Introduction
Facts
Issues in assessing hashtags' value
Approaches to deciding damages
Decision
Comment
Hashtags are an important tool for advertising and promoting products and can be used to gather momentum around a brand or product. Unlike other promotional tools such as metatags and keywords, a hashtag's visibility means that it poses a greater risk to a brand if used incorrectly. No distinction can be drawn between the use of a sign in hashtag form and any other use of a sign.(1)
In fact, the use of a sign in hashtag form potentially broadens the scope of marks deemed to be infringed. It is accepted that the features of a hash symbol and lack of spacing necessarily arise from the nature of a hashtag. Neither of these factors prevent such use of a sign from amounting to trademark infringement.
While hashtags are understood as being a valuable promotional tool for brands, quantifying that value is difficult, particularly where trademark infringement damages, based on a notional licence fee, are already nigh impossible to accurately estimate. The Intellectual Property Enterprise Court recently grappled with this issue in Gymshark v AYBL.(2)
Gymshark took issue with its competitor AYBL's use of the hashtags #gymshark and #gymsharkwomen. AYBL had used these two hashtags on 78 Instagram posts to promote its own activewear. AYBL had posted the hashtags in the comments to its own posts between July 2018 and January 2019. Gymshark objected on the basis that it owned a UK registered trademark for GYM SHARK, registered in respect of various goods and services including clothing and fitness clothing.
The Court found that the additional "#" symbol and consolidation of the words "GYM" and "SHARK" was not prohibitive to a finding of double identity trademark infringement (identical mark and identical goods and services) in respect of AYBL's use of the hashtag #gymshark. Regarding the hashtag #gymsharkwomen, the Court felt that the addition of the word "women" implied a sub-brand or targeting of the Gymshark brand towards females.
The question was: what damages were payable by AYBL to Gymshark?
Issues in assessing hashtags' value
There is a science behind the use of hashtags on social media. It is not difficult to find theories on the optimum construction, placement and number of hashtags to use for posts to gain traction. As the science of Instagram's algorithms is increasingly unpicked by the marketing industry, it seems likely the legal sector will follow suit.
The Court did not consider the fact that AYBL had posted the infringing hashtags in comments alongside its own posts (as opposed to in the caption). While the infringing hashtags would have been visible to users in the comments section, when viewed on a mobile device, the comments (and hashtags therein) would not have been immediately visible. They would have become visible only when a user tapped on the post. The hashtag's functionality remains unchanged whether used in the caption or comments; however, its visual prominence is affected. As visibility is a crucial differentiator on infringement between hashtags and metatags or keywords, it may be queried whether this should have been scrutinised.
Another difficulty to contend with was that the evidence was limited by the information readily available from social media platforms. AYBL was ordered to serve a witness statement setting out:
- the number of views on every Instagram post it had made using the infringing hashtags; and
- the number of visits to its website immediately following a user viewing one of those posts.
AYBL could not readily obtain this data from Instagram. Instead, AYBL provided the number of "hashtag impressions" (ie, the views of the post arising from following any of the hashtags used on a given post, not just the two infringing hashtags). AYBL also provided the number of click-throughs from the post to its website.
Click-throughs to a website do not necessarily result in sales. Where consumers leave Instagram to shop directly with a brand, Instagram's data will have limitations. Instagram's shopping features are becoming more sophisticated, with many businesses using Instagram storefronts. These enable users to browse and purchase goods without leaving Instagram. As more businesses sell via Instagram, there is potential for hashtag impressions to be followed through to the point of sale, giving an accurate picture of damages.
Attempting to exploit Instagram, brands often use multiple hashtags on any single post. AYBL used 28 hashtags on each post, only two of which were said to infringe Gymshark's trademarks. Where infringing and non-infringing hashtags coexist, it is difficult to apportion their individual value. Whereas generic hashtags (eg, #gym) may garner more hits, it is unclear whether hits translate into sales. Arguably, someone searching for a gym clothing brand is more likely to be shopping than someone searching for "#gym", who could be looking for "fitspiration".
Instagram's data did not take account of whether users that visited AYBL's website from its posts had already been following ABYL's Instagram account. If they were, the user could feasibly have seen the post on their feed, rather than from having followed the infringing hashtags.
Hashtags, once posted, have a quickly decaying value. Theoretically, posts are searchable but in practice they are buried over time and become difficult to locate. Ascertaining the value of a hashtag at the point of posting and understanding how far, and at what rate, this value declines is another complicating factor in assessing a hashtag's value. Gymshark accepted this point and invited the Court to award a fixed "per post" rate as opposed to multiplying a rate by a period of time.
Approaches to deciding damages
Gymshark sought damages on the "user principle", based on what royalty a willing licensor and licensee would have agreed. The fact that Gymshark had never licensed its trademark and would not license it to a competitor was irrelevant.
Gymshark also asked the Court to take a "broad axe" approach, meaning that the Court should apply an estimation rather than a precise calculation. Gymshark argued that it should not suffer because of the difficulty in calculating its precise loss. It suggested a reasonable royalty would be £50 per post per year, or £25 per infringing hashtag. Gymshark argued that the 78 posts had remained online for two to three years, providing a sum of £9,750 (although, as mentioned above, conceding that a hashtag's decaying value made a fixed per post rate appropriate).
This assessment did not take account of the (limited) data obtained from Instagram. Applying a per hashtag impression valuation, AYBL reported that the total number of hashtag impressions was 32,800. It estimated the total number of click-throughs to its website at 800 clicks; Gymshark estimated this at 1,000 click-throughs. Through AYBL's paid-for advertising, it had generated just over 3 million impressions on Instagram, translating into £34,778.45 in gross sales. AYBL therefore valued one impression at around 1p in gross revenue. On that basis, AYBL claimed that the impressions, based on the use of all hashtags, were worth £328 in gross revenue.
The per impression valuation did not take account of AYBL's cost of sales, which would reduce the number further. Nor did it distinguish the infringing hashtags from the remaining 26 hashtags. Further, this approach assumed that someone following paid-for advertising, which had been pushed on them, would be as likely to visit AYBL's website as someone independently searching for "#gymshark" on Instagram.
AYBL also suggested a conversion rate valuation, giving evidence that the number of click-throughs to AYBL's website which resulted in sales was 2%, with the average sale totalling £60. If 1,000 people visited AYBL's website (as estimated by Gymshark) and 2% of those click-throughs resulted in sales at £60, this would amount to £1,200. Again, this analysis did not take account of the cost of sales and it assumed that all click-throughs came from people arriving at AYBL's post from the infringing hashtags rather than from following AYBL on Instagram, for example. It also assumed that the conversion rate from users following AYBL's Instagram posts would be the same as for ordinary browsers of AYBL's website.
Finally, the Court considered a non-infringing alternative advanced by AYBL – paid-for advertising. When considering the cost to AYBL of paid-for advertising to generate a similar number of hashtag impressions, AYBL said that it had paid around £9,500 for advertising on Instagram, generating approximately 3 million hashtag impressions. AYBL's £9,500 advertising spend produced almost 100 times the number of hashtag impressions created by the infringing posts. This would suggest that a spend of £95 would generate the same number of impressions as the infringing posts.
The Court found that of AYBL's suggested methods, the conversion rate analysis was most useful as it translated most directly into sales.
In the absence of information on the performance of individual hashtags, the Court assumed against AYBL that all of the click-throughs came from the use of the two infringing hashtags as opposed to the other 26 hashtags. It also assumed that the conversion rate for those click-throughs was higher than average as customers using the infringing hashtags were already looking for activewear.
Applying a broad brush (if not a broad axe) approach, the Court felt that the hypothetical willing licensor and licensee would agree to a fee of £2,000.
It is already difficult to quantify damages for trademark infringement where an imaginary royalty rate is fabricated based on two parties accepted to be far removed from Gymshark and AYBL. This issue appears to be exacerbated when applied to hashtags.
For further information on this topic please contact Katy Bourne at Pinsent Masons by telephone (+44 121 200 1050) or email ([email protected]). The Pinsent Masons website can be accessed at www.pinsentmasons.com.
Endnotes
(1) Frank Industries Pty Ltd v Nike Retail BV, Nike European Operations Netherlands BV, Nike (UK) Limited [2018] EWHC 1893 (Ch), 2018 WL 03585288.
(2) Gymshark Limited v (1) RK Brands Limited (2) Reiss Edgerton (3) Kristian Edgerton.
