keyword that has been registered as a trademark by another company.

In 2003, the French fashion house Louis Vuitton discovered that, when French users entered “Louis Vuitton” into Google, they were shown an advertising link pointing to fake LV products. While LV could have sued the product imitator, it decided to sue Google. From LV’s perspective, Google was a very attractive target: If Google was found liable, LV would not need to sue numerous individual product imitators. With one lawsuit against Google, LV could stop all keyword-re-lated trademark violations at a stroke. Google, on the other hand, has a vital interest in avoiding being held liable in such lawsuits. Google’s business model relies extensively on the advertisement auctioning mechanisms underlying the Ad Words system. Of Google’s $23.6 billion gross revenues in 2009, about $22.9 billion came from advertising (see http://investor.google.com/ financial/ tables.html). A major part of this advertising revenue is believed to come from Google Ad Words.

case studies

Cases such as LV’s have popped up like mushrooms over the last few years in many countries. From a trademark law perspective, they are not easy to resolve. On the one hand, it seems unfair that, by choosing third-party trademarks for keyword registrations without proper authorization, firms can benefit from the goodwill of such marks. It also seems problematic that Google may benefit, at least indirectly, from such behavior. On the other hand, trademark law does not protect trademark owners against each and every use of their registered marks by others. Where the Google Ad Words system lies along this continuum is unclear.

In the French lawsuit of Louis Vuitton vs. Google, a Paris regional court found Google guilty of infringing LV’s trademark in February 2005. After an appeals court in Paris had upheld this decision, Google appealed to the Cour de Cassation, which is the highest French court in this area of the law. The court had to decide whether or not Google Ad Words was in compliance with French trademark law. At this point in the story the European Union kicks in. France has had a com-

Google’s business
model relies
extensively on
the advertisement
auctioning
mechanisms
underlying the
ad Words system.

prehensive trademark system since 1857. However, in 1989, the European Union required its member states to amend their national trademark systems in order to make them compliant with the European Trademark Directive enacted that year. This directive did not create a unitary Eu-ropewide trademark system. Rather, it harmonized national trademark systems across countries.a Today, if there is some disagreement about how a particular provision of national trademark law should be interpreted and whether this provision is affected by the European Trademark Directive, it is the European Court of Justice that has the last word. This was the case with the French LV litigation. As the highest court in France could not itself decide the case, in 2008, this court referred it to the European Court of Justice, which is located in Luxembourg.

The intellectual property community eagerly awaited the European Court of Justice’s decision in this case. It was of particular importance because courts in various European countries had reached wildly different conclu- a As a separate measure, the European Trademark Regulation of 1994 created a European-wide trademark system that is administered by the European trademark office (officially named the “Office of Harmonization for the Internal Market“) in Alicante, Spain. As a result, two trademark systems now exist in Europe: the national trademark systems that are administered by national trademark offices and enforced by national courts, and the European trademark system that is administered by the European trademark office and is also enforced by national courts.

sions as to whether Google’s AdWords system violates trademark law. Courts in France and Belgium, and some courts in Germany, had ruled that the AdWords system violates trademark law or unfair competition law, on the grounds that Google is using trademarks, confusing consumers, and free-riding on the goodwill of trademark owners. Courts in the U.K. and other courts in Germany have ruled the opposite, while decisions in Austria and the Netherlands have come out somewhere between these opposing viewpoints. Ultimately, in addition to the French Court de Cassation, the highest courts in Austria, Germany, the Netherlands, and the U.K. have referred Ad Words-related lawsuits to the European Court of Justice.

In March 2010, the European Court of Justice decided the French LV case.b The court held that a producer of fake LV products violates trademark law if his keyword-backed advertising link creates the impression that his products are actually produced, or at least authorized by LV. This holding by the court was not surprising. More surprising was the court’s holding that the fake product producer would violate trademark law even if he kept his advertisement so vague that ordinary consumers would be unable to determine whether or not there was some affiliation between the producer and LV. What this means in practice is unclear. While the European Court of Justice settled the relevant points of law, it did not provide a final answer as to whether the fake product producer was actually infringing trademark law. This depends on whether French consumers were really confused by the advertising link in question. As such matters of fact are not for the European Court of Justice to decide, the court referred the case back to the French courts in this regard.

The court then turned to the liability of Google itself. The court held that b This decision covered not only the lawsuit between LV and Google, but also two other related lawsuits in France, which will not be considered here. In addition, as of November 2010, the European Court of Justice has also ruled on Ad Words-related cases from Austria, Germany, and the Netherlands. No decision on the U.K. case (Interflora) had been issued at the time of writing.