The highest European court, the Court of Justice, ruled on 23 September 2011 on the use of well-known trademarks as AdWords by competitors. The Court made it clear that well-known trademark holders have broader protection and that under certain circumstances they can take action against competitors’ use of a well-known trademark as an AdWord.
In this case, worldwide flower delivery service Interflora claimed that Marks & Spencer had infringed on the INTERFLORA trademark because it purchased various character series identical or similar to the trademark as key words in Google’s AdWords advertising service and as a result, advertisements for Marks & Spencer appear when internet users search for those key words.
In its judgement the Court made it clear that trademark holders can only take action against this kind of trademark use if one of the functions of the trademark is compromised. This concerns the indication of provenance function regarded as essential by the Court, but also the investment function (and advertising function). The Court stressed that not only the essential indication of provenance function, but also the other functions of the trademark are protected. These may not be negatively affected by competitors either.
With reference to the earlier Google France judgement, the European Court reiterated that because of the AdWord advertisements, it is ‘impossible or difficult [for the average internet user] to know whether the goods or services to which the advertisement relates come from the trademark holder or a company economically affiliated with it, or, on the contrary, from a third party’. The general market knowledge of the internet user can also play a role in this.
Firstly the European Court addressed the investment function of the well-known trademark as being a protected function. This relates to the trademark’s function to preserve the reputation that can attract consumers and foster their loyalty to the trademark holder. If this function is compromised by the AdWord use, such use can be prohibited. This use cannot be prohibited however because the trademark holder has to step up its marketing efforts as a result of the competitor’s conduct or if consumers therefore switch from the trademark holder’s goods to those of the competitor.
Well-known trademarks can also take action if an unjustified advantage is drawn from the distinctiveness or reputation of the well-known trademark, or if this distinctiveness or reputation is negatively affected. This could be the case if the trademark becomes a generic term as a result of the AdWord use. This could also be the case if the well-known trademark is selected as an AdWord; and if as a consequence of this, unjustified advantage is drawn from the trademark without valid reason. This last situation is the case in any event if imitations of the well-known trademark holder’s products are offered. However, if the advertisement only presents an alternative to the well-known trademark holder’s goods without diluting the well-known trademark, and without any of the functions of the well-known trademark being compromised, there is fair competition.
The national courts will have to apply all these criteria to assess whether the AdWord advertisements put before them can stand up to these tests.