UK: ECJ Finds Google Adwords Do Not Infringe Trade Marks (But Advertising Links Could)

The European Court of Justice ("ECJ") handed down its long-awaited judgment in relation to the question of whether or not Google's 'AdWords' system, which allows the sale of keywords to trigger sponsored advertising links on its search engine, could amount to trade mark infringement.

The ECJ agreed with the Advocate General in finding that the purchase and sale of keywords which were third party trade marks was not, of itself, trade mark infringement, so Google was not liable for these aspects. However, if the display of the sponsored advertising link could mislead an 'average internet user' as to the origins of the goods/services, it may result in an infringement by the advertiser.

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The European Court of Justice ("ECJ") handed down its long-awaited judgment in relation to the question of whether or not Google's 'AdWords' system, which allows the sale of keywords to trigger sponsored advertising links on its search engine, could amount to trade mark infringement.

The ECJ agreed with the Advocate General in finding that the purchase and sale of keywords which were third party trade marks was not, of itself, trade mark infringement, so Google was not liable for these aspects. However, if the display of the sponsored advertising link could mislead an 'average internet user' as to the origins of the goods/services, it may result in an infringement by the advertiser.

Background

The ECJ's ruling is in response to three separate references from the French Cour de Cassation (Google Inc. v Louis Vuitton Malletier, Google France v Viaticum Luteciel and Google v CNHRR (C-236/08, C-237/08,C-238/08), which were referred for a preliminary hearing in May 2008. All three cases related to Google's potential liability for the sale of the keywords that corresponded to the registered trade marks of Louis Vuitton Malletier ("Louis Vuitton" and "LV"), Viaticum ("Bourse des Vols", "Bourse des Voyages" and "BDV") and M. Thonet ("Eurochallenges"). Google had sold keywords comprising these trade marks to third parties, which, when searched for on Google, triggered the display of sponsored links on the website. The sponsored links were to websites offering competing goods/services, in Viaticum and CNHRR to those of direct competitors, and in Louis Vuitton, to a site offering counterfeit Louis Vuitton products.

The French Court of Cassation referred various questions to the ECJ, which related to the liability of Google in such circumstances.

The decision is also highly relevant to the other pending references to the ECJ from other EU Member States such as Germany, the UK, Austria and the Netherlands, in which many of the questions of law referred to the ECJ were similar or the same as those posed in the French referrals. See our Law-Nows here and here.

Decision

The ECJ's decision provides guidance on three substantive issues:

1. The "use" of third party trade marks as keywords

The ECJ distinguished between the "use" of the mark by Google in allowing the keyword to be registered and the "use" made by the advertiser who purchases the keyword in order to generate advertising by sponsored links. The former use does not result in infringement, but the latter could.

If an advertiser purchases a keyword which is identical to the trade mark of another party, then the advertiser is using the trade mark in the course of trade for a commercial activity and this constitutes use within the meaning of the Trade Mark Directive (89/104).

This can be contrasted to the "referencing service provider"(Google) who, whilst engaged in commercial activity for the offer and sale of keywords, does not in itself "use" those words in its own commercial communications. Accordingly, Google is not using the trade marks and "is not involved in use in the course of trade within the meaning of the Directive".

2. The effect of such use on the trade mark

The Court also considered the potential adverse effect of the use of the AdWords system and trade marks being used as keywords on the function of the trade marks concerned.

In relation to the "essential function" of the trade mark, being the ability to identify the origin of goods/services, this may be adversely affected if the sponsored link advertisement does not enable an "average internet user" to ascertain whether the goods or services referred to in the advertisement are those of the brand owner, or someone connected to them, or from some other party entirely. The ECJ also noted that this would be the case if the user could only identify the origin of the advertisement "with difficulty". The assessment as to whether this would be the case in any given situation would be carried out by the national courts on a case by case basis.

The ECJ also considered the effect of keywords on the "advertising function", to use the trade mark in sales promotion or commercial strategy in general. The ECJ recognised that a brand owner could register its own trade marks as keywords, and would therefore have to pay to ensure that its advertisements were prominently displayed on searches. However, the court recognised that, typically, the proprietor's home page would also appear in the list of the "natural" results, so would be visible to Internet users regardless of keyword advertising. Accordingly, the court did not consider that using a third party trade mark as a keyword in a referencing service would have an adverse effect on the advertising function of the trade mark.

3. Google's liability as the "referencing service provider"

The ECJ also provided guidance as to whether Google's AdWords service was an "information society service" within the meaning of the E-commerce Directive (2000/31). If so, Google could not be held liable for the potential unlawful conduct of the advertisers (see above) if it did not have notice of the unlawful conduct.

The Court concluded that the AdWords service that Google provides to advertisers fell within the definition of an "information society service" under the E-commerce Directive, since it was one that is provided at a distance, by means of electronic equipment for the processing and storage of data at the request of the recipient of the services, and for remuneration.

However, the Court went on to say that the E-commerce Directive only provides such an exemption if "the activity of the information society service provider is of a mere technical, automatic and passive nature, which implies that the service provider 'has neither knowledge nor control over the information which is transmitted or stored'".

If an internet referencing service provider has not played an active role which would give it knowledge of, or control over, the data stored, it cannot be held liable for the data, unless it has knowledge of the infringement and does not remove the infringing data.

Consequently, it will be a question for the national courts to decide what level of involvement Google has in the AdWords system as to whether Google will be liable for the trade mark infringement of the advertisers. Google would have to be a 'mere conduit' that processes the data entered by advertisers and displays the results depending on the highest 'price per click', and involvement in "drafting the commercial message which accompanies the advertisement" or in the "establishment or selection of keywords" would be relevant. The Court made it clear that the mere fact that Google receives remuneration for the service and provides general information to clients does not (alone) prevent it from benefiting from the exemption.

Comment

Both Google and LVMH have claimed this decision as a victory, but the fact that the controversial and lucrative AdWords system has survived such close scrutiny by the ECJ is a hugely important decision for all brand owners in Europe.

The ECJ has attempted to balance the interests of rights owners with third parties who may also want to register a trade mark as a keyword for other purposes (some of which are perfectly legitimate). Whilst the Advocate General's Opinion focused upon avoiding restrictions of freedom of speech and expression on the internet, the ECJ's judgment seems more commercially minded, perhaps recognising the importance of Internet searches in modern commerce.

Although the decision means that brand owners cannot prevent Google selling trade marks as keywords to third parties, there are other enforcement options available. The ECJ's finding that a trade mark can be infringed in a sponsored link advertisement if an Internet user cannot identify the origin of the advertised goods/services opens up a new battleground for enforcement. The decision of the French court will also be followed with interest in relation to Google's role in the selection of the keyword and drafting the commercial message. The ECJ must also give guidance on the remaining ECJ references on this issue, so there will no doubt be plenty more debate still to come.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 24/03/2010.

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