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16 September 2016 AdWords: Paragons or Parasites?

By Eric Ziehlke, Partner

Summary

A recent Federal Court case has affirmed the position in Australia that the use of AdWords generally does not constitute trade mark infringement because it does not represent trade mark use.

AdWords

"AdWords" are marketed by Google and they can be very frustrating to the owners of well-known brands.  AdWords of major brands can be purchased by third parties from Google so that the landing page of the third party pops up whenever an internet searcher selects the major brand.  Many people have seen this activity as being parasitic on the reputation of major brands.

Target market

The recent case of Veda Advantage Limited v Malouf Group Enterprises Pty Limited (2016) FCA 255 concerned the VEDA brands of credit rating services.  These brands are owned and marketed by Veda Advantage which is reportedly the largest provider of credit ratings in Australia.  A bad Veda credit rating can seriously affect the commercial activities of businesses and individuals.  Malouf Group provide "credit repair" services to its clients which it carries out by challenging companies such as Veda Advantage to justify their individual credit ratings.

Trade Mark Use

Malouf Group had purchased the word VEDA as an AdWord from Google. Normally, when an internet enquirer searches under the word VEDA, the search engine then discloses relevant search data output which presumably would include the Veda Advantage site.  However, the effect of the AdWords process was that the Malouf landing site would also pop up automatically on the right-hand side of that search data output.

At issue was whether this use of the AdWords process by Malouf represented trade mark infringement of the VEDA trade marks under Section 120 of the Trade Marks Act ("Act").  The central question was whether the use of this AdWord by Malouf constituted use of the trade mark as a "badge of origin".  The Court referred to the respected trade mark publication "Shanahan's Australian Law of Trade Marks and Passing Off" (Fifth Edition) in which it was stated that use of keywords did not constitute use as a trade mark but merely presented alternative products or services to the consumer.  In the VEDA situation, these keywords were not visible to the consumer.  The Court observed that in Accor Australia & NZ Hospitality Pty Limited v Liv Pty Limited (2015) FCA 554 it was held the trade mark infringement could occur even though the relevant keywords were not visible to the consumer.  The Court found in that case that the trade mark use was "visible to those who know what to look for".  This reasoning in Accor differed from the earlier Federal Court decision in Complete Technology Integration Pty Limited v Green Energy Management Solutions Pty Limited (2011) FCA 1319 in which it was held that the use of keywords as metatags did not constitute use of a trade mark if they were not visible to the consumer.

Decision

The lawyers of Veda referred to the European case of Interflora Inc and Interflora Business Unit v Marks & Spencer plc and Flowers Direct Online Limited (2010) EWHC 925 CH in which the definition of trade mark infringement by the use of metatags was much more broadly defined.  However, in the VEDA case, the Court noted that it was constrained by the terms of Section 120 of the Act and that the foregoing European case had little relevance to the terms of that Act.  The Court found that as the relevant keywords were not visible to the consumer, trade mark infringement by the use of these metatags had not occurred.  In so doing, the Court appeared to be affirming Green Energy rather than Accor.  Nonetheless, the Court did find that within its own website, Malouf had made extensive use of the words VEDA REPORT CENTRE in a way which constituted trade mark use and had therefore infringed the foregoing trade mark.  Malouf had claimed this use was merely descriptive or comparative under the defence provisions of Section 122 of the Act but the Court found that Malouf had failed to meet the onus under this section. 

Comment

The above case appears to affirm the view in Green Energy that the use of metatags which were not visible to consumers did not constitute trade mark use, although it might be argued that Green Energy could be distinguished from Accor on the facts of the respective casesThe fact that trade marks infringement was actually proven in relation to the use by Malouf of the VEDA REPORT CENTRE trade mark on its own website was essentially a side-issue.  It appears that Australian trade mark law may be out of step with Europe in this regard and it could be that any future restriction on the use of metatags may come by way of international trade agreements or alternatively by commissions of inquiry which ultimately result in legislative changes to Section 120 of the Act.  The result in this case does not necessarily preclude the possibility of successful actions against the use of metatags based on misleading or deceptive conduct.

Google, as the supplier of the AdWords was not a party in this action but the position of intermediaries such as Google was strengthened by the High Court decision in Google v ACCC (2013) 249 CLR 435 in which Google was found to not be liable for misleading and deceptive conduct in relation to its keyword marketing business because it had only acted as an intermediary in relation to the use of those keywords.  

Eric Ziehlke, Partner  |  Phone: +61 2 9233 5544  |  Email: ejz@swaab.com.au

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This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.

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