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EU rules in favour of Google’s AdWords

May 2010 - EU & Competition. Legal Developments by Avocado Rechtsanwälte .

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On March 23, 2010 the European Court of Justice (ECJ) decided in the matter of Google France SARL, Google Inc. vs. Louis Vuitton and others (C-236/08 to C-238/08). In its judgment, the ECJ ruled that Google has not infringed trademark law by offering advertisers the opportunity to buy keywords (AdWords) corresponding to their competitors' trademarks. However, the illegal use of AdWords can still be prohibited.

The judgment

The ECJ held that Google cannot be held liable for primary trademark violation because search engine providers like Google do not use the keyword in relation to goods and services “in the course of trade” and the sale of the AdWords cannot be regarded as the use of third party trademarks.

Google and other search engine providers referred to Article 14 of the E-Commerce Directive in their defence. According to this Article, they provide an “information society service” and therefore cannot be held liable for the information stored at the request of the user. The ECJ confirmed that the service provider’s role is neutral. As long as they do not have knowledge of the data stored by the advertisers and remain passive, there is no liability. However, the risk that remains is that service providers do not take action when they become aware that one of the published advertisements does in fact infringe on trademarks. In such case, Google and providers of similar keyword services must remove the infringement because otherwise they may be held liable.

However, the advertisers purchasing the AdWords and selecting the trademark of another brand as a keyword are in fact actively making use of the goods and services. Thus, they may be sued for trademark infringement because the ability of the trademark to differentiate between its goods and services and those of another trademark would be undermined.

The issue is pending and it will fall to the judgement of national courts to decide on a case by case basis whether or not the distinguishing function of a trademark is affected.

The ECJ’s decision is to be regarded as a warning to on-line advertisers. In the future they will have to remain cautious when using AdWords or other keyword services. Advertisers should remain watchful of the decisions to be made in the national courts and take note of how they handle the sponsored links of search engine providers in terms of infringement.

Summary This judgment is positive for both Google and brand owners. Search engine providers should be able to avoid liability due to the Court’s interpretation of the law.

Brand owners can take legal action against the reservation of AdWords where it proves difficult for search engine users to determine the origin of the goods and services when the advertisement appears as a sponsored link.