PART III. The Preliminary Ruling Decision in the Case of Google vs. Louis Vuitton Concerning the AdWord Service and its Impact on the Community Law

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GONGOL, Tomáš. The Preliminary Ruling Decision in the Case of Google vs. Louis Vuitton Concerning the AdWord Service and its Impact on the Community Law. The Amfiteatru Economic Journal. 2013, vol. 15, č. 33, s. 246-260. ISSN 1582 - 9146.

3. Implications of decisions regarding Google vs. Louis Vuitton on the decisions of the national courts in the case of Google AdWords

The decision about Google vs Louis Vuitton should influence the decisions of the national courts of the Member States of the European Union and unite the often contradictory approaches outlined earlier. To illustrate this, let us mention here a few examples of decisions in this matter (Drawn from reports of the German Federal Court of Justice   BGH, No. 17/2009.). Factual basis for these disputes is the use of Google AdWords by advertisers who have chosen keywords as signs corresponding to trademarks, if you like names of companies without the consent of the competent bodies.

That's what happened in the case directly of "bananabay" (I ZR 125/07). The plaintiff, the owner of the trademark 'bananabay" in this case demanded that the defendant, his competitor in the market, ought to stop using signs corresponding to that mark as a keyword for the Google AdWords optimized search engine. The Federal Court of Justice (hereinafter referred to as "BGH") is also in this case referred to the Court with a request for a preliminary ruling. It was necessary to determine whether in these cases the third party uses the sign as a trademark and whether the use may result in an infringement of intellectual property rights arising. Given that the Court in this case (C-97/09) ruled only a few days after the above mentioned decision in the matter of Vuitton, the conclusions of the decision were based on this. The owner is entitled to prohibit an advertiser to use in advertising keywords identical with or similar to a trademark without the consent of the owner of the goods and services which are identical with those for which the trademark has been registered. However, this applies only if the advertisement does not enable an average internet user to distinguish the goods or services listed in the advertisement originate from the trademark proprietor, eventually economically linked subject to the owner or contrary from a third party.

Let’s mention also the case of "Beta Layout" (I ZR 30/07). This case differs from the previous one by a protected designation, used as a keyword, not a trademark, but the company name. It is therefore not possible to apply to this case harmonized legislation marks but national German legislation. The Court of Appeal in this case concluded that the defendant - the advertiser does not violate the law to protect the name of the company, because there is no confusion between the plaintiff and defendant, as users of search engines can distinguish between advertising (sponsored link) and natural search results. The BGH confirmed this decision with the Court of Appeal that the sponsored links are visually separated from the natural search results. Because there is not harmonized legislation in this matter, there was not filed request to the Court. It leads to the conclusion that the protection of company names and marks in factually similar cases may lead to different decisions. Such a situation is certainly not a desirable state, which is to be achieved by legal regulations. In light of the Court's decision, which affects the trademarks, but the argument does not hold water visual distinction between sponsored and natural search results.

Different approaches to decision making can be observed in matters of the trade intermediaries type of electronic auction house eBay, which is not related to the Court's decision in the case "Vuitton", however, can give an interpretative guide to the intervention of the functions of the mark. The use of sponsored links was the matter of dispute in France between Louis Vuitton SA Company and eBay Inc., which the latter one lost. EBay paid for the AdWords service to offer users links to its auction site that sells previously mentioned goods of Louis Vuitton SA Company. The Court considered such conduct of eBay as free-riding on the reputation of Louis Vuitton and its trademarks and therefore imposed eBay to pay damages in amount of 200,000 euros and for each additional violation of the rights of the trademarks and other intangible assets 1,000 euros. That decision is exactly the opposite of the Belgian court decision in a similar case. Belgian appeals court last year ruled factually a similar case between Polo / Lauren Corporation and eBay, Inc. concerning the trademark of "Rach Lauren" and came to the opposite decision than the French court. But I have to wait for the opinion of the Court on the business intermediaries’ type of eBay. In 2008, the Dutch Supreme Court asked for a preliminary ruling (C-558/08) in this case. So far, however, the decision has been rendered.

4. Implications of decisions regarding Google vs. Louis Vuitton on the decisions in the area of copyright protection

The conclusions drawn from the Court's decision in the case "Vuitton" serve wider applicability than just issues related to infringement to the function of trademarks in connection with Google AdWords. The visual field also reaches issues related to copyright protection. Shortly after the publication of that decision, the Court rendered the BGH’s decision, which refers to the decision of the Court, and deals with the protection of the copyrights associated with the images that appear as Google search engine results.

In this decision (I ZR 69/08 Vorschaubilder, from 29. 4. 2010) the BGH ruled that Google does not infringe copyright protection in situations when there are previews of images that are the result of the search. It should be noted that in the previous two cases registered under File No. 308 and 308 O42/06 O248/07, addressed to the court in Hamburg, Google disputes to view thumbnails of copyrighted works lost. It was a trial with photographer Michael Bernhard and cartoonist Thomas Horn. The court in these cases indicated that the use of photographs in the previews is not by nature a new part, therefore, must be based on the consent of the author.

The Google search engine makes it possible by entering keywords to display Internet users the thumbnails placed on various websites Images that are displayed as search results, are reduced to the original scale as the previews. Previews also include a hyperlink that allows the user to access the website where the original image is located. In order to speed up the search process, the Google search engine periodically scans the Internet and stores these images on their servers. This procedure allows to display the search results almost immediately after you enter keywords into a search engine.

In this case, the artist - a painter sued Google because after entering keywords containing her name it displayed thumbnails of her paintings that she placed on her website. The court ruled that Google did not infringe copyright because the artist could, by simple technical means prevent Google from indexing her sites and thus prevent unwanted display in the search results, but she did not do so. From the copyright protection point of view, the argumentation is strange because the use of the work generally requires the consent of the author. In this case, however, the author herself was expected to prevent indexing of her own site. Therefore, it implies that the author's consent is contained in the very publication of copyright works on the Internet.

Programs of various companies (this program used by Google, Inc. is known as „Googlebot“) scan the websites and create temporary copies of their content in order to streamline the search process and the achievement of its results. However, the authors can, through simple commands in the programming code web sites, prevent the indexing or disable directly only indexing of images.

In the mentioned decision, the court also spoke to the situation where the images were posted on the Internet by a third party without the prior consent of the author. The court said that in these cases, Google was responsible for search results only if it has been informed of such copyright infringement and did not remedy it. Even in this case, therefore, the above mentioned principles of liability of information society services apply, which result from the EC Directive No 31/2000.

5. The decisions in similar cases at USA courts

These conclusions of the BGH regarding Vorschaubilder also correspond to attitudes of American courts. One of the most famous disputes in the previews is a dispute between  Perfect 10, Inc. and Amazon.com, Inc. and Google Inc companies (decision no 508 F.3d 1146, 9th Cir. 2007). Perfect 10, Inc. sued Google for alleged copyright infringement by displaying thumbnails of photos published on the website of the plaintiff. While the Court of First Instance vindicated Perfect 10, Inc. the appellate court ruled in favor of Google. The Court of Appeal described the copying and previewing of photos as "fair use." In short, the use of the principle of "fair use" allows limited use of copyrighted works without the necessary permission. An example of such use may be a comment to a literary work and his criticism, used for teaching purposes, etc.

To consider it as the use of copyright works under the principle of "fair use", an American court had to use in the case of thumbnail images customized by the Google search engine four factors to support the conclusion of such uses:

• the purpose and character of the use of a work (including an assessment of whether the use is of a commercial or non-profit use for educational purposes),
• the nature of the copyrighted work,
• the amount and substantiality of the portion taken, and
• the effect of the use upon the potential market.

The conclusion of the court in case of Perfect 10 vs. Google relied mainly on that the thumbnail images of the original work are substantially transformed, and serves as an electronic reference tool for public in searching. Their purpose of use is completely different from the original. This situation is likened to a court decision regarding the American court’s decision of parodies, whose work generally comes in the principle of "fair use." In addition, preview images differs from the perspective of the application of this principle by the fact that the search engines provide a completely new way to use the Work (search), while a parody is typically used for entertainment purposes, the same as the original work. The conclusions of the trial were relied on mainly search engines and social benefits of an entirely different use of the work relative to the original.

U.S. courts in 2010 also dealt with the YouTube service of Google. Through this service you can place video recordings on the internet. This service, however, can be exploited to disseminate copyrighted works, which was the reason that led Viacom Company (owner of MTV, Paramount Pictures, etc.) to sue Google, demanding a billion dollars for that YouTube spread tens of thousands of video recordings protected by copyright. However, the Court concluded that Google cannot be held responsible for the content hosted by third parties through the services, unless the specific violation in a particular case is not reported. The copyright infringement of the YouTube service provider is insufficient because of only general awareness of such options. Decision also states that Google does not actively seek out illegal content. This conclusion is based on § 512 (c), (m) and (n) of the Digital Millennium Act (DMCA), which contains a limitation of liability of providers of online services. Viacom Company appealed against the decision. The result of the appeal proceedings is not yet known.

Regarding disputes of the factual basis in the use of Google AdWords, also in the U.S., Google, Inc. was sued several times. One example is the dispute with Rescuecom Corporation (case Recuecom Corporation v. Google, Inc., 2d 06-4881-cv, 3. 4. 2009). In this case it was the trademark of "Rescuecom" which was used as the key word in the above Google AdWords. The court in this case dismissed the action because of the fact that there is no violation of these rights, because Google has that mark in commerce use. We can say that the European Court of Justice has the same conclusion and justification as an appeal court in that decision.

Another problem - electronic auction can be demonstrated in terms of solving a dispute between Tiffany (NJ) Inc. and eBay, Inc. The Court of Appeal upheld the dismissive decision of the trial court in proceedings concerning infringement of trademark rights by selling counterfeit goods via electronic auction house eBay. Sellers, through eBay online auctions, offered silver jewelry under the brand name of "Tiffany", substantial part of which (more than three quarters), were fakes. The key question in this case from our point of view is whether eBay is liable for complicity in the violation of intellectual property rights (e.g. by facilitating the sale of counterfeit). Tiffany Company particularly drew attention to the fact that eBay knew or had reason to believe that vendors violate the trademark of Tiffany merchandise. Although the court acknowledged that eBay had a "general awareness" of violations of intellectual property rights, it said such awareness is insufficient to order eBay to remedy the situation. As to be liability on eBay, it must therefore be shown that in the particular case of trademark infringement, eBay was informed and did not respond to this notice.

A similar case was solved earlier in Germany between Montres Rolex SA and Ebay Inc.. As in the case of Tiffany, there was a sale of counterfeits of original products of known companies. Also in this case it was decided that eBay is not liable for violations of the rights of the trademark. However, the court imposed in this case, eBay has an obligation to prevent further violations of these rights if it was informed about this and it should prevent the same situation from occurring again. Therefore, the Court imposed a duty to monitor the virtual marketplace after the operator was informed of the violations and prevent the future sale of imitations of the product. Due to the technical complexity of the problem and the above-mentioned principle of the EC Directive No 31/2000, the decision leads to more questions rather than answers.

Conclusions

Designation selected by advertisers for a keyword within the service search engine optimization is a tool that is used to run the advertiser's display advertising, so use "in commerce" within the meaning of the EC Directive 89/104 on trademarks. The use of the products or services of an advertiser, moreover, is even when a sign which was chosen as a keyword appears in the advertisement itself.

However, the trademark proprietor cannot oppose the use of the sign which is identical or similar to his trademark, unless all of the conditions set out in Article 5 of EC Directive No 89/104 and the case law of the European Court of Justice on this article are fulfilled. According to Gielen (2010) where a third party uses a sign which is identical with the trademark in relation to goods or services identical with those for which the mark is registered, the trademark proprietor is allowed to prohibit such use if it is liable to affect one of the functions of the mark (particularly the function of indicating origin). In another situation referred to in Article 5, paragraph 1, point. b) of this directive, where a third party uses a sign identical or similar, the trademark proprietor may prevent the use of that sign if there is a possibility of confusion. These questions need to be viewed from the perspective of the "average internet user". But, who is it? Unfortunately the European Court of Justice hasn’t specified what this term exactly means. What can lead us is the definition of an “average consumer” as “reasonably well informed and reasonably observant and circumspect, taking into account social cultural and linguistic factors”. But, we should specify him more precisely. Is he more informed, observant, circumspect than an average consumer in general? According to the author’s opinion, the internet is very specific space and more and more people are connected to the global market. Maybe two decades ago the internet was just matter of experts but the technology of internet access is so easy now that all generations of people can use it. According to the author’s opinion it is necessary to specify the “average internet user” as a visitor of the internet whose observance is limited by special attributes of the internet. It is especially true in cases when commercial connection between the trademark proprietor and third person using keyword ads without permission is created.                    

The internet as an information channel decreases the “costs of searching” in the terminology of the economics of information. In Stingler’s model, the price for information is created by cost of search. For consumers the cost of search may be taken as approximately proportional number of sellers approached, for the chief cost in time. Stingler (1961) points out limitations of advertising caused by expenses of ads, especially in cases of goods which have a few potential buyers. In case of using web services such as AdWords the costs of “one click” are low in comparison with the benefits which can be made.  The influence on customers can be crucial because natural results and sponsored links will appear at the first places of searching page. The question (mentioned above) is whether the “average internet user” is able to distinguish them. The connection between the economics of information and keywords advertisement can be objective of further research.

Regarding the liability of the Internet search engine itself, as we have seen above, the decisions of the courts in matters of Internet search engines in the European Union vary from state to state. For example, whereas the German courts tend to currently access the responsibility for the outcome of the search engines more freely, the French courts are often more stringent. Differently, we can say there is much more liberal access of U.S. courts to this issue. The analyzed decisions of the Court in the case of Louis Vuitton Malletier SA vs. Google, Inc. suggest further European development as well as a series of related decisions that lead to similar (liberal) conclusions of the courts of U.S.

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