Use of trademark as keyword allowed - under certain conditions

The German Federal Supreme Court has given its long-awaited decision in the Bananabay case (I ZR 125/07). Although the decision was issued in January 2011, the grounds were published only in July.
According to the court, the use of a trademark as an AdWord is not prohibited under the German Trademark Act as long as the following conditions are met:
  • The advertisement generated by the AdWord search will be clearly designated as an advertisement - that is, it will appear under the heading 'advertisement/sponsored link' ('Anzeigen') and will be separated from the natural search results; and
  • Neither the text of the advertisement nor the URL shown in the advertisement will contain any reference to the trademark.
The claimant and the defendant were competitors in the field of adult entertainment products; they offered their products online at '' and '', respectively. The term 'bananabay' had been registered as a trademark by the claimant, and purchased as a keyword by the defendant. When an internet user entered 'bananabay' in Google's search engine, the search brought up not only the natural search results, but also the defendant's advertisement on the right hand side of the screen. This advertisement was clearly separated from the natural search results and appeared under the heading 'advertisement'. The text of the advertisement, including the URL contained therein, did not refer to the term 'bananabay'; neither did the defendant's website.
The claimant sought to stop the defendant from using its trademark as an AdWord. At first instance, the courts ruled in favour of the trademark owner. On appeal, the Federal Supreme Court referred a question to the Court of Justice of the European Union (ECJ), seeking to ascertain whether this specific use of the trademark should be considered 'use as a trademark' under Article 5(1) of the First Trademarks Directive (89/104/EEC). The ECJ ruled that there is trademark infringement:

"... where the advertising does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the proprietor of the trademark or by an undertaking which is economically connected to it or, on the contrary, originate from a third party."
In light of this answer, the Federal Supreme Court found that there was no trademark infringement, and considered that there was no adverse effect on the functions of the trademark (ie, the "function of indicating origin" or the "function of advertising", which might be harmed by keyword advertisement).
The court was of the opinion that the average internet user would not believe that there was an economic link between the claimant and the defendant's advertisement because:

  • the text and the URL displayed in the advertisement did not use the term 'bananabay'; and
  • the advertisement was clearly separated from the natural search results.
The claimant appeared in the list of natural search results in a prominent position and, therefore, the "function of advertisement" was not impaired.
This decision is in line with former 'advertiser-friendly' decisions, such as the well-known Beta Layout decision (BGH I ZR 30/07). Generally, the owner of a German trademark and company name will not be able to prevent competitors from using its trademark and/or company name as a keyword as long as the advertiser does not use them in the advertisement or the URL.
It remains to be seen whether the future will bring a level of certainty and uniformity within the European Union. Currently it is not the case, as the courts in France and Austria have decided in favour of the trademark owners. These differences result from the fact that the ECJ did not rule on whether this type of use has any negative effect on the 'function of indicating origin', but stated that the national courts should decide upon this on a case-by-case basis.
Tanja Hogh Holub, Beiten Burkhardt Rechtsanwaltsgesellschaft mbH, Munich

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