Big changes to Adwords trademark rules in the offing?

by Peter Young on September 22, 2011 · 4 comments

In a landmark case for online trademarking, Interflora’s long running battle with Marks and Spencers appears to be over. The ruling – from the Court of Justice of the European Union – may enable brand holders across Europe have far greater control over where, when and how their trademark is used online.

This judgement appears to be for more encompassing than previous rulings. In particular instances where competitor using a keyword identical to the trade mark in relation to identical goods or services which has an adverse effect on the investment in the trade mark where that use substantially interferes with the brand’s reputation and its ability to attract and retain consumers will all come under the remit of the new ruling

In addition to competitors using ‘competitor bidding’ as part of their PPC strategies may also come under the new restrictions, something Interflora and other global brands have been arguing for many years. This obviously would appear to be more akin to the previous trademark regulations for Adwords prior to the changes around a year ago and could mean realistically mean a considerable dent to the Google coffers depending on how this works its way though the system.

Many potential changes will not come into force immediately – and it is still up to the UK courts to ratify –  however it is certainly a huge ruling for Inteflora and an even bigger one for Google. The net effect may also be felt in terms of the budgets many organisations use to protect their brands and sales from competitor activity again significantly impacting on the required budgets required to dominate brand searches.

Current regulation only restricts the use of a keyword within paid search copy – whereas the new ruling may affect the usage of the ads fullstop – though any knock on effects are still to be confirmed. This one feels is a massive step forward for brands, bringing the online space much more into line with that of many other channels. How Google and the other search engines will react to this will be interesting to watch – however I would stop short of saying we will see rival ads banned at this stage from Adwords – however there will certainly be more stringent regulation thereof. That said, certain commentators in the industry suggest we may see the end of brand bidding.

That said I do feel it is going to mean PPC managers will have to be very careful about what and how they develop the creative for their paid search ads with the following particular considerations in mind

1. Ads must not cause reputational damage to the owner of the trademark, nor to the trademark itself. For example denoting an issue with quality or the like would lead particularly go against the ruling

2. Ads must not make it difficult for internet users to determine who is selling the advertised goods or services. Should an organisation imply its part of an organisation for example when its not then this ruling would cover that

3. Ads must not take “unfair advantage of the distinctive character or repute of that trademark”, nor should they damage or dilute the character or repute (for example by turning the trademark into a generic term).

Update: Whose the winner in this

Well personally I think we still have to see. There is a lot of mixed thoughts on this at present. Inteflora appear to have taken this as a win, whereas there are others out there including Dan Barker and Chris Lake from Econsultancy who think otherwise. As highlighted above there are obvious areas where the ruling will impact in the short term however in my opinion this may spark the Brand Bidding debate to the fore once again.

At present lets face it, the only winner from brand bidding at present are typically Google. Competitor based bidding as a whole is typically low conversion (although there are exceptions to the rule – and this does vary from competitor to competitor) however at the end of the day Google have a vested interest in allowing people to bid on competitors even if a trademark is in place (with the obvious restrictions in terms of ad creative)

Many large organisations are against the idea of brand bidding as in a nutshell it does often benefit those lower down the food chain and affiliates rather than the larger organisations – and in my opinion goes against what Google appear to be trying to do with SEO. For example, we see a lot in SEO circles about developing your brand and brands coming more to the fore through organic results – however the net result is those smaller organisations having to utilise a higher % of PPC as part of the overall online marcoms. It is because of this I can’t help feeling the conversation will need to be had again at some point in the future – however – that time is not now. I personally believe we may see some revisions to the existing Google regulations however not to the extent of the removal of brand competitor bidding – and that timescale is still a way off.

For those interested below is the ruling from the Courts of Justice

1.      Article 5(1)(a) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks and Article 9(1)(a) of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark must be interpreted as meaning that the proprietor of a trade mark is entitled to prevent a competitor from advertising – on the basis of a keyword which is identical with the trade mark and which has been selected in an internet referencing service by the competitor without the proprietor’s consent – goods or services identical with those for which that mark is registered, where that use is liable to have an adverse effect on one of the functions of the trade mark. Such use:

–      adversely affects the trade mark’s function of indicating origin where the advertising displayed on the basis of that keyword does not enable reasonably well-informed and reasonably observant internet users, or enables them only with difficulty, to ascertain whether the goods or services concerned by the advertisement originate from the proprietor of the trade mark or an undertaking economically linked to that proprietor or, on the contrary, originate from a third party;

–      does not adversely affect, in the context of an internet referencing service having the characteristics of the service at issue in the main proceedings, the trade mark’s advertising function; and

–      adversely affects the trade mark’s investment function if it substantially interferes with the proprietor’s use of its trade mark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.

2.      Article 5(2) of Directive 89/104 and Article 9(1)(c) of Regulation No 40/94 must be interpreted as meaning that the proprietor of a trade mark with a reputation is entitled to prevent a competitor from advertising on the basis of a keyword corresponding to that trade mark, which the competitor has, without the proprietor’s consent, selected in an internet referencing service, where the competitor thereby takes unfair advantage of the distinctive character or repute of the trade mark (free-riding) or where the advertising is detrimental to that distinctive character (dilution) or to that repute (tarnishment).

Advertising on the basis of such a keyword is detrimental to the distinctive character of a trade mark with a reputation (dilution) if, for example, it contributes to turning that trade mark into a generic term.

By contrast, the proprietor of a trade mark with a reputation is not entitled to prevent, inter alia, advertisements displayed by competitors on the basis of keywords corresponding to that trade mark, which put forward – without offering a mere imitation of the goods or services of the proprietor of that trade mark, without causing dilution or tarnishment and without, moreover, adversely affecting the functions of the trade mark with a reputation – an alternative to the goods or services of the proprietor of that mark.
Source: Europa.eu

Further Reading:
E-Consultancy – Brand bidding on Adwords is ok, rules EU in Interflora vs M&S case
Blogstorm – European Court rules in favour of Interflora – an end to brand bidding?

Google+ Comments

{ 4 comments… read them below or add one }

Richard Fergie September 22, 2011 at 10:25 am

I read that completely differently.

M&S do not “adversely affects the trade mark’s function of indicating origin” because their ad is clearly marked as an M&S ad.

Interflora can still advertise on their own brand (and appear organically) so the TM’s advertising function is not adversely affected.

M&S’s ad was not negative so it did not adversely affect Interflora’s reputation.

Pretty confusing. Needs a lawyer with SEM knowledge to properly sort things out

Peter Young September 22, 2011 at 10:33 am

I agree hence why there is a lot of may and ratification in the post itself as well as the ruling. They key point to me is this one – as part of the 5.2 ruling above

“that the proprietor of a trade mark with a reputation is entitled to prevent a competitor from advertising on the basis of a keyword corresponding to that trade mark, which the competitor has, without the proprietor’s consent, selected in an internet referencing service, where the competitor thereby takes unfair advantage of the distinctive character or repute of the trade mark (free-riding) or where the advertising is detrimental to that distinctive character (dilution) or to that repute (tarnishment).”

coupled with the point in 5.1 above
“– adversely affects the trade mark’s investment function if it substantially interferes with the proprietor’s use of its trade mark to acquire or preserve a reputation capable of attracting consumers and retaining their loyalty.”

This is ultimately down to the UK courts and Google themselves however its certainly given them some serious serious food for thought….

Jordan McClements September 22, 2011 at 11:02 am

How long do you think it’ll take for the UK courts to put something in law about it?

When they do, it’ll probably still be very far from black and white, yes?

Paul Maddock September 26, 2011 at 3:38 pm

Thanks for this Peter, a very comprehensive and balanced overview.
I’m a little confused as to why Interflora circulated this as a win, when it seems, certainly at least, neutral. After all trademark law is trademark law, online or off.

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