Most readers will be familiar with AdWords – Google’s advertising service which allows businesses to select keywords which, if searched against by Internet users, will bring up the business’s advertising link as a sponsored search result.

AdWords are big business: having been launched in 2000, the service now accounts for over 95% of Google’s revenue (which is a staggering US$28 billion!).

Brand owners have, understandably, always been keen to prevent competitors from using their trade marks as AdWords, and thus from benefiting from the substantial investment in the development and promotion of their brands. There has been much debate in recent years whether or not such activities could amount to trade mark infringement. A number of recent decisions by the ECJ have dealt with these issues – in particular the Louis Vuitton case and last week’s decision in Interflora v Marks & Spencer. The main principles derived from these judgements are summarised below.

As a general rule, businesses are permitted to use the brands of competitors as AdWords to generate sponsored search results for their own products. The ECJ held that such activities would normally fall within the ambit of fair competition by allowing businesses to alert Internet users to the availability of alternative goods and services.

However, the use of third party brands as AdWords can amount to trade mark infringement if the sponsored advertisement is likely to mislead consumers as to the origin of the goods advertised in the sponsored search results. In other words, the advertisement must enable the ”reasonably well informed and reasonably observant Internet user” to ascertain whether the advertised goods originate from the brand owner, from a business economically linked with the brand owner, or from an entirely unconnected third party. Bearing in mind that most Internet users nowadays are familiar with the widespread use of keywords and sponsored links, it is unlikely that use of a competitor’s trade mark as an AdWord will by itself cause such confusion, in particular if the advertiser displays its own name in the sponsored advert. On the other hand, sponsored links which also refer to the third party’s brand in the advertisement text are much more likely to mislead or confuse Internet users and may therefore infringe the brand owner’s trade mark rights.

In the recent interflora decision, the ECJ also clarified that AdWords can infringe trade mark rights if the advertiser does not cause confusion but takes unfair advantage of the reputation of the trade mark (so called “free-riding”) or damages the reputation or distinctive character of the trade mark. An example would be where widespread use of a food brand as an AdWord creates a risk that the brand will become a generic term for the specific type of food product on offer.  Unfortunately the Court gave no further guidance on what may constitute unfair advantage or damage to reputation in this context. For example, could there be an actionable damage to reputation if a company used a brand associated with high quality freshly squeezed fruit juice as an AdWord to bring up sponsored links for its own product made from concentrate? Future decisions by national courts applying the ECJ’s guidance may shed more light on these issues.

As matters stand at present, the circumstances in which brand owners can prevent use of their trade marks as AdWords by competitors appear to be quite rare. It is nevertheless worthwhile for businesses in the food and drinks sector to monitor other businesses’ use of their brands as AdWords (simply by carrying out keyword searches against their own brands) and to check whether the sponsored advertisements are likely to mislead consumers. Any misleading or particularly damaging use of trade marks as AdWords should be followed up with the advertiser in question and, where appropriate, also the service provider Google.