The line between lawful and infringing use of trademarks in Google Ads
by Jenny Nondal and David Brambani
In the recent case LB-2021-20075, Borgarting Court of Appeal found that use of a competitor's trademarks as paid search terms in Google Ads was lawful. The use of the competitor's trademarks, as part of the adverts themselves, was found to be unlawful. The decision further includes guidelines on the scope of trademark protection for elements of registered trademarks, the threshold for establishing trademark protection by use and the level of economic compensation due for infringement.
Kystgjerdet used "NORGESGJERDE" and "VINDEX" in its advertising. The marks appeared in some adverts. For other adverts, the marks were only used as paid search terms. For the latter, the paid search terms would only be visible in the Google search field. The court had to decide on whether this use was contrary to the Norwegian Trademark Act and Marketing Control Act.
Norgesgjerde AS' text and device trademark:
Vindex AS' text and device trademark:
The scope of protection for a registered mark
As stated above, "NORGESGJERDE" is registered as a text and device trademark. Trademark protection extends to the dominant elements of the trademark, provided that these elements are sufficiently distinctive alone to be protected as a trademark. The court found the text "NORGESGJERDE" to be the dominant element of the trademark and did not consider it as descriptive of the fences the mark is used for, as the text does not describe any of their characteristics. The court took into account a market survey conducted on behalf of Kystgjerdet, where 80% of the respondents who had heard about "Norgesgjerde", perceived fences called "Norgesgjerde" as originating from a specific producer.
Trademark protection established by use
"VINDEX" is not registered as a trademark for PVC fences. The court found that "VINDEX" is well known to the average consumer "as a distinguishing mark" for PVC fences. Thus, the court found that the mark had obtained trademark protection. The court emphasized that Vindex had used the mark consistently for all its products, and that the use had resulted in a distinct goodwill connected to the mark. The court stated that when the average consumer rarely purchases the relevant product or service, the threshold for finding a mark to be well known to the average consumer "as a distinguishing mark for the relevant goods" decreases.
In its assessment, the court referred to a market survey showing that only 9% of the respondents had heard about Vindex, and out of these only 2% associated "VINDEX" with fences or rails. Consequently, trademark protection can be established by use although only a few respondents in a market survey have heard about the mark. However, the court was in doubt and we still recommend registration, as registration provides national protection and predictability. Trademarks established by use may obtain limited local protection, and whether a trademark has established such protection is often uncertain.
How to avoid infringement?
The court found that Kystgjerdet's use of "NORGESGJERDE" and "VINDEX", when appearing in its adverts, "obviously" represented a trademark infringement.
However, the use of third-party trademarks as paid search terms was not found to represent a trademark infringement. With reference to the Supreme Court's decision in the Bank Norwegian case, the use of third-party trademarks as paid search terms was considered to present a broader selection of the market to consumers, resulting in healthy and loyal/fair competition and not adversely affecting the trademark's investment function. The fact that the trademark holder must increase its marketing efforts to maintain its reputation and goodwill is not relevant.
Consequently, a company may use its competitors' trademarks as paid search terms as long as the search terms do not appear in the adverts.
The calculation of compensation awarded to Vindex and Norgesgjerde.
The reasonable license fee was doubled, from 5% to 10%, as the court found that Kystgjerdet had exercised at least gross negligence with regards to the infringement.
The decision has been appealed to the Supreme Court and has thus not entered into force.
We regularly advise on strategy for protection of trademarks and marketing. If you have any questions regarding the protection of your company's trademarks or advertising, do not hesitate to reach out to any of our IP lawyers.