Google Wins Legal Battle Over AdWords Trademark Issue In Europe

European luxury goods maker LVMH (Luis Vuitton) sued Google in France over its AdWords policy allowing third parties, including LVMH competitors, to bid on its trademarked terms as keywords. The case originally arose when marketers bid on “Louis Vuitton” and turned out to be selling counterfeit Louis Vuitton items.

The company won in France’s highest court, even as Google was liberalizing its AdWords policy in Europe to conform to the more permissive US policy that routinely allows such third party trademark-keyword bidding. (Trademarks cannot appear in competitors’ ad copy however.) Google appealed to the pan-EU European Court of Justice.

Update: see postscript 2 below for qualifiers.

An affirmation of the French court’s ruling would have meant potentially big changes for Google (and SEM more generally) and the reinstatement of separate AdWords policies and systems for the US and Europe. Before the court were the following questions:

• Whether bidding by third parties and competitors on trademarked keywords violated European trademark law
• Whether Google AdWords were “covered by the European Union’s e-commerce law,” which protects ISPs from trademark or copyright violations unless or until those violations are brought to the attention of the service provider

According to a Google Blog post just published Google has prevailed on both questions:

Today, the Court confirmed that Google has not infringed trade mark law by allowing advertisers to bid for keywords corresponding to their competitors’ trade marks. It also confirmed that European law that protects internet hosting services applies to Google’s AdWords advertising system. This is important because it is a fundamental principle behind the free flow of information over the internet.

Google can thus breathe a sigh of relief and scratch a major case off the list in its favor. Still, many legal headaches for Google remain in both the US and Europe. Law professor Eric Goldman lays out many of those in a blog post from yesterday.

Meanwhile Foundem, one of the European anti-trust complainants against Google, says it is “confident” that the European Commision will launch a formal investigation in the near future. Right now the EC is proceeding with a more informal inquiry into complaints lodged by Foundem, French site ejustice.fr and Microsoft-owned shopping engine Ciao.

Postscript: TechCrunch originally incorrectly reported the opposite outcome:

Keyword advertising using the trademark of others without their permission is illegal and services providers such as Google are also liable for any infringement.

That’s the ruling given today by the The Grand Chamber of the European Court of Justice (ECJ), in a move that will likely shake up the search-based online industry.

The fact that Google et al can no longer claim safe harbour in Europe is particularly significant as it now firmly places the burden of enforcement on service providers.

The case being settled, which now sets the precedent in Europe, is LVMH, the luxury goods company behind such brands as Dom Perignon, VS Google. The dispute had been referred to the European Court of Justice by The French Supreme Court (Cour de cassation) who asked the European court to decide on the rules governing trademark law online as well as the liability of providers of a paid referencing service – in this case Google.

Commenting on the ruling, LVMH is obviously delighted.

The court itself, in its press release, said the following: “Google has not infringed trade mark law by allowing advertisers to purchase keywords corresponding to their competitors’ trade marks.” Individual advertisers, however, may be held liable for infringement the court ruled.

There were also questions remanded to the lower French court for determination.

Postscript 2: There’s a bit more nuance here that it originally appeared. Google reported that it had won in a relatively unqualified way. I searched unsuccessfully for the court’s actual opinion and ruling but was unable to find it.

Parties using AdWords may still sue each other if there’s an alleged trademark violation. And once Google is notified of a violation, apparently, duties kick in — much like copyright claims for unauthorized use of video in the US on YouTube for example.  In such cases Google removes the video at the copyright owners behest and request. If it fails to comply with these requests Google could be liable.

In addition Google does have some alternative vulnerability to lawsuits if its practices are found to have “encouraged” wrongful use of trademarks. The New York Times explains:

Google could also be liable if its business practices were found to encourage trademark violations, the court ruled. For example, Google critics have complained about one of the company’s services, which suggests potential keywords to advertisers, including terms like “imitation handbags,” which brand owners say encourage the sale of counterfeit goods.

There’s a fair amount of ambiguity here at a practical level that could result in new lawsuits between AdWords advertisers, who in turn might name Google as a defendant under one of the theories above. Presumably Google would use this court’s decision as a shield in such cases assuming it could prove it complied with takedown notices and so on. However, mostly, Google has dodged a bullet it appears.

Postscript 3: Law professor Eric Goldman does a more thorough legal analysis of the decision and wonders if it’s something of a “hollow victory” for Google.