Trade mark infringement and intermediary liability: ECJ rulings on Google AdWords

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

Last week the European Court of Justice handed down its rulings in the three Google AdWords cases referred by the French court and in a similar case referred by Austria. The decisions will have practical implications for brand owners, advertisers and for search engines and other online intermediaries. While the legal and commercial dust from the rulings is still settling, we provide a brief overview of the key points from the judgments.

The Google France cases

On 23 March the ECJ gave its ruling in Joined Cases C-266 to 238/08 – three cases referred by the French Cour de cassation. These cases had been brought against Google France and Google Inc by various trade mark owners including Louis Vuitton, Viaticum and CNRRH. All raised similar questions about liabilities arising from Google's Adwords service. Google had been found liable at first instance and on appeal, and had then lodged appeals in all three cases, which prompted the French court to refer the salient points of interpretation to the European Court of Justice.

Potential liability of Google as the referencing service

The first question, common to all three cases, was whether EU trade mark law must be interpreted as meaning that a trade mark proprietor is entitled to prevent the use of keywords which reproduce or imitate his trade marks by the provider of a Google Adwords–style referencing service.

Here, the relevant provisions were Article 5 of the 1989 Trade Marks Directive (which has since been replaced by the 2008 Directive) and Article 9 of the Community Trade Marks Regulation which contains similar rights.

Article 5(1) provides that "The registered trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade:

(a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered;

(b) any sign where, because of its identity with, or similarity to, the trade mark and the identity or similarity of the goods or services covered by the trade mark and the sign, there exists a likelihood of confusion on the part of the public, which includes the likelihood of association between the sign and the trade mark.

Having considered the various components of Articles 5 (1) in relation to the AdWords scenario, including the concepts of "use in the course of trade", "use in relation to goods or services" and "use liable to have an adverse effect on the functions of the trade mark", the ECJ reached the following conclusion: "an internet referencing service provider which stores, as a keyword, a sign identical with a trade mark and organises the display of advertisements on the basis of that keyword does not use that sign within the meaning of Article 5(1) and (2) of Directive 89/104 or of Article 9(1) of Regulation No 40/94".

Potential liability of advertisers using keywords

The second question, raised in the CNRRH case, was whether, an advertiser's reservation and use of AdWords which reproduce or imitate a third party's trademark, in order to designate identical or similar goods, constituted trade mark infringement.

The Court ruled that the relevant provisions: "must be interpreted as meaning that the proprietor of a trade mark is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with that trade mark which that advertiser has, without the consent of the proprietor, selected in connection with an internet referencing service, goods or services identical with those for which that mark is registered, in the case where that advertisement 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 trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party".

Application of the hosting defence

The third question, also common to all three cases, was whether the provider of a paid referencing system such as AdWords could be regarded as providing an "information society service consisting of the storage of information provided by the recipient of the service" within the meaning of Article 14 of the E-Commerce Directive. The significance is that a service provider falling within the Article 14 definition will have the benefit of the "hosting defence", i.e. it will not be liable for the information stored at the request of a recipient of the service. The hosting defence is subject to two conditions, namely that:

(a) the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent; or

(b) the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information.

The Court had regard to the recitals to the Directive and concluded that the test for the application of the hosting defence is whether "the role played by that service provider is neutral, in the sense that its conduct is merely technical, automatic and passive, pointing to a lack of knowledge or control of the data which it stores".

It ruled that Article 14 "must be interpreted as meaning that the rule … applies to an internet referencing service provider in the case where that service provider has not played an active role of such a kind as to give it knowledge of, or control over, the data stored. If it has not played such a role, that service provider cannot be held liable for the data which it has stored at the request of an advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser’s activities, it failed to act expeditiously to remove or to disable access to the data concerned."

The Court stressed that the characterisation of the service provider for hosting defence purposes is an assessment which must be made by the national courts on a case by case basis. It highlighted some relevant factors. For example, the fact that AdWords is a paid for service did not in itself preclude the application of the hosting defence, nor did the "concordance" between the keyword selected and the search term entered in itself impute knowledge of or control over the data entered by advertisers. In contrast however the role played by Google in drafting the commercial message which accompanies the advertising link or in the selection of the keywords could be relevant. This aspect of the judgment as implications not only for liability for trade mark infringement but also for liability for other types of hosted material such as copyright works.

The BergSpechte case

Two days after the Google France rulings, the Court handed down a ruling in another AdWords case, namely Case C‑278/08 which had been referred by the Austrian Court. This referral raised two questions. The first was the same question which had been raised in the Google France cases about the referencing service provider's liability, and the Court reached the same conclusion. The Austrian court had also posed a further question, predicated on the assumption that a service provider would be liable under the scenario. This was the question of whether it made a difference to the protection provided by a trade mark to its proprietor depending on whether the advertisement of a third party displayed on the basis of a keyword which is identical with or similar to that trade mark appears as a ‘sponsored link’ or elsewhere.

The ECJ declined to answer this question, saying: "It is common ground that the dispute in the main proceedings does not concern the use of signs which are identical with or similar to a trade mark in an internet referencing service leading to the display of advertisements as search engine ‘sponsored links’ managed by the provider of that service. In those circumstances, examination of the protection conferred by a trade mark on its proprietor in the event of the display of advertisements of third parties which are not ‘sponsored links’ would not be useful in resolving the dispute in the main proceedings".

The ECJ's rulings in the Google France and BergSpechte cases are available in full at:
http://curia.europa.eu/jcms/jcms/j_6/