The European Commission has fined Google EUR2.43 billion (approx. AU$3.6 billion) for misusing its market power over internet searches.
According to the Commission, Google has over 90% market share for internet searches in the EU.
The Commission found that Google had abused this dominant position in internet searching by promoting results for its own Google comparison shopping service over results for competing comparison shopping services.
While this is no doubt the start of a long legal process, Ben Thompson at Stratechery has an interesting, succinct analysis of the application of competition rules to Internet players here which is well worth reading.
Katzmann J “gets” the Internet and helps to bring Australian trade mark law well and truly into the 21st century: buying keywords for search engine advertising is not trade mark use. some instances of the use of the trade mark in the sponsored links, however, did infringe.
Malouf is business which helps people who get a bad credit report repair or correct that report.
Veda is a credit reporting agency. Amongst other things, it has registered VEDA in class 36 as a trade mark for:
Financial services; provision of credit risk, financial and asset information and reports; credit scoring and risk assessment services; information provision, advice, research, appraisal, analysis, credit enquiry and consultation ….
Malouf bought advertisements for its business on Google search results pages using the Google AdWords program. Through that program, the advertiser selects terms – keywords – for which, when someone does a “Google” search including one of those keywords, they will pay to have their advertisement appear as an advertisement – a sponsored result – in the search results pages. The keywords Malouf chose included VEDA and 85 other terms using it such as “contact veda”, “veda credit score” etc. Mr Malouf explained his strategy:
So, with Veda approximately anywhere from 20 to 40 per cent — which is published on their website — of people may have an adverse credit history with a credit reporting body. A lot of them don’t know that they’ve got bad credit. So, potentially, one in five customers that are trying to contact Veda may be our target market. … [W]e want to have our ad showing up — anyone trying to contact Veda — because, potentially, one in five of those customers may be wanting to fix their credit file.
Over time, the advertisements Malouf paid to place took 3 forms. Until October 2014, they were along the lines of these sponsored links:
After September/October 2014, the sponsored links did not feature “Veda” in the text.
This gave rise to two main issues: (1) did the use of “keywords” infringe and (2) did the uses in the actual advertisements (sponsored links) infringe?
Katzmann J held that Malouf’s “purchase” of keywords using VEDA did not infringe Veda’s trade marks. It was not use as a trade mark. Her Honour gave 3 reasons:
First, all Malouf did was select the keywords and provide them to Google. In doing that, objectively, it was not using the words to distinguish its services from those of other providers. “Rather, it has used them to identify internet users who may have an interest in using [Malouf’s] services.”
Second, anyone could acquire the keywords, not just Malouf. This was not determinative, but it was a consideration. What it meant was that anyone, including any of Malouf’s competitors could also “buy” the same keyword(s). Thus, the keywords were not performing the function of a trade mark: distinguishing (identifying) the trade source to the exclusion of all others.
Thirdly, and perhaps most significantly, the keywords were invisible to consumers. Katzmann J explained:
… the proposition that using words which are invisible and inaudible, indeed imperceptible, to consumers is using them as a trade mark makes no sense. How could the keywords be understood to be used to distinguish the services of one trader from those of another when the keywords are indiscernible? How could it appear to consumers that, by Malouf’s designation of the Veda keywords to Google, the words are used to denote a connection in the course of trade between Malouf’s services and the services provided by another trader, or to distinguish its services from the services of others, when the consumers have not seen or otherwise perceived the keywords?
Also, when the consumer did not search on the term VEDA alone, how would he or she know which term(s) generated the search results?
At this point, Veda relied on Accor. Katzmann J, however, pointed out, first, that Accor involved metatags, not keywords. More significantly, her Honour noted Accor was inconsistent with Kenny J’s ruling in Complete Technology where Kenny J had said:
I do not accept that the use of any of CTI’s Registered Trade Marks in Green Energy’s metatags would constitute a trade mark infringement for the purposes of s 120(1). Metatags are invisible to the ordinary internet user, although their use will direct the user to (amongst other websites) Green Energy’s website. Once at the Green Energy website, then, in the ordinary course, the internet user will be made aware that the website is concerned with Green Energy’s services. It cannot, therefore, be said that the use in a metatag of CTI’s Registered Trade Marks is a use that indicates the origin of Green Energy’s services.Thus, metatag use is not use as a trade mark …. (emphasis supplied by Katzmann J)
Katzmann J agreed with Kenny J’s analysis.
Katzmann J then rejected Veda’s reliance on 2 New Zealand cases and the CJEU’s decision in Google France. They were decisions in a different context and, in any event, the English courts since Google France had held that keywords did not infringe.
Whether the sponsored links which used Veda in their text infringed turned on the nature of the actual use.
Malouf had used expressions like “Clean Your Veda File”, “Fix My Veda History”, “Get Your Veda Report File”, “Veda Credit File Repairs”, but also “The Veda Report Centre” and “The Veda-Report Centre”.
Katzmann J held that the uses like “Clean Your Veda File” were descriptive and used in a descriptive rather thant trade mark sense:
In all but the advertisements featuring “The Veda Report Centre”, I am not satisfied that Malouf has used the Veda Trade Marks as trade marks. Rather, it seems to me that they have been used to describe the object to which its services are directed — fixing, cleaning or repairing Veda credit files or reports — not as a badge of the origin of its business and therefore not as a trade mark. …. the Veda Trade Marks have not been used by Malouf to distinguish its services from those provided by others but to describe the kind or character of the services it provides. ….
The Veda Report Centre, however, was a different case. That was used as a badge of origin to market the Malouf business under the Veda name.
The second conclusion seems to me, with respect, uncontroversial. I also personally agree with the first conclusion that the descriptive uses were not infringements too. In the “old days”, that would have been beyond controversy as the case law clearly established that use of the trade mark Yeastvite in an expression such as “Substitute for Yeastvite” was not use as a trade mark – use of a registered trade mark to refer to the products which the trade mark owner marked with the trade mark was not trade mark use. What the North Americans call “nominative fair use”.
The wrinkle here is that, with the introduction of s 123 into the Act, the High Court has left open the question whether that “old” law is still “good” law. Following that, a number of Full Courts – in which the question did not arise because the goods in question were in fact pirate or counterfeit goods, not genuine goods – have proceeded on the basis that the “old” rule no longer applies.
Even if the Full Court (assuming there is an appeal) continues down that, with respect, heretical path, all may not be lost as Malouf did invoke s 122 in its defence. In reaching her Honour’s, with respect eminently sensible conclusion, Katzmann J did note that it was unclear from the case law how s120 related to s 122. In any event, her Honour found that Malouf could rely on the s 122 defence except in relation to the usage “The Veda Report Centre”. Katzmann J rejected Veda’s arguemnt that the sheer number of keywords showed a systematic and targetted attempt to undermine the registered trade mark. Almost all of those uses were not infringements.
As with the trade mark infringement case, the allegations of misleading or deceptive conduct all failed except in respect of the “Veda Report Centre” usage in the sponsored links.
Marks & Spencer has been found to have infringed Interflora’s trade mark in the UK by ‘buying’ ads triggered by Google searches for the keyword INTERFLORA.
An example of the ads Arnold J found infringing:
In Google France, the CJEU established that an advertiser would infringe a registered trade mark when its ads were triggered by a trade mark as a keyword where: 
“82 The essential function of a trade mark is to guarantee the identity of the origin of the marked goods or service to the consumer or end user by enabling him to distinguish the goods or service from others which have another origin (see, to that effect, Case C–39/97 Canon  ECR I–5507, paragraph 28, and Case C–120/04 Medion  ECR I–8551, paragraph 23).
83 The question whether that function of the trade mark is adversely affected when internet users are shown, on the basis of a keyword identical with a mark, a third party’s ad, such as that of a competitor of the proprietor of that mark, depends in particular on the manner in which that ad is presented.
84 The function of indicating the origin of the mark is adversely affected if the ad does not enable normally informed and reasonably attentive internet users, or enables them only with difficulty, to ascertain whether the goods or services referred to by the ad originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party (see, to that effect, Céline, paragraph 27 and the case-law cited).
85 In such a situation, which is, moreover, characterised by the fact that the ad in question appears immediately after entry of the trade mark as a search term by the internet user concerned and is displayed at a point when the trade mark is, in its capacity as a search term, also displayed on the screen, the internet user may err as to the origin of the goods or services in question. In those circumstances, the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark (see, by way of analogy, Arsenal Football Club, paragraph 56, and Case C–245/02 Anheuser-Busch  ECR I–10989, paragraph 60).
Arnold J found on the evidence that a significant section of the public were confused and so Marks & Spencer infringed.
It is not possible to do justice in a blog post to the full range of reasons contributing to his Lordship’s conclusion. Some that stand out follow.
Arnold J accepted (at ) that the majority of UK internet users appreciated the difference between paid ads and natural or organic search results, but there was still a significant proportion of internet users in the UK who did not. His Lordship also accepted that “nowadays” the majority of consumers appreciate .
nowadays the majority of consumers appreciate [they are being presented with ads by competitors to the brand they had searched for]. But I consider that a significant proportion do not. (emphasis supplied)
Secondly, the nature of the INTERFLORA brand appears to have been crucial. As you will no doubt be familiar, INTERFLORA is a network. It operates through a network of agents who are usually (always?) branded under their own names and trade marks. Those customers who were not buying online from “interflora.co.uk” or “interflora.com”, for example, would typically go into a retail outlet operating under its own name (and which may display the INTERFLORA name and logo).
The significance of this (at  and ) was that there was great potential for those customers who realised they were dealing with Marks & Spencer when they clicked on the ad mistakenly to think it was part of the INTERFLORA network.
That potential was in fact borne out by the evidence. In particular, there was evidence from “Hitwise data” that people who (1) searched on the keyword INTERFLORA and (2) as a result clicked on a Marks & Spencer ad generated in response to the search (3) were between 44 and 106 times more likely than the average visitor to the M & S flowers site to leave the M & S site without purchasing and instead go on to an INTERFLORA site.
At  – , his Lordship accepted the propositions that:
a significant number of consumers in Segment A decided after they had clicked through to the M & S website that it was not where they wanted to be and went to the Interflora website instead. The second is that the reason for this change of mind was that those consumers had clicked through from the M & S advertisement because they assumed from the appearance of the advertisement in response to their search that M & S was part of the Interflora network, but they realised that that was not the case when they clicked through to the M & S website and saw no reference to Interflora.
and such “initial interest” confusion was itself enough for trade mark infringement.
Thus, while Google doesn’t infringe by ‘selling’ keywords, the advertiser may and, in this case on Arnold J’s findings, did.
What, if anything, does it mean for us?
First off, the judgment is full of fascinating details about the “AdWords” and “search” market and the strategies that businesses deploy. For example, it appears that Google held around 90% of the global search (and paid advertising relating to search) market, with Bing and Yahoo! trailing out of site. There are also discussions of market research reports and Ofcom studies into what consumers understand when using the internet.
It is not clear whether Arnold J’s reasoning will provide us with much assistance here. First, while EU law does not appear to require use as a trade mark to infringe, the origin function referenced by the CJEU in Google France appears similar to our concept of use as a trade mark – as a badge of origin or to identify the trade source.
Secondly, it seems doubtful that the considerations identified in  of Google France would be relevant at all under our law. The idea of examining whether the “normally informed and reasonably attentive internet users” could ascertain the trade source from the ad, or do so “only with difficulty”, indicates that the content of the advertisment may make it clear that the trade mark owner is not the source of the advertised product. However, a registered trade mark is infringed in Australia even if the trade source is made clear, for example by a disclaimer or other identifying factor. The type of analysis being engaged in under EU law is rather more like what would take place in a passing off action or action for misleading or deceptive conduct.
Thirdly, our law does recognise the idea of “initial interest confusion”, but the number of people who apparently went to M & S’ website and “clicked away” does rather highlight the difficulties with the concept as applied to web searches: clicking the back button, or even doing another web search in the browser, is not so costly as walking out of the shop, hopping back in your car and going looking for the intended destination.
Arguably, the most significant point could be the starting point identified at  – the Court of Justice’s recognition that:
keyword advertising is not inherently or inevitably objectionable from a trade mark perspective. On the contrary, the case law of the CJEU in this field recognises that, as a general rule, keyword advertising promotes competition ….
On this view, it was only the very special nature of INTERFLORA as a ‘network’ that convicted Marks & Spencer.
For example Southern Cross v Toowoomba at  but, at least in the context of misleading or deceptive conduct / passing off (yes, I know this is a post about registered trade marks) some brake may be imposed on that in at least some cases. ?
The High Court unanimously allowed the appeal. Google did not create the sponsored links that it published or displayed. Ordinary and reasonable users of the Google search engine would have understood that the representations conveyed by the sponsored links were those of the advertisers, and would not have concluded that Google adopted or endorsed the representations. Accordingly, Google did not engage in conduct that was misleading or deceptive.
French CJ, Crennan and Kiefel JJ delivered the principal judgment, Hayne J and Heydon J each delivered separate concurring opinions.
Google Inc v Australian Competition and Consumer Commission  HCA 1
The ACCC has successfully appealed the Google Adwords case for misleading and deceptive conduct.
So, for example, Alpha Dog Trainging has been operating a dogtraining business for 12 years. Dog Training Australia (Ausdog) bought ads on the keywords Alpha Dog Training through Google’s Adwords program. One ad generated was:
Alpha Dog Training
DogTrainingAustralia.com.au All Breeds. We come to you. No dog that can’t be trained.
Instead of being taken through through to Alpha Dog Training’s website, however, a user who clicked on the ad was taken through to Ausdog’s website.
A clear case of misleading or deceptive conduct by Ausdog.
Because of its role in “selecting” which ads got placed in what order, Google has also been found liable.
Prof. King, formerly an ACCC commissioner, highlights why and thinks the Court got it seriously wrong.
Dr Mark Summerfield has an interesting post demonstrating some work he and his colleagues have been doing modelling the ownership of patents in the smartphone space.
In their mobile technology landscape, or themescape, they seek to demonstrate pictorially:
Samsung appears to own key hardware patents;
Microsoft seems to own most software patents;
but Apple seems to have highly strategic patents.
The themescape also seeks to demonstrate that Google was a long way behind, but may be catching up if it gets to acquire Motorola’s patents.
Dr Summerfield does express some frustration:
It is therefore ironic – and some might say more than a little unfair – that Apple should be in a position to frustrate Samsung’s attempts to compete against its iPhone and iPad products, while the FRAND obligations associated with Samsung’s much larger patent portfolio leave it in a strategically weakened position.
In this context, it is hardly surprising that Samsung is in the Federal Court of Australia arguing that it should not be barred from obtaining an injunction against the iPhone 4S on the basis of the FRAND status of the patents which it is asserting against Apple.
But one might equally wonder why Samsung should be allowed to get injunctions on the basis of its so-called FRAND patents (assuming the fair and reasonable royalty is forthcoming) when it apparently volunteered its patents for inclusion into various standards in return for FRAND obligations? This FRAND-type issue has been around since at least the 1980s and led to this basic position.
Foss Patents also has a relatively recent round up of where many of the litigations between the various smartphone manufacturers currently sit.