The European Court of Justice (‘ECJ’) has this week handed down its Judgment in a case referred to it by the French courts in three trademark cases. The cases all concerned whether the sale of Adwords by Google and their use by advertisers infringes the rights of brand owners who have registered the same words as trademarks.

In this hugely important case for Google the ECJ ruled that the sale of AdWords by Google does not constitute trade mark infringement. However advertisers (and possibly Google) could be liable if the advert triggered by the AdWord does not easily identify to the average internet user that the advertiser’s goods are not those of the brand owner.  The effect of the Judgment is that Google will have to review its own involvement in the AdWord process, and change its policies to prevent misleading advertisements appearing as sponsored links.

AdWords are a major source of revenue for Google and the backbone to the internet giant’s business model. They allow advertisers to pay a fee so that "sponsored” results for their own websites are generated when a user searches on the Adword, with the links frequently appearing above the “natural” and less prominent search results. In one of the cases referred to the ECJ, Louis Vuitton (“LV’”) complained that Google were allowing third parties to purchase and use Adwords identical to LV’s luxury brands for the purpose of selling counterfeit products.

Commenting on the decision, Simon Chapman, IP specialist and partner within the Media, Brands & Technology group at Lewis Silkin said:

“Brand owners complained that the AdWord programme was akin to a shop owner putting a large sign above his shop, such as “NIKE” and in fact only selling ADIDAS trainers.  The result of this activity was to divert customers of one brand to another.

This judgment is hugely significant in the development of the internet and intellectual property law.  Whilst many brand owners would have hoped for a direct victory against Google to deal with the problem at source, this is still a good result.  It will enable them to stop the use of AdWords where the sponsored results that are generated are misleading.  If sponsored results are misleading they will be able to take action against the advertiser and possibly Google too if Google were involved in the appearance of the link, or refuse to take it down.

Google are lauding the result as a victory for them, however the programme will not be of much value if advertisers’ use of it is heavily restricted. They have also said that the court confirmed that European law relating to internet hosting services protects them.  That is just not right.  The ECJ have said that Google’s involvement in the AdWord programme must be looked at by the National court and a decision made as to whether its activities, including its involvement in the production of text for the advertisement and/or the selection of keywords, is neutral.”

For further information, please contact:

Mark Grant
Director of Business Development
Lewis Silkin LLP
5 Chancery Lane
Clifford's Inn
London
EC4A 1BL

T:+44 (0) 20 7074 8226

E:Mark Grant