Google AdWords cleared by European Court but advertisers warned over trade mark abuse

Out-Law News | 23 Mar 2010 | 10:33 am | 3 min. read

Google's AdWords system does not break trade mark law but companies can still stop their trade marks being used in the system in some circumstances, the European Union's top court has said.

The Court of Justice of the European Union (CJEU) has said that Google's AdWords system does not violate the trade mark rights of a brand owner when its trade marks are used by another to trigger adverts.

It said, though, that the advertiser does infringe trade mark rights in some cases and that trade mark owners can demand that Google stop the use of its trade marks, and that Google will be liable for that infringement if it does not act quickly to stop that use.

AdWords displays adverts beside natural search results in Google's search engine. It displays according to which are most relevant and which companies paid the most to be associated with a certain search term.

Luxury goods maker Louis Vuitton Moet Hennessy (LVMH) had argued that Google infringed its trade marks when it allowed anyone other than it to bid on those trade marks in the AdWords sytsem.

The Court has said that Google is only an information service provider and does not infringe any trade marks, it only creates the environment in which trade mark owners and advertisers do business.

"The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign," said the Court's ruling, published this morning. "To the extent to which it has permitted its client to make such a use of the sign, its role must, as necessary, be examined from the angle of rules of law other than [the Trade Marks Directive and Regulation]."

"A referencing service provider is not involved in use in the course of trade within the meaning of the abovementioned provisions of [the Directive and Regulation]," it said.

The ruling did say, though, that owners had the right to stop the use of their trade marks in AdWords when the adverts displayed suggested that they were linked to the trade mark owner or caused confusion about who was behind them.

One of the functions of a trade mark is to make it clear who is behind the sale of goods and services. Trade marks are designed to indicate the origin of goods. The Court said that some AdWords could frustrate this function.

The ruling said:

"In the case where a third party’s ad suggests that there is an economic link between that third party and the proprietor of the trade mark, the conclusion must be that there is an adverse effect on the function of indicating origin.

In the case where the ad, while not suggesting the existence of an economic link, is vague to such an extent on the origin of the goods or services at issue that normally informed and reasonably attentive internet users are unable to determine, on the basis of the advertising link and the commercial message attached thereto, whether the advertiser is a third party vis-à-vis the proprietor of the trade mark or, on the contrary, economically linked to that proprietor, the conclusion must also be that there is an adverse effect on that function of the trade mark."

Trade marks also have an advertising function, but the Court said that even though other companies' bids on a firm's trade marks could make advertising more difficult and costly, it did not undermine its advertising function.

Companies have objected to the use of their trade marks in AdWords because it pushes up the price of advertising in relation to their own brands because there is competition for ad spots. If trade mark law forbade anyone else from advertising based on their trade marks, costs would be much lower.

The Court said that this, in itself, does not represent a blocking of the trade mark's advertising function.

"The proprietor of the mark must, as necessary, agree to pay a higher price per click than certain other economic operators if it wishes to ensure that its ad appears before those of those operators which have also selected its mark as a keyword," it said. "Furthermore, even if the proprietor of the mark is prepared to pay a higher price per click than that offered by third parties which have also selected that trade mark, the proprietor cannot be certain that its ad will appear before those of those third parties, given that other factors are also taken into account in determining the order in which the ads are displayed."

"Nevertheless, those repercussions of use by third parties of a sign identical with the trade mark do not of themselves constitute an adverse effect on the advertising function of the trade mark," it said.

The Court said that companies could still reach consumers through a search engine's ordinary results.

"When internet users enter the name of a trade mark as a search term, the home and advertising page of the proprietor of that mark will appear in the list of the natural results, usually in one of the highest positions on that list," it said. "That display, which is, moreover, free of charge, means that the visibility to internet users of the goods or services of the proprietor of the trade mark is guaranteed, irrespective of whether or not that proprietor is successful in also securing the display, in one of the highest positions, of an ad under the heading ‘sponsored links’."