The European Court of Justice (ECJ) has delivered its judgment in the landmark case of Google France versus Louis Vuitton Malletier, writes Mark Lubbock, partner at Ashurst LLP.
While the ECJ accepted that the unauthorised use of keywords could fall foul of European trademark law, it found that an internet referencing service provider, such as Google, which offers those keywords as sponsored links through its AdWords service, is not liable for trademark infringement.
The Court also held that Google would not be liable for the use of the keywords stored at the request of an advertiser, provided that it had not played an active role which would give it knowledge of, or control over, that data. If informed of unlawful activity, under European law, Google would need to act expeditiously to remove or disable the data concerned.
Impact on brand owners
While brand owners will be pleased that the law with respect to infringing advertisers has been clarified, Google's vindication leaves them with something of a dilemma.
In reality, infringers are often based outside of the EU (in Asia, for instance) and are consequently beyond the reach of the European authorities. Brand owners now have little choice but to continue the costly process of monitoring online activity and pursuing infringing advertisers or vendors via the courts in Member States (where the advertiser has a presence in the EU) or by impounding imports of infringing goods at the port of entry into the EU. They face a possible loss of revenue where consumers are encouraged to purchase counterfeit, grey market or rival products as a result of AdWords ads, and possible brand dilution where these products are of inferior quality.
Impact on Google
Google will be relieved by this result, which supports its highly successful AdWords service. While one of the consequences of the decision is that advertisers may be required to distinguish their products from the brands used as keywords, which could inhibit sales and dissuade them from using the service, the use of AdWords is likely to grow.
Google may decide to lift its current restrictions on the sale of words which are registered as trademarks as keywords in France and other EU Member States such as Italy and The Netherlands. This would bring Google's policies in these countries into line with current practices in the UK and US, where advertisers are able to purchase keywords that correspond with the trademarks of competitors.
Google is likely to adopt a comprehensive "hands-off" approach to its AdWords business, to ensure that it does not assume an active role which would give it knowledge and control over the data. Potentially "active" practices, such as suggesting keywords and messages for ads to advertisers, could expose Google to liability.
A commercial decision
Online advertising is big business - in the UK, revenues now exceed those obtained from television. With this in mind, it is worth noting that all 15 members of the ECJ heard the appeal. If the Court had decided the other way it may have undermined a fast-growing market. Their decision underlines the need for discussions at EU and national level over how best to regulate online IP infringement, and is likely to lead to greater pressure on ISPs to monitor infringing activity.