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Google in the clear on AdWords, however advertisers must take care

April 2010

The European Court of Justice (ECJ) has ruled that Google’s use of third parties’ trade marks in the operation of its AdWords system does not constitute trade mark infringement. However, in some circumstances advertisers may commit an infringement where they use keywords which correspond to trade marks owned by third parties.

Although there is still a long line of keyword-related cases pending before the ECJ, brand owners and advertisers should take on board this latest decision. Brand owners will need to be more vigilant in monitoring third party use of their trade marks as keywords and consider taking action against advertisers, as well as notifying Google, if they believe a keyword is being used in a manner detrimental to their brand, for example where an advertisement displayed following a search on the keyword does not enable internet users to easily identify the origin of the goods and services being advertised. With regard to advertisers, more care will need to be taken when linking advertisements to keywords which correspond to competitor brands, so that it is clear that the goods/services being advertised are not those of the owner of the trade mark.

Background

The background to this decision was set out in our article “An Opinion on AdWords” published during October last year, in which we reported on the opinion of Advocate General Poiares Madura on the questions referred to the ECJ in three cases (Google France and Google Inc. v Louis Vuitton Malletier[i], Google France v Viaticum Luteciel[ii], and Google France v CNRRH and others[iii]) which were joined together following separate referrals to the ECJ from the French Courts.
The respective Claimants had issued proceedings against Google for trade mark infringement on the basis that when their trade marks were entered into Google’s search engine, it triggered the display of advertisements offering counterfeit products (in one case) and products of an identical or similar nature to those in respect of which the trade marks were registered (in the other cases). The cases were the first in a line of referrals to the ECJ from various national courts relating to this issue.

Test for infringement

In its judgment, the ECJ stated that, in order for there to be an infringement under Article 5(1)(a) of the Trade Marks Directive[iv], there needs to be ‘use’ of a sign identical to the trade mark:

in the course of trade;
in relation to goods and services identical to those for which the mark is registered; and
where such use affects, or is liable to affect, the functions of the trade mark.

Google

In finding in favour of Google the Court said that Google carries out a commercial activity and therefore operates ‘in the course of trade’. However, while it provides the technical conditions necessary for advertisers to use third parties’ trade marks, Google does not actually ‘use’ those marks itself within the meaning of the Trade Marks Directive. On that basis, the ECJ held that Google should not be held liable for trade mark infringement as it merely provides a platform on which third parties can advertise.

Advertisers

The ECJ found that where an advertiser uses a trade mark owned by a third party as a keyword, with the aim of advertising alternative goods and services to those of the trade mark proprietor, the advertiser uses an identical mark ‘in the course of trade’ and ‘in relation to goods and services’. As to whether such use is likely to affect one of the functions of the trade mark, the Court considered the essential function of guaranteeing the origin of goods/services (the ‘indication of origin’) and other functions such as guaranteeing quality of the goods/services and communication/advertising under the mark (the ‘advertising function’).

Indication of origin

The ECJ held that there would be an adverse impact on the indication of origin if an advertisement displayed following a keyword search on a particular trade mark does not enable “normally informed and reasonably attentive internet users” (or only enables them with difficulty) to ascertain whether the goods and services referred to by the advertisement originate from the proprietor of the trade mark or from a third party. The Court went on to say that the “proprietor must be entitled to prohibit the display of third party ads which internet users erroneously perceive as emanating from that proprietor.”

However, the ECJ declined to give guidance as to the circumstances when an advertisement will cause confusion as to the origin of the goods/services being advertised, stating that “It is for the national court to assess, on a case-by-case basis, whether the facts of the dispute before it indicate adverse effects, or a risk thereof, on the function of indicating origin……” As a result, there is still a lack of clarity as to what will or will not constitute an infringement.

Advertising function

The ECJ held that a trade mark proprietor is entitled to prevent a third party from using a sign identical to the trade mark in relation to identical goods and services for which the mark is registered in circumstances where the proprietor’s use of its mark as a factor in sales promotion or as an instrument of commercial strategy is adversely affected.

E-Commerce Directive exemption from liability

With regard to whether a paid referencing service can enjoy the exemption from liability under the E-Commerce Directive[v], the ECJ held that the exemption will only apply where the service provider has not played an active role so as to give it knowledge of, or control over, the data stored. In addition, having obtained knowledge of the unlawful nature of data stored or of an advertiser’s activities, the referencing service provider must act expeditiously to remove or to disable access to the data concerned.

Comment

The ruling that Google’s operation of the AdWords service does not infringe third parties’ trade marks is obviously a triumph for Google, as well as other reference service providers, however it is not an unqualified victory. Where advertisements do infringe trade marks owned by third parties, Google will need to act expeditiously to remove such advertisements as soon as it becomes aware of them, in order to benefit from the exemption from liability contained in the E-Commerce Directive. This is likely to result in Google (and all other search engines selling keywords) receiving an increased number of take-down notices from brand owners, particularly as the ECJ made it clear that it is not necessary for a trade mark to appear in the text of an advertisement in order for there to be an infringement. However, such a situation will be problematic for Google and others as the ECJ failed to give guidance on exactly when an infringement will occur and therefore search engines selling keywords will need to make their own assessment as to which take-down notices they should comply with.

In terms of the effect on advertisers, the ruling does leave the door open for brand owners to object to the use of their trade marks as keywords where the advertisements displayed indicate a link with the brand owner. Therefore, advertisers will need to ensure that their advertisements displayed following a keyword search on the trade mark of a third party are not misleading and enable internet users to easily identify the origin of the goods/services advertised. It remains to be seen whether this will have an effect on the appetite of advertisers to register third parties’ trade marks as keywords.
With regard to brand owners, given that the operation of a referencing service does not itself constitute an infringement, they will be forced to consider pursuing advertisers directly. However, it is worth remembering that referencing service providers could still be liable where they do not act expeditiously to take down infringing advertisements following receipt of notification. Therefore, brand owners should monitor advertisers’ use of their trade marks as keywords and consider issuing take down notices to referencing service providers in relation to infringing advertisements. Alternatively, brand owners could consider increasing their spend on the pay-per-click price for use of their trade marks as keywords, in order to ensure that their sponsored links appear above those of their competitors. However, such a strategy will continue to be a bitter pill for brand owners to swallow.

Jeremy Harris and Jessica Stretch

[i]C-236/08

[ii]C-237/08

[iii]C-238/08

[iv]First Directive 89/104/EEC of the Council, of 21 December 1988, to Approximate the Laws of the Member States Relating to Trade Marks

[v]Directive 2000/31/EC of the European Parliament and of the Council dated 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce)