Federal Court of Justice: On Google AdWords trademark complaint

BGH, Decision of 12 March 2015 (case no. I ZR 188/13 – Purchase of watches over the Internet)

Head notes (Excerpt):

a) The filing of a general trademark complaint with the operator of an Internet search engine does not constitute an unfair impediment of competition in the meaning of Sec. 4 No. 10 Act Against Unfair Competition simply because competitors intending to run non-infringing AdWords advertising must acquire the prior consent of the trademark holder.
b) An unfair impediment of competition in the meaning of Sec. 4 No. 10 Act Against Unfair Competition is given if, after submitting a trademark complaint to Google as a result of which the use of the trademark in AdWords advertisements is prohibited, the trademark holder refuses to consent to the AdWords advertising of a competitor, even though the intended advertising does not infringe the trademark.

Annotations

Trademark holders are making increasing use of the possibility of submitting a “trademark complaint” to Google in order to prevent the use of their trademark in the text of AdWords advertisements of third parties. In addition to the fundamentally legitimate purpose of preventing trademark infringement, the trademark holder can also use this instrument to effectively exclude third parties from advertising with the trademark using Google AdWords, even though the trademark holder could not otherwise prohibit the use of its trademark in this form. The Federal Court of Justice was presented with such a legal situation, and faced the question of whether the affected third party can object under competition law against such an action on the part of the trademark holder. The Court found in the affirmative, on the basis that it comprises an impermissible impediment of competition (Sec. 4 No. 10 Act Against Unfair Competition).
 
Google “trademark complaint” is basically permissible under competition law

The Federal Court of Justice first makes clear that the mere submission of a “trademark complaint” to Google does not in itself represent an unfair impediment of competition in violation of competition law, despite the resulting de facto blocking effect. To justify its decision the Court states that the “trademark complaint” initially serves the fundamentally legitimate purpose of preventing trademark infringement, and the trademark holder is able without further ado to approve a third party‘s AdWords advertisement when so requested.

Refusal of consent to an intended noninfringing advertisement represents impermissible  impediment of competition

Conversely, however, it follows that the actions of the trademark holder enter the sphere of impermissible impediment of competition if it refuses to consent to a competitor‘s planned AdWords advertisement featuring the trademark when so requested, even though the AdWords advertisement in question does not violate the trademark.

An impermissible impediment of competition in the meaning of Sec. 4 No. 10 Act Against Unfair Competition may first of all be found if the relevant action is undertaken for the specific purpose of preventing individual competitors from developing, and eliminating them. However, an action may also appropriately be regarded as constituting an impermissible impediment of competition even if undertaken without such an intent if it has the objective result that the affected competitors are no longer able to adequately bring to bear their performance on the market through their own efforts. Whether the latter conditions are met is to be determined by a comprehensive balancing of interests, in accordance with established case law.

Decisive criterion:
Exhaustion of the trademark rights

The decisive aspect for the preponderance of the interest of the competitor prevented from running an AdWords advertisement by the “trademark complaint” and the refusal to grant permission for the use of the trademark of the trademark holder, in the Federal Court of Justice‘s opinion, was the question of whether the trademark holder would be able to prohibit the intended advertisement on the basis of its trademark rights without the trademark complaint. The AdWords advertisement at issue in the present case was an advertisement for the purchase of used original goods (namely ROLEX watches). Without the trademark complaint, the holder of the “ROLEX” trademark would not have been entitled to prohibit under trademark law the use of its trademark in an advertisement for this purpose, as its trademark right in the used original goods has been exhausted through the putting into circulation within the EU of the original watches by the trademark holder or with its consent (Art. 13 Para. 1 Community Trademarks Regulation and Sec. 24 Para. 1 German Trademark Act). The patent holder has no justified legal interest in effectively preventing, by means of a Google “trademark complaint” and subsequent refusal to approve the use of the trademark, an advertisement that would be perfectly permissible under trademark law. Accordingly, the interest of the competitor in being able to run an AdWords advertisement mentioning the “ROLEX” trademark prevails. In addition, consumers performing a Google search have an interest in also being informed about the competitor‘s business trading in original (used) watches of the same brand. Given this array of interests, the refusal by the trademark holder to grant consent to the intended AdWords advertisement is to be seen as an impermissible impediment of competition.

Legal consequence: Mandatory consent obligation on the part of the trademark holder?

As a legal consequence, the Federal Court of Justice affirmed a claim for removal on the part of the competitor, which takes the specific form of an obligation on the part of the trademark holder to consent to the intended AdWords advertisement of its competitor. This somewhat ignores reality, as, according to the authorisation terms in its AdWords trademark guidelines, Google offers trademark holders only the option of authorizing in full particular Google accounts to use the trademark as part of any AdWords advertisements, but not to approve individual advertisements of an account owner or the use of the trademark under certain conditions. This practical aspect played no role in the dispute underlying the Federal Court of Justice‘s decision, as it was apparently not brought up by either party to the case. However, it adds further complexity to the matter, as the trademark holder can thus be compelled first to authorise a competitor‘s  account to use the trademark in its advertising text, regardless of the specific form taken by that use, and then to revoke such authorisation once trademark infringements are identified. It remains to be seen whether Google will respond to the resulting threat of a devaluation of the instrument of the AdWords trademark complaint by amending its AdWords trademark guidelines.

Conclusion

To avoid unnecessary legal disputes, trademark holders may find it advisable after submitting a “trademark complaint” to Google to carefully review competitors‘ requests for authorization to use the trademark in intended AdWords advertisements and to consent to such requests of the intended use if it does not infringe their trademark rights; this applies regardless of the competitor‘s level or type of trade. This may be particularly advisable if the competitor (as in the case at issue) trades in, and wishes to advertise, used – or even new – original items in which the trademark holder‘s trademark rights have been exhausted. Such a case-by-case analysis may be difficult; however, the FCJ expressly holds the associated effort and expense to be a reasonable burden on a trademark holder making use of the instrument of the Google AdWords “trademark complaint”. It remains unclear though to what extent the trademark holder may refuse to grant such authorization to a competitor if such competitor has previously made infringing use of the trademark, but currently states its intent to advertise in a non-infringing manner.