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Thursday, 22 January 2009

BGH refers main "AdWord" question to the ECJ but decides on "AdWord" use of company names

In its eagerly awaited three "AdWord" decisions of today's date (see the IPKat's earlier post here), the German Federal Supreme Court (BGH) has denied trade mark infringement in two of the cases and referred the third matter to the ECJ.


This new Kat will closely scrutinise the actual decisions, once they are available in their entirety. So far the IPKat has only seen the BGH's press release, which the Kat has translated into English and summarised below.

The BGH's press release of today's date points out that all its three decisions are based on cases, where the defendants had purchased the respective claimant's trade mark (or company name) as a keyword/Adword and where the display of the sponsored links was visually separated from the actual search results displayed on the search engine results website. In all three cases, the actual internet advertisement did not include the respective claimants' trade mark/company sign or any other reference to the proprietor of the trade mark/company sign that had been used as a keyword. The objectionable advertisements also did not include any reference to the respective claimant's goods and/or services.

The BGH had already hinted it might refer the matter to the ECJ and so it does not come as much of a surprise that the court decided to refer the main question to the ECJ; based on the press release the IPKat believes the question should be phrased along the following lines: "Does the use of a third party's trade mark as a keyword/Adword on identical goods/services constitute trade mark infringement under the Directive?" However, the court ruled use of third party's trade mark as a merely descriptive keyword, could not constitute trade mark infringement.

Let's have a look at the facts and arguments in the three cases that have been decided.

*First case "bananabay" (I ZR 125/07): The claimant and the defendant both sold adult entertainment products. The claimant is the proprietor of a trade mark registration for "bananabay" and sought to stop its competitor's use of the trade mark as a keyword/'AdWord' for the competitor's website, claiming trade mark infringement and seeking damages.

The BGH decided that, in cases where another party's trade mark was used as a keyword/Adword on goods/services that are identical to the goods/services protected by that trade mark, it needed to clarify whether such use was "use as a trade mark" and could constitute trade mark infringement. Given that the relevant infringement provisions in the German trade mark are based on harmonised European law, the court decided to suspend the proceedings and refer this question to the ECJ under Article 234 EC-Treaty.

Comment: Not too much of a surprise here, the IPKat thinks. The BGH follows the example of other national courts, which also referred similar questions to the ECJ.

*Second Case "PBC" (I ZR 139/07): The claimant and the defendant were again competitors and both were active in the field of 'printed circuit boards'. The claimant owns a trade mark registration for "PCB-POOL" and the defendant used the sign 'pcb' as an 'AdWord'/keyword for its website. This led to the result that the search term "PCB-pool, when typed into a search engine, retrieved sponsored links that referred to the defendant's website. The court of appeal, the Higher Regional Court of Stuttgart, had agreed with the claimant and ruled that the use of a trade mark as a keyword/'AdWord' in this case did constitute trade mark infringement.

In this case the BGH overturned the decision of the Higher Regional Court of Stuttgart and denied trade mark infringement. In a first step, the BGH established that the relevant specalist consumers would understand the acronym "pbc" as short for “printed circuit board”. In the light of this, the BGH ruled that the proprietor of a trade mark could not prohibit the use of a descriptive term (here: pbc), even if this term was used as a trade mark and even if this use caused a likelihood of confusion with a protected trade mark. Such descriptive use was permissible and could not constitute trade mark infringement. A referral of the ECJ was not necessary.

Comment: It appears noteworthy that the defendant only purchased "pcb" as a keyword and not "PCB-pool". The matter would have perhaps decided differently if PCB-pool has been used. The IPKat will scrutinise the actual decision but can't really find much fault here but wonders what do the readers think?

*The third case "Beta Layout" (I ZR 30/07) was slightly different because it related to the use of a company name as a keyword. Whilst company names are protected under the German trade mark act, it is important to note that this protection is not based on harmonised European law but a German quirk. The claimant in the second case (I ZR 139/07) was also the claimant in the third case. The defendant had designated the claimant's company name "Beta Layout" as an 'AdWord'. The court of appeal, the Higher Regional Court of Dusseldorf, had decided that this use did not infringe the claimant's company name. The Dusseldorf court ruled that there was no likelihood of confusion because users of search engines knew how to distinguish between advertisement and actual search results.

The BGH confirmed the decision of the Higher Regional Court of Dusseldorf. The internet user would not assume that the sponsored link, which was visually separated from the search results, originated from the claimant. The BGH could not find any fault in this finding of facts. Given that the legal protection of company names was not based on harmonised European law, the BGH decided that this matter did not have to be referred to the ECJ for a decision.

Comment: The protection of company names in the trade mark act is a German quirk. However, the IPKat wonders why company names should (potentially) be treated differently to trade marks. This decision also seems to indicate the the BGH is of the view that in cases where the search engine users can clearly distinguish between sponsored links and actual search results, the use of a company name (...and a trade mark?!) should per se be permissible. The IPKat acknowledges that this is really a question of facts and that the ECJ will only rule on matters of law. However, should the eventual ECJ decision allow a different assessment in this regard, then it will be interesting to see whether the BGH will maintain its decision in relation to company names.

What do our readers think?
The court's press release can be retrieved here in its entirety (in German).

2 comments:

C.E. Petit said...

The third matter ("Beta Layout") also reflects a poor choice of company name/weak or descriptive mark problem. The "beta layout" in pcb design is very similar in concept to the "beta release" of software: It is a non-laboratory test version that is supposed to work, is supposed to be as bug-free as possible, and (distinct from software) is supposed to consider the manufacturing issues... but another set of eyeballs on complexity never hurts, so some testing in the real world is encouraged.

This is yet another "bad facts make bad law" instance, as the mark is very weak to start with. Had the company name been less descriptive, perhaps this would have been a closer question requiring some real reasoning; as it is, though, a hypothetical maker of plush toys named after its founder -- rather than its product, or an ingredient in its product, or a stage in the process of developing its product -- is stuck with this as precedent. (That's a big hint for some litigation I expect to see.) I, for one, am not convinced that the court's reasoning extends beyond descriptive marks and company names.

And, meanwhile, Anheuser-Busch's lawyers are no doubt studying all three opinions intensely to see whether their longrunning battle over horse kidney products with an identically named Central European vendor will be affected...

mcvooty said...

Perhaps a naive question re "bananabay," from a US'er, but doesn't 2006/114 EC, the misleading/comparative advertising directive apply? AFter all, the issue is the legality of an ad. And if it does apply, then the TM Directive doesn't; so then, what does "use of a trademark" have to do with it?

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