Introduction

In what is likely to be seen as a set-back for brand owners, the European Court of Justice (ECJ) has held that Google is not liable for trade mark infringement with its AdWords system.

Background

Google operates a paid referencing service, ‘AdWords’. AdWords allows an advertiser to reserve a keyword and so obtain a placing of an advert (an advertising link and short commercial message). When an Internet user’s search term contains the advertiser’s keyword the advertiser’s advert appears in the sponsored links section of the Google search results page (separate, but along with, the ‘natural’ results which are displayed according to relevance to the search term). The advertiser pays a fee for each click on its advertising link based on the maximum price per click that the advertiser bid for the keyword and the number of clicks. More than one advertiser can reserve the same keyword. Their respective advertising links are displayed according to the maximum price per click, number of clicks and quality of the advert as assessed by Google. AdWords is reportedly a main source of Google’s $23 billion annual revenue.

Google’s AdWords has resulted in litigation across the EU and elsewhere against Google. At its heart this litigation rests on the claim by brand owners that Google’s AdWords has allowed third party advertisers to reserve the brand owner’s registered trade marks as keywords.

Brand owners claim that by generating income through the ‘sale’ of keywords that comprise brand owners’ trade marks Google is infringing trade mark rights. They also claim that they have to bid at a higher maximum price per click for their own brand name keywords if they want to ensure their advert is placed higher up the sponsored links than third parties’ adverts, and that competitors and sellers of imitation goods are reserving and using brand owner’s trade marks as keywords.

The proceedings

The ECJ case reference results from referrals from 3 French proceedings brought against Google regarding the legality of the use of trade marks as keywords. In these cases advertisers were using keywords corresponding to a brand owner’s registered trade marks for counterfeit goods or for identical competing goods.

One of the claimants in France is LVMH, the luxury goods brands being particularly susceptible to internet based counterfeit operations.

The French courts found Google liable for trade mark infringement in two of the cases and an accessory to infringement by the advertiser in the other. Google appealed, leading ultimately to the referral of a number of key questions to the ECJ.

The ECJ’s decision

The ECJ has now ruled that where an advertiser uses a keyword corresponding to a brand owner’s registered trade mark:

  • The advertiser may be liable for trade mark infringement, depending on the manner that the advert in question is presented and, in particular, whether and the extent that the advert does or does not enable the average internet user to ascertain whether the goods or services referred to in the advert originate from the brand owner or an economically connected party.
  • Google itself is not liable. Google operates the AdWord service “in the course of trade” but it is not itself making trade mark “use” of the brand in question.
  • Google could, potentially, be liable on other grounds for permitting an advertiser to use a trade mark as a keyword. However, Google’s AdWord’s service was capable of qualifying for the protection from liability set out in the E-Commerce Directive (2000/31/EC). This protection would mean that, under national laws, Google could not be liable for an advertiser’s infringing keyword use unless Google had actual knowledge and did not act expeditiously to stop the advertiser’s infringement.

Comment

The decision has been declared a victory by Google and, to an extent, by the brand owners.

Whilst it remains to be seen how the French and other national courts in the EU will apply the ECJ’s decision (and there are other referrals pending before the ECJ), the indication is that Google will not be liable for direct trade mark infringement and can only be liable indirectly if it actually knows of the infringing use by the advertiser and does not move quickly to stop that.

For brand owners (particularly those subject to extensive on-line infringement and counterfeiting) the ECJ’s decision is, on balance, a set back in that it confirms that they will not be able to fight counterfeits and other infringers by stopping Google Adwords and similar systems at source. However, the fact that the ECJ has clarified that advertisers can in principle be liable for trade mark infringement by use of ‘Adwords’ is at least a helpful development, as is the finding that Google can become liable if it does not act expeditiously to remove the infringement. In order to engage Google’s responsibility brand owners should continue to monitor possible trade mark infringements and notify them to Google.

Tthe ECJ’s decision in full can be read here: Case No. C-236/08 to C-238/08.