European Court rules against purchase of trademarked keyword search terms

The European Court of Justice (ECJ) has ruled that companies buying trademarked keywords for use on search engines to advertise rival services could be in breach of European law, in a decision that could have a major impact on online businesses.

The decision relates to a case brought against Marks & Spencer by Interflora after the retail chain bought the keyword 'interflora' on Google to advertise its own flower delivery service.

The High Court referred the case to the ECJ for clarification under European law, and the decision handed down on Thursday made it clear that companies have the right to expect their trademark to be protected from such practices.

"[European law] must be interpreted as meaning that the proprietor of a trademark with a reputation is entitled to prevent a competitor from advertising on the basis of a keyword corresponding to that trademark," the ECJ said.

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

The statements are not a final ruling, but are likely to influence the decision at the High Court and any similar cases in the future.

The decision follows an ECJ ruling in March 2010 which said that Google had not infringed the trademark of Louis Vuitton by letting other businesses buy the designer's trademarks as keywords on the AdWords platform.

However, the latest decision suggests that companies buying trademarked keywords on AdWords will now be in breach of European law.

Kirsten Gilbert, a partner at law firm Marks & Clerk, explained that the ruling will be welcomed by many businesses, but is likely to cause headaches across the industry.

"The practice of purchasing rivals' trademarks as keywords is widespread, and marketers may now have to think of other creative ways to advertise their brands on the web," she said.

"Google is likely to be disappointed with the ruling. The revenue Google generates from its AdWords service is significant. Companies will now be a lot more cautious with their choice of words."

Gilbert added that the case underlines the legal system's difficulty in keeping pace with technology innovations that challenge existing legislation.

"Trademark law has at times struggled to keep up with the internet age. The opportunities presented by online advertising were unforeseeable when our system of law was conceived," she said.

"Google innovations like AdWords have presented unique questions that trademark law is only now providing answers for."