Reposted from DLA Piper’s Law à la Mode Edition 4 – Winter 2011

By:  Michael K. Barron, Sarah Phillips and Nadea Taylor (Boston and London)
“AdWords,” the paid, subscription-based Google referencing service which allows users to advertise their companies alongside Google search results, has recently been the subject of much legal scrutiny.  In late September, the European Court of Justice (ECJ) gave a preliminary ruling on questions referred to it by the English High Court in the case between Interflora and Marks & Spencer (“M&S”), regarding the purchase by M&S of the Google AdWord “Interflora” and other similar AdWords. 
In answering the questions referred to it, the ECJ repeated much of the recent jurisprudence in this area, in particular from the Google France case.  Previous cases established that purchasing a third parties’ trademark as an AdWord would only amount to trademark infringement if such use would have an adverse effect on one of the functions of the trademark.  
The ECJ gave the following guidance on how national courts should assess whether the use by a third party of a sign identical with a trademark in relation to identical goods or services has an adverse affect on one of the functions of the trademark:

By: Michael K. Barron, Sarah Phillips and Nadea Taylor (Boston and London)

“AdWords,” the paid, subscription-based Google referencing service which allows users to advertise their companies alongside Google search results, has recently been the subject of much legal scrutiny.  In late September, the European Court of Justice (ECJ) gave a preliminary ruling on questions referred to it by the English High Court in the case between Interflora and Marks & Spencer (“M&S”), regarding the purchase by M&S of the Google AdWord “Interflora” and other similar AdWords. 

In answering the questions referred to it, the ECJ repeated much of the recent jurisprudence in this area, in particular from the Google France case.  Previous cases established that purchasing a third parties’ trademark as an AdWord would only amount to trademark infringement if such use would have an adverse effect on one of the functions of the trademark.  

The ECJ gave the following guidance on how national courts should assess whether the use by a third party of a sign identical with a trademark in relation to identical goods or services has an adverse affect on one of the functions of the trademark:

The origin function is adversely affected if the advertisement does not permit reasonably well-informed and reasonably observant Internet users to recognize the source of the goods or services referred to by the advertisement as the owner of the trademark.  Alternatively, the adverse effect can be established if the Internet user encounters great difficulty in making such a determination, or the Internet user believes the advertisement originates from a third party.  
With regard to the advertising function, the mere fact that the use obliges the owner of that trademark to intensify its advertising in order to maintain or enhance its profile with consumers is not a sufficient basis, in every case, for concluding that the trademark’s advertising function is adversely affected.  
When the use substantially interferes with the owners’ use of its trademark to acquire or preserve a reputation capable of attracting customers and retaining their loyalty, the third party’s use must be regarded as adversely affecting the trademark’s investment function.  This is the most significant aspect of the ECJ decision, as any “substantial interference” with the “investment function” of a trademark constitutes infringement.
Interflora operates through a large commercial network, so while the ECJ recognised that consumers could be led to believe that M&S is part of this network, the final determination will be made by the English High Court.  It will be interesting to see how the High Court applies this guidance and, in particular, whether the guidance in relation to the investment function will open up new lines of argument for brand owners.  
Similarly, under U.S. law, purchasing a third party’s trademark, even a famous trademark, which is accorded heightened protection under the Lanham Act, as an AdWord does not necessarily constitute per se trademark infringement.  Some U.S. courts have, however, found that such use could be considered trademark infringement if an owner has a valid protectable trademark for commercial use and there is a likelihood that a third party’s use of the trademark will cause confusion in the marketplace.  
The Ninth Circuit recently determined in Network Automation, Inc. v. Advanced Systems Concepts, Inc. that there was an insufficient likelihood of confusion resulting from a third party’s use of the owner’s trademark as an AdWord to support a preliminary injunction against such use.  However, courts may be more likely to find trademark infringement by the purchase of AdWords for use by a third party to trigger a sponsored link through Google’s AdWords service, which implies an association with the trademark to advertise a third party’s competing products.  
For example, in Rosetta Stone Ltd. v. Google Inc., the Eastern District of Virginia court found no trademark infringement where Rosetta Stone sued Google for allowing use of its trademarks.  However, in Hearts on Fire Company, LLC v. Blue Nile, Inc., the District of Massachusetts court found, on a motion to dismiss, that the use of a competitor’s trademark as a keyword to trigger sponsored links could create a likelihood of confusion under the facts of the case.
As the international debate for trademark ownership in cyberspace continues, trademark owners should be vigilant and continue to be cognizant and knowledgeable of new media and advertising platforms, so that they can adequately protect the value of their trademarks and brands.

 

  • The origin function is adversely affected if the advertisement does not permit reasonably well-informed and reasonably observant Internet users to recognize the source of the goods or services referred to by the advertisement as the owner of the trademark. Alternatively, the adverse effect can be established if the Internet user encounters great difficulty in making such a determination, or the Internet user believes the advertisement originates from a third party.  
  • With regard to the advertising function, the mere fact that the use obliges the owner of that trademark to intensify its advertising in order to maintain or enhance its profile with consumers is not a sufficient basis, in every case, for concluding that the trademark’s advertising function is adversely affected.  
  • When the use substantially interferes with the owners’ use of its trademark to acquire or preserve a reputation capable of attracting customers and retaining their loyalty, the third party’s use must be regarded as adversely affecting the trademark’s investment function. This is the most significant aspect of the ECJ decision, as any “substantial interference” with the “investment function” of a trademark constitutes infringement.

Interflora operates through a large commercial network, so while the ECJ recognised that consumers could be led to believe that M&S is part of this network, the final determination will be made by the English High Court.  It will be interesting to see how the High Court applies this guidance and, in particular, whether the guidance in relation to the investment function will open up new lines of argument for brand owners.  

Similarly, under U.S. law, purchasing a third party’s trademark, even a famous trademark, which is accorded heightened protection under the Lanham Act, as an AdWord does not necessarily constitute per se trademark infringement.  Some U.S. courts have, however, found that such use could be considered trademark infringement if an owner has a valid protectable trademark for commercial use and there is a likelihood that a third party’s use of the trademark will cause confusion in the marketplace.  

The Ninth Circuit recently determined in Network Automation, Inc. v. Advanced Systems Concepts, Inc. that there was an insufficient likelihood of confusion resulting from a third party’s use of the owner’s trademark as an AdWord to support a preliminary injunction against such use.  However, courts may be more likely to find trademark infringement by the purchase of AdWords for use by a third party to trigger a sponsored link through Google’s AdWords service, which implies an association with the trademark to advertise a third party’s competing products.  

For example, in Rosetta Stone Ltd. v. Google Inc., the Eastern District of Virginia court found no trademark infringement where Rosetta Stone sued Google for allowing use of its trademarks.  However, in Hearts on Fire Company, LLC v. Blue Nile, Inc., the District of Massachusetts court found, on a motion to dismiss, that the use of a competitor’s trademark as a keyword to trigger sponsored links could create a likelihood of confusion under the facts of the case.

As the international debate for trademark ownership in cyberspace continues, trademark owners should be vigilant and continue to be cognizant and knowledgeable of new media and advertising platforms, so that they can adequately protect the value of their trademarks and brands.