European Court clears Google of Adwords infringement, but risks for advertisers remain
The ECJ has handed down judgment in the joined cases of Google France, Google Inc v Louis Vuitton Malletier (C-236/08), Google France v Viaticum Luteciel (C-237/08) and Google France v CNRRH and Others (C-238/08) which finally addresses the legality of third parties purchasing trade marks as keywords for online advertising.
The ECJ’s decision was handed down on 23 March 2010. In an unusually clear and lucid judgment, the Court held that:
- Google was not liable for trade mark infringement by allowing advertisers to purchase keywords corresponding to trade marks;
- Trade mark owners may prohibit advertisers from advertising, using keywords which are identical with that owner’s trade marks, if such use may make it difficult for users to know where the goods or services “emanate” from;
- If it can be shown that Google played an active role in the storage of data at the request of an advertiser, it may be held to be liable for the data.
Background
Google allows advertisers to purchase particular terms, known as Adwords, which will trigger their advertisements when inputted into Google’s search engine. Whenever internet users carry out a search against those words, they are presented with a display of those advertisements next to otherwise “natural” search results. Advertisers pay Google on a “pay-per-click” basis generating billions of U.S. dollars in revenue to Google each year.
An objection to Google’s programme is that advertisers are able to select brand-owners’ trade marked terms as AdWords for use in advertisements for sites promoting identical, similar, or even counterfeit, products to the brand owner.
Whether or not brand-owners can take legal action against Google and other search engine providers in respect of their keyword advertising programmes has resulted in numerous divergent decisions handed down across the various EU Member States. The recent decision in Cases C-236/08, 237/08 and 238/08 provided the European Court of Justice (ECJ) with the opportunity to harmonise the European approach as to whether or not trade mark owners could restrict the use of Adwords which correspond to their trade marks.
Initial Reference to the ECJ
In the first set of trade mark infringement proceedings against Google in France, Louis Vuitton objected to its trade marks being used as Adwords in relation to advertising for sites offering counterfeit Louis Vuitton products. In the second and third cases, the trade mark owners claimed that their trade marks were being used to trigger advertisements for sites offering identical or similar products.
In each case, the French courts had held that Google was liable for trade mark infringement. Google appealed and a number of questions were referred to the ECJ for a preliminary ruling. The questions included:
- Whether trade mark owners could prevent search engine providers from selling their trade marks to advertisers for use as keywords in advertisements which link to sites offering infringing goods;
- Whether the answer to Q1 is different where trade marks have a reputation; and
- Whether search engine providers fall within the liability exemption for hosting as set out in Article 14 of the E-Commerce Directive (and accordingly cannot incur liability for featuring content on their site which involves trade mark infringement until they have been notified by the trade mark owner of any unlawful use of trade marks by advertisers).
The Advocate General’s Opinion
In anticipation of the ECJ’s decision, Advocate General Poiares Maduro delivered a detailed Opinion on 22 September 2009. Although non binding, the opinion of the AG often provides a good indication as to how the ECJ will rule and thus brand owners were prepared for bad news. A note on that Opinion is available here.
The ECJ’s decision
Google is not liable for trade mark infringement
Ignoring the AG’s two-pronged approach to use by Google, the ECJ held that the main question was simply whether Google was using the trade marks in the course of trade.
The Court took the view that although a referencing service provider (such as Google) operates “in the course of trade” when it: (a) permits advertisers to select, as keywords, signs identical with trade marks, (b) stores those signs and (c) displays its clients’ ads on the basis thereof, it did not follow that that the service provider was “using” the signs itself within the meaning of that term in the applicable law (Article 5 of Directive 89/104 and Article 9 of Regulation No 40/94).
The Court said that there must, at the very least, be use of a sign with a party’s own commercial communication. However, in this case, it was only the third parties (i.e. Google’s clients, the advertisers) that were making this “use” of the sign.
The fact that that Google created the technical conditions necessary for the use of the signs and was paid by its clients for the use did not mean that it itself was using the sign.
Liability of advertisers for use of trade marks as keywords
Was there use, in a trade mark sense, by the advertiser?
The Court held that since the trade mark selected as an Adword was the means used to trigger that advertisement, the advertiser was using it in the context of commercial activity.
Furthermore, by choosing a particular trade mark to be used as an Adword, the advertiser intended that a web user who entered that term in a search should click on the advertising link of that advertiser. When faced with advertising links to sites offering goods or services displayed beside or above the natural results of a search for a particular trade mark, the web user may, if he does not immediately disregard those links as being irrelevant and does not confuse them with those of the brand-owner, perceive those advertising links as offering an alternative to the goods or services of the brand-owner. Thus, when an advertiser selects a sign identical with a competitor’s trade mark as an Adword with the aim of offering internet users an alternative to the goods or services of that proprietor, there is a use of that sign in relation to the goods or services of that advertiser.
Did the advertiser’s use have an adverse effect on the functions of the trade marks?
The essential function of a trade mark online is to enable web users to browse ads displayed in response to a search for a specific mark to distinguish the goods or services of that brand- owner from those which have a different origin. There would be an adverse effect where an ad does not enable normally informed and reasonably attentive internet users to easily determine whether the goods or services referred to by the ad originate from the brand-owner (or an economically linked undertaking) or whether they originate from a third party. Accordingly, the brand-owner is entitled to prohibit the display of third-party ads which web users may erroneously perceive as emanating from that owner.
This finding was enough to enable the Court to hold that the proprietor of a trade mark is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with one of its trade marks, when these conditions are satisfied. It is for the national courts to assess, on a case-by-case basis, whether they are.
Several issues are left unclear. First, who is the onus on in ensuring web users can determine what is a brand-owner’s ad and what is not? Does the advertiser have to take steps to ensure this is so? What does “emanate” mean? If genuine goods are being sold can they be said to emanate form the brand-owner, even if via a web retailer?
The Court also looked at whether the use of another person’s trade mark as a keyword was liable to have an adverse effect on the advertising function of the trade mark. It found that it did not, despite acknowledging the repercussions on trade mark owners by third parties’ use of trade marks as keywords.
Situation in respect of trade marks with a reputation
This question was only directed to the ECJ in respect of Google’s acts. As the Court had already found that the storage of trade marks as Adwords by search engines such as Google did not constitute use of the signs within the meaning of the relevant law, it did not matter whether or not Google’s act applied to reputable trade marks or not.
E-Commerce Directive
Finally, the ECJ looked at whether in the event Google could be held liable for trade mark infringement, it could nevertheless benefit from a safe harbour under the EU’s E-Commerce Directive. The hosting exception is a key plank in the business model of many web services, and issues arise under it also in respect of copyright, and other content liability issues, s any examination of its effect by the ECJ is significant.
The ECJ quickly dealt with a threshold issue which was whether a service such as a search engine qualified for the exemptions at all, it held that it did.
Turning to the conditions under which the exemption could be enjoyed by Google, the ECJ held that neutrality in its behaviour was key. The Court noted that Recital 42 of the Directive provides that the exemptions from liability set out in the Directive only cover cases in which the activity of the ISP is “of a mere technical, automatic and passive nature”, which implies that that it “has neither knowledge of nor control over the information which is transmitted or stored.”
The fact that Google’s Adwords service is subject to payment, and that Google sets the payment terms or that it provides general information to advertisers, did not have the effect of depriving Google of the exemptions under the Directive. The ECJ also added that concordance between the Adword selected and the search term entered by a web user is not sufficient alone to find that Google had knowledge of, or control over, the data entered into its system by advertisers and stored in memory on its servers. However, the role played by Google in the drafting of the commercial message which accompanies the advertising link or in the establishment or selection of keywords may be relevant.
Ultimately, however, the ECJ held that the national courts are best placed to assess the actual terms on which Google supplies its services, and thus whether its role falls within the exemptions of the Directive.
Harbottle & Lewis LLP