European Court of Justice clarifies rules on use of adwords

Last Thursday, the European Court of Justice (ECJ) ruled on the use of trademarks as keywords (adwords) following preliminary questions raised in the Interflora/Marks & Spencer case. A flower delivery service called Interflora started the lawsuit against British retailer Marks & Spencer (M&S) that also has a flower delivery service and used the trademark 'Interflora' as an adword. As a result, an advertisement of M&S appeared on the top of the paid-for search results in Google, whenever someone would type the word ‘Interflora’.

The ECJ rules companies on the internet may use keywords that are similar to the competition in search engines such as Google, provided such use does not have an adverse affect on the functions of the trademark, such as the ‘origin function’, the ‘investment function’ and the ‘advertising’ function. In case the consumer is confused about the origin of a brand, this is detrimental to the origin function. The investment function is tantamount to the fact that the trademark is also a strategic business tool and can be used to build up a reputation.  The investment function is harmed, in case the use of a trademark as an adword effects the reputation or jeopardizes the maintenance of such a reputation. The final function of a trademark is the advertising function, as a trademark can also be used for advertising purposes. According to the ECJ, however, the use of a trademark as an adword does not affect the advertising function.

Furthermore, the ECJ set up some guidelines regarding the use of a well - known trademark as an adword. The use and selection of well-known trademarks as keywords will in principle be seen as taking unfair advantage of a trademark as a result of free riding on a trademark. According to the ECJ, this will likely be the case when a competitor selects a keyword identical to the well-know trademark without due cause to advertise for goods that are imitations. However, if a company offers alternative services or products that are not imitations, this will fall under the scope of fair competition and the trademark owner may not prevent this on grounds of trademark law. However, the latter use is only legitimate, in case this does not dilute the trademark, is detrimental to the reputation of the trademark, or otherwise affects the functions of the trademark.  An example of dilution is when the use of trademark as an adword turns the trademark into a generic term (such as aspirin was once a trademark for a specific trademark and has now become a generic name for painkillers).

The next interesting question that might be raised in the future, could regard the use of adwords of legal download and streaming sites such as iTunes by illegal file sharing sites. Should these sites be seen as an alternative and fall within the limits of fair competition, or should they be considered as imitation and as illegal free riders of the well-known trademark iTunes? We will have to wait and see whether a national court will answer this question, as will be the case in Interflora/M & S. Eventually, the national court has to determine whether the use of the Interflora-adwords by M&S is legitimate and does not infringe the trademark rights of Interflora.

You can read the ruling here.

Reference: IE-forum.nl