AdWords dynamic keyword insertion trademark infringement

Court of Palermo excludes ISP liability for trademark infringementThe Court of Palermo IP Section, with ruling of June 7, 2013 in joined cases 11626/08 and 11627/08, definitively sentences on trademark infringement allegedly perpetrated by the means of Google’s service AdWords and on the supposed liability of the Internet Service Provider providing the advertising service. The Court finds that the illicit conduct affected only when the “dynamic keyword insertion” technique is implemented and thus it leads to ruling against the Defendant’s conduct for trademark infringement. Google’s liability is denied on the basis that the internet provider is not called to check the content of the whole advertisers’ ads.

Two italian car rental companies at competition

An Italian “rent a car” company based in Sicily, purchases ads slots from Google and begins to promote itself throughout web. It uses a keyword for its AdWords ads and a website’s metatag, Maggiore, to identify its service of renting cars. Then it happens that a Google’s average user who enters a query with that word, is provided with results linking to the Sicilian company’s website. In order to obtain a higher effect on users, the company asked for a slot among sponsored ads.

Sponsored ads are much more visible than organic search results since they are highlighted in bold and placed on top of the page. Clicking on the sponsored ads of “Maggiore” the user is linked to the company’s website.

The mark of the competitor is used as keyword within the ads title

The given keyword, indeed a common-sense word, is also the name of one of the most famous undertakings of car rental, established in Italy with over one hundred of subsidiaries. A user who wants to rent a car right from this big company and is looking for its closest agency, enters on the search bar the name of the company. To him, are shown a lot of results containing the keyword he entered.

While among these results can certainly be found the link to this major car rental company, top results and sponsored ads link to another car rental company, much smaller than the first, with less agencies. At this point the user could be confused and convinced that those sponsored ads are linking to the bigger one and the risk is that, once entered into the Sicilian car rental company website, he gives up on renting from the first company and rents a car from the second.

AdWords allows the “dynamic keyword insertion” technique

The self-promotion of the Sicilian car rental by the means of AdWords is extended for four years, from September 2004 to March 2008. By this time lapse, are counted a grand total of 1.450.555 impressions for the keyword at issue. It means that the sponsored ads of the Sicilian company dropped 1.450.555 times on the search result page of the users that were entering the keyword. Generally speaking, ads are not clicked as much as organic search results each time they are fetched.

So, if the Sicilian company’s ad showed 1.450.555 times, in four years it was clicked 31.170 times. To welcome more viewers, companies can launch ad campaigns on AdWords. One of them was called “Competitors” and it brought over the 90 percent of users to the Sicilian car rental website. At the end of the fourth year, Sicilian company has gained 360 online reservations.

From 2007 to 2008, some impressions showed the keyword – meaning the rival company’s name - as the ad title above the green URL to the Sicilian company’s website. This “dynamic keyword insertion” technique, yielded to the company less than one hundred online reservations of people interested in renting a car.

Two different proceedings of plaintiffs are then joined

Both licensee and holder of the mark file two different summons to make the Defendant appear before the Court of Palermo. The Court reunites both proceedings under the same cause and fixes the hearing for the Defendant to respond to Plaintiffs’ complaints. After the preliminary stage to give evidence to alleged facts, the Court grants the final decision.

The illicit conduct of advertiser is asked to be ascertained

Plaintiffs are respectively the holder and the licensee of the trademark. They sue Defendant to be ascertained the illicit use of the holder’s mark as metatag or keyword in Google’s AdWords ads. They ask for Defendant’s liability to be ascertained upon unfair competition within the meaning of art. 2598, paragraph 1, nn. 1 and 3, Civil Code and upon misleading advertising pursuant to art. 2, paragraph 1, lett. b) of Legislative Decree No. 145 of 2007.

Defendant calls Google to respond for the damage

The Defendant calls for the joining of both judgments separately established by the Plaintiffs or, in the alternative, for suspension of the impending judgment on unfair competition claims being it potentially absorbed by the judgment over trademark infringement.

It outlines that the licensee of the trademark lacks capacity to be made Plaintiff due to a specific purchase and licensing agreement’s clause that prohibits the licensee to take judicial or extra-judicial initiative.

On the merits it denies any liability for misleading or unfair use of the trademark with consequent rejection of compensatory damages claim. It sues Google claiming they should hold advertisers harmless against any liability of trademark infringement.

Google arguments against ISP’s liability

Google calls for its non-involvement in the illicit conduct of advertisers since every decision regarding the content of AdWords ads is hired by the advertiser itself. In the alternative, it declares to have immediately ceased association of the mark to the AdWords service. Then, it points out the lack of probative support of the damage requested by Plaintiffs.

Focusing on keyword advertising and dynamic keyword insertion

The Court first dismisses all preliminary questions proposed by the Defendant who called for notification irregularity and lack of legal capacity of the proceedings for the holder of the trademark.

As to the merit of the cause, the Court starts from the CTU conclusions. He focuses on three points: the period of use of the “keyword”; impressions, clicks and bookings generated by its use; the period of use of the “Dynamic keyword insertion” technique and related effects.

Out of dynamic keyword insertion there is not trademark infringement or unfair competition

The Court’s decision is issued under 95/08 EU Directive and 207/09 Regulation.

While it denies that the use of the keyword in the Google AdWords is to be considered harmful of the advertising function of the mark, it should be figured out whether the function of indication of origin has been harmed during the implementation of the “dynamic keyword insertion” technique.

In fact, CTU demonstrates that out of this technique, the view of link and URL made the difference between advertiser and mark holder easily acknowledgeable, and the user could have been aware that the first was a competitor of the second and not his subsidiary.

Again, during the not-implementation of the technique, there was no dilution of the mark. Since the service advertised was clearly described as independent from that of the mark holder being the sponsored link clearly attributable to the Defendant, there was not transformation of the nature of the mark in a generic term.

The Court finds it proved that when the “dynamic keyword technique" was not used, the mark kept being able to attract consumers as a reputational value and was offered not a simple imitation of it but an alternative with the consequence that there was not unfair competition or corrosion of the mark or injury to its reputation.

A technique generating confusion on users between two competitors’ services and products

On the contrary, the use of the “dynamic keyword insertion” has generated confusion between services because the Defendant has employed the word naming the mark as a keyword and as a URL to open the sponsored link to its site, exploiting the notoriety of the sign.

This conduct leads to trademark infringement and unfair competition. In fact, the function of indicating origin is found to be affected when that technique made the Plaintiffs’ trademark shown in the title of the Defendant’s ads creating a risk of confusion or association between the two competitors’ services and products.

The investment function has been affected as well by the technique harming the capability of the mark to acquire or preserve a reputation and to attract and retain consumers’ loyalty.

The Court definitely denies ISP liability as a mere service provider

As to the role of third party Google, the Court outlines that the Defendant held the unfair conduct through Google’s AdWords, a service providing advertisers with the “dynamic keyword insertion” that associates the keyword of the search to a word within the title of the sponsored result.

The Internet Service Provider, pursuant to article 16, Legislative Decree n. 70/2003 which implemented EU Directive 2000/31/EC, is not demanded to match each keyword chosen by advertisers with every mark to evaluate a possible trademark infringement. As a consequence, Google is not liable for the unfair competition or the illicit conduct of the Defendant.

As pointed out by the Court, the ISP’s activity is limited to hosting services and it is not required to check information uploaded by the users. Beside the absence of liability pursuant to law dispositions, the Court favorably assesses Google’s conduct having it promptly blocked the association between Defendant’s ads and Plaintiffs’ trademark as soon as informed of the illicit act.

The Defendant is condemned to pay damages suffered by the Plaintiffs exclusively with regard to advertising campaigns launched under “dynamic keyword insertion” technique.

When keyword advertising should be considered harmful for the mark

For the Court of Palermo, the conduct of using the same sign of a competitor’s mark within an advertising service like AdWords does not compromise the function of the mark. Adopting the same subdivision that the EU jurisprudence elaborated as a criterion for the trademark protection, the Court of Palermo identifies three elements that must be preserved for the advertiser’s conduct not to be declared illicit: function of indication of origin, advertising function and investment function of the mark.

As the Court points out, unauthorizedly use of a competitor’s mark as a keyword is just a licit commercial conduct that hardens but not harms competitions. Keyword advertising is not adversely affecting those three functions per se but only when generates confusion on user between competitors’ services.

EU Court of Justice famous precedents

EU Court of Justice has been often recalled by the Sicilian Court. The most important of all the sentences constituting the legal basis of the decision at issue, about illicit use of the keyword advertising and trademark infringement, are BergSpechte C-278/08 about keyword advertising and the Interflora cause in which the EU Court stated fundamental principles about trademark infringement and the three fundamental functions of the mark. 

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