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Why the Advocate General got Google AdWords wrong

OPINION: We have been waiting for the formal opinion of an advisor to the European Court of Justice, in cases brought by three French companies against Google. Now that it has been published, we think the analysis is wrong.06 Oct 2009

The opinion is important because the analysis concerns the Google AdWords policy and the broader acknowledgement of brand rights online.

Three companies are suing Google because they object to the current Google AdWords policy, which allows anyone to bid for their brands as triggers for sponsored links on Google searches. The companies argue that their trade mark rights are infringed when other companies use their names as triggers for ads.

Google's AdWords system displays adverts next to the 'natural' search results generated by a search term. Advertisers pay to have their ads appear beside chosen search terms. So, for example Pepsi could pay to have their ads triggered when a user types "coke" or "coca-cola" into a search.

The Advocate General's opinion is the forerunner to the full judgment of the Court. The Court usually but does not always follow the opinion. Opinions have been known to be wrong when it comes to the eventual legal analysis. We hope this is the case for the Google claim. The Advocate General has advised the Court that Google's behaviour is legal and does not infringe trade mark rights.

The opinion and the eventual judgment have to answer written questions which have been referred to the court. In this case, the questions put to the court were legalistic, but in essence they were: if I have exclusive rights to a particular trade mark, and Google 'sells' that term in the context of the Google AdWords programme, is that trade mark infringement?

The Advocate General said no.

We disagree with the Advocate General because of our analysis of trade mark law – a pretty basic disagreement. The starting point is Article 5(1)(a) of the Trade Marks Directive (Directive 89/104):

"The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:

(a)  any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered…"

This is generally recognised as a property right. A registered trade mark can be bought, sold, and licensed. It has a value, although value tends to be described as the 'brand' value. It is an exclusive right. The starting point is that only the owner of the registered trade mark can use the mark for the goods and services for which it is registered.

It would seem obvious, then, that if Google uses the mark to generate adverts in relation to identical services, then it is trade mark infringement.

The Advocate General was concerned that the scope of trade mark protection was being expanded. He says:

"The Court is … being asked to expand significantly the scope of trade mark protection. I shall make clear why I believe that it ought not to do so. My examination of the question whether there is trade mark infringement will reveal, first, that the use in AdWords of keywords which correspond to trade marks does not, in itself, constitute a trade mark infringement, and, secondly, that the connection with other (potentially infringing) uses is better addressed, as it has been hitherto, through the rules on liability."

There seems to have been a general nervousness about how the internet will develop. Enforcing the trade mark exclusivity against a trader (Google) who is using and letting others use trade marks without permission of the trade mark owner does not expand the scope of trade mark protection at all. This case is the opportunity for the Advocate General and the European Court to restate established trade mark law but in the context of a new advertising model.

The Advocate General has also added an extra condition for trade mark infringement: He says:

"According to established case law, there are four cumulative conditions which must be satisfied if trade mark proprietors are to be able to prevent the use of their trade marks under Article 5(1) of Directive 89/104 (or, in other words, for there to be a trade mark infringement). One of those conditions is clearly satisfied: the use by Google, in AdWords, of keywords which correspond to trade marks is manifestly not consented to by the trade mark proprietors. It therefore remains to be ascertained whether the remaining three conditions are satisfied, that is to say, whether: (i) that use takes place in the course of trade; (ii) it relates to goods or services which are identical or similar to those covered by the trade marks; and (iii) it affects or is liable to affect the essential function of the trade mark – which is to guarantee to consumers the origin of the goods or services – by reason of a likelihood of confusion on the part of the public."

This is simply not the case. As can be seen Article 5(1)(a) carries no requirement to prove confusion. Article 5(1)(a) says: "The proprietor shall be entitled to prevent all third parties ..from using in the course of trade… any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered".

The Advocate General did offer some comfort to trade mark owners. A question that has tested many judges is whether Google's use of the trade mark is "use in the course of trade". The Advocate General said that it was. "When Google offers advertisers, through AdWords, the possibility of selecting keywords which correspond to trade marks, it does so as a commercial activity: even though its remuneration does not come about until later (when internet users click on the ad’s link), Google’s service is provided ‘with a view to a gain’," he wrote. "This condition should therefore be regarded as satisfied."

The Advocate General has also left a muddle for the Court to sort out on the question of whether the AdWords service amounts to use of a trade mark on identical goods or services. This is important because if the analysis is that AdWords links the trade mark to identical goods of a competitor, confusion is not a requirement and infringement is established.

At one point, he says:

"The essential factor is therefore the link that is established between the trade mark and the good or service being sold. In the traditional example of a use in advertising, the link is established between the trade mark and the good or service sold to the general public. This happens, for example, when the advertiser sells a good under the trade mark. That is not the case with the use by Google consisting in allowing advertisers to select keywords so that their ads are presented as results. There is no good or service sold to the general public. The use is limited to a selection procedure which is internal to AdWords and concerns only Google and the advertisers. The service being sold, and to which the use of the keywords corresponding to the trade marks is linked, is therefore Google’s own service, AdWords.

"It seems evident that AdWords is not identical or similar to any of the goods or services covered by the trade marks. Accordingly, this condition is not satisfied and, in consequence, the use consisting in allowing advertisers to select in AdWords keywords which correspond to trade marks, so that ads for their sites are presented as results for searches involving those keywords, does not constitute a trade mark infringement."

In other words, AdWords is an advertising system, so it is not the same as (say) holidays. That conclusion is difficult to reconcile with his observations in another part of his opinion where it is said, in the context of an analysis of the Google search engine:

"…by displaying ads in response to the keywords which correspond to trade marks, it establishes a link between those keywords and the sites advertised, including the goods or services sold via those sites. Even though the keywords do not feature in the ads themselves, this use falls under the notion of use ‘in advertising’ as referred to in Article 5(3)(d) of Directive 89/104: the link established is between the trade mark and the goods or services advertised. The sites concerned sell goods which are identical or similar to those covered by the trade mark (including counterfeit products). This condition should therefore be regarded as satisfied."

Running though the opinion is the Advocate General's worry about the power that ruling in favour of the trade mark holders would give them:

"I am concerned that, if trade mark proprietors were to be allowed to prevent those uses on the basis of trade mark protection, they would establish an absolute right of control over the use of their trade marks as keywords. Such an absolute right of control would cover, de facto, whatever could be shown and said in cyberspace with respect to the good or service associated with the trade mark."

The notion of an absolute right of control is not correct. There are many circumstances where it is right and proper that third parties can use the registered trade mark of another, for example, in comparative advertising. These circumstances are set out in the Directive and elsewhere.

The answer is, I think, that the Advocate General has started with a concern that brand owners were going too far in seeking protection for their brands, and then he has worked backwards. He has been forced to include in his analysis a requirement for confusion. There is a lengthy and convoluted analysis of confusion when there is no need for that analysis. Confusion is not a requirement under the current law. Brand owners are entitled to have their rights protected. Google has become the dominant search service so brand rights on Google are incredibly important for consumers and brand owners. Let's hope the Court takes a different view.

By John Mackenzie, a partner with Pinsent Masons, the law firm behind OUT-LAW.COM. Pinsent Masons is acting for Interflora in a dispute with Marks and Spencer over the use of AdWords – a case that is on hold pending the full judgment of the European Court of Justice in the French cases.