Ruling Could Spell Trouble for Googles AdWords

A French appeals court ruling against Google could mean more legal woes for the company's AdWords advertising program.

A French appeals court ruling against Google Inc. last week could mean more legal trouble for the companys AdWords advertising program, said a specialist in IT law.

The Versailles Court of Appeals upheld an October 2003 judgment in a decision published on Wednesday, ordering Google to stop allowing the linking of advertisements to search terms trademarked by two travel companies. Google must also pay 75,000 euros ($100,300) in damages to travel firms Luteciel SARL and Viaticum SA, the court said.

The companies sued Google because the search giant allowed competitors such as EasyJet to display their ads when users searched for two trademarked phrases: "bourse des vols" ("flights exchange") and "bourse des voyages" ("travel exchange").

A Google spokesperson said the company is still considering whether to appeal the case. Google may also appeal a similar decision from February involving Louis Vuitton, but hasnt yet made a decision, the spokesperson said.

At stake is the advertising systems with which Google and other search engines, such as Yahoo Inc.s Overture, generate most of their revenues. Googles AdWords allows advertisers to link their advertisements against search keywords, including words that are the registered trademarks of competitors.

/zimages/3/28571.gifClick here to read about how AdWords fits into Googles product formula.

The recent decisions in France are broadly in line with previous decisions in the United States, which have generally gone in favor of trademark holders over search engines. But in December a landmark U.S. case was decided in Googles favor against a trademark holder, leading to a conflicting U.S.-EU legal situation, legal experts say.

In mid-December, a federal judge dismissed the major claim in a lawsuit by the Government Employees Insurance Co. GEICO had accused Google of undermining its trademark and confusing consumers by allowing GEICO competitors to bid on the insurers trademark to return the sponsored links that appear alongside Web search results.

The U.S. court ruled that there was no likelihood of confusion because users would recognize that the sites in question were not affiliated with GEICO. On another claim, however—involving the issue of trademarked terms within the ads themselves&$151;the judge asked both parties to work on a settlement.

Last weeks decision reinforces the differences between the French and U.S. legal climates on the issue, and is more significant in that it comes from an appeals court, lawyers said.

The Versailles decision is the first Court of Appeals ruling on AdWords and creates a precedent that will influence the Tribunals de Grande Instance under the Versailles jurisdiction, said Olivier Hugot, an attorney with Paris-based law firm Hugot Avocat, which specializes in IT and intellectual property issues. "It seems unlikely that the various Tribunals de Grande Instance over which the Versailles Court of Appeals has jurisdiction are going to go the other way now, even if new legal arguments are developed by Google," Hugot said.

For example, this would include an earlier AdWords decision involving Le Meridien, handed down by the Nanterre Tribunal, which is under the Versailles Court of Appeals jurisdiction. On the other hand, the Vuitton case, if appealed, would go to the Paris Court of Appeals, which hasnt yet rendered any decision on the matter, Hugot said.

There is no binding precedent in France until a decision is made by the French Supreme Court, the Cour de Cassation, he said.

The recent decisions make it more likely that Google will face further lawsuits, Hugot said. "Companies are probably going to be looking closely to see if a search for their trademark will trigger AdWords results, and if this is the case, my guess is they would be more prompt to file a suit against Google than they would have been a year or two ago," Hugot said.

Besides eliminating AdWords—which is unlikely—Google may be able to head off legal threats by imposing better controls on how the system works. The appeals court found AdWords problematic partly because Google didnt control the keywords reserved by its customers, and suggested keywords to customers without first verifying whether the words infringed trademarks.

If Google controls the keywords more closely, it would go a long way toward eliminating possible infringement, although the company could still be liable for trademarked keywords that slip through, Hugot said. "It is unclear whether Google would still be liable if the actions taken are not sufficient to completely stop such triggering," he said.

If Google decides not to settle the cases already filed, it may still be able to convince the courts of its arguments, because of some ambiguities in trademark laws, Hugot said.

"Google does not generate trademarks, but words that may be protected by trademark law," he said. "Its true that there is a reproduction of trademarks, but reproducing a trademark is not always an infringement. A judge might accept this reasoning and consider that offering such a service is not an infringement."

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