Google AdWords and European trademark law

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DOI:10.1145/1866739.1866749 Stefan Bechtold

Law and Technology
Google AdWords and
European Trademark Law
Is Google violating trademark law by operating its AdWords system?

W
HEN THE DOT-COM istries required to check domain name whether Google is violating trademark
boom began in the registrations for trademark violations? law by operating its AdWords system.
late 1990s, many ana- Is eBay liable for counterfeit product With Google AdWords, advertisers can
lysts and observers sales on its site? To what extent should buy advertising links in the “sponsored
proclaimed the death Google be allowed to offer excerpts links” section of a Google search re-
of intermediation. Supply chains from copyrighted books in its Google sults page. When a user enters a key-
seemed to become shorter and short- Book service without the consent of the word selected by the advertiser, the ad-
er as new B2C companies emerged in relevant rights owners? vertising link will appear in the upper
Silicon Valley. These companies could Both in the U.S. and in Europe, such right-hand corner of the search results
deal with their customers directly questions have led to countless law- page. In principle, the advertiser is free
over the Internet, rendering distribu- suits and legislative initiatives over to select any keyword for his advertis-
tors, wholesalers, brokers, and agents the last 15 years. One of the most de- ing link. This becomes a legal issue,
superﬂuous. bated issues in recent years has been however, if the advertiser chooses a
While some traditional middlemen
have indeed become less important as
Internet commerce has developed, we
have not seen a general death of inter-
mediation. Rather, many new interme-
diaries have arisen on the digital land-
scape over the last 15 years. Just think
of Amazon, eBay, or Google. If all these
companies have been successful, it is
not because they have removed all bar-
riers between producers and consum-
ers. They have been successful because
they offer innovative services located
between producers and consumers
along the digital supply chain.
The law often has a difﬁcult time
coping with new intermediaries.
Should an Internet service provider be
held liable for violations of copyright
or criminal law committed by its cus-
tomers? Is Yahoo obliged to prevent
PHOTOGRA PH BY GW ENA ËL PIASER

French consumers from accessing a
site where Nazi memorabilia is sold?
Can copyright holders compel peer-
to-peer ﬁle sharing systems to remove
copyrighted material or to screen for
such material? Are domain name reg- The European Court of Justice in Luxembourg.

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keyword that has been registered as a sions as to whether Google’s AdWords
trademark by another company. system violates trademark law. Courts
In 2003, the French fashion house Google’s business in France and Belgium, and some
Louis Vuitton discovered that, when model relies courts in Germany, had ruled that the
French users entered “Louis Vuit- AdWords system violates trademark
ton” into Google, they were shown an extensively on law or unfair competition law, on the
advertising link pointing to fake LV the advertisement grounds that Google is using trade-
products. While LV could have sued marks, confusing consumers, and free-
the product imitator, it decided to sue auctioning riding on the goodwill of trademark
Google. From LV’s perspective, Google mechanisms owners. Courts in the U.K. and other
was a very attractive target: If Google courts in Germany have ruled the op-
was found liable, LV would not need underlying the posite, while decisions in Austria and
to sue numerous individual product AdWords system. the Netherlands have come out some-
imitators. With one lawsuit against where between these opposing view-
Google, LV could stop all keyword-re- points. Ultimately, in addition to the
lated trademark violations at a stroke. French Court de Cassation, the highest
Google, on the other hand, has a vital courts in Austria, Germany, the Neth-
interest in avoiding being held liable in erlands, and the U.K. have referred
such lawsuits. Google’s business mod- prehensive trademark system since AdWords-related lawsuits to the Euro-
el relies extensively on the advertise- 1857. However, in 1989, the European pean Court of Justice.
ment auctioning mechanisms under- Union required its member states to In March 2010, the European Court
lying the AdWords system. Of Google’s amend their national trademark sys- of Justice decided the French LV case.b
$23.6 billion gross revenues in 2009, tems in order to make them compli- The court held that a producer of fake
about $22.9 billion came from adver- ant with the European Trademark LV products violates trademark law if
tising (see http://investor.google.com/ Directive enacted that year. This di- his keyword-backed advertising link
ﬁnancial/tables.html). A major part of rective did not create a unitary Eu- creates the impression that his prod-
this advertising revenue is believed to ropewide trademark system. Rather, ucts are actually produced, or at least
come from Google AdWords. it harmonized national trademark authorized by LV. This holding by the
systems across countries.a Today, if court was not surprising. More sur-
Case Studies there is some disagreement about prising was the court’s holding that
Cases such as LV’s have popped up like how a particular provision of nation- the fake product producer would vio-
mushrooms over the last few years in al trademark law should be inter- late trademark law even if he kept his
many countries. From a trademark preted and whether this provision is advertisement so vague that ordinary
law perspective, they are not easy to affected by the European Trademark consumers would be unable to deter-
resolve. On the one hand, it seems Directive, it is the European Court of mine whether or not there was some
unfair that, by choosing third-party Justice that has the last word. This afﬁliation between the producer and
trademarks for keyword registrations was the case with the French LV liti- LV. What this means in practice is un-
without proper authorization, ﬁrms gation. As the highest court in France clear. While the European Court of Jus-
can beneﬁt from the goodwill of such could not itself decide the case, in tice settled the relevant points of law,
marks. It also seems problematic that 2008, this court referred it to the Eu- it did not provide a ﬁnal answer as to
Google may beneﬁt, at least indirectly, ropean Court of Justice, which is lo- whether the fake product producer was
from such behavior. On the other hand, cated in Luxembourg. actually infringing trademark law. This
trademark law does not protect trade- The intellectual property communi- depends on whether French consum-
mark owners against each and every ty eagerly awaited the European Court ers were really confused by the adver-
use of their registered marks by others. of Justice’s decision in this case. It tising link in question. As such matters
Where the Google AdWords system lies was of particular importance because of fact are not for the European Court
along this continuum is unclear. courts in various European countries of Justice to decide, the court referred
In the French lawsuit of Louis Vuit- had reached wildly different conclu- the case back to the French courts in
ton vs. Google, a Paris regional court this regard.
found Google guilty of infringing LV’s a As a separate measure, the European Trade- The court then turned to the liabil-
trademark in February 2005. After mark Regulation of 1994 created a European- ity of Google itself. The court held that
an appeals court in Paris had upheld wide trademark system that is administered
by the European trademark ofﬁce (ofﬁcially
this decision, Google appealed to the named the “Ofﬁce of Harmonization for the b This decision covered not only the lawsuit
Cour de Cassation, which is the high- Internal Market“) in Alicante, Spain. As a re- between LV and Google, but also two other
est French court in this area of the sult, two trademark systems now exist in Eu- related lawsuits in France, which will not be
law. The court had to decide whether rope: the national trademark systems that are considered here. In addition, as of November
or not Google AdWords was in com- administered by national trademark ofﬁces 2010, the European Court of Justice has also
and enforced by national courts, and the Eu- ruled on AdWords-related cases from Austria,
pliance with French trademark law. ropean trademark system that is administered Germany, and the Netherlands. No decision
At this point in the story the European by the European trademark ofﬁce and is also on the U.K. case (Interﬂora) had been issued at
Union kicks in. France has had a com- enforced by national courts. the time of writing.

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Google was not using the LV trademark Google AdWords can really cause con-
in its AdWords system in a manner cov- fusion among consumers. Up to now,
ered by European trademark law. The The danger is that most U.S. courts have denied Google’s
idea behind this is simple. Trademark national courts will liability on such grounds.
law does not entitle a trademark owner Third, as a result of the decisions
to prevent all utilization of his trade- continue to interpret by the European Court of Justice re-
mark by a third party. In the view of the European trademark lating to the AdWords system, Google
court, Google is merely operating a ser- revised its European AdWords trade-
vice that may enable advertisers to en- law in different ways. mark policy in September 2010 and
gage in trademark violations. Google limited its support for trademark
does not decide which trademarks to owners. Under the new policy, adver-
use as keywords, but merely provides tisers are free to select trademarks
a keyword selection service. This is not when registering advertising links.
sufﬁcient, in the view of the court, to However, if a trademark owner dis-
justify an action for direct trademark the court did not give a deﬁnite answer covers that an advertiser is using his
infringement. as to whether Google should be pro- trademark without proper authoriza-
However, Google might still be li- tected by safe harbors provisions. For tion, Google will remove the advertis-
able for what lawyers call secondary most of these questions, the European ing link if the trademark is being used
infringement. The argument would Court of Justice provided some general in a confusing manner, for example
be that, if advertisers actually infringe guidelines, but left it to the national if it falsely implies some afﬁliation
trademark law because they create courts to rule on details which may be between the advertiser and the trade-
customer confusion in the AdWords small, but decisive. Therefore, in Eu- mark owner. By this policy change,
system, Google is beneﬁting ﬁnan- rope, it will ultimately be the national Google has molliﬁed at least some
cially from these trademark violations. courts which will decide on the liability trademark owners and provided a
While this argument may sound con- of Google for its AdWords system. We mechanism outside the court system
vincing at ﬁrst sight, the European E- still lack a clear answer on how to de- that may resolve a substantial propor-
Commerce Directive of 2000 restricts sign a keyword-backed advertisement tion of AdWords trademark disputes
the liability of “information society system in a way that clearly does not in Europe. Nevertheless, it is almost
service providers” (such as, potentially, violate European trademark law. certain that national courts in Europe
Google) for infringing activities by third will continue to rule on the details of
parties (the advertisers). Therefore, Indecisive Decision how the AdWords trademark policy is
the European Court of Justice had to This does not mean that one should implemented and enforced.
decide whether the safe harbor provi- feel sorry for Google which still has
sions of this directive shielded Google to operate in an area of somewhat Conclusion
from secondary liability. The European unsettled law. First, Google has some In the end, the decision by the Euro-
Court of Justice held that the answer to experience in this regard. Just think pean Court of Justice may indeed turn
this question depends on whether the of the Google Books project. Second, out to be a victory for Google. Whether
Google AdWords system is a mere auto- Google has been running its AdWords it is a victory for the European trade-
matic and passive system, as portrayed service in the U.S. for years, and in mark system is less clear. While the
by Google, or whether Google plays an the U.S. the liability question is still European Court of Justice provided
active role in selecting and ordering ad- not fully settled. In 2009, the Court of some general guidelines on Google Ad-
vertisements. As in the customer con- Appeals for the Second Circuit held Words, the task of working out the little
fusion question, the court refrained that Google was using trademarks “in details has been left to courts in Paris,
from giving any deﬁnite answer, but commerce” (as required by the Lan- Vienna, Karlsruhe, The Hague, London
rather referred the case back to the ham Act) when operating its AdWords and other cities. The danger is that na-
French courts. system,c thereby taking a slightly dif- tional courts will continue to interpret
In the popular press, the Europe- ferent stance from that of the Euro- European trademark law in different
an Court of Justice’s decision in the pean Court of Justice. The impact of ways. French courts, for example, may
Google AdWords case has often been this decision on Google AdWords in continue to be more critical of Google
portrayed as a victory for Google. Does the U.S. remains to be seen. At least, AdWords in their decisions than Ger-
victory really look like this? Well, it de- courts in the U.S. will now examine man or U.K. courts. This is not exactly
pends. The European Court of Justice more closely whether unauthorized the idea of a trademark system which
refrained from providing a ﬁnal answer trademark-backed advertising links in is supposed to be harmonized across
as to whether keyword advertising can Europe by the institutions of the Euro-
lead to customer confusion. Nor did it c Rescuecom Corp. v. Google, Inc., 562 F.3d 123 pean Union.
provide a comprehensive answer as to (2009). This decision did not rule on the ul-
whether Google could be held liable timate question of Google’s liability, as the Stefan Bechtold (sbechtold@ethz.ch) is Associate
Court of Appeals remanded the case back to Professor of Intellectual Property at ETH Zurich and a
not because of customer confusion, the district court for further proceedings. In Communications Viewpoints section board member.
but because other goals of trademark March 2010, the parties settled their dispute
protection had been violated. Finally, out of court. Copyright held by author.

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