Exporting A Case Of Fake AdWords & Google

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1 July 2008 Trade Marks Trade Marks and Keyword Advertising Over 2.8 billion was spent on internet advertising in the UK in 2007, according to the Internet Advertising Bureau which is almost three times higher than the equivalent figure for It is expected that by 2012, 10.8 billion will be spent on internet advertising across Europe. The importance of this form of advertising and in particular keyword advertising and Google s dominance of the medium can not be overstated. Keyword Advertising Google AdWords, Yahoo! Search Marketing and Microsoft adcenter are the leading online services that allow anyone to sponsor search terms, or keywords. The keyword advertising business is dominated by Google in the UK. According to a survey by Hitwise in April 2008, approximately eighty percent of searches on search engines are conducted through either Google.co.uk or Google.com and UK usage of Google by ad sellers is approximately 90 percent of the total keyword ad seller market. Interestingly, it believed that Yahoo! and not Google first developed the keyword ad phenomenon in 1996 on prompting from a client who wished his adverts for golf products to appear when a user searched the word golf. Google simply improved on the system to do it very very well. Until recently, Google allowed the owner of trade marks held in the UK or Ireland to prevent sponsorship of their marks by a third party. Controversially, Google changed its policy for dealing with trade marks used as keywords in May Google trade mark policy, pre-may For those with marks in the US and Canada, Google would investigate complaints from the trade mark owner about the appearance of their marks in the ads of rivals. However, it would not consider complaints about the sponsorship of those marks. Google appears not to tolerate references to others' trade marks in an advert once that advert becomes the subject of a complaint. However, it is reactive in dealing with complaints: it generally does not monitor ads for trade mark infringement at the time they are placed. For trade mark owners outside the US and Canada, Google would investigate complaints about the appearance of marks in ads and the use of trade marks as keyword triggers. Where a trade mark owner discovered that a rival was using its registered trade mark as a keyword they could complain to Google and Google's policy was to stop that use. So trade mark owners could enjoy a monopoly on that ad space in Europe by asking Google not to let any other party use its trade marks as keyword triggers. For trade mark rights held in all countries other than the US, Canada, the UK and Ireland the 'pre-may 2008' trade mark policy continues to apply. Google trade mark policy, post-may On 5th May 2008 Google unblocked keywords that had previously been restricted due to complaints from owners of trade mark rights in the UK and Ireland. The move brings the policy for trade marks held in the UK and Ireland in line with Google's policy for trade marks held in the US and Canada. Brand owners must now compete with other firms to position their ads beside the natural search results when a user types their trade mark into the Google search engine. That bidding process will increase the costs of advertising a trade marked brand through Google's AdWords programme, with some experts predicting the ad spend will rise by four times present levels. Following the change in policy, it is still the case that Continued on reverse

2 advertisers are not allowed to use a trade marked term in the actual advert itself. Advertisers will be able to buy the right to display their ad when a trade marked term is used by the searcher, but will not be able to use that term in the advert. The change of Google's UK policy may be the consequence of the recent MR SPICY decision, discussed below. Lawsuits over keyword advertising Google's differing policies on keyword usage for the US, Canada, the UK and Ireland and the rest of the world reflect the differing attitudes to the courts in various countries in their rulings on AdWord disputes. Furthermore the recent decision in the UK regarding the use of registered trade marks in adwords, essentially bringing the UK into line to a degree with US jurisprudence could be seen as the trigger for Google s recent change of policy in the UK and Ireland. The position in the US The US has to a degree been the driver of Adword cases, however, even here the US courts have not taken a consistent line. Courts on the West Coast of the US, notably the Californian district courts and the US Court of Appeals for the Ninth Circuit in San Francisco, tend to be much more favourable in their disposition to brand owners than the East Coast courts of the New York district courts and the US Court of Appeals for the Second Circuit in Manhattan. In the main East Coast courts have taken the position that the use of registered trade mark in an invisible adword is not trade mark usage at all. In 2006, the Second Circuit dismissed a case by Merck & Co relating the use of the registered mark Zocor in an adword on the basis that the purchase of the keyword was not trade mark usage. By contrast the Californian courts have held the contrary and in the ground breaking decision of 2004 between Playboy Enterprises Inc. and Netscape Communications Corp., where Playboy took issue with the purchase of the terms playboy and playmate as adwords applied the doctrine of initial interest confusion to the use of adwords. This doctrine with regards adwords describes the distraction or diversion of a potential customer from the website he was initially seeking to another site, based on the user's belief that the second site is associated with the one he originally sought. Inherent in this concept is the risk that the user will be satisfied with the second site or sufficiently distracted that he will not arrive at or return to the site for which he was originally searching. In the Playboy case, the Ninth Circuit held that this was a possibility. GEICO v Google In the US, the clearest judicial guidance comes from a case decided in December Here, Google was partially successful in defeating a claim raised by Geico, a car insurance firm, concerning the sale of Geico's registered trade marks as AdWords. These triggered the listings of rival insurance websites. The claim was defeated in relation to the triggering of ads which made no visible use of the registered marks of Geico. However, Judge Brinkema reasoned that Geico had provided sufficient evidence of initial interest confusion between the use of its trade marks in the text and headings of sponsored links and its brands. Geico pointed out the unique nature of the car insurance market and its business model. Geico contended that because customers seek an average of fewer than two quotes before purchasing car insurance, the company would lose significant business from the alleged initial interest confusion that misdirects potential customers who originally searched for 'GEICO' to sites where they can obtain other companies' quotes. Also, potential customers of Geico's services can get GEICO rate quotes only directly from the company. Links that appear when users search for 'GEICO' and that advertise other sites' ability to provide rate quotes for car insurance, even from unnamed companies, are misleading because of the implied association with GEICO. Geico's evidence had principally consisted of a consumer survey. But its survey was criticised by Judge Brinkema. As a consequence of flaws in the methodology, it did not produce evidence that the use of 'GEICO' as a keyword to trigger rivals' ads would cause confusion. And mindful of the importance of the issues before her "to the ongoing evolution of internet business practices and to the application of traditional trademark principles to this new medium," Judge Brinkema was careful to emphasise that her ruling "applies only to the specific facts of this case". Google and Geico eventually settled out of court, leaving unanswered the question of whether Google or its advertisers should be liable for damages for the use of Geico's trade marks in the headings and text of Google's sponsored links. The GEICO case, which ran in Virginia, was not the final word on the subject in the US. Although a case between American Blind & Wallpaper Factory Inc and Google was settled in May of last year, in February of this year, the US District Court for the Northern District of California found that Aroa Marketing infringed Storus Corp s trade mark registration of SMART

3 MONEY CLIP when it sponsored the term 'Smart Money Clip' in Google's search engine and displayed the term as the headline of the advert. The Court held that there was "initial interest confusion" over the use of the term by Aroa Marketing. To an extent the case law in the UK has mirrored that of the US and no doubt the recent developments in the MR SPICY case as detailed below were one of the reasons why Google has recently decided to bring its adword policy in the UK and Ireland into line with US and Canadian practice. The position in the UK Although not on all fours with the US cases, two decisions in the UK provide some guidance on this important issue. Reed Executive plc v Reed Business Information Ltd As readers will recall, Reed Business Information Ltd ran a recruitment site called totaljobs.com. Searches on Yahoo! for the word 'Reed' triggered the display of a banner ad for totaljobs.com. Reed Executive sued Reed Business Information, alleging trade mark infringement. The Court of Appeal resolved the case in 2004, ruling that there was no trade mark infringement. The case turned on whether the public would be confused into thinking that by typing "Reed" into the search engine and getting a result for totaljobs.com, the public would be confused into thinking that totaljobs.com was in some way connected to Reed Executive. Confusion had to be established, as Lord Justice Jacobs held that the marks were similar and not identical. Lord Justice Jacobs found that the average consumer would not be confused into thinking that a banner ad carrying the brand totaljobs.com, with no reference to Reed, was in some way connected to Reed Executive. The judge seemed to accept that there is much clutter in search engine results and that the public has become educated not to make a direct association between the keyword they type into a search engine and any pop-up advert that may appear. Lord Justice Jacob did, however, comment in this case that if the mark used by Reed Business Information had been identical to Reed Executive's registered trade mark, the position might have been different, as there is no need to establish confusion under Section 10(1) of the Trade Marks Act. Wilson v Yahoo! In February 2008, the High Court dismissed a lawsuit against Yahoo! brought by a businessman who claimed that Yahoo! infringed his trade mark rights by displaying adverts for other companies when users entered his trade mark as a search term. Victor Wilson owns a London-based catering business and has a Community Trade Mark registration for the mark MR SPICY for food and hospitality-related goods and services. Wilson sued Yahoo! because he discovered that typing 'MR SPICY' into Yahoo!'s UK search engine triggered sponsored links for Sainsbury's supermarket and price comparison site PriceGrabber.co.uk. Mr Wilson claimed that this infringed his trade mark rights. The text of the adverts made no reference to 'MR SPICY'. Evidence showed that both companies had sponsored the English word 'spicy' but, contrary to Mr Wilson's belief, neither had sponsored the term 'MR SPICY'. Yahoo! acknowledged that entering the term 'MR SPICY' could trigger adverts for companies that sponsored the word 'spicy' due to its word-matching technology. Wilson claimed this was trade mark infringement. Yahoo! asked for a summary judgment, arguing that it had not 'used' Mr Wilson's trade mark or that any use by Yahoo! did not amount to 'trade mark use' in terms of the Trade Marks Act Mr Justice Morgan accepted Yahoo!'s arguments. The court found that only the person searching on the term "MR SPICY" was using the trade mark, and that Yahoo!'s response to that search term was not use of the trade mark by Yahoo! Mr Justice Morgan also decided that if Yahoo's response did amount to use of the trade mark, such use was of the word "spicy" and not of the trade mark "MR SPICY". This meant that, as in Reed above, Mr Wilson would need to show confusion to succeed in establishing trade mark infringement. The case also raised the issue of whether use of a trade mark by a search engine, if there was use, was use in a trade mark sense. Mr Justice Morgan confirmed the now established rule set out in the well know Arsenal case and recently confirmed by the European Court of Justice in the Adam Opel case that a trade mark owner's rights to stop a third party's use of his mark are limited to those situations where the third party's use impinges upon the essential function of the trade mark. On this issue, Mr Justice Morgan pointed out that the text of the adverts complained of made no reference to Wilson's business. "There is a reference to Sainsbury's," he wrote. "It does not say that all food sold at Sainsbury's has Mr Wilson's

4 trade or business as an origin. It is not pretending that Sainsbury's food all comes from Mr Wilson's trade or business, MR SPICY." Thus he concluded that the text of the ads could not have an adverse impact on Wilson's trade mark rights. The ruling suggests that Yahoo! would not infringe Wilson's trade mark even if Sainsbury's had sponsored the term 'Mr Spicy' provided it was for different types of goods and services. Mr Justice Morgan wrote: "there can be no objection to Yahoo, if this is what they want to do, to solicit from third parties the use by those third parties, in return for payment, of a keyword 'Mr Spicy' if they are going to attach 'Mr Spicy' to goods and services different from those protected in Mr Wilson's case." He did not comment on the right of Yahoo! to sell as a keyword a trade mark that enjoys protection across a wider range of goods and services and/or greater distinctiveness. Nor did he discuss whether or not Sainsbury's would have infringed the mark by sponsoring 'Mr Spicy' as a term. MR SPICY and Google s change of policy Although Google do not explicitly state that its change of adword policy in the UK and Ireland was prompted by the MR SPICY decision, it seems a remarkable co-incidence that the change of policy occurred within a few months of the decision. However, is MR SPICY the last word on the subject in the UK? It should be noted that there were a number of special circumstances surrounding the case. The judgment was a summary judgment. Mr Wilson represented himself in court and Mr Justice Morgan, was not a specialist intellectual property judge. Further, the decisions of various European courts against search engines do not appear to have been considered at the hearing. The issue of how Yahoo! uses the search terms typed in by users of its site in generating the results, and also in the results itself, also does not seem to have been considered by the court. It can be argued at the moment that UK case law is undoubtedly steering a US centric course. However, are there any cases in other European jurisdictions which might provide guidance on the subject? The position in Austria, the Benelux, France and Germany In 2007, the Austrian Supreme Court held in favour of Wein & Co, a famous chain of wine stores in Austria and against a competitor who had bought 815 adwords from Google. The Supreme Court held that the use of a trade mark in an adword was trade mark usage and that there was confusion in the marketplace. In a further case in 2007, the Amsterdam Court of Appeal found in the Portakabin case that it was legitimate for an adword purchaser to purchase adwords consisting of the registered trade marks of legitimate products carrying the said marks which it sold on its website on exhaustion grounds. By implication this suggests that the converse is not the case, and if an adword purchaser is not selling such branded goods they can not legitimately purchase a brand owners marks within adwords. In April 2005, the Court of Appeal in Versailles upheld a decision against Google France over AdWords. Online travel agents Luteciel and Viaticum operated websites La Bourse Des Vols (flight market) and La Bourse des Voyages (travel market) and Google had sold the terms 'bourse des voyages' and 'BDV' to Lutecial's competitors as triggers for sponsored links to the competitors' websites. Google suffered a similar defeat when it sold the trade marks of Louis Vuitton Malletier SA as sponsored keywords to a trader which triggered links to sites selling counterfeit Louis Vuitton products and Overture Inc. has lost in similar circumstances in France. In Germany no consistent line has been reached in the various decisions on the subject of Adwords and registered trade marks. Reference to the European Court of Justice On the 20th May 2008, the Louis Vuiton case interestingly was been referred to the European Court of Justice for guidance. This reference could be of crucial importance to not only the issue of the use of adwords and registered trade marks in France, but across the whole EU and importantly in the UK. The French courts supposedly applying the same trade mark doctrine as the UK courts, we all follow the European Trade Mark Directive afterall, seem to have come to radically different conclusions. The crucial issue at hand is whether the European Court of Justice will come to conclusions similar to the French courts, or those of the UK and US. Displeasure with Google Many UK firms have expressed their displeasure with Google s change in adword policy and implications it has for

5 increased advertising budgets. The two UK cases decided to date on this issue, on the face of it, seem to support Google s position. Nevertheless on closer inspection, it should be remembered that these two cases did not deal with the use of adword terms identical to a registered trade mark. Furthermore, the courts of France, and to a lesser extent Austria and the Benelux countries seem to have taken a radically different approach to the UK courts on this important subject. The question is what the European Court of Justice will decide on this matter following the recent referral of the Louis Vitton case and whether another UK trader or traders will take the plunge in another adword case in the UK. 'This article written by Lee Curtis originally appeared in the July/August 2008 edition of the ITMA Review - the Journal of the Institute of Trade Mark Attorneys.' Pinsent Masons LLP 2008 Should you have any questions please contact Lindsey Wrenn (lindsey.wrenn@pinsentmasons.com) or Lee Curtis (lee.curtis@pinsentmasons.com) your usual Pinsent Masons adviser who will be able to assist you further. This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered. LONDON BIRMINGHAM BRISTOL LEEDS MANCHESTER EDINBURGH GLASGOW DUBAI BEIJING SHANGHAI HONG KONG T Pinsent Masons LLP is a limited liability partnership registered in England & Wales (registered number: OC333653) and regulated by the solicitors Regulation Authority. The word partner, used in relation to the LLP, refers to a member of the LLP or an employee or consultant of the LLP or any affiliated firm who has equivalent standing and qualifications. A list of the members of the LLP, and of those non-members who are designated as partners, is displayed at the LLP s registered office: CityPoint, One Ropemaker Street, London EC2Y 9AH, United Kingdom. We use Pinsent Masons to refer to Pinsent Masons LLP and affiliated entities that practice under the name Pinsent Masons or a name that incorporates those words. Reference to Pinsent Masons is to Pinsent Masons LLP and/or one or more of those affiliated entities as the context requires. For important regulatory information please visit: