By CHRISTINA PASSARIELLO and MAX COLCHESTER
The European Union’s highest court ruled that Google Inc. can continue selling ads linked to searches for brand names, a judgment that protects a crucial revenue stream for the search-engine provider.
[EUGOOGLE] Associated Press
Louis Vuitton said it would police advertisers that misuse its brand.
The ruling followed a lawsuit brought by luxury-goods group LVMH Moët Hennessy Louis Vuitton SA, which complained that ads sold by Google infringed its trademarks and promoted the sale of counterfeit goods on the Internet.
The case concerned Google’s AdWords service, which prompts ads to appear alongside the search results when a user searches for a particular term.
An advertiser can pay to have a search term call up one of its advertisements—even an ad for a rival product to what was searched for.
For example Google sells the right to link from a search for “Fendi” to various retailers. LVMH complained that such links often were bought by counterfeiters and constituted trademark infringement.
The European Court of Justice in Luxembourg ruled that Google isn’t liable for trademark infringement when it sells linked ads to a brand’s competitor. The court held that the search giant is merely a host for ads and that it is an advertiser’s responsibility to make clear if its product is different from that searched for.
However, the court opened the door for brands to demand that Google take down ads that confuse consumers.
* Court’s press release | Full text of ruling
Advertising makes up 97% of Google’s annual revenue, which totaled $23.7 billion last year. Tuesday’s ruling was thus a victory for Google as it protects its main source of revenue, said Nicola Dagg, an intellectual-property lawyer at London-based law firm Allen & Overy.
“It gives Google legal certainty over what is a very big cash cow,” Ms. Dagg said.
The ruling was the first time a court as high as the EU’s Court of Justice has ruled on the legality of Google’s AdWords. The court’s opinions apply to all 27 European member countries.
The ruling also applies to other search engines, such as those of Yahoo Inc. and Microsoft Corp. Google faces hundreds of lawsuits for trademark infringement from brands in countries, including the U.S., Germany and France.
LVMH said it was satisfied with the ruling, saying that it provides leeway for brand owners to stop search engines from selling certain ads. “We will be able to cut off the keyword trade at the source,” LVMH Vice President Pierre Godé said in an interview.
But analysts said the ruling was a setback for brands.
“Brand owners would have preferred to stop Google selling the AdWords,” said Mark Blair, a partner at Marks & Clerk Solicitors in London, an expert in intellectual-property law.
“Now they can’t put the blame at Google’s feet.…They have to deal with each advertiser on a case-by-case basis.”
He said the decision was likely to spur a series of trademark-infringement cases between brands. Already the European Court of Justice is expected to rule on a dispute between retailer Marks & Spencer Group PLC and U.K flower delivery service Interflora. Marks & Spencer bought the AdWords “Interflora” to promote its flower delivery service.
Google started AdWords 10 years ago. The service now has hundreds of thousands of advertisers that finance Google’s search engine.
The European Court of Justice verdict came in response to lawsuits filed in France by LVMH’s Louis Vuitton division, travel company Viaticum and CNRRH, a matchmaking service with mostly Eastern European women. The plaintiffs wanted to stop Google from selling their trademarks as AdWords.
Google argued that Internet users who search for the term “Louis Vuitton” aren’t only looking for a bag, they also may be after other information pertaining to the name such as product reviews. Louis Vuitton said sites selling fake versions of its bags have appeared on Google’s sponsored links.
The court noted that consumers could be confused by some ads. But it said it is up to advertisers using a competitor’s name to differentiate their goods.
LVMH itself spends between €10 million and €20 million, or roughly $13.5 million–$27 million, a year to buy such Google ads for its brands, which include Sephora, Moët & Chandon champagne and Dior perfume.
LVMH sued Google in 2004 and won several rounds before France’s highest court, the Court of Cassation, asked the European Court of Justice to weigh in. LVMH also has prevailed in several French cases against auction site eBay Inc. Google has maintained that its purpose is to provide the most information possible to its search users.
“We believe that user interest is best served by maximizing the choice of keywords, ensuring relevant and informative advertising for a wide variety of different contexts,” said Google’s senior litigation counsel, Harjinder S. Obhi.
Write to Christina Passariello at email@example.com and Max Colchester at firstname.lastname@example.org