The ECJ’s answers are eagerly awaited not only by the head of one of the world’s best-known luxury goods manufacturers and the bosses at the world’s best-known search engines but by brand owners with reputations to defend in areas as diverse as Portakabins, flowers, fast food and adult entertainment products. In fact, with so many consumers now using the Internet to buy products or find out more about brands, all businesses trading in Europe that have either an Internet presence or a brand reputation to protect should be aware of the ECJ’s forthcoming decision on what, in the context of search engine keywords and sponsored links, constitutes ‘use’ of a trade mark under the EC Trade Marks Directive (First Directive 89/104/EEC of the Council, of 21 December 1988, to approximate the Laws of the Member States relating to Trade Marks).
Variations on the question of what constitutes trade mark ‘use’ in relation to search engine advertising have been put to the ECJ by several different European courts over the past year, and both the Dutch and German courts have added queries in the past few months.
What are Keywords?
Keywords are those words which, when typed into a search engine, trigger a ‘sponsored link’ advertisement. Search engines sell keywords to advertisers, who typically place bids to have their advert appear when certain keywords are entered. The most well-known keywords services are Google’s AdWords, Yahoo! Sponsored Search and Microsoft’s adCenter sponsored links.
In both Europe and the US, keywords have become the focus of increased litigation in recent years. This litigation has arisen out of the fact that some search engines allow advertisers to bid on keywords which are subject to trade marks owned by the advertisers’ competitors.
The effect of this is that the advertiser’s sponsored advert may appear on the same search results page as the natural search results showing the Web site of the trade-mark owner’s brand. In response, various trade mark owners have taken legal action for trade mark infringement against either the competitor advertiser or the search engines themselves.
Within the EU, under the Trade Marks Directive, the most relevant types of trade mark infringement are use in the course of trade of: (i) an identical trade mark with identical goods/services; (ii) a similar/identical mark for similar/identical goods or services such as to cause confusion; or (iii) a similar/identical mark which takes unfair advantage of or is detrimental to the distinctive character or repute of the mark.
The key question trade mark holders want answered is whether use of keywords by the search engines or advertisers is ‘use’ for infringement purposes. For this to be the case, the use of the trade mark must affect the essential function of the trade mark, which is to designate the origin of the goods/services. This is the main issue on which the European courts’ referrals to the ECJ have focused.
Referrals to the ECJ
The most recent referral of a question to the ECJ was in January this year, when the German Federal Supreme Court (BGH) asked the following question:
‘Does the use of a third party’s trade mark as a keyword on identical goods/services constitute trade mark infringement under the [Trade Marks] Directive?’
This question was a referral from the case of Bananabay, in which the claimant, which sold erotic products, accused its competitor of trade mark infringement for use of its mark as a keyword. As with all referrals to the ECJ, the German court will not be able to rule on this case until it has received guidance from the ECJ.
This German referral drew attention because it came little more than a month after a reference by the Dutch courts on the same issue. In a case brought by Portakabin against Primakabin, which sells second-hand Portakabins, Portakabin alleged that its competitor’s registration with several search engines of the trade mark PORTAKABIN as a keyword, as well as other similar but mis-spelt words, was trade mark infringement.
In an extensive referral, the Dutch Supreme Court asked the ECJ the following five questions:
1. Does the use of another party’s trade mark as a keyword constitute ‘use for goods and services’ as defined under the Trade Marks Directive? In particular, does it make a difference if the link to the advertiser’s Web site, which appears as a result of a search, appears as a ‘natural’ search result or as a sponsored link, and does it make a difference if the advertiser’s offer for sale of goods which are identical to the trade-marked goods appears on the search engine results page?
2. If the answer to the first question is ‘yes’, is use of a trade mark as a keyword nevertheless acceptable because it is an indication of the characteristics of the goods? [In this case, because the advertiser offered for sale genuine but second-hand goods.]
3. If the answer to the first question is ‘yes’, is use of a trade mark as a keyword nevertheless acceptable because the trade mark owner’s rights have been exhausted? [In this case, because the advertiser offered for sale genuine but second-hand goods.]
4. Would the answers to questions 1, 2 and 3 still be the same if the advertiser had registered only mis-spelt versions of the trade mark?
5. If an advertiser’s use of a trade mark as a keyword does not constitute ‘use for goods and services’ under the Trade Marks Directive, may an EU Member State apply its national trade mark law to prevent the use if it occurs ‘without due cause’ and ‘takes unfair advantage of’ or is detrimental to the distinctive character or repute of the trade mark?
The questions asked by the German and Dutch courts arose from cases in which a trade mark owner was suing a competitor. They complement the first questions on this issue referred to the ECJ from a French case, in which Louis Vuitton accused Google itself of ‘trade mark counterfeiting’ and ‘damage to its trade marks’. Louis Vuitton argued that Google’s AdWords programme had allowed advertisers to register its name as a keywords and had suggested phrases such as ‘Louis Vuitton fakes’ and ‘Louis Vuitton replicas’ as phrases on which advertisers might want to bid (practices Google has since ceased in mainland Europe). The lower French courts found Google liable for trade mark infringement, but the highest French court, the Cour de Cassation, decided in May 2008 that in order to make a final decision it needed to refer questions to the ECJ, including:
1. Are search engines which allow advertisers to bid on trade-marked keywords with links to sites which sell counterfeit products making ‘use’ of these marks under the Trade Marks Directive and the Community Trade Mark Regulation (Regulation 40/04 on the Community Trade Mark), which the trade mark owner is entitled to prohibit?
2. Furthermore, can a trade mark owner prohibit this use if the trade marks in question have a significant reputation?
By taking action against the search engine rather than its competitors, Louis Vuitton has attempted to cut off its problem at the source, rather than pursuing individual competitors. Pursuing a search engine has the advantage of being less costly than pursuing a number of different competitors. A search engine is also likely to have deeper pockets than a company’s competitors, especially if the competitor is one advertising counterfeit goods, as in the Louis Vuitton case.
In August, the Austrian courts had referred its own questions along similar lines:
1. Must the Trade Mark Directive be interpreted to mean that a trade mark is ‘used’ in a manner reserved for the trade mark proprietor if the trade mark or a similar sign is reserved as a keyword and which can be purchased by advertisers of identical or similar goods/services?
2. If the answer to question 1 is ‘yes’:
a. Is it infringement if a search term identical to the trade mark is used for an advert for identical goods or services, regardless of whether the advert appears in the list of hits or in a separate advertising block and whether it is marked as a ‘sponsored link’?
b. In respect of the use of a sign identical to a trade mark for similar goods/services, or the use of a sign similar to the trade mark for identical or similar goods/services, is the fact that the advert is marked as a ‘sponsored link’ and/or appears in a separate advertising block rather than in the list of hits sufficient to exclude any likelihood of confusion?
UK Context
The keywords issue has become of greater concern to UK trade mark holders since May 2008, when Google reversed its policy on the registration of trade-marked terms as keywords. In a U-turn against its former practice of allowing trade mark owners to notify it of their trade marks and prevent registration of those words as keywords by other advertisers, Google decided that in the UK it would not only to allow advertisers to bid on trade marks, but would provide a ‘keyword suggestion tool’ which would suggest keywords, including trade marks, that advertisers might want to bid on.
This change put Google’s policies in the UK and mainland Europe at odds, as Europe retains the former practice, but it brings Google’s UK policy in line with its one in North America. The law on trade marks should be harmonised within the European Union, so when an ECJ decision is issued, it may be difficult for Google to continue to maintain this difference between its policies in the UK and elsewhere.
Commentators have speculated that the timing of the change may have been influenced by the UK case known as ‘Mr Spicy’, which was decided in March 2008. This saw the proprietor of the trade mark MR SPICY, a mobile catering business, lose his case for trade mark infringement against Yahoo!, which he said had sold the trade mark as a keyword. This decision was seen by some as indicating that use of trade marks as keywords might be tolerated, particularly as the judge in the case commented that use of a trade mark as a keyword would not infringe a registered trade mark. However, the decision has questionable significance, as it was: a summary judgment by a lower court; Yahoo! had not even used the claimant’s trade mark as a keyword – it used the generic word ‘spicy’ instead; and the claimant was not represented by lawyers.
Many UK trade mark owners have been upset by Google’s policy change, and it is to be expected that more litigation will come on this issue. In December for example, it was reported that Interflora had commenced proceedings against Marks and Spencer and another online flower retailer for bidding on the word ‘Interflora’ as a Google keyword.
Significance of the ECJ’s Decision
Many people, including trade mark owners, their competitors and the search engines themselves, will be keen to hear the ECJ’s guidance on the referred questions. The ECJ is due to hear the questions asked by the French courts in the Louis Vuitton case on 17 March 2009 but, as it can take six months or more after a hearing for the ECJ to hand down its decision, observers may have to wait a little longer yet. As the questions asked by the different Member States all cover very similar issues, it is to be hoped that the Court might choose to deal with all the referrals at once, but so far, there are no plans to do this. In the meantime, the Advocate General’s opinion on the French referrals, which will be given before the ECJ’s decision, will make for interesting reading when issued – although the ECJ may still choose not to follow this.
Whichever decision is finally given, it will affect brand owners, their competitors and search engines all over Europe – and the ripples will spread further afield. No matter what answer each stakeholder may be hoping for, it is clear from the number of questions racking up to be answered that an ECJ decision, no matter which way it decides, should bring much needed clarity and guidance, and will shape the next stage of evolution for search engines.
Susan Barty and Isabel Davies are Partners at CMS Cameron McKenna LLP. Phillip Carnell is a Senior Associate there. See www.cms-cmck.com
