In three decisions rendered Jan. 22, 2009, the first civil division of the German Federal Court of Justice had to decide the question of if and under what circumstances the use of third-party trademarks as a search term for the purposes of so-called Adword advertisements in the search engine Google was permitted under trademark law. Two of the cases were decided by the Federal Court of Justice, whereas one case was referred to the European Court of Justice for a preliminary ruling on the construction of the European Trademark Directive.

In both of the decided cases (I ZR 30/07 and I ZR 139/07), the Federal Court of Justice dismissed the actions. In the first case, a company named Beta Layout GmbH brought an action against a competitor for the latter’s use of the term “Beta Layout” as a Google search term. Affirming the judgment of the lower instance court, the Federal Court of Justice held that there was no risk of confusion, because an Internet user would not be induced to believe that the advertisement appearing next to the hit list actually belongs to Beta Layout GmbH.

In the second case, the owner of the trademark “PCB-POOL” for circuit boards claimed against the competitor’s use of the search term “PCB” on Google Adwords. Also in this case, the claim was dismissed, although on grounds different from those found by the lower court. It was decisive that the term “PCB” was regarded by the relevant class of persons as an abbreviation of the English term “Printed Circuit Board.” The Court held that the use of the term was a mere descriptive use of the term “PCB,” which generally cannot be prohibited by a trademark owner.

The third case (I ZR 125/07) concerned an action brought by the owner of the trademark “Bananabay” (for adult articles) against a competitor’s use of this term as a search term on Google Adwords. There was no doubt as to the identity of trademark and product. The Federal Court of Justice held that the existence of a trademark infringement was dependent upon the question of whether or not the use of this term was to be regarded as the use of a trademark within the meaning of the Trademark Act. Because this question draws on the European Trademark Directive, which harmonized the trademark law of all member states, the Court suspended the proceedings and referred this question to the European Court of Justice. The suspense therefore continues. A decision of the ECJ may normally be expected in one-and-a-half to two years. In the meantime, the use of a third-party trademark as a search term on Google Adwords in cases that do not constitute a clear descriptive use of a trademark – as in the “PCB-POOL” case – ought to be refrained from, because there is a significant risk that trademark owners concerned may apply for a cease-and-desist order, and may seek damages in case of such use.