Court rules that trademarks may be used by competitors in search engine ads
In one respect, Google’s policy has been uncontroversial due to the European Court of Justice’s ruling in Interflora, which determines that such keyword practice does not amount to trademark infringement as long as there is no consumer confusion. The problem is that unlike national trademark laws, national marketing and unfair competition laws are not harmonized at the EU-level. To some extent, this opens up for the application of stricter rules at the national level.
The recent ruling from the Asker and Bærum District Court establishes that the use of a competitor’s trademark does not “conflict with good business practice among traders.”
Bank Norwegian, the leading Norwegian consumer lending bank, was on 4 January 2018 acquitted in a lawsuit brought by three competing banks for alleged breach of Section 25 of the Marketing Act’s provision on good business practice between traders. The court held that the Marketing Act does not prohibit this type of advertising. The case deals with Bank Norwegian’s advertising practices on the Internet. Specifically, Bank Norwegian uses its competitors’ trademarks to generate advertisements, hereunder consumer traffic, for its competing loan products.
The decision is the first court ruling in Norway dealing with this issue and overrules five previous non-binding decisions (or recommendations) by Næringslivets konkurranseutvalg (the “Norwegian Business and Industry Committee”), which handles complaints among traders under the Norwegian Marketing Act. The Committee has previously consistently concluded that the Marketing Act prohibits the use of third parties’ trademarks as search engine keywords for triggering advertisements for similar products.
The Marketing Act stipulates that “no act shall be performed in the course of trade which conflicts with good business practice among traders.” Search engine advertising, in particular where the advertiser uses a competitor’s trademark in a commercial context, has proliferated in the last decade, becoming a major marketing channel. This is particularly true for products and services that are offered and sold online. This form of marketing is made possible by Google’s keyword bidding system, which enables competitors to bid on trademarks and other related terms as search engine triggers.
The court pointed out that the committee has, in several cases, established a strict practice. The court further reasoned that the consequence of the European Court of Justice’s ruling in the Interflora case must be that the use of trademarks as keywords, as a general rule, cannot be regarded as “free-riding” in the sense of the trademark directive. That is, the practice does not unfairly take advantage of others’ goodwill, as long as the purpose is to offer consumers alternative goods or services. Consequently, as long as traders do not offer imitations or otherwise infringe or dilute a trademark or the acquired and associated goodwill of a particular product or service, it is fully permissible to offer alternative goods and services – irrespective of whether the advertisement is triggered by a consumer’s initial search of a particular trademark. Such marketing practices constitute a healthy and loyal competition.
In its assessment, the court first concluded that the use of the trademarks as a paid keyword does in fact to some degree interfere with the exclusive rights of the trademark holder. However, it is commonly known that Internet searches in the various search engines contain a mixture of organic and paid search results. Seeing that the design, content, wording, and location of the relevant advertisements made it adequately accessible the for the average consumer to determine the source of the advertisement, even without the need to click on the advertisement link, the advertisements were not misleading or unclear. As such, the advertisements did not constitute “hidden door openers.”
It was also noted in the ruling that the consideration of the efforts behind a protected trademark is significant. The court nonetheless concluded that the practice in question was not parasitic in nature, nor unreasonably exploitative of the competitors’ accumulated goodwill.