Optimising visibility on search engines’ result pages has become a core component of any online marketing strategy. But how can brand owners protect themselves when competitors are using their trade marks, business names and domain names as AdWords or keywords to increase their ranking on search engines such as Google? Equally what checks and balances can advertisers using the Google AdWords program and search engine providers, put in place to avoid allegations of misleading and deceptive conduct?

Subject to a pending appeal to the High Court, a recent Full Federal Court decision in Australian Competition and Consumer Commission v Google Inc1 has significant ramifications for Google’s AdWord’s program and clarifies the advertising practices of search engine providers in Australia. As a result of this decision aggrieved brand owners may have recourse not only against the advertisers responsible for the advertisements but directly against Google. The High Court is likely to revisit the issue of Google’s liability later this year.

The Full Court’s finding that Google is liable for the content of advertiser’s sponsored links in Australia (under our consumer protection laws)2 is to be contrasted with the position in Europe and the United States where Google has not been held liable (under the trade mark laws in those jurisdictions)3. Australian Courts are yet to consider whether Google/the advertiser's use of competitor's names in headlines of sponsored links constitutes a breach of our trade mark laws. To do so would require a finding that Google's use of the AdWord was "use as a trade mark".4

The Google decision at first instance and two recent Federal Court decisions also provide guidance as to how advertisers should tailor their AdWord programs.

Key points

For trade mark owners:

  1. The first avenue for trade mark owners is to file a Google AdWord Complaint regarding use of its mark as an AdWord or in the text of a sponsored link.5
  2. If the Google AdWord Complaint is not successful or a satisfactory outcome cannot be negotiated, there is now a further avenue of issuing proceedings in the Federal Court not only against the advertiser responsible for the Google ad but also, in certain circumstances, directly against Google.
  3. If the Full Federal Court's decision is maintained, Google should be more responsive to AdWord Complaints.

For advertisers:

  1. Advertisers should not use a competitor’s trade mark, trading, product or domain name as the headline of its sponsored link when the ad text links to a website which does not contain any information about the competitor or its products/services.
  2. Advertisers should consider excluding competitor's names when buying generic AdWords and featuring hanging representations in their ads, for example “Buy online and save up to 70%”, when the advertiser knows that the word is likely to be searched with a competitor’s name.

For search engine providers:

  1. Search engine provider’s staff should be instructed not to encourage advertiser to create advertisements which contain trade marks / domain names of known competitors which will be returned in response to an inquiry of the search engine provider.
  2. Merely having terms and conditions attempting to limit the search engine’s liability is unlikely to avoid liability.6

What are “Sponsored links” in Google search results?

Google's search result pages typically present users with “organic search results” that comprise web pages containing the user’s search query (and which are ordered by relevance), and “sponsored links” (now called “ads”) which are advertisements that advertisers have paid to have included on particular search result pages. These sponsored links include a headline, short text and the address of the advertiser’s website (also known as its ‘URL’), as shown below:

To see picture please click here.  

The AdWords advertising service

Google offers a program whereby advertisers purchase "AdWords” or keywords; which, when entered by the Google user, cause the advertiser's sponsored link to appear in the search results for that word. The AdWord may be the name or trade mark of another trader unless and until Google receives a complaint under its Google AdWord Complaint Policy from the owner of the name or mark. Advertisers pay Google a fee if its sponsored link is clicked by a user.

ACCC v Trading Post Australia Pty Ltd and Google, Inc7 and ACCC v Google Inc8

Advertiser's liability

The first instance Federal Court decision concerned eleven sponsored links, including:  

To see picture please click here.  

A consumer who searched Google for example, for the terms "Harvey World Travel", was presented with a sponsored link to a rival website which contained no information regarding the competitor who featured in the headline of the sponsored link. The ACCC alleged that each of these sponsored links were misleading or deceptive or likely to mislead or deceive.

These advertisements were created using the Google AdWord program. After the keyword/s had been selected, the advertiser provided Google with the text of an advertisement into which a keyword/s was inserted. Each advertiser opted to use Google’s keyword insertion facility such that keywords selected by the advertiser were automatically inserted in the sponsored link headline as it appeared on the results page.

Three of the eleven advertisements were published by Trading Post Australia Pty Ltd (“Trading Post”)9. Trading Post had published the sponsored link below which included competitor's name (Kloster Ford, a NSW car dealer) in the headline. When users clicked on the headline they were taken to the Trading Post website which did not contain any information regarding Kloster Ford or its car sales.

Kloster Ford

www.tradingpost.com.au

New/Used Fords – Search 90,000 + auto ads online. Great finds daily!

At first instance Nicholas J declared that such conduct constituted misleading and deceptive conduct and false or misleading representations as to a commercial association or affiliation between the Trading Post and Kloster Ford when none existed.10

Nicholas J considered ten other sponsored links11. However, to the extent that any of the sponsored links were held to be misleading and deceptive the advertiser, and not Google, was held liable.

Google's liability

Although Google provided the technical facilities (including the keyword insertion facility) and Google staff had some input in creating the sponsored links, at first instance Nicholas J held that Google had merely communicated the advertisement and had not endorsed or adopted the information conveyed in the advertisement. His Honour concluded that ordinary and reasonable users would understand that Google was a commercial enterprise separate and distinct from the advertisers who make use of it.

On appeal by the ACCC, the Full Federal Court unanimously held that Google had made the misrepresentations contained in four sponsored links. According to the Full Court:  

87. No user of Google’s search engine presented by Google with a sponsored link in response to a search query would regard the sponsored link displayed by Google with a clickable link to the sponsor’s URL as conveying the message that the sponsored link is a statement by an advertiser which Google is merely passing on. What appears on Google’s webpage is Google’s response to the user’s query … Google’s conduct cannot fairly be described as merely passing on the statements of the advertiser for what they are worth.12

The specific conduct that was said to be misleading and deceptive was Google’s:

88…. display of the sponsored link in response to the entry of the user’s search term in collocation with the advertiser’s URL. The display of the sponsored link is effected by Google’s engine as Google’s response to a user’s search. That which is displayed by Google is called up by Google’s facility as Google’s response to the user’s search. The clickable link, when clicked, takes the user directly to the advertiser’s URL.13

The Full Court found that Google was "in fact, much more than a mere conduit".14

The Full Court observed that whether a corporation has engaged in misleading conduct or has merely acted as a conduit for another will be a question of fact in each case.15  According to the Full Court "the intermediary’s conduct must be considered as a whole to determine whether the intermediary was merely passing on the information. Whether or not there is an implied disclaimer or an implied adoption or endorsement is a conclusion of fact which follows from a determination based on all the circumstances of the case.”16

Was the “publisher’s defence” available?

In its defence Google sought to rely on the so-called “publisher’s defence” under section 85(3) of the Trade Practices Act 1974 (Cth)17, which protects publishers (such as magazine and newspaper publishers) from liability for misleading claims made by its advertisers.

To rely on this defence, Google needed to establish that its business was to publish or arrange publication of advertisements, that it received the advertisements for publication in the ordinary course of business, and that it did not know and had no reason to suspect that its publication was misleading or deceptive. At first instance, Nicholas J concluded that if Google had been liable for the misrepresentations made in the four advertisements, the publisher’s defence would not have been available because Google (via its employees) should have known or had reason to believe that its publication of the advertisements would mislead or deceive consumers.

The Full Court agreed with the conclusion of Nicholas J and held that Google could not rely on the publisher’s defence on appeal.18

With respect to the Harvey World Travel advertisements, for example, the Full Federal Court considered Google ought reasonably to have suspected that the use by STA Travel of Harvey World Travel’s name as a keyword triggering an advertisement for STA Travel was likely to mislead or deceive a consumer searching for information on Harvey World Travel. Indeed, Harvey World Travel was also a client of Google.19

As such Google had engaged in conduct that was misleading or deceptive having misrepresented that there was an association or affiliation between the competitor and the advertiser.

Google was ordered to pay costs20 and to establish and implement a trade practices compliance program.

Google's application for special leave to Appeal to the High Court granted

On 22 June 2012 Google was granted special leave to appeal to the High Court21. The principal issues on appeal are:

  • whether the Full Federal Court was correct in finding that because Google published the advertiser's links it was responsible for them; and
  • whether the decision of Universal Telecasters (QLD) v Guthrie22  (relating to the liability of a television broadcaster relied on by the ACCC and the Full Federal Court) is relevant to determining liability for misleading and deceptive conduct in the online environment, particularly in the search engine context.

Recent interlocutory decisions involving AdWords

Recent interlocutory decisions involving AdWords, but which did not involve findings against Google, include Specsavers Pty Ltd v Coastal Contacts (Aus) Pty Ltd23 and Specsavers Pty Ltd v Buyinvite Pty Ltd.24

In the first case a competitor of Specsavers, Coastal Contacts (Aus) Pty Ltd purchased the Google AdWord “contacts” but had not excluded the word “Specsavers” from its AdWord program. Someone entering the search terms “contacts” and “Specsavers” would see Coastal Contact’s sponsored link which included the statement “Buy Online and Save Up to 70%". Specsavers did not allege that the representation itself was false but that consumers who searched the terms "contacts" and "Specsavers" would ask ‘70% of what?’ and assume that the comparison was made with Specsavers.25

Jacobson J held that “it is (or was) the failure of Coastal Contacts to exclude from the keywords the name Specsavers and the knowledge … that the name Specsavers will be combined with the common descriptive terms “contacts” which brings about the misleading conduct”26. The interlocutory injunction was granted. However, the example of misleading and deceptive conduct involving Google Adwords was but one of multiple examples of misleading and deceptive conduct engaged in by Coastal Contacts.

In the second case, Specsavers obtained an undefended interim injunction against Buyinvite regarding the following ad:

80% off Alex Perry frames.

www.buyinvite.com.au

As seen on Today Tonight!

Alex Perry frames at irresistible prices.

As Specsavers has the exclusive right to offer Alex Perry branded glasses for retail sale in Australia, Foster J held that Buyinvite's advertisement was "misleading and deceptive and false because it suggested that [Buyrite] has the capacity to supply Alex Perry branded glasses when it clearly does not.

While the Specsavers cases are worth noting, they arguably have no precedential value - the AdWords aspect of the first decision was one of many instances of misleading and deceptive conduct which tipped the balance of convenience in favour of Specsavers and the second case was undefended. Both cases have now been finalised.

Australian Courts are yet to consider whether Google’s or an advertiser's use of competitor's names in headlines of sponsored links constitutes trade mark infringement. To do so would require a finding that Google's or advertiser’s use of the AdWord was "use as a trade mark"27. Nonetheless, there is a body of case law developing in Australia concerning Google AdWords with which IP practitioners need to be familiar.