Last updated: March 23, 2010 12:10 pm

Google wins key AdWords victory

Google on Tuesday won an important legal victory in its battle with brand-owners over its Adwords service when Europe’s top court found that its activity did not amount to trademark infringement.

The European Court of Justice ruling will be a relief to the US-based company, which obtains a large proportion of its income from the service, where advertisers pay Google for certain keywords so that their advertisements are displayed to internet users once keywords are fed into Google’s search engine.

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A group of French brand owners – including LVMH’s Louis Vuitton Malletier – challenged the inclusion of keywords corresponding to certain trademarks in the Adwords system. They argued that searching on Google under some of the names brought up ads for sites selling counterfeit versions of the trademarked products.

In its ruling clearing the search company, the court did say, however, that advertisers themselves could not, by using keywords that corresponded to trademarks, arrange for the search company to display advertisements that confused internet users. Users should be able to establish easily from whom the goods or services in the ad originated, it said.

Lawyers said the decision was, in large part, a victory for Google, which would benefit from the legal certainty. They suggested that advertisers might now add a clarifying sentence or disclaimer if they were seeking to capitalise on keywords corresponding to trademarks.

“This does give more legal certainty,” said Nicola Dagg, at the Allen & Overy law firm. “I suspect Google will come up with a formula for advertisers”.

“Google have dodged the bullet on this one. AdWords is a key money earner for them so this is a big legal victory,” said Michael Gardner, at Wedlake Bell. But he added: “Advertisers who do use other people’s brand names are part of their search engine strategy are still potentially in the firing line”.

Luxury goods manufacturers, also welcomed today’s ruling, pointing out part of the advocate-general’s opinion had now been refined. Guy Salter, speaking for a group of European luxury goods associations, said it would “ensure that the principles of EU law are applied equally to both offline and online in Europe”.

LVMH welcomed the part of the ruling prohibiting an online advertiser from using a registered trademark as a keyword without the consent of the trademark owner, saying it would avoid confusion among consumers regarding the sourcing of products.

“This decision represents a critical step towards the clarification of the rules governing online advertising” said Pierre Godé, LVMH senior executive vice-president. ”As the world’s leading luxury group, with more brands actively engaged with the internet than any other luxury company, we are committed to working with all parties, including Google, to eradicate illicit online practices. ”

The AdWords case was brought before the EU court because, on top of the French case, similar legal challenges were also brought in Italy, Germany and the UK – although some cases were targeted at the advertisers rather than Google. With lower courts coming to different conclusions on the trademark issue, France judges decided to refer the matter to the EU’s top court in Luxembourg for guidance.

The case was heard by the “grand chamber” – a particularly large panel involving more than a dozen judges used for cases that are thought to have wide significance or be legally challenging. Aside from the parties, both the French government and the European Commission made submissions.

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