Google France: ECJ rules on Google’s AdWords service

The Court of Justice of the European Union’s judgment in Google France was released today. This is the first of a series of cases relating to the use of keywords through search engines to reach the EU’s highest court. It will give Google great comfort but is less welcome for brand owners. The thrust of the proceedings is over whether Google, by allowing third parties to purchase keywords which correspond to trade marks, should be liable for trade mark infringement.

Google’s AdWords service is its flagship advertising product and main source of revenue. The service allows advertisers to purchase ‘keywords’ which, when entered into Google’s search engine, trigger the display of advertisements as ‘Sponsored Links’. Google’s results page lists the Sponsored Links above or adjacent to the ‘organic’ search results and Google receives payment each time a user clicks the advertisement. Brand owners’ concern is that, by allowing advertisers to purchase keywords which correspond to their trade marks, counterfeiters and competitors and can ‘ride on the coat tails’ of their brands’ reputation.

Google France

In the three combined Google France cases, three French companies, had each brought trade mark infringement proceedings in 2003 in France against Google. The first was LVMH the owner of a Community trade mark for VUITTON and French marks for LOUIS VUITTON and LV. It claimed that Google’s advertisements led to counterfeit goods. The second party, Viaticum, owned French trade marks for BOURSE DES VOLS, BOURSE DES VOYAGES and BDV in respect of travel arrangement services. It claimed that Google’s advertisements led to competitors of Viaticum. The third party, CNRRH, is a licensee of the French trade mark EUROCHALLENGES in respect of matrimonial agency services. It claimed that Google’s advertisements led to competitors of CNRRH.

The French courts found Google to be liable in all three cases. Google’s appeal had also failed in all three cases. The ECJ was therefore asked to rule on the following questions:

  1. whether trade mark proprietors are entitled to prevent Google from selling keywords to third parties where they correspond to identical or similar trade marks protected for identical or similar goods or services?
  2. whether it makes any difference if the trade marks have a reputation?
  3.  if the trade mark proprietor cannot prevent Google selling keywords, whether Google is liable if it is informed of unlawful use of the trade mark by the advertiser, such as where the advertisement leads to counterfeit goods?

The ECJ focussed its attention on the test for infringement of identical marks as that was what was in issue here. It began by referring to Article 5(1)(a) of the Trade Marks Directive and its own case law interpreting that provision:

…a trade mark proprietor is entitled to prohibit a third party from using, without its consent, a sign identical with that trade mark in the course of trade, in relation to goods or services which are identical with, or similar to, those for which that trade mark is registered and the use affects, or is liable to affect one of the functions of the trade mark.

A brand owner therefore need only show that an advertisement adversely affects one of the functions of a trade mark to succeed in a claim for trade mark infringement.

Google’s liability

The ECJ ruled that although Google sold advertising space through its AdWords service on the basis of the trade marks, it does not use the trade marks in its own commercial communications. Instead, Google allows its clients to use the trade marks without itself using those signs. The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign ‘in the course of trade’. That means the operation or use of Google’s AdWords service does not amount to trade mark infringement per se.

Advertisers’ liability

The ECJ held that the advertiser’s liability will depend on whether its use of the trade mark has an adverse affect on one of the functions of the trade mark, including:

  • the essential function of indicating origin
  • the advertising function
  • the communication function
  • the investment function

The origin function

The ECJ ruled that whether a trade mark’s origin function is adversely affected depends on the manner in which the advertisement is displayed. It is irrelevant whether the trade mark appears in the advertisement itself. It said there will be infringement where:

…the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party.

If an advertisement suggests an economic link between the proprietor of the trade mark and the advertiser, or is so vague that “normally informed and reasonably attentive internet users” cannot distinguish whether the commercial message originates from the brand owner or a third party, then there must be an adverse effect on the function of the trade mark. In those circumstances, the advertisement will constitute trade mark infringement.

It is for the national court to determine in each case how the advertisement will be interpreted. However, the ECJ stated that the very fact that a keyword triggers the display of an advertisement is “liable to create the impression that there is a material link” between the brand owner and the third party. That indicates a presumption in favour of infringement which the advertiser must rebut.

The advertising function

In respect of the advertising function, that is the ability of the mark to inform and persuade consumers, the ECJ said that there would be infringement where the third party’s use adversely affects “the proprietor’s use of its mark as a factor in sales promotion or as an instrument of commercial strategy“.

Interestingly, the ECJ ruled that the advertising function was not adversely affected by third parties bidding on the trade mark and inflating the price of the advertisements for all parties. It referred to the fact that brand owners website would appear in any event in the natural or organic search results and therefore the visibility was “guaranteed”. Does this mean that brand owners whose websites do not appear in the organic search results, perhaps because they choose not to have an online presence, have a stronger claim to an adverse effect on the advertising function?…

Does it make any difference if the trade mark has a reputation?

The court reiterated its guidance in L’Oreal v Bellure that, where a third party:

…attempts to ride on the coat-tails of a trade mark in order to benefit from its power of attraction, reputation and prestige, and to exploit, without paying any financial compensation and without being required to make efforts of its own in that regard, the marketing effort expended by the proprietor of that mark in order to create and maintain the image of that mark, the advantage resulting from such use must be considered to be an advantage that has unfairly been taken of the distinctive character or the repute of that mark.

Does Google have a defence under Article 14 of the E-Commerce Directive?

Finally, the ECJ considered the E-Commerce Directive 2000/31/EC, Article 14 of which provides that an internet service provider acting as a ‘host’ is not liable for the infringing activities of its users. The ECJ ruled that the protection afforded by Article 14 would only apply where the internet service provider had not played an active role of such a kind as to give it knowledge of, or control over, the data stored.

If it has not played such a role, that service provider cannot be held liable for the data which it has stored at the request of the advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser’s activities, it failed to act expeditiously to remove or disable access to the data concerned. It is for the national court to determine on the facts whether that is the case.

So where does that leave us?

Brand owners cannot prevent third parties from purchasing their trade marks as keywords. However, brand owners can bring proceedings for trade mark infringement where they can show the average internet user is unable to distinguish whether the advertisement is from the trade mark owner or a third party or where the advertiser is gaining an unfair advantage from the reputation of the brand.

Google will be liable where it plays an active role in the creation of an advertisement, or is made aware of an infringing advertisement and fails to remove it.

All iPit posts on Google AdWords can be found here.

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