Google Ads in the Supreme Court

by Halvor Manshaus


Woman working on laptop
The Norwegian Supreme Court recently rendered its decision in a landmark case regarding the use of competitors' names and brands in digital marketing. Traditional marketing in print, radio and television has seen a significant shift towards digital platforms targeting consumers through search engines, social media and digital entertainment. This has opened up a variety of complex legal issues regarding how the advertiser can present content, services and products in relation to competitors in the same market.

The core issue at stake before the Supreme Court in this matter was Bank Norwegian's use of the names of its competitors as paid search terms in Google Ads (previously known as Google AdWords). Most readers will be familiar with the interface of the Google search engine, where search results are presented in a qualified list, visibly divided into two separate parts. The top part displays ads that are relevant to the search query, with the actual search results being presented by order of relevance in the following list. The list of relevant ads is generated through an auction system, executed for every search query entered into Google's search field. 

The algorithm handling this auction will review the list of bidders and perform a ranking based on a series of factors, where bidding price and relevance are the most important. This means that a high degree of relevance normally will give rise to a lower bidding price, and vice versa. In this auction scheme, the owner of the brand can very well expect to be outbid by a competitor for a position in the displayed list of relevant ads. This not only means that the competitor can outperform the brand owner using the brand name, but that the price for winning the auction will grow correspondingly higher. Since these auctions are held for every search input into Google, thousands of auctions have been held since you started to read this short article. The payment for the auction (from the successful bidder to Google) is processed when a Google user clicks the search result in the ads-section of the result list. Typical generic search phrases such as "insurance" and "loans" are at the very top of the price list for these auctions, with searches for category brand names tending to sell for lower prices.

Bank Norwegian had successfully bid for the names of its competitors Komplett Bank, Ikano Bank and Monobank as paid search terms in Google Ads. In technical terms, this meant that whenever anyone performed a search using the terms "ikano bank", "komplett bank" or "monobank", the list of results would display ads from Bank Norwegian in the first part of the result list as described above. The plaintiffs in this case, the three banks whose names were used by Bank Norwegian, complained that this represented an unfair business practice as per the Marketing Control Act section 25. The plaintiffs first brought their case before the Council dealing with unfair marketing practices (Næringslivets Konkurranseutvalg – NKU), which found in the plaintiffs' favour. Oslo District Court and Borgarting Court of Appeal[1] however, both found in favour of Bank Norwegian, pointing especially to case law from the Court of Justice of the European Union ("CJEU").

EU case law has in general terms applied a liberal perspective to the use of trademarks in advertising as described above, and the plaintiffs instead invoked the rules against unfair business practice. Thus, a core element for the Supreme Court was to examine if the Marketing Control Act section 25 supplied additional protection for the brand owners in addition to and separate from that offered under the trademark law. In its decision, the Supreme Court first recapitulated the extent of the trademark protection offered against brand name auctions of the type offered by Google, pointing directly to specific CJEU cases.

The Supreme Court concluded that the EU Trademark Directive and the case law from the CJEU does not prevent the application of other national rules and regulations that provide additional protection to brand owners, the plaintiffs in the present case.[2] Applied towards the Marketing Control Act section 25, this regulation can then be applied in cases where the trademark regulations fail to capture or regulate certain elements of the alleged infringement. This position is consistent with the Supreme Courts previous case law in key cases such as the "Ice cream" judgment in Rt. 1998 p. 1315 and the "Mozell" judgment in Rt. 1995 p. 1908.    

This means that the Supreme Court must perform a case-specific analysis in order to establish if the general provision of the Marketing Control Act section 25 can be applied as a supplement to the specialized trademark regulations, even if there is no violation or infringement of the latter. The Supreme Court first points out in section 84 of its ruling that the action subject to the dispute is the application of brand names, which by its nature falls within the scope of trademark regulations. This gives a very narrow opening for further employing trademark-like arguments in the application of the general provisions of the Marketing Control Act section 25. The Supreme Court refers to the CJEU in the Google France-ruling (joined cases C-236/08 to C-238/08) in section 87:

"Although it thus proves to be the case that advertisers on the internet can, as appropriate, be made liable under rules governing other areas of law, such as the rules on unfair competition, the fact nonetheless remains that the allegedly unlawful use on the internet of signs identical with, or similar to, trade marks lends itself to examination from the perspective of trade-mark law."

In practice, this meant that trademark-like arguments were already consumed, leaving little or no room for applying identical or highly similar arguments in a test of infringement under the Marketing Control Act section 25. Thus, the plaintiffs main arguments concerning "snylting", that Bank Norwegian was freeloading and piggybacking off the goodwill of the plaintiffs' brand names, could not be presented as supplementary arguments under section 25. The same was held for arguments relating to the hidden nature of the auction and selection process for the ads presented to the consumer; this was considered as part of the analysis under the trademark regulations. The Supreme Court also did not find sufficient basis for deviating from previous CJEU statements, which held that auctions for brand names stimulate healthy and loyal competition.

This latter aspect of healthy competition is a key component in the Supreme Court ruling, but despite this it is discussed only briefly, in the final sections 94-95. A persuasive argument for applying the Marketing Control Act section 25 will normally be the disloyal actions of the offending party towards other professional parties acting in the same market. However, since the Supreme Court concurred with the CJEU that bidding for third party brand names makes for healthy and loyal/fair competition, this leaves no room for arguing that the same action is also disloyal/unfair and constitutes a breach of section 25.

The Supreme Court in this ruling gives a summary of its understanding of existing case law from both the European and Norwegian perspective and provides further guidance as to where there might be room for the supplementary application of general provisions such as the Marketing Control Act section 25 to specialized provisions such as the Trademarks Act section 4 on protection of trademarks. The result of any pending case will turn on the specifics and nature of that matter, where disloyal/unfair actions and distance to normal industry practice will be important factors.

[1] We have previously written an article about the latter case before Borgarting Court of Appeal in Lov & Data 2019 nr 1 page 21-23

[2] The Court of Appeals in the preceding round also pointed to our commentary to the Trademarks Act, where we take the position that EU case-law has a an important role in the interpretation of Norwegian Trademark Law.

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