Robert Dewald is a JD Candidate at Osgoode Hall Law School

Online keyword advertising, using internet search engines such as Google and Yahoo!, continues to be a highly contentious area of the law.  Litigation involving trademark infringement by competing companies in keyword advertising campaigns continues in Canada and around the world.  In Canada, it appears that competing companies are allowed to utilize each others’ respective trademarks as keywords for online advertising so long as the trademark does not appear within the sponsored link or advertisement (see the VCC decision).  On the surface, advertisers have great latitude to use competitors’ trademarks for keyword ads.  Yet many jurisdictions around the world attempt to prevent ads that mislead customers or damage competitors’ trademarks. 

The European Court of Justice (ECJ) has addressed the issue of misleading keyword advertising on internet search engines in Case C-558/08 Portakabin Ltd and Portakabin BV v Primakabin BV. 

The plaintiff, Portakabin Ltd., is a manufacturer and supplier of mobile buildings and is the owner of the PORTAKABIN trademark for goods in both metal and non-metal buildings, parts and building materials.  The defendant Primakabin is a competing company that also manufactures and markets its own mobile building units, such as work shelters or temporary offices.  Primakabin is also engaged in selling and leasing used units, including those manufactured by Portakabin.

The basis of the claim against Primakabin is that it paid to have its web address and company description posted as a sponsored link when users of Google typed in ‘Portakabin’ or misspellings of the word.  The heading of Primakabin’s ad, which appeared once one of those words was entered into the search engine, was ‘new and used units’. Later Primakabin changed this to ‘used portakabins’.

Portakabin commenced its action against Primakabin seeking an injunction to prevent the use of its trademark as a keyword for Primakabin’s advertisements on Google’s internet search engine.  Portakabin also sought relief from Primakabin’s use of its trademark when advertising second-hand Portakabin units.   Portakabin’s claim alleged that Primakabin greatly benefited from online keyword advertising using the PORTAKABIN trademark to market used Portakabin models.  Portakabin also stated that the use of its trademark as a keyword and within Primakabin’s ads mislead customers, ultimately damaging the value of the PORTAKABIN mark.

In response to the reference from the national court, the ECJ provided guidance to help determine when trademark owners may prevent the use of the mark by an advertiser.  The ECJ stated that “a trade mark proprietor is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with, or similar to, that mark…where that advertising does not enable average internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or from an undertaking economically linked to it”

Building upon this test the ECJ clarified when a trademark owner may restrict the use of a mark as keywords for internet search engines, that was used without the consent of the owner and is identical with, or similar to the owner’s trademark.

The European Trade Marks Directive indicates that the owner of a trademark is entitled to prevent use, without the owner’s consent, of that mark should the use adversely affect the function of that trademark.  The Court, referring to case law, explained that if the ad suggests there is an economic link between the advertiser and trademark owner, or the ad is vague to the extent that the origin of the goods or services is thought to be linked to the trademark owner, the conclusion must be that there is an adverse effect on that function of the trade mark.

However, in contrast the ECJ indicated that the trademark owner “cannot oppose that use of the sign, identical with its mark, if that use is not liable to cause detriment to any of the functions of that mark”.  This assessment, by the ECJ, indicates that the core of the national courts analysis must be to determine if the average internet user would be misled to think that the source of Primakabin’s advertisement was Portakabin.

If the national court finds that the ad does not allow the average internet user, or enables them only with difficulty, to determine whether the goods or services advertised originate from the trade mark owner or from a third party, it is unlikely that the advertiser can claim not to be aware of the ambiguity caused by the ad.  The ECJ advised, in this circumstance, that because the advertiser has full knowledge of its economic sector and chose keywords corresponding to another company’s trade mark, the advertiser cannot, in principle, claim to have acted in accordance with honest practices in industrial or commercial matters.

Despite the potential that Primakabin’s advertising campaign has to mislead internet users, the ECJ observed that the sale of second-hand goods under a trade mark is a well-established form of business, with which the average consumer will be familiar.  As a result, the ad will likely not create the impression that the reseller and the trademark owner are economically linked or that the ad is seriously detrimental to the reputation of that trademark.  The ECJ concluded its explanation stating that without using the trademark, the reseller who markets second-hand goods under another person’s trade mark, will have difficulty communicating such information to his potential customers without using that mark.

The ECJ then went on to analyze how Primakabin’s conduct, as a reseller of used Portakabin units, influences the plaintiff’s claim.  Portakabin claimed that Primakabin had removed any reference to the trademark PORTAKABIN from the used mobile buildings which it was selling and replaced it with the wording ‘Primakabin’.  This practice of rebranding was later confirmed by Primakabin. 

When a product is rebranded by a reseller, without the consent of the trademark owner and resulting in the trademark of the manufacturer being entirely concealed, the ECJ advised the national court that the trademark owner is entitled to prevent the reseller from using that mark in its advertisements.  The ECJ continued, stating that the use of the trademark by the reseller, in this circumstance, would damage the essential function of the trademark, which is to indicate the original origin of the goods.

This reference to the ECJ clarifies the ability of keyword advertisers to utilize competitor’s trademarks.  The national court must now consider if Primakabin’s keyword advertisements mislead internet users as to the origin of the advertised goods.  The national court must also weight Primakabin’s business practices of occasionally rebranding Portakabin’s units when determining if the value of the PORTAKABIN trademark has been damaged. 

Advertising on internet search engines should allow broad use of keywords, including trademarks, to provide customers the ability to view as wide a spectrum of products as possible.  It is appropriate that the ECJ holds that advertisers may utilize trademarks as keywords for search engine ads, while granting trademark owners the ability to prevent the use of their mark in ads that mislead internet users, or damage the value of the trademark. This ECJ opinion appropriately outlines the boundaries that limit keyword advertisers from utilizing competitor’s trademark while balancing the rights of trademark owners and advertisers.

Posted in Internet, IP, Trademarks