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ARTICLE

KEYWORD ADVERTISING (SPONSORED LINKS)

With many internet users seeing the web through Google-tinted goggles and search engine
optimisation at the top of the agenda for brands with a presence online, it is little wonder that there
is a legal skirmish over the practice of keyword advertising and sponsored links. Last year, a UK
court handed down a decision on this topic (which is far from definitive for reasons I will give later)
and since then several member states of the EU have referred questions to the European Court of
Justice for guidance.
What is the issue?
The practice in question goes as follows. An advertiser specifies the keywords it wants to buy. When
an internet user types any of those words into a search engine, a sponsored link to the advertiser’s
website will appear either at the top or down the side of the list of results. So essentially the
advertiser has paid to leap frog all of the other non-paid-for links which are generated on the
results page.
If the keywords are part of a trade mark owned by the advertiser, no problem – for example, if I
Google “apple”, the sponsored link at the top of the page is to Apple’s Official UK Store. However, if
the keywords are part of a trade mark owned by a third party, we head into murky waters – for
example, my Google search of “apple” also returned a sponsored link to “Top Brands at John
Lewis.”
The case law in this area has generally been in the context of trade mark infringement. What is not
clear is whether an advertiser buying a keyword which is part of a competitor’s trade mark
amounts to “use” and infringement of the trade mark for the purposes of the relevant legislation (in
the UK, the Trade Marks Act 1994). And as the search engine is profiting from selling the keyword,
is the search engine also liable to claims for trade mark infringement?
Mr Spicy
Here is a quick recap of the UK case on this issue, Wilson v Yahoo! UK Ltd. The claimant, Mr Wilson,
had a mobile catering business selling Afro-Caribbean and South Asian snacks under the brand
name “Mr Spicy”. He also had a registered community trade mark (CTM) for "Mr Spicy." When users
of Yahoo!'s search engine entered the search terms "Mr Spicy" (or “spicy”), sponsored links were
displayed to third party sites (e.g. Sainsbury’s) who had bid on those keywords. Mr Wilson argued
that Yahoo! infringed his trade mark by displaying these links to third party sites based on the
search terms "mr" and "spicy", whether the sponsor had bid on such keywords individually or in
combination.
Mr Justice Morgan awarded summary judgment to the defendant, Yahoo!, stating that the claim
against it was "totally without merit." His reasoning, at paragraphs 64 and 65 of the judgment, was
as follows:
"64. I can put my conclusions really quite concisely...as follows: The trade mark in this case is not
used by anyone other than the browser who enters the phrase "Mr. Spicy" as a search query in the
defendants' search engine...The response of the defendants to the use of the trade mark by the
browser is not use of the trade mark by the defendants. That is enough to decide the case in the
defendants' favour. But the matter does not stop there. If, by some process of reasoning, one were
to hold that the search engine's response to the words used by the browser was, itself, use by the
defendants, in my judgment, it is not use of the mark "Mr. Spicy". What, instead, is being used is
the English word "spicy" as it appears in that phrase.
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65. Further, even if, contrary to what I have now held are two fatal answers to Mr. Wilson's claim, I
were to hold that the defendants were using his trade mark in doing what they did, then they are
not using it as a trade mark as explained in the Arsenal Football Club case. In my judgment, this
case, very comfortably and clearly, comes within paragraph 54 of the decision in that case; that is,
Mr. Wilson is not able to prohibit the use of the words "Mr. Spicy" even when they are being applied
to goods identical to those for which the mark is registered if that use cannot affect his own
interest as proprietor of the mark having regard to its functions. That is satisfied here."
Following this ruling, Google changed its policy and, whereas before it had allowed trade mark
owners to notify it of their trade marks and to prevent the registration of those trade marks as
keywords, now it has no such qualms. It now allows advertisers to bid on any keywords, including
trade marks, and even offers a ‘keyword suggestion tool’ which suggests keywords the advertisers
might like to buy.
So, this case has established in UK law that a search engine is not liable for trade mark
infringement by selling keywords and displaying sponsored links, right? Wrong! There are many
reasons to handle this decision with care:
1. It was a summary judgment made in the High Court and as such it does not have the
authority of a Court of Appeal or House of Lords ruling. If two big names with deep pockets
for the legal fees decide to battle it out in court, there may well be a more definitive ruling
from a higher court – and it would not be bound by the precedent set in this case.
2. Mr Wilson represented himself in court and so he was outweighed by Yahoo!’s legal team.
3. This case related to the search engine’s activities only so the question of whether the
advertiser itself (in this instance, Sainsbury’s) is infringing trade mark laws is still untested.
4. The word “spicy”, taken alone, is generic and there was no evidence to suggest that
Sainsbury’s had bought the phrase “Mr Spicy” as a whole.
Following this decision, there has been further consideration of this issue by the courts of several
EU member states and they have referred questions to the ECJ for guidance. Collectively, they ask
whether the search engine and/or the advertiser are “using” the trade mark for the purposes of the
Trade Mark Directive by selling and bidding on trade marked keywords and displaying sponsored
links. If so, does this constitute trade mark infringement which the trade mark owner is entitled to
prohibit.
Germany’s Questions
Does the use of a third party's trade mark as a keyword on identical goods/services constitute trade
mark infringement under the [Trade Marks] Directive?
The Netherlands’ Questions
1. Does the use of a third party’s trade mark as a keyword constitute “use for goods and services”
under the Trade Marks Directive?
2. If the answer to question 1 is yes, is such use of the trade mark as a keyword acceptable
because it is an “indication of the characteristics of the goods”?
3. If the answer to question 1 is yes (in the situation where the advertiser is offering genuine
second-hand trade marked goods for sale) is use of the trade mark as a keyword acceptable
because of the doctrine of exhaustion?
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4. What if the advertiser had bid on keywords which were mis-spelt versions of the trade mark?
5. If the advertiser’s use of a trade mark as a keyword does not constitute “use” for the purposes
of the Directive, may an EU Member State apply its national trade mark law to prevent this use
if it is without due cause and takes unfair advantage of or is detrimental to the distinctive
character or repute of the trade mark?
France’s Questions
Are search engines which allow advertisers to bid on trade marked keywords with links to sites
which sell counterfeit products making “use” of a mark under the Trade Marks Directive which the
trade mark owner is entitled to prohibit?
Furthermore, if the trade marks have a significant reputation, can the owner prohibit this use?
Conclusion
Despite the “Mr Spicy” ruling in the UK, there is little certainty over whether the practice of paid-for
keyword advertising constitutes trade mark infringement either on the part of the search engine or
the advertiser. The ECJ’s response to the various questions raised by the member states will
provide some clarification. It will also be important to observe how national courts decide cases on
this issue following guidance from the ECJ.

Yasmin Joomraty
Laurence Kaye Solicitors
© Laurence Kaye 2009
T: 01923 352 117
E: laurie@laurencekaye.com
www.laurencekaye.com
http://laurencekaye.typepad.com/

This guidance note is not intended to be exhaustive and it does not constitute or
substitute legal advice, which should be sought on a case by case basis.
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