While the Adwords service does generate income for advertisers, lawyers for corporations like Louis Vuitton argue that their clients’ competitors receive an unfair benefit by buying ads which feature their trademarked brand name. For example, under Google’s current Adwords service, Pepsi could buy a sponsored link which highlighted Coke as a key term. In this way, Pepsi could drive Coke’s market to its own website. Another point of contention lays in the fact that counterfeiters and gray market sellers use of a trademarked brand name could tarnish a company’s reputation for quality products and services.
Google is no stranger to tough legal battles in courts throughout the world—and there have been at least 70 decisions on Google Adwords in the EU alone! In the U.S., Google recently won a case against Geico—whose lawyers argued that Geico’s customers were confused into visiting its competitors’ websites through misleading ads which featured the Geico trademark. The ruling was based on the fact that Geico could not prove that the trademark-triggering ads led to confusion in Internet users.
In addition to Google’s trademark law issues, it has also come under fire for “click-fraud” in which a computer program automated script or person continues to click on an ad for the sole purpose of generating revenue for Google. In 2006, Google settled a “click-fraud” lawsuit for $90 million.
Of particular interest in this most recent European lawsuit, is that Google did not always allow advertisers to bid on their competitors’ trademarked keywords. In 2004, Google eased the regulations surrounding their pay-per-click advertising in the U.S. and Canada, and in 2008, extended this practice to the UK and Ireland. The reason Google loosened the restrictions came from a desire to allow advertisers to create more narrowly targeted ad text which detailed their specific inventory and to provide business owners with more freedom to give relevant information.
U.S. courts have historically allowed advertisers to utilize another companies’ trademark if it employs the trademark as a keyword for commercial use. Since Geico lost its case in 2004, this precedent remains unchallenged.
Google could be hard-hit by a decision which requires ceasing the sale of trademarked keywords in Europe. Google currently generates $24 billion from its Adwords service—which constitutes 97 percent of its annual revenue. If Google suffers huge loss from this decision, pay-per-click prices may raise significantly, causing increased competition for sponsored links.
While this most recent suit against Google is specific to the European Union, a clear decision there may influence U.S. law concerning trademark rights in keyword advertising; laws which still remain muddy and unclear.
