Google Adwords trade mark decision: your questions answered

By now, most readers will have seen that the European Court of Justice (ECJ) has handed down its long awaited decision in relation to Adwords on 23 March 2010.  However, why do we all care and what does it mean?

To help, set out below are some Q&As to ensure you are in the loop:

What is all this about?

Most of us are familiar with AdWords.  This is the paid referencing service offered by Google.  When a search is undertaken, the algorithm will provide you with the ‘natural’ results of that search.  However, advertisers will also pay for sponsored links displayed on the right hand side of the screen or the upper part of the screen.

So far, so good.  However, if you are Louis Vuitton, when you pay for a sponsored link, you don’t want to see counterfeiters advertising imitation LV goods next to the genuine article, and using the ‘Louis Vuitton’ or ‘LV’ keywords or adtext to achieve this nexus.  Likewise, if you are Viaticum and have certain French trade marks registered for travel-arrangement services, it’s an unpleasant surprise to observe competitors advertising their wares next to yours, using your trade mark as the sponsored link.

Accordingly, Louis Vuitton, Viaticum and another party sued Google for implementing this practice, on the basis that it constituted trade mark infringement.  The ECJ decision is a preliminary ruling concerning the interpretation of Article 5(1) and (2) of First Council Directive 89/104/EEC of 21 December 1998.  The matter had been referred to it by the French Cour de Cassation.

Who won and why?

Google won.  Akin to a number of internet service provider decisions in various contexts around the world (defamation, copyright etc), it was found that Google was not engaging in the requisite trade mark use because it simply provided technology services to advertisers.  In other words, it was operating the system, not designing the content.

So does this mean I can’t sue anyone attempting to ride my coat-tails?

Not at all.  The decision means that Google was the wrong defendant, albeit the most likely given that it has deep pockets, is easily located, and operates and profits from the sponsored link service.

The ECJ did make statements indicating that advertisers improperly using sponsored links were still vulnerable to a potential trade mark infringement claim.  In other words, the decision does not challenge the underlying capability of an AdWord as a ‘sign’.  Rather, based on a technical interpretation of the relevant directive, it was found that an ISP which stores these signs is not using them in the relevant trade mark sense. With such a decision, the right defendant is the advertiser or the company misusing the trademark.

What are some broader implications?

These are just preliminary thoughts, but it can’t be all good news for Google.  Its ability to maintain a profitable sponsored link business will depend on advertisers wanting to be sufficiently confident in their legal rights to use it.  If they are vulnerable to trade mark infringement for improper use of trade marks, one would expect Google’s customer base to shrink…at least to a degree.

One also wonders whether Google’s potential liability is completely extinguished by this decision.  Given that it operates and maintains the sponsored link service, there might be another head of claim against Google other than trade mark infringement.

It must also be remembered that while trade mark infringement is one potential type of claim against an advertiser improperly using AdWords, it is not the only option.  In Australia, other possibilities include misleading and deceptive conduct under section 52 of the Trade Practices Act 1975 (Cth) and passing off.


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