1 August 2011Jurisdiction reportsJens Künzel

Trademark infringement through adwords? the Bananabay II decision

The Bananabay II case, which was decided by Germany’s Federal Supreme Court in February 2011 and is the origin of the European Court of Justice’s (now the Court of Justice for the EU) eis.de decision in March 2010, concerns a practice that has become quite common on the Internet.

Many businesses pay search engines to have their advertisements (and usually a link to the businesses’ websites) appear on search engine results when certain keywords are used for Internet searches. Some keywords contain competitor trademarks so that when a customer searches for a certain trademark, their advertisements pop up at the top or to the side of the actual search results instead.

The usual case is that the competitor trademarks are not used in the advertising itself, but only as an invisible keyword. The parties in the Bananabay II case sold erotic articles. One competitor used the other’s trademark ‘Bananabay’ as a keyword for an adwords advertising campaign in a search engine, but did not use the trademark in the advertising itself.

The advertising contained a price-reduction offer and a link to a website. The lower instance courts had decided that the use of a competitor’s trademark as an adword for one’s own advertising is a trademark infringement. The Federal Supreme Court therefore remitted the case to the European Court of Justice.

It asked whether such a trademark use is a ‘use’ of the trademark within the meaning of Article 5(1) of the Trademarks Directive if the adwords advertising can be recognised as advertising, and if the trademark is not used in the wording of the advertising and the advertising does not contain an indication as to the trademark’s owner and its products.

The European Court of Justice ruled that a trademark owner may invoke its trademark rights against the use of its trademark as a keyword in adwords advertising if the Internet user cannot or may not recognise from the advertising whether the goods and services offered originate from the trademark owner, a business connected to the trademark owner or a third party.

Germany’s Federal Supreme Court applied this ruling to the case at hand. The use of a trademark as a keyword for adwords advertising was a use of the trademark for goods and services. However, this did not constitute the use of the trademark “as a mark”.

The owner of a trademark may not object to the use of its trademark if such a use is not in conflict with one of the established functions of a trademark. In the present case, the Federal Supreme Court said that the function to indicate the origin of goods and services was not affected.

If the advertising enables the Internet user to recognise whether the goods offered in the advert are from the trademark owner or a third party, then the function to indicate origin is not affected. The Federal Supreme Court turned down the argument used by the appeals court that the common Internet user did not differentiate between the actual search results and the adverts in the adwords column.

This argument, the Federal Supreme Court said, does not sufficiently consider the exact position and outlook of the adwords section.

Furthermore, the use of a trademark as a keyword for adwords advertising should be viewed differently than the use of the trademark as a metatag. If a trademark is used as a metatag, then the site using this metatag is placed among the group of leading search results. Here, the user may not be able to determine whether a certain search result has anything to do with the trademark owner and its products.

The Federal Supreme Court also considered whether other trademark functions, such as the advertising and investment functions, were affected.The result was that these functions were not sufficiently affected.

The court took into account that the use of a trademark impairs the possibilities of the trademark owner to use its own trademark in advertising, since its adwords advertising has to compete with adverts from third parties making use of its trademark (this argument was dealt with in the Google France decision of the European Court of Justice).

However, this was not enough to say that the marketing function of the trademark was sufficiently affected. The trademark owner could still be placed first or among the leading group in the results section. This was the section relevant to the user typing in a keyword to effect a search.

That the trademark owner may not be the first in the advertising section was not enough to assume that the marketing function of the trademark was sufficiently affected. This decision is important for the advertising sector, since the use of keywords in adwords advertising will be admissible if the advert itself makes it clear that the offer contained therein refers to third-party goods and services. This condition should not be too difficult to meet.

Jens Künzel, LLM, is a partner at Krieger Mes & Graf v. der Groeben. He can be contacted at: jens.kuenzel@krieger-mes.de

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