4 Feb
2016

Keyword advertising in the European Union

This chapter provides an overview of the relevant European jurisprudence, before examining the attempts of courts in the United Kingdom and Germany to interpret that guidance within a national context.

Over the last eight years, the European Court of Justice (ECJ) has handed down guidance regarding keyword advertising through a series of high-profile decisions, starting with its now-famous judgment in Google France (joined Cases C-266 to 238/08). Set against a backdrop of ever-improving internet literacy, national courts have sought subsequently to apply the ECJ’s rulings to increasingly complex factual circumstances involving technology and algorithms that were not contemplated at the time of Google France. This chapter provides an overview of the relevant European jurisprudence, before examining the attempts of courts in the United Kingdom and Germany to interpret that guidance within a national context.

Keyword advertising

Although different search engines employ slightly different criteria, sponsored advertising typically enables an advertiser to influence search results through the selection and purchase of keywords. In the context of search engine keyword programs, sponsored advertising is triggered when an internet user enters a search term that corresponds to or incorporates a third-party keyword. Sponsored links appear alongside ‘organic’ results, which themselves are generated and ranked according to (among other things) the meta tags appearing in a website’s HTML source code. Although this chapter focuses on the right of a trademark owner to act against advertisers for the use of keywords that correspond to its registered marks, the ECJ guidance is sufficiently broad to capture the use of trademarks as meta tags or within search functions operated by online retailers (eg, Cosmetic Warriors Limited v Amazon.co.uk Limited [2014] EWHC 181 (Ch)).

Google France

In the seminal Google France decision the ECJ addressed two key issues:

  • whether bidding for a keyword by an advertiser constitutes use of a trademark in the course of trade; and
  • if so, whether an advertiser’s purchase of a keyword which is identical to a registered third-party trademark (in order to direct internet users to the advertiser’s own website which offers similar or identical goods or services) amounts to behaviour which a trademark owner is entitled to prevent.

Turning to the first issue, the ECJ held that as the selection of a keyword which is identical to a trademark has the “object and effect” of displaying an advertising link to the site on which the advertiser offers its goods or services for sale, such conduct constitutes ‘use’ pursuant to the EU Community Trademark Regulation (207/2009).

Referring to its precedents in Arsenal Football Club (C-206/01) and Céline (C-17/06), the ECJ emphasised that a trademark owner cannot “oppose the use of a sign identical with the mark if that use is not liable to cause detriment to any of the functions of that mark”. The relevant functions include not only the “function of indicating origin”, but also other functions, such as guaranteeing the quality of the goods or services, communication, investment and advertising.

Indication of origin

The court explained that whether there is an adverse effect on the indication of origin depends “in particular on the manner” in which an advertisement is presented, which is left for the national courts to assess case by case. However, infringement must be assumed in two circumstances:

  • where a third-party advertisement suggests that an economic link exists between that third party and the trademark owner; and
  • where an advertisement is so vague concerning the origin of the goods or services that a normally informed and reasonably attentive internet user cannot determine, on the basis of the advertising link and the commercial message attached to it, whether the advertiser is an unrelated third party or economically linked to that trademark owner.

The ECJ left open the question of how precisely the national courts should define ‘vagueness’; as expected, these courts have subsequently developed different criteria.

Advertising function

In addition to indicating trade origin, a trademark is used to advertise and “to inform and persuade consumers”. As such, the ECJ held that a trademark owner is entitled to prevent a third party from using an identical sign in relation to identical goods or services where the third-party use adversely affects use of the mark as a factor in sales promotion or an instrument of commercial strategy. A brand owner’s “home and advertising page” is usually also displayed free of charge in the organic search results, which guarantees a degree of visibility for the trademark owner and its products. As long as this is the case, keyword advertising has no adverse effect on the advertising function of the trademark.

BergSpechte: mere similarity between keyword and trademark

In the Austrian referral BergSpechte (C-278/08) the ECJ clarified that trademark enforcement can also be sought outside the ambit of cases of double identity, where a keyword is only similar to a registered trademark. It must be determined whether there is “a likelihood of confusion when internet users are shown, on the basis of a keyword similar to a mark, a third party’s ad which does not enable normally informed and reasonably attentive internet users, or enable[s] them only with difficulty, to ascertain whether the goods or services referred to by the advertisement originate from the proprietor of the trademark or an undertaking economically connected to it or, on the contrary, originate from a third party”.

The question of likelihood of confusion was again left to the assessment of the national courts. However, within the context of keyword disputes, the ECJ’s distinction between infringement under Articles 9(1)(a) and 9(1)(b) of the EU Community Trademark Regulation on the basis that the latter requires a likelihood of confusion is somewhat contradictory. An internet user who is unable – or is able only with difficulty – to ascertain the origin of the advertised goods/services is already arguably confused, rendering unnecessary the ECJ’s specific reference to “likelihood of confusion”. Within the context of keyword advertising at least, the tests under Articles 9(1)(a) and 9(1)(b) are effectively the same.

Portakabin: parallel imports

In the Dutch referral Portakabin (C-558/08) the ECJ confirmed its earlier case law and addressed the permissibility of using a third-party trademark as a keyword where a re-seller advertiser is offering genuine (albeit second-hand) goods via its website.

The ECJ confirmed that where advertisers offer genuine trademarked products which have already been placed on the European Economic Area market under the trademark by the owner itself, there is an argument that the owner’s rights have been exhausted, meaning that it can no longer object to the use of its trademark as a keyword (or in advertising) unless it has legitimate reasons to object to further commercialisation. Legitimate reasons can be assumed where the use of the keyword:

  • gives the impression that the reseller and the trademark owner are economically linked (eg, through affiliation or distribution agreements); or
  • is seriously detrimental to the trademark’s reputation.

Once more, these issues were left to the national courts to determine case by case. The mere fact that an advertiser has used a competitor’s trademark with additional wording indicating that the goods are being resold does not constitute sufficient grounds to object; however, there is a legitimate reason to oppose further commercialisation where the reseller has ‘de-branded’ a product by removing/concealing the trademark from the goods.

Interflora

The ECJ in Interflora (C-323/09) reiterated that in cases of so-called ‘double identity’, trademark infringement can be assumed only if there is an adverse effect on one of the functions of the trademark. With regard to keyword use in cases of double identity, the relevant functions are indicating origin, advertising and – in cases of a mark with a reputation – investment.

The ECJ held that the origin function of a trademark can be adversely affected if internet users gain the incorrect impression that the keyword advertiser is part of the trademark owner’s distribution network, where it is “particularly difficult… to determine, in the absence of any indication from the advertiser, whether or not the advertiser is part of that network”.

The ECJ also discussed the protection of a trademark’s investment function – first highlighted in L’Oréal v Bellure – in more detail. The court held that in cases of double identity, an adverse effect on the investment function can be found where keyword use “substantially” interferes with the owner’s use of its trademark “to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty”. Further, where a trademark already enjoys a reputation, the investment function is adversely affected where such use “affect[s] that reputation” and in so doing “jeopardise[s] its maintenance”. However, the investment function is not affected if the only consequence of the third-party use of the mark is that the trademark owner must adapt its own efforts to acquire or preserve its reputation in order to retain consumer loyalty.

Application by national courts

United Kingdom

Following the widely reported High Court judgment in Interflora Inc v Marks & Spencer Plc ([2013] EWHC 936 (Ch)), Marks and Spencer (M&S) successfully appealed a number of Justice Arnold’s findings to the Court of Appeal, which in turn remitted the case back to the High Court for a retrial.

The appeal proceedings are significant because the Court of Appeal rejected the notion proposed at first instance that there is a reverse burden of proof on third parties to show that there is no possibility of confusion under Article 9(1)(a) of the EU Community Trademarks Regulation. The Court of Appeal stated that Arnold had been “deeply troubled by the notion that… the same test should be applied under [Article 9(1)(a)] and under [Article 9(1)(b)] and considered that, as he put it, the best way to make sense of the case law was to interpret the decision in Google France as laying down a likelihood of confusion test but with a reversed onus”. Referring to the decision in BergSpechte, the Court of Appeal noted that if the ECJ had “intended [a reverse burden of proof] then it would indeed have said so”.

The Court of Appeal also cast serious doubt – at least in the context of keyword advertising disputes – on the doctrine of initial interest confusion, which Arnold had introduced through his decision in Och-Ziff Management Europe Ltd v OCH Capital Ltd ([2010] EWHC 2599 (Ch)). In its most basic form, initial interest confusion allows rights holders to argue that liability should arise on the basis of interim, temporary confusion which was corrected before sale (in the context of keyword advertising, clicking on a third-party sponsored link before navigating back to the original results page to find search results originating from the rights holder). However, the Court of Appeal was not persuaded, noting that the existing tests under Google France and others had “been formulated by the Court with great care and reflect the importance of trademarks in developing a system of undistorted competition”. Further, the tests “enunciated by the Court… incorporate appropriate checks and balances… In our view the doctrine of initial interest confusion is therefore an unnecessary and potentially misleading gloss on the tests the Court has articulated”.

One additional point of interest arising from the Court of Appeal’s judgment concerns negative matching. In summary, Interflora’s complaint extended to instances in which M&S bid on generic flower-related terms. Searches by consumers for ‘interflora’ were subsequently linked by Google’s algorithm with generic terms, generating sponsored advertising originating from M&S. The court held that bidding on generic flower-related terms without negatively matching the word ‘interflora’ may constitute use of the INTERFLORA mark by M&S within the meaning in Google France, although this ultimately depended on the duration of the disputed activity and whether the object and effect of M&S’s actions were to trigger such ads.

Germany

The German Federal Court of Justice is known for its technology-friendly precedents on keyword advertising, which date back to 2009 in pcb (I ZR 139/07), Beta-Layout (I ZR 30/07) and its referral to the ECJ in Bananabay/eis.de.

The Federal Court of Justice consistently assumes that consumers are technology savvy. For example, in Beta-Layout the court held that it would be wrong to assume that internet users would:

  • make a mental connection between a search term entered and a sponsored link displayed (provided that the sponsored link was visually separated from the organic search results and displayed adjacently in a special advertising block); or
  • treat that advertisement as an indication of the origin of the goods or services advertised.

In Bananabay II (I ZR 125/07) the Federal Court of Justice clarified its views. Applying the ECJ’s guidance in Google France and eis.de (C-91/09), the court decided that purchasing a sign which is identical to a third-party trademark as an advertising keyword in order to trigger ads for identical goods or services does not amount to trademark infringement, provided that the ad:

  • does not include the trademark itself;
  • is visually separated from the natural search results; and
  • does not incorporate a ‘display URL’ pointing to the trademark owner’s website.

In MOST-Pralinen (I ZR 217/10) the court further held that purchasing a competitor’s trademark as a keyword does not amount to trademark infringement, provided that:

  • the ad displayed contains no reference to the trademark owner or its products and is visually separated from the organic search results; and
  • the ‘display URL’ points to a website that is not that of the trademark owner, even if the ad itself does not expressly state that the advertiser and trademark owner are not economically linked.

In Fleurop (I ZR 53/12), which was based on similar facts to Interflora, the Federal Court of Justice further delineated its case law on keyword advertising. Similar to the English decision in Interflora, the Federal Court of Justice decided that in exceptional cases a third-party ad may have to include information clarifying that no commercial link exists between the third-party advertiser and the trademark owner, in order to prevent infringement.

Comment

While national courts’ interpretations of the ECJ’s guidance initially diverged, they have increasingly adopted a more coordinated approach, culminating in Fleurop and Interflora – cases which were essentially decided in the same way. Nonetheless, given that keyword advertising disputes may also be determined according to unharmonised national laws such as unfair competition, there is still room for discrepancy in the future.

National courts have also shown themselves to be adept at applying the ECJ’s guidance in factual circumstances that depart significantly from those of the original dispute. For example, the ECJ judgment in Google France was applied in Cosmetic Warriors Limited v Amazon.co.uk Limited, in which the UK High Court concluded that Amazon’s use of LUSH trademarks in its internal search algorithm constituted use in the course of trade, consequently damaging the origin, investment and advertising functions of Lush’s trademarks.

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Ben Hitchens
Counsel

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Ben Hitchens holds the position of counsel in the firm’s IP group. His practice covers all aspects of IP law, with a particular focus on trademark and copyright litigation in the online and digital domains. Mr Hitchens has recently assisted clients in the High Court, Court of Appeal and EU General Court on a number of high-profile disputes.

Birgit Clark
Counsel

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Qualified as a solicitor and trademark attorney in the United Kingdom and an attorney at law in Germany, Birgit Clark is counsel in the Locke Lord’s IP group and focuses her practice on trademarks and soft intellectual property. She regularly writes and speaks on IP matters.