Trade Marks, Search Engines and Fair Play

The Internet has opened up new channels of communication and ways of doing business. It has generated new possibilities for businesses to compete effectively in the open market. It has also created new ways in which companies (and individuals) can engage in commercial mischief such as exploiting the property rights of others without authorisation. In no area is this more evident than that of trade marks.

The Basics

Definition of a Trade Mark

Under Council Directive No. 89/104/EEC to approximate the laws of the Member States relating to Trade Marks (the Trade Mark Directive), a trade mark is defined as any sign capable of (a) being represented graphically; and (b) distinguishing the goods/services of one undertaking from that of another.[1] While anything can be registered as a trade mark, in the e-world, it is “words” and “logos” that are most readily identified and used.

The benefit of a trade mark registration is that it gives its owner exclusive rights in the mark in respect of certain goods/services. This means that when goods/services are offered for sale over the Internet by reference to a trade mark, a claim for trade mark infringement may arise if (without the owner’s consent) a similar/identical mark is used in the course of trade in respect of identical/similar goods/services and there exists a likelihood of confusion (including association) on the part of the public.[2] Infringement will also arise if an identical mark is used in the course of trade in respect of identical goods/services. Limited circumstances exist though whereby a third party is entitled to use the trade mark of another without a claim of trade mark infringement arising (such as comparative advertisement[3] or use to indicate the intended purpose of a product/service provided it is in accordance with honest practices in industrial or commercial matters).[4]

Comparative Advertisement

Under Directive 97/55/EC amending Directive 84/450/EEC concerning misleading advertising so as to include comparative advertising (the Comparative Advertising Directive), comparative advertising is defined as any advertising which explicitly or by implication identifies a competitor or the goods/services offered by a competitor.[5] Comparative advertising will be permitted provided the advertisement objectively compares the material, relevant, verifiable and representative features of the competing goods/services and provided it does not (inter alia) mislead, cause confusion, discredit or denigrate the trade mark of the competitor.

There are differing views as to whether or not comparative advertising should be allowed. For example, German laws are very restrictive in this regard and, in France, it is rarely used because of the strict conditions that apply. In Belgium[6] and the Netherlands,[7] comparative advertising has not been accepted. The matter has yet to be tested in the Irish courts but the principles adopted by the UK courts in this matter are likely to be of persuasive value for an Irish court. In the UK, the courts have indicated that acceptable business practice in comparative advertisements requires that the use be honest. The test is objective, ie whether a reasonable reader would deem the advertisement honest. Industry codes of conduct are not useful as the test has to be gauged against the reasonable expectation of the public. The advertisement must be considered as a whole rather than being subjected to a minute textual examination, which is something a reasonable reader would not do. It is the take-home message that is important.[8]

As evident above, the objective of the Comparative Advertising Directive to harmonise the practice throughout Europe has not been achieved. This is further compounded by the accession of 10 new countries. It is hoped though that this will change following the adoption, on 11 May 2005 of Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the Internal Market. It amends Directive 84/450/EEC and sets further parameters whereby certain commercial activities that effect the economic behaviour of consumers will be deemed unfair and, therefore, illegal. The new Directive does not however address matters such as taste and decency (which varies widely among Member States) or business-to-business commercial practices. However, it is hoped that it will finally provide legal certainty and protect businesses against competitors who use unfair practices.

Passing Off

In jurisdictions such as Ireland and the UK, actions for trade mark infringement and/or comparative advertising may also give rise to a claim for passing off. Its equivalent in Europe is “unfair competition”.

Misleading Advertisement

In addition to giving rise to issues of trade mark law, there is also the possibility of trade libel as well as claims of misleading advertisement.[9] The latter arises where (including its presentation) the advertisement deceives or is likely to deceive the persons to whom it is addressed or it reaches and, by reason of its deceptive nature, is likely to affect their economic behaviour or injures (or likely to injure) a competitor.[10] In determining whether an advertisement is misleading, an account is taken of all its features including the characteristics of the goods/services, their nature, composition and method of manufacture.

IT Advancements & the Law

With the advancement in technology, difficult questions are being asked of the Courts world-wide in relation to the application of existing laws to novel situations. Such examples include the use of “metatags”, “pop-up advertisements” and “keywords”. I will examine the issue of metatags and pop-up advertisements very briefly but will concentrate primarily on the use of keywords by search engines as this activity has recently given rise to a spat of litigation worldwide.

(a) Metatags

This refers to the keyword term imbedded in the HTML source code of the Web page which is used by search engines and portal sites to classify it. During normal browsing, metatags are hidden from the user’s view but they are visible to the search engines and to anyone who peruses the HTML or similar source code of the Web site.

Many search engines rank the search results based on the amount of data in a web site that is responsive to the search criteria. Therefore, the web site having the most references to the searched term will appear at the top of the search results. There are obvious advantages to an advertiser in appearing near the top of that list.

If the metatags used by businesses are generic terms, there are no problems as proprietary rights cannot be claimed for such terms. However, the practice has arisen whereby businesses place the trade marks of their competitors in the metatags in their web site source code so that their web site is ranked high in a results list when the consumer enters the trade mark into the search engine. Does this activity constitute trade mark infringement and unfair competition? Judicial guidance was required.

In the United States, use of a competitor’s trade mark as a metatag has been held to violate the Lanham Act[11] but such use may be valid in certain circumstances such as comparative advertisement or use in a descriptive manner.[12] What is the position in Europe? The legal landscape is mixed.

In France,[13] trade mark infringement has been held to arise where a trade mark is included in the metatag of a web site. This is because of the likelihood of confusion arising over the ownership and relationship between the web site and the legitimate trade mark owner.

In the UK, doubt has been cast over whether trade mark infringement arises through use of trade marks as metatags. The position before 3 March 2004 was that use of a trade mark in a metatag gave rise to a claim of trade mark infringement.[14] However, after that date,[15] the position appears to be that the activity is most likely not “use in the course of trade” and so, not caught by the UK Trade Marks Acts 1994. According to the UK Court of Appeal, causing a site to appear in a search result, without more, does not suggest any connection or trade origin/source and so is not infringing. Consumers know upon viewing the content of a web site that it was not what they wanted and so no confusion (or claim of trade mark infringement) arises. However, if the web site content was misleading and confused the consumer into believing that it did provide the product from the source they desired, trade mark infringement would arise.

The matter has yet to be tested in the Irish courts. However, given the similarities between the respective legal systems, judgments of the UK courts are of persuasive value (although not binding) in Ireland and so, it is possible that the Irish courts might adopt a similar approach.

In Germany, the legal position is unclear. The Regional Court of Munich[16] is of the opinion that use of a trade mark as a metatag is trade mark infringement provided the trade mark is not generic or descriptive. However, the Higher Regional Court of Düsseldorf[17] holds a differing opinion, viewing the use of a trade mark as a metatag not to be trade mark infringement on the grounds that it is not being used as a trade mark.

In Denmark[18] and Belgium,[19] the position appears to be that use of a trade mark in metatags is trade mark infringement. However, it is unclear in Belgium whether liability rests with the advertiser or the search engine.

In Italy,[20] the courts view the use of a trade mark in a metatag as infringing unfair competition provisions, not trade mark law. The courts do not believe that such use is use as a trade mark. I understand that, in Italy, misleading advertisement usually falls within the scope of unfair competition but, in the cases to date, none of the advertisements involved were deemed to be misleading. Obviously, this will vary on a case-by-case basis.

In Spain, there has been no case to date. However, I understand that use of trade marks as metatags may be deemed unfair competition as well as trade mark infringement and possibly, misleading advertisement.[21]

As the Trade Mark Directive does not require a mark to be visible in order for trade mark infringement to arise, strictly speaking, there is nothing to prevent a national court from making a finding of trade mark infringement. However, until the ECJ gives guidance on whether (a) use of a trade mark in a metatag is “use in the course of trade” and (b) confusion arises when a consumer is taken to a web site as a result of a search engine hit, disparities between the judgments of the courts of the various Member States will continue.

(b) Pop-up Advertisements

These advertisements pop up on a user’s computer based on an analysis of their interests as determined by their Internet browsing activity. Companies such as WhenU.com operate by selling advertising space on their software program which is downloaded by the consumer as part of a bundle of applications they receive. The consumer consents to the operation of the program on their computer as well as the delivery of these advertisements. Businesses then purchase the right to have their advertisements displayed when a consumer selects a particular information category. The advertisement usually appears in a window which partially covers the trade mark owner’s site.

The legal position in the United States in respect of this activity is that the advertisements do not constitute “use in commerce” under the Lanham Act.[22]

There have been no cases to date in Europe on this issue. Until the ECJ gives guidance, the various national courts are likely to hand down differing judgments on whether such advertisements give rise to trade mark infringement. It will also be a matter of interpretation by the courts whether a claim of misleading advertisement will succeed.

(c) Keywords

Search engines operate by selling advertising links to search terms (keywords). These can vary from generic and descriptive terms to trade marked words. Advertisers bid on the keywords and pay the search engine according to the number of clicks their “sponsored link” receives.[23] A high payment guarantees a prominent position in the results page. The average cost per click is 50 cents and can increase to as much as $100 for top keywords.

The sponsored links usually appear at the top, bottom or right-hand side of the results page. They usually include some variation that sets it apart from the generic search results. Therefore, when a consumer enters a search term, the search engine displays not only a list of web sites generated by the program using neutral criteria but also displays the web sites of its paid advertisers. This advertising model has been extremely successful for advertisers as well as search engines where it accounts for a significant portion of its revenue. By way of example, Google reported a revenue of $1.256 billion in the first quarter of this year.

When the sale of keywords involved only generic terms, the practice was not controversial. However, problems arose when the rights to trade marks as keywords were sold to competitors. Initially, Google prevented advertisers from purchasing keywords that contained the trade marks of others, especially when the trade mark owner complained. However, presumably following frustration on its part to maintain its business, comply with the law and satisfy both trade mark owners and advertisers, Google changed its US and Canadian policy in April 2004 in relation to its Ad Words Program. The change in policy also coincided with its filing of the Initial Public Share Offering. Under the new policy, Google no longer screens for trade marks in keyword advertising. Advertisers are now permitted to bid on any keyword, including trade marks. Google will now only review trade mark complaints that relate to the content of the ads, not the keyword purchased to trigger the ads. It will now no longer disable keywords in response to a complaint by a trade mark owner. This is in contrast to its international policy where, upon receiving a complaint from a trade mark owner, Google will review whether the trade mark is being used in the ad content or as a keyword. If this is the case, it will require the advertiser to remove the trade mark from the ad content or keyword list and will prevent them from using the trade marked term in the future.

Yahoo! Search Marketing (formerly, Overture Services Inc.) has however adopted a more conservative approach. Its policy requires advertisers to agree that their search terms, listing titles and descriptions and the content of their web site do not violate the trade mark rights of others. Yahoo! Search Marketing allows bids only if the advertiser presents content on its web site that (i) refers to the trade mark or its owner or related product in a permissible manner without creating a likelihood of consumer confusion or (ii) uses the term in a generic or descriptive manner. The advertiser’s listing should also disclose the nature of the relevant content. This restrictive policy may be the reason why litigants to date have primarily pursued Google.

How does the sale of trade marks as keywords fit into established law? Search engines maintain that trade mark law is completely irrelevant because they are not making trade mark “use” of the marks. They argue that placing competitors advertisements in a list of search results will not lead to consumers being confused that the advertisers are affiliated with the trade mark owner. They believe that consumers are used to seeing advertising such as this. Also, they view the advertiser as being responsible for keywords (and ad content) they choose to use.

In response, trade mark owners argue that search engines are selling rights to their trade marks to third parties and that, under these circumstances, they are intervening in the commercial transaction between the consumer and the trade mark owner. They believe that this sale, as well as the placement of competitor advertisements on the search results page, infringes and dilutes their trade mark rights. They also believe that (national) unfair competition and misleading advertisement laws bars the exploitation of the marks as advertising keywords. However, this is disputed by the search engines. This difference in opinion has led to litigation on the issue.

In the US, there is currently no legal consensus on the legality of the use of trade marks as keywords. The case law is a mixed landscape including judgments which held (in general) that it was not trade mark infringement to sell and then use a competitor’s trade mark to trigger an advertisement[24] to those that require the trade mark to appear in the actual sponsored links in order to run foul of the Lanham Act.[25] This legal vacuum will continue in the US until direction is handed down by the US Supreme Court or Congress enacts a legislative solution. In the meantime, a judgment from the Circuit Court will be a binding precedent within that circuit, carrying more weight than a district court judgment.

In Europe, the situation depends on where the infringing act takes place. If it occurs in Germany, the precedent appears to be that a claim of trade mark infringement will not succeed unless the trade mark appears in the text of the advertisement and the search engine is notified of the breach by the trade mark owner and refuses to act.[26] The German courts strictly interpret the domestic law, deciding that infringement arises only where there is a willful act on the part of the infringer (namely, the search engine). It is of the view that infringement should not arise as search engines are not in a position to examine whether or not keywords violate the trade marks rights of third parties. In respect of a claim of misleading advertisement (which is part of the domestic unfair competition law), I understand that to succeed one must show that consumers believe that all the results listed when the trade mark as a keyword is entered offer and distribute goods/services with the trade mark. This high threshold might explain why few litigants rely on (or succeed under) trade mark infringement.

In France, search engines have had less success.[27] This is because, under French law, the activities in question are akin to trade mark counterfeiting in respect of which strict rules apply. The French courts appear to apply a (strict) literal interpretation to their domestic legislation, viewing use of a trade mark as a keyword to be “trade mark use”. It also views the search engines as dealing in the trade mark and thus being primarily liable for trade mark infringement (ie whenever they play an active role in the selection of the keyword). It should also be noted that claims for unfair competition and misleading advertisements have succeeded in France.

In the UK, the only case to date concerns the use of trade marks in metatags.[28] In that case, the Court of Appeal cast doubt on the ability of a trade mark owner to claim infringement through metatag abuse and, presumably, keywords used in sponsored links. Causing a web site to appear without anything further does not suggest trade origin and so infringement does not arise. The Court reiterated the importance of trade origin and source. However, it laid importance on the content of the web site and whether it was dishonest, misleading and confusing. Only where such circumstances exist could a claim of trade mark infringement arise.

In Ireland and Italy, there have been no cases to date on this issue. In Ireland, there is no reason to believe that the UK judgments would not be of a persuasive (although not binding) nature to an Irish Court. In Italy, the liability of ISPs has been limited in trade mark infringement actions but there have been circumstances[29] whereby such providers have been deemed liable under unfair competition legislation. In Spain, pursuant to AAP’s 1999 Rules,[30] use of trade marks as keywords would be likely to be considered trade mark infringement, misleading advertisement and unfair competition.

Conclusion

The primary objective of European trade mark law, unfair competition and misleading advertisement legislation is to prevent confusion amongst consumers. However, there is a fine balancing act between an advertiser’s right to inform consumers and a trade mark owner’s exclusive rights in their trade mark.

It is for this reason that comparative advertisement (as well as other exceptions) is permitted under EU and domestic legislation (including trade mark law). However, the activity (which conceivably includes the use of metatags, pop-up advertisements and keywords) is only allowed to the extent that use is in accordance with honest practices in industrial or commercial matters and that it does not take unfair advantage of or is detrimental to the reputation of the trade mark. While the free movement of goods is pivotal to the existence (and development) of the EU, it is acknowledged that it must not be to the detriment of rights holders as to do so would stifle innovation.

Trade marks are valuable (intangible) assets. Their owners spend substantial time, resources and (financial) investment in creating, developing and promoting their marks. Why then should these be exploited (without consent) by third parties in metatags, pop-up advertisements and keywords. Provided the trade marks are not generic or descriptive terms, it is hard to see how their selections are coincidental or innocent. They were obviously chosen for the goodwill that is attached to them and for their drawing power. In today’s business environment, commercial advantage over one’s competitors (by any means) is imperative and the internet is being used (unfairly and improperly) by some businesses to achieve this objective.

The legal uncertainty in Europe in relation to metatags, pop-up advertisements and keywords begs the question whether the current European legislation and tests are sufficient or whether the law should be revised in light of advances in technology. I believe that the current legislation is adequate provided sufficient guidance on its interpretation is handed down by the ECJ. Unfortunately, until this happens, the courts of Member States will continue to deliver differing (and conflicting) judgments.

In addition to decisive court guidance, one cannot overstress the importance for all parties (namely, trade mark owners, search engines and advertisers) to act responsibly as recommended already by interested organizations.[31] This is because each is ultimately trying to achieve the same goal – ie to service the needs of the consumer. It is imperative therefore that this is done in a non-anti-competitive, non-misleading and non-confusing manner.

As for trade mark owners, while they cannot prevent competition, they should seriously consider utilising the new advertisement techniques which are linked with their trade marks as they are clearly effective marketing tools.

Maureen Daly is Head of IP/IT at Beauchamps Solicitors, Dublin.