Two days ago the Advocate General, Mr. Maduro, handed down his Opinion in relation to a number of reference questions referred to the European Court of Justice from the Cour de Cassation concerning "adwords”.
The "adwords” were purchased from search engine providers upon a price-per-click basis. The adwords bring up the URLs advertising well-known branded goods and services alongside the name of rival products, some of which might even be counterfeit. The question for the court was whether the use of an adword which corresponds with a registered trade mark constitutes trademark infringement.
Of the 3 cases the Louis Vuitton reference focused upon a user of the Internet entering the Louis Vuitton trademark into a Google search engine which then produced advertising of imitations of Louis Vuitton product alongside the legitimate Louis Vuitton's URL. Was Google by offering its adword service, "using" Louis Vuitton's well-known trademark registrations within the context of the Trade Marks Directive?
The 2nd reference concerned scenarios where the advertising brought up by entry of a registered trademark did not bring up advertising containing that registered trade. The 3rd reference concerned similar scenarios, but asked the extra question: whether the mere selection by Google of adwords comprising trademarks was, of itself, an act which constitutes trademark infringement.
The Advocate General was also required to consider article 14 of Directive 2000/31, the Electronic Commerce Directive, which exempts a “hosting” Internet service provider such as Google from liability provided it does not have actual knowledge of any illegality taking place, in these cases, acts constituting trademark infringement, “the safe harbour provisions”.
The Advocate General interpreted the arguments of the 3 registered trademark proprietors as seeking to extend the protection afforded by the Trade Marks Directive to act of "contributory infringement".
He dissected the activities of Google to 2, the 1st, the permission granted by Google to allow advertisers to use adwords and the 2nd the display of the third-party advertisements.
The Advocate General decided that because Google received money in exchange for permitting users to adopt adwords, that was “use in the course of trade", but was it use "in relation to goods or services"? The AG considered that the mere act of permitting adword selection by Google customers was a procedure internal to Google and not linked to any goods or services.
Further, such use by selection would not affect one of the essential functions of trademark, "origin identity". He failed to mention the effect of that act upon the other functions of a trade mark.
Turning to, "use by display", the AG was not so certain that that might not constitute trademark infringement. The AG, at this juncture sought to distinguish between “natural” advertisements, i.e., advertisements which did not contain trademarks, brought up by the keyword and counterfeit ones, and the extent to which a registered trademark was "exposed " by this. Accepting that such use fulfilled the other criteria of Arts 4(1) and 5(2) of the Directive in so far as it was “use in the course of trade” and also “in association with goods”, the AG went on to determine whether such use “by display” affected the essential functions of trademark. The AG considered that question, in turn, tightly interwoven with consideration as to whether such use would result in confusion. The AG considered that liability would only arise if Google were found to be a "contributory infringer".
The AG however did not consider there would be any risk of confusion because an Internet user would visit the various sites brought up by the Adword and be able to distinguish between those sites and by visiting the sites he would be unlikely to be confused. In passing, a similar point was made by Jacob J in a UK judgement.
The AG then sought to distinguish what he considered to be the functions of a trademark. What is curious about this approach is that the EC J has been developing legal theory with regard to what constitutes the essential functions of a trademark along the lines of (i) origin association (ii) quality control and more recently, (iii) advertising function. The AG, now appears to classify "essential function", not based upon those existing criteria, but based upon whether one is dealing with marks protected against "likelihood of confusion" or “marks with reputation”. The AG’s analysis, in this regard for trade mark lawyers, is important.
The AG then referred to the relative protection afforded to trademarks which was right exercised conditionally, permitting descriptive use, use in comparative advertising and in exercise of freedom of expression. The AG considered it " absurd" that Google be permitted to display "descriptive use of a registered trademark" and not "trademark use” in the adverts brought up by a keyword. Were a registered proprietor to excise the control sought, they would have de facto control, over all such use. That, he considered , would obstruct the Internet and competition. In consequence, the use of ad words by Google which are also registered trademark, do not affect the functions of a trademark namely, quality control and advertising, and the same is true whether the mark possesses a reputation or was lesser-known. The AG supported his conclusion by pointing out that trademark owners can prohibit sites advertising counterfeit goods by bringing infringement proceedings against them individually.
The AG did not discount Google's potential liability in the exercise of the procedure it has adopted by which advertisers are allowed to select keywords, particularly any information Google provides which optimises the advertising of those sites whilst employing a trademark, but he considered that was a matter for the domestic court.
The AG went on to consider the safe harbour provisions of Directive 2000/31, deciding Google's adwords and search engine fulfilled the Directive definition of “information society services” but failed that of “hosting”, because Google's involvement was neutral in providing its service as required by article 15 of the Directive because Google uses algorithms to generate its search results.