“Use in commerce” or “Use in the course of trade”: The Conflict Between U.S. and E.U. Trademark Protection

By Luke Peterson

Google continued its recent string of IP litigation with a favorable decision before the European Union Court of Justice Grand Chamber. Google France v. LVMH, Case 236-08 (2010). The controversy focused on AdWords, one of Google’s most irritating if not remarkably successful features. AdWords functions by allowing advertisers to link their advertisements to keywords entered in a search; each search including that word triggers a tailored list of sponsors on the results page. For example, a search for “ties” might yield a list of “Sponsored Links” including “Men’s Warehouse” and “Buy ties at Tieguys.com.” Advertisers select the keywords, insert a description, and link to their sites. Google arranges ads according to the price-per-click contract rate, number of clicks, and overall quality.

Vuitton alleged that the AdWords program unlawfully permitted a number of purveyors of imitation Vuitton bags to link their website to a search of the designer’s premier trademark. In effect, Google enabled advertisers to use the Vuitton trademark to attract business. Rather than attack each instance on a case-by-case basis, Vuitton sought relief from the big cheese. Google was found to have violated Vuitton’s copyright in both the Tribunal de grande instance de Paris and Cour d’Appel de Paris. However, the Cour de Cassation stayed the judgment and referred the issue to the E.U. Court of Justice for interpretation of Directive 89/104.

Article 5 of Directive 89/104 (now superseded by 2008/95/EC) gives the holder of a trademark the right to prevent third parties from using an identical or similar sign in relation to identical or similar goods without the holder’s consent in the course of trade. In this case, the advertisers used the Vuitton name, sometimes in conjunction with terms like “fake,” “imitation,” or “replica” to link to a site offering to sell identical “Vuitton” leather bags and goods. The advertisers used the trademark to draw consumers to its web site for economic gain, which falls under the gambit of Directive 89/104.

While providing the technological means for using the trademarks in advertising, the Court determined that Google did not “use” the trademark within the meaning of the Directive. “The fact of creating the technical conditions necessary for using the sign and being paid for that service does not mean the party offering the service itself uses that sign.” See LVMH ¶57. Google permitted others to use the mark in the course of trade; however, its own use was limited to storing the mark and making it available to advertisers. The economic gain Google received derived from its service, not the use of the mark.

Interestingly, the COJ interpretation runs counter to the decision just one year ago by the Second Circuit on essentially the same question under U.S. law. Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009). In that case, the Second Circuit addressed whether Rescuecom could survive a 12(b)(6) motion, but did not indicate whether Rescuecom may win on the merits under the Lanham Act. To state a claim under the Lanham act, Rescuecom must show that it has a valid mark that was entitled to protection under the act and that the alleged infringer’s actions are likely to cause confusion with the owner’s mark. Rescuecom alleged that the list of Sponsored Links generated by AdWords would confuse would-be consumers into believing that the advertisements were sponsored by or affiliated with Rescuecom.

As in LVMH, the Second Circuit decision in Rescuecom turned on whether Google’s “use” of the mark was in commerce. Under the Lanham Act, “use in commerce” is defined to include use or display “in the sale or advertising of services…rendered in commerce…and the person rendering the services is engaged in commerce in connection with the services.” 15 U.S.C. §1127 (2006). Assuming the facts in favor of Rescuecom, the Second Circuit determined that because Google offered, displayed, and sold the mark to its advertising customers and recommended using the mark through its Keyword Selection Tool. Based on the statutory language, a reasonable jury could find that appearance of the Rescuecom trademark in AdWords constituted a violation of the Lanham Act.

The disparity in the E.U. and U.S. approach to “use” marks a subtle fracture in existing trademark law and highlights the need for a unified, international approach. In the fractured system, the trademark holder is unsure of her rights and the commercial advertiser is unsure whether its acts constitute infringement. A trademark holder will be protected in some geographic areas while exposed in others. At the same time Google is using a trademark “in commerce” in the United States, it is not using the same trademark “in the course of trade” in France. The free exchange of information over the internet makes national boundaries an arbitrary and damaging basis for determining the jurisdictional boundaries of law governing that information.