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A company can stop other companies using its trademarks to trigger search engine adverts if those adverts do not allow a web user to tell which company is behind the ads, the European Court of Justice (ECJ) has said.

Europe's top court has confirmed a previous ruling and has said that the use of someone else's trade marks as 'keywords' in search advertising systems will violate their trade mark rights if the ads themselves create confusion about their origin.

The ad will breach the trademark owner's rights if it "does not enable average internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or from an undertaking economically linked to it," the ruling said.

Portable building maker Portakabin objected to ads placed by portable building lease and sales company Primakabin's use of the trademarked term 'Portakabin'. It paid Google so that when users of its search engine typed in 'Portakabin' or some mis-spellings of the word they were shown Primakabin ads beside the search results.

Portakabin said this was an illegal use of their trademark in the course of business. The Court said it was a use of the mark in trade, but that it was mostly allowed.

"Use by an advertiser of a sign, which is identical with another person’s trade mark, to suggest to internet users an alternative to the offer from the proprietor of that mark, is use ‘in relation to goods and services’ within the meaning of [the Trade Marks Directive]," said the ruling. "That being so, the trade mark proprietor cannot oppose that use of the sign, identical with its mark, if that use is not liable to cause detriment to any of the functions of that mark."

Amongst the 'functions' of the trademark are to guarantee the origin of the goods and to advertise the goods.

The ECJ said that in previous cases involving L'Oréal and Google France, the Court had said that the Google AdWords programme did not of itself use the trademarks as its operation did not interfere with these functions.

"As regards the function of advertising, the Court has held that use of a sign identical with another person’s trade mark in a referencing service such as ‘AdWords’ is not liable to have an adverse effect on the advertising function of the trade mark," it said. "That finding must also apply in the present case, since the dispute in the main proceedings concerns the selection of keywords and the display of ads within the context of the same ‘AdWords’ referencing service.

"As regards the function of indicating origin, the Court has held that the question whether that function is adversely affected when internet users are shown a third party’s ad, on the basis of a keyword identical with a mark, will depend in particular on the manner in which that ad is presented," said the Court.

The ECJ said that a company which confused viewers into thinking the ad was linked to the trademark holder would fall foul of trademark law. That confusion was extended to any company "economically linked to it".

"The function of indicating the origin of the mark will be adversely affected if the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically linked to it or, on the contrary, originate from a third party," it said.

Iain Connor, an intellectual property specialist at Pinsent Masons, the law firm behind OUT-LAW.COM, said companies should be wary of sponsoring third parties' trademarks.

"After the hype surrounding the Louis Vuitton v. Google case, which was widely reported as exonerating users of the AdWords system from liability, this case shows that, between advertisers, the true position is somewhat different.

"When choosing AdWords, unless the products and services of the trade mark owner and brand bidder can be clearly differentiated without the risk of internet users being misled then brand bidding will amount to trade mark infringement."

Copyright © 2010, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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