Google AdWords and Trademarks: Confusing Plumbers

Google Adwords and Trademark Law: A Never-Ending Story

Online sales and thus online advertising is becoming ever more relevant. It is no surprise that the use of (third party) trademarks in keyword advertising, in particular with respect to Google AdWords, is still a prominent topic. Trademark owners are spending substantial amounts of money for online advertising. It is understandable that they want to enjoin third parties from using their trademarks in the context of keyword advertising.

Various courts, most prominently the European Court of Justice, tried (and often failed) to provide clear guidelines for the use of trademarks in keyword advertising, in particular with respect to Google AdWords (see already previous articles in BR-News of 7 January 2013, BR-News of 10 July 2012, BR-News of 26 October 2011). The following cases are of particular relevance:

• German Federal Court (“Bundesgerichtshof”) of 13 December 2012 (“MOST”)
• German Federal Court of 13 January 2011 (“Bananabay II”)
• European Court of Justice of 23 March 2010 (“Google France”)
• European Court of Justice of 25 March 2010 (“BergSpechte/trekking.at”)
• European Court of Justice of 8 July 2010 (“Portakabin/Primakabin”)
• European Court of Justice of 22 September 2011 (“Interflora/M & S Interflora Inc.”)

Facts

The facts of the case were rather specific. The decision may therefore not serve as a reference for the common trademark uses in connection with keyword advertising. The case and, in particular, the assessments of the High Court deal nonetheless with some interesting trademark issues.

The parties involved were Victoria Plum Ltd. and Victorian Plumbing Ltd. Victoria Plum was previously doing business as Victoria Plumb and had registered VICTORIA PLUMB trademarks. Both companies are bathroom retailers. They have both co-existed and been in competition under similar company names and trademarks since 2001.

The trademark issues commenced when Victorian Plumbing bid on the trademarks of Victoria Plum as part of its pay-per-click initiatives with Google AdWords. In 2012 Victorian Plumbing started to bid on the trademarks of Victoria Plumb on a substantial level and increased the bidding in the subsequent years.

Victoria Plum claimed that the following conducts of Victorian Plumbing constitute trademark infringements:

• The bidding on the Victoria Plum(b) trademarks on Google AdWords and the displaying of advertisements on searches of those terms, which include the following signs (victoria plumb, victoriaplumb, victoria plumbing, victoriaplumbing);
• The use of its trademark in ads, linking to Victorian Plumbing, that appeared as a result of Google’s dynamic keyword insertion service.

Victorian Plumbing admitted a trademark infringement in the second constellation. It, however, denied any wrongdoing in the first one. It rather argued that it used the trademark in the form of an honest concurrent use.

Trademark Infringement Affirmed

In a first step the High Court came to the conclusion that the first constellation above constitutes a trademark infringement. The High Court applied the test set out by the European Court of Justice in its “Google France” decision.

The High Court cited the European Court of Justice in many instances. The following considerations of the European Court of Justice in the Google France decision deserve to be repeated:

“The function of indicating the origin of the mark is adversely affected if the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party.”

“In such a situation, which is, moreover, characterised by the fact that the ad in question appears immediately after entry of the trade mark as a search term by the internet user concerned and is displayed at a point when the trade mark is, in its capacity as a search term, also displayed on the screen, the internet user may err as to the origin of the goods or services in question. In those circumstances, the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark.”

“In the case where a third party’s ad suggests that there is an economic link between that third party and the proprietor of the trade mark, the conclusion must be that there is an adverse effect on the function of indicating origin. In the case where the ad, while not suggesting the existence of an economic link, is vague to such an extent on the origin of the goods or services at issue that normally informed and reasonably attentive internet users are unable to determine, on the basis of the advertising link and the commercial message attached thereto, whether the advertiser is a third party vis-à-vis the proprietor of the trade mark or, on the contrary, economically linked to that proprietor, the conclusion must also be that there is an adverse effect on that function of the trade mark.”

The High Court in the Victoria Plum case came to the conclusion that there is a propensity for confusion in keyword advertising. Pursuant to the High Court the case law of the European Court of Justice establishes the following:

• A user who searches by reference to a brand name is likely to be looking for that brand. If the resulting advertisment is vague as to the origin, there is a propensity for confusion.
• This propensity for confusion explains the emphasis on transparency by the European Court of Justice.
• If, however, there is transparency regarding the origin of the advertisement (and the goods and services advertised), the bidding on keywords cannot be objected.

Experts appointed by both parties analyzed the click through rates of the Google AdWord advertising of Victorian Plumbing Ltd. The analysis revealed a striking difference between click through rates to the Victorian Plumbing website when its advertisements appeared following a search for Victoria Plum trademarks (15-20% click through) and when those same advertisements appeared following a search for other competitors brands (0-4%). The expert appointed by Victoria Plum explained that the most logical explanation for this difference is searcher confusion between the intent of their search (Victoria Plum) and the advertisement being posted (Victorian Plumbing). The court followed that explanation.Interesting, because legal literature is often comparing the keyword advertising constellations with offline sales constellations, is the following consideration of the High Court:

„An analogy from the offline environment may serve to illustrate the point. If a consumer enters a department store and asks an assistant for a particular brand of goods, that is what he is expecting to be shown. If the assistant leads him to goods of a competitor with a very similar name, which do not make clear that they have no connection with the brand owner, the consumer is very likely to be confused. In fact, the position is worse when searching on the internet, because consumers click through to links very quickly and with no opportunity to inspect the goods.“

No Honest Concurrent Use

The High Court had more difficulties with regard to the defense of honest concurrent use brought forward by Victorian Plumbing.

The High Court held that the defense of honest concurrent use might entitle Victorian Plumbing to continue to use its own company name or brand name. The defense does, however, not grant Victorian Plumbing the right to use a third party name or trademark for commercial gain.

Furthermore, the High Court held that the use in the specific case was not honest. There was evidence that Victorian Plumbing tried to capitalize on consumer confusion.

Passing Off Counterclaim

Victorian Plumbing filed a counterclaim for passing off. Victorian Plumbing was able to provide evidence that Victoria Plumb bid itself on trademarks of Victorian Plumbing in the context of its Google AdWords strategy.

The judges held that the conduct of Victoria Plumb caused consumer confusion, resulted in a damage to the goodwill of Victorian Plumbing’s trademarks, and constituted therefore an illicit passing off.

Comments

The facts in the case are rather unique – the conflicting trademarks were almost identical – and the decision may therefore not be generalized.

Important to know is that the use of third party trademarks in the context of keyword advertising, in particular on Google AdWords, is not generally to be qualified as trademark infringement. The context of the use matters. Each case must be assessed with regard to its specific facts.

It should, however, also be mentioned that there is no general safe harbor from trademark infringement when using third party trademarks in keyword advertising. With that respect the Federal Court in Germany (“Bundesgerichtshof”) seems to follow a different path than the European Court of Justice. Taken the consideration in the MOST-decision of the Federal Court, there may never be a trademark infringement if the ad triggered by the keyword is placed in a separate “ad” box and is clearly identified as ad. This consideration differs significantly from the considerations of the England and Wales High Court and the European Court of Justice.

From a law and economic perspective, keyword advertising, such as Google AdWords, has significant benefits for the consumers. The benefits exist when using third party trademarks as keywords. The consumer search costs are reduced when customers who are searching for a specific branded product are also informed about competitor’s products. Yet, the consumer search costs are not reduced, but rather increased, if the third party trademark is used in a way that results in consumer confusion. The test applied by the European Court of Justice is therefore from that perspective appropriate.

Further information:

• England and Wales High Court of 18 November 2016
• BR-News of 7 January 2013
• BR-News of 10 July 2012
• BR-News of 26 October 2011
• European Court of Justice of 23 March 2010 (“Google France”)