AdWords: clarity out of confusion


Luke Portnow

AdWords: clarity out of confusion

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The position on trademark infringement regarding Google AdWords and keyword bidding has been clarified in recent years with a number of rulings handed down by the CJEU. Luke Portnow of Boult Wade Tennant reports.

As Europe’s highest court, the Court of Justice of the EU’s (CJEU) decisions are binding throughout the EU. Its rulings on AdWords have originated from national courts, which refer to it questions on points of European law, especially in relation to the Community Trademark (CTM) Regulation. This regulation provides for CTM applications and the harmonisation of trademark law throughout the EU. This article examines the significance of these recent rulings, and how they have been interpreted by national courts, particularly in the UK.

The first important case was Google France v Louis Vuitton, in which Louis Vuitton Moët Hennessy (LVMH) had argued that Google was infringing its trademarks when it allowed anyone other than LVMH to bid on its registered marks using the AdWords system.

The CJEU ruled that Google is an information service provider and so does not infringe any trademarks but only creates the environment in which trademark owners and advertisers do business. Put simply, a referencing service provider such as Google is not involved in the use of a trademark “in the course of trade”, the court said.

However, the CJEU did go on to state that “in the case where a third party’s ad suggests that there is an economic link between that third party and the proprietor of the trademark, the conclusion must be that there is an adverse effect on the function of indicating origin”.

The CJEU also said that where an ad (while not suggesting the existence of an economic link) is so vague that “normally informed and reasonably attentive internet users are unable to determine whether the advertiser is a third party vis-à-vis the proprietor of the trademark or, on the contrary, economically linked to that proprietor”, then the conclusion must be that this also provides an adverse effect on the function of the trademark. Whether or not this encompasses the concept of ‘initial interest confusion’ is now the subject of a well-publicised infringement case in the UK. 

Shortly after Google France v Louis Vuitton, the CJEU was asked to provide guidance on a further keyword bidding dispute, in Interflora v Marks & Spencer. 

Interflora is the operator of a large and well-known flower delivery network, and Marks & Spencer (M&S) is one of the best-known retailers in the UK. M&S has sold flowers online since as early as 2000. In its adverts, M&S used Google AdWords so that when Google users entered ‘Interflora’ as a search term, an advertisement or sponsored link would appear for the competing M&S flower service with a link to its website. In spite of the trademark ‘Interflora’ never appearing in the M&S advertisement itself, Interflora sued M&S for infringement.

Initially it was thought that the CJEU ruling in Google France v Louis Vuitton could not help Interflora as M&S was not using the word Interflora in its sponsored link advertisement. However, Interflora was able to argue that M&S’s use of the AdWord Interflora was damaging its reputation and distinctive character without due cause.

When the UK court referred several questions to the CJEU during the early proceedings, the court confirmed that a trademark owner is entitled to prevent a third-party competitor from using another mark covering goods or services identical to those protected by that mark, where that use is likely to either:

  • Have an adverse effect on one of the functions of the proprietor’s trademark (including, in summary: (i) adversely affecting the earlier registered trademark’s function of indicating origin; (ii) adversely affecting the earlier registered trademark’s advertising function; or (iii) adversely affecting the earlier registered trademark’s investment function if it substantially interferes with the proprietor’s ability to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty); or
  • Prevent a company from using a trademark in keyword advertising where the competitor takes unfair advantage of its distinctive character or repute (free-riding), or where the advertising is detrimental to that distinctive character (dilution) or to that repute (tarnishment), where the registered mark has a reputation.

The English High Court found that M&S infringed Interflora’s trademark, on the basis that the people who searched for Interflora and then clicked on the M&S advertisement were led to believe (incorrectly) that M&S’s flower service was part of the Interflora network. The UK court’s interpretation of the CJEU’s Interflora ruling is subject to an appeal, based on the argument that the UK court misapplied the ‘reasonable internet user’ test laid down by the CJEU and that it incorrectly decided that initial interest confusion was sufficient to establish liability. It may be that further case law and clarity on the point of initial interest confusion may come out of this latest round of the litigation.

Lush results

Regarding developments since these initial CJEU rulings, in February 2014 the English High Court handed down a judgment in the AdWords case of Lush v Amazon.

Here, Amazon was using Lush’s trademark ‘Lush’, both in keyword advertising and also on its website search engine, to generate sponsored advertisements in Amazon’s own internal search results—these ads led to products that were not Lush’s.

"the ads included the trademark and the average consumer would not expect Amazon to be advertising the ‘Lush’ mark if those goods were not available to buy."

In summary, there were deemed to be three ‘classes’ of use by Amazon of Lush’s trademark: (i) the trademark appearing within the sponsored advertisement when consumers searched for Lush on Google; (ii) sponsored links that did not use/show the word Lush but did reference products similar to those sold by Lush; and (iii) results shown when a user typed the word Lush into the search facility on Amazon’s website (eg, when typing the letters ‘lu’ the drop-down menu would appear with search options such as ‘Lush bath bombs’ or ‘Lush cosmetics’).

Based on Google France and Interflora, the UK court decided very quickly on the question of infringement relating to the use of ‘Lush’ under classes (i) and (ii) mentioned. For the first class, this was an infringement, as the ads included the trademark and the average consumer would not expect Amazon to be advertising the ‘Lush’ mark if those goods were not available to buy. For the second class, there was no infringement, because consumers are familiar with sponsored adverts and accustomed to seeing a competitor’s adverts when using a search engine, so if the sponsored link was for Lush products, the ad would have said so. 

The third and most interesting class (ie, the use of ‘Lush’ on the dropdown search bar on Amazon’s website) presented more of a problem. After much consideration, the High Court held that the average consumer would be unlikely to know how Amazon’s dropdown menu worked, and so would expect to find Lush products when clicking on the ‘Lush’ results. This meant that Amazon was using the ‘Lush’ mark as a generic indicator of a class of goods, and this damaged the origin function of the trademark. The investment function was also damaged by Amazon’s implication that it sold Lush goods, as Lush does not allow Amazon to sell its goods. 

Here we see how flexible, and adaptable, the basic legal position and principles laid down by the CJEU in Interflora v M&S can be. This also shows an underlying public policy consideration behind Interflora that search results should be easy and clear for consumers in order to avoid the traditional confusion associated with trademark infringement. 

The most important and far-reaching CJEU rulings (Google France v Louis Vuitton and Interflora v M&S) hold that Google’s AdWords system does not violate the trademark rights of a brand owner when its marks are used by a third party to trigger adverts. However, third parties using a proprietor’s trademark as an AdWord can be liable to infringement if an ad suggests there is an economic link between the parties and/or if the ad has an adverse effect on the essential function of the trademark—ie, its indication of origin or its reputation.

Luke Portnow is trademark assistant at Boult Wade Tennant. He can be contacted at:

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