Google v. Louis Vuitton - A Case Study
EU Trademark Law, Online Advertisement, Effects-Test and Functions of a Trademark
This essay addresses one of the most famous disputes over the use of trademarks as keywords in online search engines: Google v Louis Vuitton. It arose over a crucial question for the future of trademark protection and online advertising. A description of the parties and the background is followed by an examination of the preliminary ruling issued by the European Court of Justice (ECJ) in March 2010 and the legal and economic consequences deriving from it. Several experts have commented on this controversial decision and the paper will provide an overview of their opinions. The last part will consist of concluding remarks by the author.
2. The parties and the issue at stake
The conflict arose between the French group Louis Vuitton Malletier SA (LV) as claimant and Google Inc, based in Palo Alto, California, US and its French subsidiary Google France SARL (Google) as defendant. LV is a leading producer of luxury bags and other high quality leather goods. It owns the community trademark “Vuitton“ and the French trademarks “Louis Vuitton” and “LV”, all of which enjoy excellent reputation. Google operates an online search engine. Its paid reference service “AdWords” allows the display of ads in a special section called “sponsored links” whenever a certain keyword is typed in by a user. Anyone may reserve such a keyword and one keyword may be reserved by several clients. The listing depends among other factors on the fee-per- click to be paid to Google. In 2003, LV filed a claim against Google, alleging the infringement of its trademarks. Google allowed other market players not only to reserve LV’s trademarks as keywords, but also these keywords in combination with expressions such as “imitation” or “copy”. Thus, for example, upon a query for “Vuitton imitation” or “LV copy”, several links to sites offering illegal imitations of LV’s products appeared. Google was found guilty by two French courts until, after a second appeal, the Cour De Cassation in Paris finally asked the ECJ for a preliminary ruling on the interpretation of the underlying EU directives.
3. The ECJ’s ruling - legal and economic impacts
According to the EU directives regarding trademarks1, a trademark proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade, signs which are identical with or similar to the trademark in relation to goods and services which are identical with or similar to those for which the trademark is registered. In its ruling, the ECJ focused on the word “using” and found that “an internet referencing service provider which stores, as a keyword, a sign identical with a trade mark and organises the display of advertisements on the basis of that keyword does not use that sign.” As a consequence, Google may make available trademarks with a reputation for selection in its AdWords service without facing liability under European trademark law.
Regarding the liability of keyword-advertisers, the ECJ stated that a trademark owner might not oppose the use of a sign identical with the mark unless such a use causes detriment to any of the functions of the mark. This includes not only the function of indicating origin, but also quality, communication, investment and advertising. Whether these functions are adversely affected through keyword advertising should be determined on a case-by-case basis by looking at the misleading nature and the likelihood of confusion triggered by the ad.5 For instance, the function of indicating origin is detrimentally affected if an ad suggests that there is an economic link between the advertiser and the proprietor of the trademark.6
The ruling was widely considered a victory for Google and a boost for its business model.7 Although it may not be precluded that the laws of some EU Members allow for an intermediary liability of the service provider, Google is basically free to accept requests for keyword- references by its clients. As a result of the ruling, advertisers are required to self-assess the likelihood of confusion prior to placing the ad. This is a difficult task, given the diverging level of awareness among internet-users and inconsistent legislation regarding the “average-internet-user” standard in EU Member States. Trademark owners must tolerate that their marks may be used as keywords and may feel compelled to spend more money and time on observing the online use of their marks. The fact that an adverse effect allows them to prohibit the use by third parties creates uncertainty over what constitutes such an effect. This is likely to lead to increasing litigation over keyword advertising and additional legal cost, which is especially burdensome for owners with limited financial resources.
4. Views and critique expressed by commentators The ECJ omitted to interpret the notions of “link” and “behavior that seeks to mislead” and this has been under fire by many commentators. Moreover, it was criticized that the court did not indicate which party must prove that ads are or are not misleading. While some consider the establishment of an adverse-effect test regarding the functions of a trademark as a serious alteration of trademark law that restricts the rights of trademark owners, others praise the ECJ’s interpretation because it shifts trademark protection more into the area of competition and grants protection only if necessary. It can be expected that lawyers will be the only real beneficiaries of the ruling.13
The author agrees with the ECJ that Google should not be responsible for trademark infringements, as this would essentially put Google in charge of trademark protection. However, additional guidelines for search engine providers regarding the visibility of paid references and information on the origin of the ad would be favourable. Moreover, the question whether a search engine should be obliged to prevent the use of combinations of trademarks and words like “copy” should receive further deliberation. The restriction of trademark rights and the effects-test should be seen positively as there is no need to overly protect trademarks to the detriment of lively competition. By requiring search engine operators to provide fast and transparent take-down procedures for evidently infringing ads, the additional burden for advertisers (self-assessment) and brand-owners (observation) could be mitigated. Nevertheless, the question raised in this dispute is likely to constitute only the beginning of a litigation-series regarding the interpretation of adverse effects on a trademark’s functions and the likelihood of confusion. Further jurisprudence must bring clarity and enable a faster and less costly out-of-court dispute settlement.
1 First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, OJ 1989 L 40, 1, has been repealed by Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks (codified version), OJ 2008 L 299, 25, which entered into force on 28 November 2008. However, having regard to the time at which the facts occurred, the disputes in the main proceedings remain governed by Directive 89/104.
2 Google France and Google, para. 121.
3 Google France and Google, paras 55 et seq.
4 Google France and Google, para. 76.
5 Google France and Google, para. 89.
6 Google France and Google, paras 89-90.
7 Sweney, Mark, Google wins Louis Vuitton trade mark case, guardian.co.uk/media/2010/mar/23/google-louis- vuitton-search-ads (2010); Bodoni, Stephanie, Google May Have to Step Up Keyword Monitoring After EU Ruling, businessweek.com/news/2010-03-23/google-sale-of- trademarked-keywords-may-be-limited-by-eu-ruling.html (2010).
8 Ott/Schuber, “It’s the Ad text, stupid“, Journal of Intellectual Property Law & Practice, 2010, p. 3.
9 Ott/Schuber, “It’s the Ad text, stupid“, Journal of Intellectual Property Law & Practice, 2010, p. 4; “A new brand of litigation“, Legal Week, April 2010.
10 “A new brand of litigation“, Legal Week, April 2010.
11 Ott/Schuber, “It’s the Ad text, stupid“, Journal of Intellectual Property Law & Practice, 2010, p. 4; Knaak, Roland, ”Keyword Advertising - Das aktuelle Key-Thema des Europäischen Markenrechts”, GRUR Int, 2009, p. 556.
12 Schuhmacher, ”Keyword advertising und eine vorsichtige Neubestimmung der Markenfunktionen“, Wirtschaftsrechtliche Blätter, 2010, p. 282.
13 Ott/Schubert, “Fremde Marken als Keywörter”, MarkenR, 2010, p. 160.