THE LEGAL STATUS OF TRADEMARK LAW IN THE EUROPEAN UNION

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GOOGLE ADWORDS

“The act of typing a keyword into an internet search engine has become part of our culture, its results immediately familiar. The actual inner workings of how those results are provided are, it is fair to say, mostly unknown to the general public. It is simply assumed that if you ask, it shall be given to you; seek, and you shall find.5” This statement delivered by the Advocate General Poiares Maduro captures the essence of an Internet search and simultaneously raises the thought of how the functionality of Internet searches is linked to Google AdWords.

HOW DO GOOGLE ADWORDS WORK?

In simple terms, Google AdWords aim to manipulate search results to artificially prioritize an advertiser’s website over other possible search results. In doing so, an advertiser purchases the keywords with which he intends his webpages and AdWords ads to be associated6. Here, several ad formats can be chosen; thus, the most common form remains to be a simple text ad consisting of a hyperlink headline to the advertiser’ s website, two short lines of descriptive text and the URL of the advertiser’s website7. At the same time, this ad is internally linked to the keywords that have been purchased8. Therefore, if the Internet users conduct any kind of search, the ad will automatically be displayed alongside other search results9. AdWords account holders can adjust their ads to certain sections or webpages in the scope of Google’s “content network” and can target customers using both computers and mobile devices. Apart from that, the precision with which the search results match their keywords can manipulatively be set by the account holders10. They can also stipulate that particular ads are blocked from appearing in response to selected keywords.
The setting-up of an AdWords account is as simple as the online registration with accounting information. While the account holder has to pay a small, non-refundable fee upon the activation and creation of an account, the creation of ads and selection of keywords is free of charge. After having set an ad to run, the account holder is billed by Google according to one of the following two options: cost-per-thousand-impressions, where fees are charged every time an Internet user views the ad or cost-per-click where charges are triggered every time an Internet user clicks on the ad. The account holder can then decide on a maximum billing rate, which represents one tool Google applies when determining the ad’s “ranking”. Where in the search results page the ad will appear is thus determined by an ad’s ranking. In other words, an account holder who “bids” on a keyword sees himself competing for it with all other account holders who aim to take use of that keyword. The financial power of an account holder is, thus, not a too inconsiderable factor when the exposure of his ad is determined11. By comparison, non-sponsored links are usually displayed on the search results site in accordance to their “relevancy” to the search query. Here, Google’s search algorithm typically determines the relevancy by using non-commercial criteria such as the number of other websites that link to a website to mimic a consumer’s natural search behavior12. What appears to be valuable to advertisers of AdWords derives from the fact that Google’s keyword-linked ads are allowed to circumvent Google’s common site ranking system for non-sponsored links. While ads are still subject to “rankings” among themselves, they gain priority over non-sponsored links on Google’s search results pages. Furthermore, as the ads are displayed besides search results that have been subject to the usual page ranking algorithms and often do not expressly indicate that they have been sponsored, Google’s Internet users may be led into error to assume that the ads represent the most relevant search results. Thus, the ads trade on Google’s reputation for providing the most appropriate search results to attract users to click on them, while making a potentially worldwide advertising audience available through modest financial investment.

WHERE DO GOOGLE ADWORDS AND TRADEMARK LAW INTERFACE?

The controversy evolving around Google AdWords stems from its practice of allowing an account holder to pick a trademarked keyword even though he is not holding the rights to the trademarked term concerned. At the time of selection, the trademark status of a keyword is not checked by Google. Instead claims of infringement are only investigated after having received a complaint13. Moreover, Google currently applies different policies to the choice of a trademark as keyword, all depending on in which region trademark is registered. As the United States are concerned, Google only investigates alleged uses of trademarks in the displayed text of an ad; the use of keywords is not subject to investigation14. Considered that an ad is displayed to U.S. Internet users, Google may force the ad’s owner to remove the infringing term but the use of the mark as Google AdWords keyword will not be disabled15.
The same policy is applied by Google to the United Kingdom and Ireland. However, for the remaining countries of the EU, Google investigates suspected used of trademarks in keywords, ad texts, or in both, keywords and ad texts. Google further demands to remove trademarked terms from the keyword list of the breaching AdWords account holder. Regardless of the country, Google’s trademark infringement inquiries are restricted to keywords associated with the ad or AdWords ad in general and do not have effect on the internal use of trademarked terms by Google’s search processes. When a trademark holder is no longer willed to display his trademark in search results, Google instead asks the trademark holder to apply to the webpages owners appearing in the search results in order to request removal of the trademark from those sites. Following Google’s perception, as an intermediary service provider, it should not be requested to act as a first-instance enforcer of trademarks16. In accordance, advertisers, but not Google should be primarily responsible for ensuring that their use of AdWords is fully compliant with trademark rights. Google’s current policy prompts trademark holders with alleged trademark infringements to satisfy their claims directly with advertisers – constituting Google’s own “limited investigation of reasonable complaints about the use of trademarks in ads” as a mere “courtesy to trademark owners”17.
Apart from its stated position, Google has been subject to lawsuits in the U.S. as well as in the EU where it has been alleged that Google holds the prime responsibility for trademark infringement policies in AdWords and that this responsibility has been deliberately disregarded by Google18. Such lawsuits have to the present been resisted by Google19. It cannot be assumed that Google’s policies or strategies will be changed in the very near future as such a policy alteration would put Google in the unfavorable situation of functioning as a first-instance enforcer of trademark rights, significantly increasing Google’s expenses for monitoring on keywords.

THE LEGAL STATUS OF TRADEMARK LAW IN THE EUROPEAN UNION

According to EU legislation, trademarks are allowed to be registered both at the member state and at EU level20. As EU level is concerned, trademark law is only partly harmonized and harmonization is explicitly restricted to “those national provisions of law with the most direct effect on the functioning of the internal market21”. Although harmonization does completely cover enforcement rights against infringement, the application of EU law (“Community law”) is still mainly a matter of the national courts of the EU member states22. In view of the fact that Community law has been applied very differently by the national courts, rise is given to conflicts in the legal interpretation amongst the member states23.

TRADEMARK LAW OF THE COMMUNITY

Trademark infringement under Community law can be referred to two different legislative bases. The first basis is established under Trademark Directive II, Article 5(1), stipulating that:
The Trademark holder shall be authorized to prevent all third parties not having his consent from using the course of trade.
(a) any sign which is identical with the trademark in relation to services or goods which are identical with those for which the trademark is registered24.
The second basis of trademark infringement is found under Trademark Directive II, Article 5(2), constituting that:
Any Member State may also provide that the trademark holder shall be authorized to prevent all third parties from not having his consent from using in the course of trade any sign which is identical with, or similar to, the trademark with respect to services or goods which are not similar to the those for which the trademark is registered, where the latter has a reputation in the Member State and where use of that sign without due cause takes unfair advantage of, or is detrimental to, the distinctive character or the reputation of trademark25.
Article 5(2) thus grants additional protection for certain trademark constructs by removing the requirement to prove “likelihood of confusion” with regard to the trademarks in concern26. Both Article 5(1)(a) and Article 5(2) require that the trademark is “used”, which the CJEU has determined as indicating that an allegedly infringing sign is representing a trademark27. In other words, the mere use of a trademark is not sufficient for infringement; instead the sign must act as effective shorthand for the trademark amongst the consumers28. In addition, the alleged “use” must fulfill four “cumulative” conditions:
(1) the use is not authorized
(2) the use is in the course of trade
(3) the use is “in respect of services or goods which are identical with, or similar to, those for which the mark is registered;”
(4) the use “affects or is liable to affect the essential function of the trade mark, which is to guarantee to consumers the origin of the goods or services, by reason of a likelihood of confusion on the part of the public.”29
Taking a closer look at the four above conditions, the first requirement “not authorized use” is usually a non-controversial definition. The second requirement, “in the course of trade” on the other hand, is fulfilled in cases where the allegedly infringing sign is applied to a “commercial activity aimed at economic advantage and not to a private matter”30. The third criterion, “in relation to services or goods” is fulfilled provided that the sign is used in a way that it establishes a link “between the services provided or the goods merchandized by the alleged infringer31”. The fourth and final requirement is satisfied when the sign is used in such a manner that the risk for consumers of being confused to the service’s or good’s origin is posed32. Additionally, since trademarks falling under the scope of Article 5(2) are not required to show “likelihood of confusion,” claimants alleging infringement under that provision may satisfy the fourth criterion simply by indicating that the infringer has taken “unfair advantage” of the trademark’s reputation33. The failure of one condition is satisfactory to prevent a finding of infringement and removes the need for an analysis under the remaining conditions34.

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TRADEMARK JURISPRUDENCE OF THE COMMUNITY

With regard to the EU, judicial power is shared between the Court of Justice of the European Union (“CJEU”) and the national courts35. As far as national courts are concerned, they act as courts of first instance in issues in the context of Community law, although they may transfer cases to the CJEU when they are unsure about the interpretation of Community law or when the validity of Community legislation is called into question36. Provided that the CJEU accepts the transfer, it only is binding on the national court seeking for transfer as well as on the other national courts within the EU37.
Regarding the decentralized organization of trademark enforcement in the EU, it appears plausible that national courts would bring about inconsistent interpretations of Community law, particularly when facing a technical progress such as Google AdWords. While French courts have repeatedly held that Google AdWords’ use of trademarked terms as keywords represents a violation of EU trademark law38, British courts have held that AdWords’ uses are not infringing39. National courts in Germany, the Netherlands and Austria were also faced with difficulties of formulating a consistent approach to keyword advertisement and have finally all raised references to the CJEU for primarily rulings on how to apply the Trademark Directive II to Google AdWords40. On March 23, 2010, the CJEU passed its ruling on the subject41. While the CJEU held that AdWords services are capable of infringing trademark law, it was adamantly opposed to hold Google directly liable for infringements in terms of keyword use42. Instead, the individual AdWords account holder is to be held liable for any trademark infringement43. Google’s indirect liability for trademark infringements of its AdWords account holders is further restricted by other EU laws. In assessing the AdWords program, the CJEU first examined how trademarked terms have been used under Trademark Directive II, separated into three specific “uses”: how keywords are stored on Google servers, how AdWords ads based on associated keywords are displayed and how keywords are selected44.
The CJEU further examined whether the above uses met the four cumulative conditions for trademark infringement. After having found that the first requirement for “unauthorized use” was fulfilled, the court analyzed the “use in the course of trade” requirement and held that all three AdWords “uses” fell within that scope for the reason that they had a clear connection to an AdWords user’s offering of services and goods for online sale45. Nonetheless, the CJEU maintained that these “uses” were not made by Google, even though Google provided the means by which they are implemented. Instead the court found, that unauthorized uses were implemented by third-party users: AdWords account holders. The court further argued that Google itself made no “use” of trademarked terms that fall under the scope of Article 5 of Trademark Directive II46. As a consequence, Google AdWords cannot be held to represent a trademark infringement under Trademark Directive II.
However, the “uses” of enabled by AdWords may still facilitate actions for trademark infringement within the scope of Article 5 (1)47. The CJEU noticed that individual advertisers using trademarked terms in their AdWords campaigns are making use of those terms “in relation to services or goods”. In doing so, the third requirement under Trademark Directive II is satisfied48. An individual advertiser accordingly commits a trademark infringement if his AdWords use of trademarked terms occasions an “adverse effect” to the function of trademarked terms with regard to the fourth requirement. The CJEU recognized the “relevant functions to be examined as the function of signifying origin and the function of advertising”49. The Court then stated more precisely that AdWords ad is adversely affecting the indication-of-origin-function if is misleading or that vague that “a normally informed and reasonably attentive”50 Internet user is not able to ascertain whether it has been displayed by the trademark holder or by a third party. But on the other hand, the CJEU explicitly stated that AdWords do not represent harm to the advertising function, although they in fact raise the costs of purchasing a trademarked term as a keyword for trademark holders without the guarantee that the respective ad will appear in the most desirable position51.
In this context, it might be relevant to compare the CJEU ruling with the CJEU Advocate General Poiares Maduro’s point of view with regard to the case. Although an Advocate General Opinion is not of binding character for the CJEU, it mostly has great influence on the CJEU’s final judgment, and if the court’s decision is consistent with the Advocate General’s recommendations, can serve as explanation for the reasoning behind a CJEU final ruling52. Following Maduro’s point of view, AdWord’s use of trademarked terms is even less harmful to the advertising function that comparative advertising, considering that comparative advertising intentionally takes advantage of a trademark’s success53. On the other hand, Maduro understood AdWord’s uses as “restricted to providing information” about competitors’ uses of trademarked terms, regarding that they only disclose to customers where the terms are used on webpages as well as in ads without necessarily supporting the uses54.
The CJEU final decision does not expressly agree on Maduro’s point of view; however, its ruling allows national courts to adopt an analysis similar to that of the General Advocate. While it has not been observed how the Google France judgment will be applied by national courts, the CJEU appears to concentrate mainly on AdWords ads for counterfeits.
As the final step, the CJEU dealt with the application of EU “information society service” platforms for “internet referencing service” providers55. As Google is not making use of trademarked terms, AdWords are not subject to platforms for the storage of keywords and displaying of ads triggered by keywords. However, Google may fall under the platform with respect to hosting services, provided that Google’s actions concerning AdWords are “merely technical, passive or automatic, hinting at a lack of control or knowledge of the data which it stores56”. In consequence, even if trademark infringements are committed by individual AdWords users, Google may not even indirectly be held liable for those infringements57.
In turning away from contradistinctive national court decisions, Google France fundamentally altered the landscape of EU trademark infringement legislation. However, its general ruling stands in conflict with judgments passed by U.S. courts. Taking into account, that the importance of borders is becoming more and more meaningless in e-commerce, Google France may appear as controversial as the fragmented national court decisions that preceded it.

Table of contents :

1 INTRODUCTION
1.1. Problem Formulation
1.2. Purpose
1.3. Delimitations
1.4. Method and Material
1.5. Disposition
2 GOOGLE ADWORDS
2.1. Where Do Google AdWorks Work?
2.2. Where Do Google AdWords and Trademark Law Interface?
3 THE LEGAL STATUS OF TRADEMARK LAW IN THE EUROPEAN UNION
3.1. Trademark Law of the Community
3.2. Trademark Jurisprudence of the Community
3.3. EU Trademark Policy Objectives
4 THE LEGAL STATUS OF TRADEMARK LAW IN THE UNITED STATES
4.1. U.S. Federal Trademark Jurisprudence
4.2. U.S. Trademark Policy Objectives
5 A COOPERATED EU – U.S. PLATFORM FOR KEYWORD ADVERTISING
5.1. Danger of Balkanization?
5.2. Google AdWords as Generator for Trade Liberalization
5.2.2. How Do AdWords Liberalize International Trade?
5.2.3. Allowing Trademark Holders to Dictate Trademark Policies Detrimentally
Affects Trade Liberalization
6 CONCLUDING REMARKS
BIBLIOGRAPHY
 Legislation
 Articles and Publications
 Websites
 Table of Cases

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