IP Osgoode Speaks: Graeme Dinwoodie “A Comparative Analysis of Liability for Keyword Advertising”

IP Osgoode Speaks: Graeme Dinwoodie “A Comparative Analysis of Liability for Keyword Advertising”

Nathan Fan is a JD candidate at Osgoode Hall Law School.

This past Thursday, IP Osgoode hosted Professor Graeme Dinwoodie, Oxford Professor and Director of the Oxford Intellectual Property Research Centre, who gave a lecture on recent developments in keyword advertising cases. Titled “A Comparative Analysis of Liability for Keyword Advertising”, his lecture focused on a detailed analysis of a set of recent keyword advertising cases arising in the US and in the EU.

Dinwoodie first focused on recent developments in American case law. The first case brought to attention was a recent U.S. Second Circuit decision in Rescuecom v. Google (April 3, 2009), where it was held that Google’s Adwords sale of Rescuecom’s trademark as keyword triggers to advertisers may constitute an actionable claim under the Lanham Act.

In analyzing Rescuecom’s decision, Dinwoodie first looked at a prior Second Circuit decision 1-800-Contacts, Inc. on pop-up ads, where the court ruled that the defendant did not engage in trademark use under Section 45 of the Lanham Act (“use in commerce”).  In essence, the Second Circuit court held that the main issue of trademark infringement claims was whether the trademark was used to brand any goods (trademark use requirement), leaving any confusion arguments to the wayside. As such, subsequent cases in the Second Circuit were being decided on the basis of ‘no trademark use’ only. Such a trademark use requirement would effectively immunize any search engines from liability.

Dinwoodie noted that the Second Circuit’s grounds for decision on keywords departed from the rest of the Circuits, where some claimants still prevailed on the confusion argument. However, due to the high threshold for proof of confusion, it resulted in most of the cases in all the Circuits coming to similar judgments, albeit for different reasons. Dinwoodie also addressed some policy concerns arising from the disparate grounds utilized by the Circuits, including the uncertainty of compliance for search engines, the difficulty for trademark owners to police keyword infringement and damages, and the implications for future trademark law.

The Rescuecom decision sought to accept the policy critiques of the trademark use requirement arising out in the 1-800-Contacts decision. Dinwoodie noted that the judgment itself was in a somewhat peculiar form, with a notably short judgment followed by an Appendix. While the Appendix was considered to just be “dictum”, it explained that the 1-800-Contacts decision had just been misunderstood by the district court. The Appendix also included a notation that it had the agreement of the 1-800-Contacts judges.

The immediate significance of the decision is that the Second Circuit has now chosen to focus on confusion as the overall barometer of liability, leaving search engines potentially liable.

Dinwoodie’s second focus in the lecture was on recent developments in the EU.  The Advocate-General (AG) of the European Court of Justice (ECJ) had recently completed a recommendation report regarding three cases referred by the French Supreme Court involving Google’s AdWords system and Louis Vuitton, Viaticum, and Tiger (this topic was covered in a previous post here).  From the referral, three questions were raised to the AG.

The first question referred to the AG was whether search engines were liable for the sale and display of keyword advertising under Article 5(1) and 5(2) of the EU Trade Mark Directive.  Article 5(1)(a) provides protection for trademark owners against the use of identical signs in relation to goods or services, while 5(1)(b) provides protection against the use of similar signs for similar goods or services that is likely to cause confusion on the part of the public.  Article 5(2) protects mark holders whose trademark has a reputation, from the use of signs that take unfair advantage of, or is detrimental to, the distinctive character or reputation of that trademark.

With regards to Article 5(1)(b), the AG made the distinction between the sale of ads (including the keyword suggestion tool) and the display of sponsored links. As defined in Article 5(1)(b), the use must have a link with similar goods and services of the mark owner. The AG stated that the sale of ads by Google involved no services sold to the public and did not involve similar goods and services, and thus carried no liability.

The AG continued to state that the display of sponsored links rested on the essential function of the display and that there is no judgment about the trademark until the link is clicked. Thus, based on the trigger alone, there would be no confusion on the part of the public. Here, Dinwoodie noted that the AG’s underlying policy concern was that his analysis should not make Google liable for the creation of organic results, as it would effectively kill the search engine market. In doing so, Dinwoodie questioned whether the AG’s assessment of public confusion should have been factually determined by national courts.

In addressing Article 5(1)(a) and 5(2), the AG stated that the protection offered under these provisions was not absolute and ought to be balanced against other values, including freedom of expression, freedom of commerce, and fundamental rights, among others. The AG found keywords as essential instruments by which information is organized and made accessible to internet users.

The second question referred to the AG was whether search engines were immune under the E-Commerce Directive, absent any actual knowledge. Under Article 14, Google’s organic search results are immune to liability. However, there is a distinction between organic and paid search results. Because Google profits from its AdWords service, it no longer provides “neutral” search results and is barred from the immunity provisions of Article 14.

The third question was whether advertisers were liable to trademark owners for the purchase of keywords. The AG responded with a similar policy concern as in the previous questions, stating that the allowance of advertiser liability would undermine the policies behind search engine immunity. Dinwoodie noted here that the AG had only addressed ‘trigger-only’ keywords (i.e. ads that are triggered by keywords, but  with no actual reuse of the keyword in the ad) and did not address ‘trigger plus ad text’ (i.e. ads that are triggered by keywords and the keyword also appears in the ad itself).

The report of the AG is only a recommendation for the ECJ and is not binding. While the ECJ upholds about 80 per cent of AG recommendations, the most recent recommendations in this field have not been so readily accepted. Dinwoodie does not predict how the ECJ will respond to the AG’s report, but he does provide a couple of issues with the AG’s report that the ECJ may struggle with in deciding whether to accept the recommendations.

One of his concerns was the fact that the AG had made summary judgment with regards to his assessment of public confusion. Dinwoodie thinks it would be more readily received if the AG had deferred the issue to the national courts.

Another concern is that in addressing the extent of trademark protection and the balancing of other values, the ECJ may find that the AG’s list of balancing values may be too broad in scope (e.g. freedom of expression).

The ECJ will not be making its decision until early next year, but with the serious changes to the EU trademark law landscape proposed by the AG, the ECJ may wish to take its time in making this decision.

Powerpoint slides and video coverage of Professor Dinwoodie's talk, including the questions and answer period, may be found on IP Osgoode's Events Archive page.