The use of third party trademarks as “ad-words” in order to gain advantageous referencing in Internet searches does not necessarily constitute trademark infringement, the Enterprises Section of the Milan Court ruled on appeal against a summary judgment, in a decision that is filled with references to the EU Court of Justice case-law.

The controversy sparked between the parties, two competitors in the same market, when one started using the registered (national) trademark of the other in the context of the Google AdWords service, so that Google searches performed on the basis of the sign in question displayed so-called sponsored links to its website, accompanied by a short commercial message, in a prominent position.

The trademark owner, holding that such unauthorised use of its sign to advertise services identical to its own constituted a trademark infringement as such, applied for a preliminary injunction with the Enterprises Section of the Milan Court.

Click here to view example of sponsored link.

The application was however rejected by the first instance judge, on the grounds that the applicant should not have acted against the advertiser, but against the search engine provider.

The trademark holder filed an immediate appeal before a 3-judge panel. Although the appellate court dismissed (unsurprisingly) the first instance judge’s reasoning—quoting the ECJ Google France doctrine under which, in such cases, the search engine does not “use” and thus may not infringe the relevant trademark—it nevertheless denied the appeal, on grounds unrelated to any issues of locus standi, and tackling instead the merits of the extent of the protection conferred by trademark rights.

In reaching its decision, the appeal court drew widely from the ECJ case-law on the subject (chiefly, the rulings in the Google FrancePortakabin and Interflora cases) and from the doctrine taught thereof that the use of a competitor’s trademark as a keyword within the context of an Internet referencing service may not be prevented by the proprietor of the trademark as such, but only if it has an adverse effect on one of the functions of the same. The appellate judges found, indeed, that in the case before them none of the said functions of the trademark in suit had been adversely affected by its use as an “ad-word”.

As for the trademark’s primary function of indicating origin, according to the appellate judges in the case at hand, the “well informed” and “reasonably observant” Internet user—one who would be aware of the existence and operation of the AdWords service, and would know that, by virtue of the latter, any Google searches made on the basis of a trademark would display not only links relating to the owner of the trademark, but also those related to third party advertisers—could not have been misled about the origin of the services so advertised from the trademark holder, or about the existence of any connection between the latter and the advertiser.

The judges observed in particular that the disputed advertising—composed of the sponsored link and a short commercial message—did not hint in any way at the existence of any economic link with the applicant, whose trademark did not appear at all in the ad; on the contrary, the advertiser’s own trademarks were prominent in the commercial message, providing a clear indication of the origin of the services. It would therefore be “absolutely clear” to the informed Internet user that the sponsored link offered an alternative to the services of the trademark holder.

Nor, according to the judges, would the use of the applicant’s sign in the AdWordsservice affect as such the advertising function of the trademark in suit. Internet keyword advertising based on competitors’ trademarks constituted, in the court’s view, a practice inherent to (fair) competition, having the purpose of proposing to Internet users alternatives to the goods or services of the trademark owner. This use enabled consumers to make informed choices, and, on the other hand, did not deprive the trademark proprietors of the ability to continue using their trademark effectively in order to inform and persuade consumers, possibly accessing the AdWords service themselves.

As to the investment function of the trademark—referring to the efforts needed to acquire and preserve a business reputation—the court, again echoing the ECJ, observed that no use of a trademark, respectful of its function as an indication of origin, which has the only consequence of forcing the owner of the trademark to adapt its efforts to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty, can be prevented by the trademark holder.

The ruling might be summarised as a confirmation of the principle that the protection of a trademark against use by third parties, even for identical goods or services, is never absolute, but always relative.