Google wins keyword advertising case

March 23, 2010

The ECJ has finally ruled on three disputes arising from the sale and use of Google AdWords (Google's keyword advertising business) that have been referred to it by the French courts. It ruled in Google’s favour holding that the sale by Google of a trade mark as an AdWord did not constitute "trade mark use". The limit of Google’s obligation is that it has to take down an infringing use if it is notified of the use.

The issue is whether it is lawful for Google to sell trade marks as key words that generate sponsored links to goods or services that are not linked to the trade mark owner. Trade mark owners dispute the sale by Google of registered trade marks for AdWords by anyone willing to pay the asking price. Search engines retort that they are a mere conduit and have no general obligation to monitor unlawful activity by internet users

An example is if I purchase the search term “Gucci” and then when you or I enter "Gucci" into a Google search engine my website selling knock off Gucci products appears as a sponsored link. The fashion industry is particularly concerned about this Louis Vuitton who as one of the claimants in this action is trying to stop Google selling the terms "fake Louis Vuitton"" or "Louis Vuitton copies".

Aside from the counterfeiting scenario, popular trade marks can command high sums, the most recent example being the use of 'Interflora' by UK retailer Marks and Spencer plc (M&S) to link to its own mail order flower service. In the nine days before Valentine’s Day 2009 the price for per-click advertising rose to between 23 and 29 pence as M&S, Flowers Direct and Interflora all entered the bidding. This was in contrast to an average of 2p per click in 2008. While M&S paid the greatest amount for use of the keyword, Interflora estimated that the value of its lost business was $750,000.

This is a drop in the ocean compared to the amount lost by high end fashion retailers who argue against a more pernicious feature of keyword advertising - the use of words such as ‘imitation’, ‘copies’ and ‘knock-offs’ in association with trade marks. The French case against Google Louis Vuitton claims that it was not surprising that many of the sponsored links that used such words in conjunction with Louis Vuitton trade marks directed users to websites that offered counterfeit Louis Vuitton products.


Notwithstanding this, the ECJ held that Google's business of selling trade marks as AdWords is not use in the course of trade within the terms of Article 5 of Directive 89/104 and Article 9 of Regulation 40/94. Google is simply allowing its clients to use signs which may be identical or similar to trade marks, without itself using the signs. The fact that clients pay for the use of such signs and the fact that Google creates the technical conditions necessary for this does not change this fact.
 
Comment
Some would argue that simply because Google have reduced the system of purchasing such signs to an automated process does not mean that it can wash its hands of what its customers get up to. The Court is in effect saying that technology trumps rights. A curious outcome given that Google could easily put in a filter to prevent third parties from purchasing a trade mark as an AdWord if it does not own the mark.

In practical terms there is little change with this Judgment trade mark owners will have to continue to monitor use, and as the internet grows as a tool of e-commerce the money spent by brand owners in combating infringements will increase. This will push up costs and ultimately the price of goods and services. Also, sites that are misleading and are not picked up by the brand owner will not be pulled; this will cause confusion and mislead the consumer as to the true origin of the products or services it is purchasing. Ultimately it is the consumer who will suffer.


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