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Commercial Question

Searching for the right word

updated on 17 May 2011


Are AdWords reducing the value of trademarks online?


The use of AdWords is a significant issue for trademark proprietors because it has become common practice for search engines to sell terms and phrases (including trademarked terms) to advertisers, thereby ensuring that their services are prominently displayed. 'AdWords' is Google's service that sells terms and phrases in this way, but it is also a more generic term by which other search engines' similar services are generally known and will be referred to in this article.

While it's clear that legislation plays a role in ensuring that this practice does not reduce the value of trademarks, the novel circumstances have thrown up new challenges and situations that are arguably not contained within the current meaning of trademark infringement. For instance, what happens in situations when a trademarked term is purchased as an AdWord so as to trigger a competitor’s advert, but the trademark itself does not actually appear in the advertisement?

The validity of selling trademarked terms as AdWords has attracted legislative and court-based challenges, the focus of which has been twofold. First, trademark owners (and, to a degree, legislators) have argued that the practice itself should be stopped. Second, trademark owners have argued that the use of trademarks in this way equates to infringement on the part of the advertiser. On both fronts, however, a satisfactory conclusion is pending.

What are AdWords?
Internet users have largely moved away from searching for specific domain addresses - instead, they use search engines to find the relevant web pages. The terms entered into search engines are therefore of utmost importance to businesses with an online presence, as they need to attract as much traffic to their sites as possible. In order to display relevant web pages, search engines refer to factors such as a page’s meta data. 'Meta data' is a keyword or phrase embedded into a website’s code, by which a search engine can identify and categorize its contents. Listing results in this manner creates the ‘natural’ results of a search.

However, search engines also offer services selling keywords or AdWords to advertisers. When the AdWord is searched for, the purchaser’s advertisement is exhibited in a prominent position. In the case of Google, they appear under the heading ‘sponsored links’ either at the top or right-hand side of the page.

Clearly, many trademarks will feature highly in lists of frequently used terms and, consequently, it has become the practice of advertisers to purchase trademarked terms as AdWords. Search engine providers actively allow this.

Preventing the practice
In terms of liability, European case law has, to date, sided with the search providers. In an action brought against Google by Louis Vuitton, the European Court of Justice (ECJ) held that selling trademarked terms as AdWords did not constitute ‘use’ of the mark as required to infringe Article 5 of Directive 89/104 or Article 9 of Regulation 40/94. A search provider creates the technical conditions necessary for this use, but is not itself a ‘user’. Thus, under case law, a search provider cannot be held to account for this practice.

However, in Resolution 2010/2052(INI) - dated 15 December 2010 - the European Parliament called for the prevention of the sale of the right to advertise when trademarks belonging to competitors are searched for. The resolution calls on the European Commission to explore the EU level options for modifying the limited liability regime for information society services in order to make the sale of trademarked terms as AdWords subject to prior authorisation from the trademark proprietor. Such a change would clearly go a long way to protect the strength and reputation of trademarks against online threats.

Showing infringement by the advertiser
Trademark owners have, understandably, been keen to show infringement by advertisers, and they have had more success in this regard. In the Google case, the ECJ held that an advertiser would be liable so long as its use of the trademark would not enable "normally informed and reasonably attentive" internet users (or enable them only with difficulty) to ascertain whether the goods or services referred to in the advertisement originate from the trademark owner or an economically linked undertaking - or, on the contrary, from a third party.

This has become the accepted stance of the courts, and has been followed in cases including Portakabin Ltd v Primakabin BV and Die BergSpechte Outdoor Reisen und Alpinschule Edi Koblmüller GmbH v Günter Guni. In the latter, the ECJ makes it clear that an advertiser can infringe even when the keyword is not identical but merely similar to a trademark (in this case the mark was figurative). The issue of misspellings has also been addressed, and a misspelling may amount to infringement.

To an extent, however, shades of grey remain. For instance, the case Interflora Inc v Marks & Spencer Plc, which is on-going, is considering the issue of a registered trademark triggering a competitor’s advertisement but not itself being present in the advert. Should such circumstances be held not to constitute trademark infringement, mark owners will have legitimate concerns over the value and reputation of their marks. They would be denied control of content exhibited as a result of the input of their mark.

The opinion of the advocate general is that, in these circumstances, there is potential for trademark infringement if a mark identifies a well-known commercial network; and the display of the name of a different enterprise in a sponsored link triggered by the mark's use as an AdWord is likely to create the impression that the enterprise mentioned in the advertisement belongs to the commercial network of the mark owner. The point is made, though, that a mere display of commercial alternatives in circumstances where the consumer will not be confused as to the origin of the goods, will, in many cases, not be deemed harmful to the mark. The "well-known commercial network" criterion is potentially quite narrow. Until this case is decided, the issue of trademark protection in the face of AdWord selling remains in the balance.

Trademark owners will no doubt be hoping that, pursuant to Resolution 2010/2052(INI), the commission finds an appropriate means of ensuring that search engines require prior authorisation from the trademark's proprietor in order to sell trademarked terms as AdWords. Should permission not be made requisite, AdWords could become a major area of trademark litigation. The potential for AdWords to decrease the value of trademarks online is not in question as, to date, the case law shows that the courts have generally offered trademark owners notable protection; but the existence of possible grey areas such as the circumstances in Interflora will certainly cause trademark owners some concern.

Benjamin Woodfield is a first-year trainee in the intellectual property department of Bird & Bird.