AdWords: Paragons or Parasites?


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” 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.


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. 


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 cas­es. The 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.