Supreme Court rules in three landmark keying cases

After years of uncertainty as to whether use of a competitor’s trademark or company name as a keyword in Google's AdWords system constitutes trademark infringement, the Federal Supreme Court has considered the issue in three separate cases (bananabay (Case I ZR 125/07), PCB (Case I ZR 139/07) and Beta Layout GmbH (Case I ZR 30/07 )).

 

In its 2006 decision in the Impuls Case, the court had held that use of a third party’s trademark as a metatag could amount to trademark infringement (for further details please see "Supreme Court considers use of trademarks in metatags for first time"). However, the question remained as to whether use of a trademark for other types of contextual online advertising (eg, use as an AdWord) could also constitute trademark infringement, and various courts had come to different conclusions.

 

In bananabay, the claimant was the owner of the registered trademark BANANABAY. The claimant and the defendant both offered adult entertainment goods. The claimant sought to stop the defendant from using the BANANABAY mark as an AdWord. As the goods and the signs at issue were identical, the question was whether use of a trademark as an AdWord constitutes use “as a trademark” (ie, to distinguish the goods of one company from those of competitors).

 

The Supreme Court decided to stay the proceedings and referred the question to the European Court of Justice (ECJ) for a preliminary ruling. The ECJ will consider the issue in light of Article 5 of the First Trademarks Directive (89/104/EEC) (now the EU Trademarks Directive (2008/95/EC)).

In the other two cases, the Supreme Court issued decisions on the merits.

 

In PCB, the claimant was the owner of the registered trademark PCB-POOL. The claimant and the defendant both sold printed circuit boards. The defendant had been using the abbreviation 'PCB' (which is commonly known among IT experts as meaning 'printed circuit board') as an AdWord. When internet users conducted a search using the keywords 'PCB-POOL' and 'PCB', the defendant’s advertisements appeared as sponsored links. The court held that use of a descriptive sign as an AdWord is admissible and does not amount to trademark infringement. Therefore, the issue of whether use of a trademark as an AdWord should be considered as use “as a trademark” was not decisive in this case.

 

In Beta Layout, the claimant (which was the same as in the second case) alleged that the defendant had infringed its rights in the company name Beta Layout GmbH by using the words 'Beta Layout' as an AdWord. The Supreme Court held that use of a company name as an AdWord does not constitute trademark infringement because there is no likelihood of confusion among the relevant public. According to the court, internet users would be able to distinguish between sponsored links and natural search results. As the law on rights deriving from company names is not harmonized in the European Union, the court did not refer the issue to the ECJ for a preliminary ruling.

 

In Germany, the principles governing the use of trademarks and company names are similar. Thus, it seems likely that the Supreme Court would consider that use of a trademark as an AdWord does not constitute trademark infringement where:

However, if the ECJ holds that use of a trademark as an AdWord may amount to trademark infringement, it will be interesting to see how the German courts will rule in cases involving the use of trademarks or company names.