Supreme Court quashes rulings holding Google liable for trademark infringement - International Law Office

On July 13 2010 the Supreme Court rendered four anticipated rulings in relation to Google's liability for its paid referencing service, AdWords.

Various trademark owners sued Google for infringement on the grounds that it allowed advertisers to select registered trademarks as keywords to trigger the display of sponsored links. The Paris Court of Appeals held Google liable for infringement.

The Supreme Court referred the cases to the European Court of Justice (ECJ) for preliminary rulings on the interpretation of the EU Trademark Directives and the notion of "use of a trademark in the course of trade", and the interpretation of the EU E-commerce Directive with regard to the definition of 'hosting providers', which benefit from limited liability.

The ECJ rendered its ruling on March 23 2010 and held as follows:

• A trademark owner can prevent third parties from advertising identical goods or services on the basis of a keyword identical to the trademark in cases where there is a risk of confusion as to whether the goods or services originate from the trademark owner.
• An internet referencing service which stores such keywords and organises the display of advertisements does not 'use' the trademarks, and therefore may not be held liable for infringement.
• The limitation of liability provided for hosting providers applies to a service provider that "has not played an active role of such a kind as to give it knowledge of, or control over, the data stored".

The four Supreme Court rulings implement the ECJ ruling and annul the appeal rulings that held Google liable for trademark infringement. The following reasoning is worth noting:

• To exclude infringement claims against Google, the Supreme Court quoted and referred to the ECJ judgment, holding that:

  "an internet referencing service provider which stores, as a keyword, a sign identical with a trademark and organises the display of advertisements on the basis of that keyword does not use that sign [in such way that the proprietor's consent is required]."

• In one case an advertiser was also involved as a party to the proceedings and the Supreme Court approved the appeal court ruling, which held that the advertiser was liable for trademark infringement on the grounds that the wording of the advertisement was insufficiently clear to avoid confusion as to the product's authenticity, and that the separation of the promotional links in a separate column under the heading 'sponsored links' was insufficient to prevent a risk of confusion for the average internet user.

• In all four cases the appeal court had excluded that Google could benefit from the limitation of liability awarded to hosting providers. The reasons were not identical from one case to another, but the decisions were based on the finding that Google did not merely provide a data storage service, but marketed a lucrative advertising service and therefore should not be considered as a mere technical intermediary. The Supreme Court quashed the rulings by holding that according to the ECJ, the criterion must consist of the active role which the service provider may have played with regard to the data. Quoting the ECJ, the Supreme Court held that if it has not played an active role of such a kind as to give it knowledge or control over the data stored:

  "the service provider cannot be held liable for the data which it has stored at the request of an advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser's activities, it failed to act expeditiously to remove or to disable access to the data concerned."

The four cases are now back in the hands of the Paris Court of Appeals, so that the appeal magistrates may apply the 'active role' test (also referred to as the 'neutrality' test) to determine whether Google should be considered as a mere hosting provider for Google AdWords.

Since the ECJ judgment in March 2010, the Paris Court of Appeal has had the opportunity to apply the active role test in three cases involving Google (April 9 2010), Dailymotion (April 14 2010) and Yahoo! (June 11 2010). Each application of the test ruled in favour of considering that the service provider should be considered as a hosting provider, thereby benefiting from the limitation of liability provided by French law.

For further information on this topic please contact Philippe Allaeys at Nomos by telephone (+33 01 43 18 55 00), fax (+33 01 43 18 55 55) or email (pallaeys@nomoparis.com).