Is using another company’s registered trademark as a keyword for your own online ad (e.g. Google Ads) a trademark infringement or fair marketing tactics? As always, it depends.
Having a trademark registration gives you the right to prevent others from using the same or similar trademark for the same and similar goods and services. According to EU trademark regulation, this also includes the use of the mark in advertising. That being said, there are also exceptions to the exclusive rights granted by trademarks, such as the right to comparative advertising.
The actual situations might vary significantly, but let’s take a simple example that’s perhaps the most common in practice. A company chooses a competitor’s registered trademark as a keyword for its Google ad. The ad itself promotes the company’s own products without mentioning the registered trademark in the ad text or the URL it displays. When the internet user types in the competing brand name (the registered trademark) in Google search, she will be shown an advertisement for a competing product. Is this a trademark infringement or fair game?
According to the EU’s Court of Justice, the trademark owner can prevent the use of keywords in advertising if the advertising has an adverse effect on the essential functions of the trademark. In practice, the EU court has been very permissive towards the use of trademarks in keywords, finding that the essential functions of the trademark are not very easily adversely affected.
When are the registered trademarks adversely affected?
The most important function of a trademark is to distinguish different products in the marketplace. In other words, consumers must be able to distinguish products that come from different commercial origins (the “origin function”). Here, the main question is whether the internet user might mistakenly believe that there is a connection between the trademark owner and the products that are offered in the advertisement. There are a number of factors that are relevant, but the most important is the text of the advertisement. If it is clear that the products offered for sale have nothing to do with the trademark owner, but rather are competing products, there is usually no adverse effect to the trademark’s origin function.
The use of the registered trademark as a keyword by competitors can be costly for the trademark owner. As competitors “bid” for the trademark as a keyword, its price as a keyword will also increase for the trademark owner. In that regard, it has been decided by the EU’s Court of Justice that although trademarks are essential elements in the system of undistorted competition which European law, including trademark laws, seeks to establish, it does not protect trademark owners against practices that are inherent in competition. In other words, even if the price of advertising (i.e. the price of a keyword) goes up for the trademark owner as well, that’s not an adverse effect that can be prevented by resorting to trademark claims.
Trademarks also have an “investment function”. They enable the owners to acquire and preserve the reputation of the brand so that they can be used to acquire or retain clients. If the use of the trademark as a keyword by a competitor interferes with the owner’s use of its own trademark to acquire or maintain its reputation, the owner has a right to prevent such use. If the advertiser makes sure that the origin function is respected (there is no likelihood of confusion), the investment function is not generally adversely affected.
This brings the main issue back to the advertisement itself. In general, if the advertisement that is triggered by the keyword enables a reasonable internet user to easily determine that the advertised product has nothing to do with the registered trademark, there is usually no trademark infringement and the owner of a registered trademark is not entitled to prohibit such use.
“Well-known” trademarks (trademarks with “reputation”) enjoy enhanced protection under EU trademark laws. Usually, the owner of a trademark with a reputation can prevent the use of another trademark even if there is no likelihood of confusion, provided that some extra conditions are met. The requirement is that the use of a later trademark is detrimental to the reputation or distinctiveness of the earlier trademark, or takes unfair advantage of its reputation without due cause. An example of this is where the trademark is used in a way that contributes to it becoming a generic term. But in most cases, where the advertisement is simply for a competing product (not imitations or knock-offs), such use falls within the ambit of fair competition and the user has “due cause” for the use. According to the EU’s top court, not even well-known trademarks can claim any significant enhanced protection against their brands being used as keywords in advertising. As with “normal” trademarks, it boils down to the ad that is triggered by the keyword.
While the EU court has been relatively permissive about the use of registered trademarks as keywords, it should be noted that it is always for the national courts to determine the relevant facts around the case, such as whether the advertisement might lead to likelihood of confusion and therefore a trademark infringement. It cannot be categorically said that just avoiding mentioning the registered trademark in the ad text is always sufficient. For example, if the prior trademark belongs to a loosely organised network of professionals, each of them operating with their own names, just avoiding mentioning the trademark in the ad might not be enough as it could be thought that the advertiser is part of the network. This would constitute a likelihood of confusion and therefore be an infringement of the trademark. So, context matters a lot. Using a competitor’s trademark in advertising, whether it is comparative advertising or keyword advertising, is always risky.