it any economic loss or detriment; or has resulted in any economic gain or advantage to H3G. It is true that the evidence showed that subscribers to ThreePay increased enormously during 2004. It is possible to infer that some at least of the increase was attributable to the “highly aggressive” comparative advertising campaign. But it is not possible, on the evidence, to go any further. Whether customers came from O2, from Vodafone, from Orange or T-Mobile is impossible to say. Even if it were possible to say, it is impossible to say whether they were attracted by the lower price that H3G claimed for ThreePay, by H3G’s use of bubbles in its advertisement, by dissatisfaction with their existing network or by some other reason. It is also possible to say that O2’s churn rate increased from 31 per cent to 37 per cent between 2004 and 2005. But it is not possible to say why that happened. It may well be that the very appearance of H3G had some effect. It may be that the objective price comparison had some effect too. But it is not possible to go any further.
The Comparative Advertising Directive checklist
215.	Finally, I turn to consider the relevant parts of the checklist laid down in the Comparative Advertising Directive.
Is it misleading?
216.	It is common ground that the text of H3G’s advertisement was not misleading. The visual presentation accentuated, rather than eroded, the distinction between the two service providers. Taken as a whole, the advertisement was not misleading.
Does it compare goods or services meeting the same needs or intended for the same purpose?
217.	It is common ground that it does.
Does it objectively compare prices?
218.	It is common ground that it does.
Does it create confusion in the market place between the advertiser and a competitor?
219.	In my judgment taken as a whole, the advertisement does not create confusion between O2 and H3G or between O2’s trade marks or distinguishing marks and H3G’s trade marks or distinguishing marks. At the end of the advertisement a viewer would be left in no doubt which part of the advertisement related to which service provider and whose distinguishing marks were represented in each part of the advertisement.
Does it discredit the trade marks or services of O2?
220.	I have held that it does not.
Does it take unfair advantage of the reputation of O2 or O2’s trade marks?
221.	I have held that it does not.
222.	I conclude, therefore, that H3G’s advertisement complied with the Comparative Advertising Directive. It follows, in my judgment, that there has been no infringement of O2’s rights under the Trade Marks Directive or the Trade Marks Act 1994.
Result
223.	I conclude that:
i)	The registered marks had both inherent and acquired distinctiveness;
ii)	H3G has established its defence under the Comparative Advertising Directive to a prima facie case of infringement under article 5 (1) (b) (section 10 (2);
iii)	O2 has not established infringement under article 5 (2) (section 10 (3))
iv)	Even if O2 had established infringement under article 5 (2) (section 10 (3)), H3G would have established a defence under the Comparative Advertising Directive;
224.	It follows that I will dismiss the action, and the counterclaim.