Paid Search Advertising and Protected Trademarks
As we live in a technology-led society, the activities that can only take place in the physical world are becoming less and less. Likewise, consumer preferences follow a similar pattern. In a digitally connected world, businesses employ marketing strategies adjusted to these consumer trends. Digital is an integral part of such successful campaigns, as is a tool that is capable to engage with a larger pool of the population whilst generating positive attention and interest around a service or a product by deploying more efficient and economical business models.
One of these widely used digital marketing tools is Paid Search. Paid search marketing uses various sponsored advertising listings in a search engine. When the search engine user uses a word that is identical to the keywords chosen by the advertiser to trigger these sponsored listings, the results no longer appear organically in a random order. The sponsored content is favourably displayed at the top of the search engine’s user environment ranking, increasing the possibility of attracting more traffic to the advertised content.
In the free market economy, this marketing tool could lead to legal problems. ‘Aggressive’ advertising plans in paid search have seen advertisers utilising strategies of maximum value bidding for multiple keywords including words distinctive to competitors such as protected trademarks owned by third parties. Typically, the law confers protection to registered trademarks proprietors in the form of exclusivity of use and prohibition of use by third parties, unless one of the recognised areas of exceptions the law imposes is applicable. In the EU internal market, this protection is achieved by Article 10 of the 2015 Trade Marks Directive which approximates the laws of the Member States relating to trademarks.
Article 10 confers exclusive rights to the proprietor of a trademark upon its registration. The proprietor is entitled to prevent all third parties that did not previously acquire her consent from using, in the course of trade, in relation to goods or services, any sign where exists a likelihood of confusion on the part of the public. The likelihood of confusion includes the likelihood of association between the sign and the trade mark among others.
However, the legislative text does not explicitly refer to the circumstances arising from the use of registered trademarks in Paid Search, so a question around the issue was referred to the Court of Justice of the European Union (CJEU) for a preliminary ruling soon after the paid search marketing technique started taking over as a medium of advertising back in 2008.
A legal dispute has arisen in the French courts between Louis Vuitton Malletier SA, a well-known luxury leather goods and fashion manufacturer and retailer and Google France Sarl, the French subsidiary of the technology giant Google operating as a search engine company. Louis Vuitton’s registered trademarks were used as keywords in Google’s sponsored listings which advertised links to websites offering imitation goods. The French Court of Cassation stayed the proceedings in order for the CJEU to determine if the exclusive use rights conferred by the EU legislation entitle the registered trademark’s proprietor to prevent such use.
The CJEU clarified that the search engine operators do not infringe any trademark rights by allowing the purchase of keywords corresponding to registered trademarks. The proprietor could prohibit, though, the advertisers from such use if there were a likelihood of adverse effects on at least one function of the trademark. In particular, on the guarantee of origin and/or the quality of the goods/services, or the possibility to confuse the average internet user, by making it difficult to understand whether the goods/services originate from the proprietor or a third party.
That same year, the CJEU’s ruling in Portakabin Ltd and Portakabin BV v Primakabin BV C-558/08 followed a similar pattern, however, went even further to specify the boundaries of the trademark protection in this setting. Portakabin Ltd manufactures and supplies mobile building units and Primakabin sells and leases new and second-hand mobile units, including those manufactured by Portakabin. Primakabin reserved several keywords corresponding to Portakabin’s protected trademark to obtain listing in Google’s advertising referencing service. The purpose was to trigger a display of advertisements for goods which were identical to those in respect of which the trademark was registered.
The Court once again made clear that the proprietor cannot oppose to the use of the sign, if that use is not liable to cause detriment to any of the functions of the mark (indicating origin, guaranteeing quality, communication, investment or advertising). It was found that the paid search ad listing does not adversely affect the advertising function of the mark. The functions are adversely affected if the advertisement does not enable the ‘normally informed and reasonably attentive internet users’ or enables them only with difficulty, to ascertain whether the goods or services referred to by the advertisement originate from the proprietor or an undertaking that is economically linked to it, or on the contrary, originate from a third party. This was established as the standard test for the national courts to determine.
The Court in this instance went further to refer to defenses. After the finding of likelihood of confusion based on the test of the normally informed and reasonably attentive internet user from the national court, the infringing party can use the defense of honesty as proposed by the duty to act fairly in relation to the legitimate interests of the trademark proprietor. In reality the success of the defense is unlikely, as it could be extremely difficult for an advertiser to genuinely claim she that has been unaware of the ambiguity caused by its ad after a confusion finding by the court.
It is evident that the CJEU has clearly expressed a preference over protecting the consuming public rather than over-protecting the trademark proprietors or punishing the search engine providers. Admittedly, these providers are sufficiently tech-savvy to complete due diligence controls to avoid protected trademark listings but these could come with an opportunity cost in time, funds and resources that could potentially outweigh the income generated by their ad service offering unjustifiably. One would expect the trademark proprietor who was diligent, swift and compliant with all registration formalities as imposed by the 2015 Directive, she would be more protected by third parties who are somehow entering the market and betting their success on the distinctiveness or popularity of a registered trademark they do not own.
What is really protected is the fair competition in the Single Market ensuring fair and equal conditions for businesses whilst leaving space for innovation and the development of small businesses and providing alternative to consumers as long as the origin of the goods or services is clear. New market entrants are not barred and the paid search marketing tools are ‘fair competition enablers.’ This is apparent by the CJEU setting higher the standard of the test for finding infringement by shifting from the ‘average internet user’ to the ‘normally informed and reasonably attentive internet user’. Only in the case there is any ambiguity suggesting affiliation with the protected trademark, the trademark proprietor is enabled to prohibit such use, and when other functions of the mark are affected adversely, or when the trademark’s reputation is being tarnished.
Directive (EU) 2015/2436 of the European Parliament and of the Council of 16 December 2015 to approximate the laws of the Member States relating to trade marks  OJ L 336
Case C-236/08 Google France Sarl v Louis Vuitton Malletier SA 
Case C-558/08 Portakabin Ltd and Portakabin BV v Primakabin BV