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Google wins, but AdWords is no longer a free haven for trademark infringements

June 2010 - EU & Competition. Legal Developments by Advokatfirmaet Thommessen AS.

More articles by this firm.

On 23 March 2010, the Court of Justice of the European Union gave its awaited decision in the trademark dispute between Louis Vuitton Malletier SA and Google France SARL et al, concerning Google’s advertising service AdWords. The Court found that Google does not violate trademark rights by offering advertisers to purchase search terms that are identical to registered trademarks. However, Google can still be held liable for contributory infringement on certain conditions. Pursuant to the judgement, the trademark holder will in any event be able to prohibit advertisers from using protected trademarks as search terms, if the use makes it more difficult for the ordinary internet user to determine whether the product originates from the advertiser or the trademark holder.

The decision by the European Court of Justice concerns the interpretation of Article 5 of the Trademark Directive and Article 14 of the E-Commerce Directive. In the decision, the Court sets instruction for the enforcement of the directives by national courts. The decision could prove to have considerable consequences for advertisers' use of trademarks as AdWords or similar in search engines on the internet. The Court addressed the following issues:

  • Is the use of a search term which is identical to a protected trademark a trademark infringement?
  • Can Google or other providers of storage services be held liable for the infringement?
  • Can the trademark holder prohibit an advertiser from using a protected trademark as a search term in the marketing of copied products?

Google's search engine makes it possible to search the internet using specific words (search strings) to find the most relevant internet sites related to the search. In addition, Google offers an advertising service known as "AdWords". Through this service, advertisers can pay for one or more specific search terms to activate a link to their advertisements. The advertisement is shown as a sponsored link on the right hand side of the natural hits the search term generates. In many cases, these search terms are protected trademarks. AdWords is a considerable source of revenue for Google.

The background to the decision was three joined cases referred by French Supreme Court in which LV commenced an action against Google for trademark infringement. LV is the proprietor of the Community trademark "Vuitton" and of the French national trademarks "Louis Vuitton" and "LV". The use of LV's trademarks as a search term in the Google search engine activates links to websites which advertise copied LV products.

Google does not violate the exclusive rights of the trademark holders

The Court of Justice found that a trademark holder cannot prohibit the provider of an online information service such as Google from using protected trademarks.

The Court found that by supplying the technology and the service, Google does not exploit the trademarks pursuant to the Trademark Directive. The Court's reasoning for this was that Google, as opposed to the advertisers, does not use the trademarks to promote its own commercial messages to the consumers. The Court therefore found in favour of Google with regard to the question of direct infringement of LV's trademarks.

Trademark holders can prohibit the advertisers from using their trademarks as search terms

The Court found that the trademark holders can prohibit advertisers from using protected search terms in reference services in such a manner that prevents or makes it more difficult for consumers to determine the origin of the product that is promoted, typically whether the product is genuine or a copy. The Court found that this can be the case even if there is no reference to the trademark in the advertisements. The trademark holder can prohibit the use of trademarks as search terms if the use of these has a negative effect on the trademark's function as a guarantee of origin. This will be the case when the advertisement implies that there is a financial connection between the advertiser and the trademark holder. Trademark infringement may also be claimed even if the advertisement does not imply such a connection, if the Internet users have difficulties determining whether the advertisement originates from the trademark holder or a third party. This part of the judgement was adopted by the Court of Justice in a judgement related to advertising services rendered no more than two days after the Google case.

Whether the function of origin is disturbed, will now be up to the national courts to assess - based on the guidelines set out by the Court. It will probably be up to the trademark holder to prove that the advertiser has used the trademark in a way that will have a negative effect of the trademark's function as a guarantee of origin in each case.                                                                                

At the outset, Google is off the hook for contributory infringement
The Court of Justice confirmed that Google cannot be held liable as a consenting party to trademark infringement due to the liability exemption for storage information services in Article 14 of the E Commerce Directive. However, if the service provider has had an "active role" in relation to the storage, the company falls outside the liability exemption. The question of whether a service provider has had an "active role" is something that the national courts will have to decide from case to case.

Practical consequenses
At the outset, the judgment means that Google is off the hook for direct or contributory trademark infringement, however it does not provide any final clarification of Google's or other search engines' liability. The judgement will probably have consequences both for the search engines contractual conditions with their AdWords customers and for the advertiser's use of AdWords and similar services. It will be up to the courts in each country from case to case to decide whether the use of AdWords or similar services has a negative effect on the function of trademarks or whether the internet provider has taken an active role in providing the services.

Search engines will probably ask for their customers' confirmation that they have the right to use the search strings they wish to use, and also make a clearer distinction between rights holders and unauthorised users. The search engines will probably also act promptly to remove a search term after having been informed by a trademark holder that the use is illegal.

Trademarks holders should for the future regularly check the search engines for their trademarks, and, if unlawful use is discovered, contact the company using their trademarks as AdWords or similar services directly. The trademark holders should also contact Google or the relevant search engine and demand that the ad is removed.  

Contacts Camilla Vislie, Senior Associate, Oslo Arne Ringnes, Partner, Oslo