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Online advertising, AdWords, the e-commerce Directive and Web 2.0

There has been a considerable number of cases within Europe in which the owners of trademarks have complained that sale of Google AdWords infringes their intellectual property rights. When the Google search engine is used to carry out a search, it displays ‘natural’ or ‘organic’ links based on relevance to the search term used, as well as ‘sponsored links’ which are triggered by searching for an AdWord. Clicking on a sponsored link triggers a charge to the advertiser.

Certain aspects of the issue have been considered most recently in England and Wales by the High Court in Interflora Inc v. Marks & Spencer Plc [2009] EWHC 1094 (Ch) which concerned the purchase by Marks & Spencer of Google AdWords including not only the term ‘Interflora’, but also a number of combinations of ‘Interflora’ with a descriptive term (such as ‘flowers’, ‘delivery’ or ‘online’) some misspellings and variants (including ‘Inter flora’ and ‘Intaflora’), and Interflora’s domain names (www.interflora.co.uk and www.interflora.com). Therefore, when the search term ‘Interflora’ (or any of the variants purchased by M&S) is entered into Google, ‘M&S Flowers Online’ appeared as a sponsored link:

The European Court of Justice has since issued the preliminary opinion of Advocate General Poiares Maduro in the joined cases of Google France v. Louis Vuitton Malletier, Google France v. Vaiticum Luteciel and Google France v. CNRRH (joined cases C-236/08, C-237/08 and C-238/08)(28 September 2009)(the ‘Google France cases’). Advocate General Maduro concluded that Google did not infringe trade mark rights when selling AdWords or when sponsored links appeared alongside organic links following a Google search. He also concluded that Google cannot be regarded as providing an information society service within the meaning of Article 14 of the Directive on electronic commerce (Directive 2000/21/EC) since if AdWords displays results based on the commercial relationship with advertisers then it is not a neutral information vehicle which would fall within the definition of hosting under Article 14. The distinction between sponsored links and organic links was that, for natural search results, Google did not have any pecuniary interest in bringing any specific site to the searcher’s attention.

However, the Attorney-General’s opinion that Google’s selling of AdWords to potential competitors did not infringe trade mark rights is not fatal to Interflora’s case since it has a number of important distinctions. First, Google has a different policy in the UK from that which it operates in the rest of Europe. It used to be the case that a trade mark owner could notify Google that it had registered a particular word as a trade mark. Google would then block that word from being purchased as an AdWord without the permission of its owner. However, since 5 May 2008, Google’s policy for the United Kingdom and Ireland, but not for other EC member states, ceased blocking keywords registered as trade marks. The effect of this is that, within the UK and Ireland, parties may bid for AdWords registered as trade marks unfettered, including for use in relation to goods or services for which such trade marks are registered. Interflora expressly questions whether a search engine provider should not allow trade mark owners to block competitors bidding on their brands. In the High Court, Arnold J commented that:

A cynic might suggest that the explanation for this [Google’s policy] was a calculation…that the courts in the United Kingdom and Ireland interpret trade mark law more restrictively (that is to say, less in favour of trade mark owners) than courts in other member states.

Second, unlike the Google France cases, the Interflora action is brought against M&S, its competitor, and not the search engine. The Google France opinion does not deal with competitor bidding, but instead focuses on customer confusion which is not at issue in Interflora. Finally, the Advocate General’s opinion is precisely that: it is not guaranteed that the ECJ will follow it and it has no binding legal authority on the UK courts. It is for the UK courts to decide whether Interflora’s rights have been infringed.

The immunities in Articles 12 to 15 of the e-commerce Directive concern the exemptions from liability of intermediary service providers in relation to caching, hosting and acting as a ‘mere conduit’ of information. Yet, the provisions of the Directive were drafted with the content delivery model of the late 1990s in mind: the creation of software and content which was hosted, updated and distributed. This does not sit easily with the so-called Web 2.0 intermediaries who exploit both client- and server-side software with content syndication to deliver information storage, creation, and dissemination capabilities to users. Web 2.0 technologies are shifting the Internet from a traditional goods and services marketplace to a user-centred and user-driven environment. The new class of intermediary includes sites such as eBay, Facebook, Wikipedia and YouTube as well as search engines. This is mirrored by a shift from an online advertising model whereby companies deliver content based on a CPI (cost per impression) model or targeted online advertising on sites enjoying high traffic to companies who provide targeted online advertising based upon specific user data, such as browsing history or contextual relevance between a particular brand and the recipient website.

There is, then, a current absence of legal clarity in cases concerning the display of targeted advertising which might, on the face of it, infringe the rights of competitive brand owners. As a result of this legal uncertainty, the serving of advertisements which are based on behavioural marketing and which deliberately aim to exclude (or certainly to marginalise) the owners of competitive brands would seem set to continue, at least until the ECJ considers the queue of related cases coming before it (Portakabin Limited and Portakabin BV v. Primakabin BV; Die BergSpechte Outdoor Reisen und Alpinschule Edi Koblmuller GmbH v. Gunter Guni and trekking.at Reisen ; Bananabay) and manages to provide a level of certainty and harmonisation across the EU which is currently lacking. It may also finally review the system of immunities within the e-Commerce Directive in the light of the technological advances and consumer behaviour patterns of the past ten years.

Dr Stefan Fafinski, IT expert of Invenio Research Limited (invenio-research.co.uk) and Simon Halberstam, Solicitor (weblaw.co.uk). Contact Simon Halberstam