The comparative analysis of judicial practice in France, the United Kingdom and Germany in questions of liability imposition within the infringement of intellectual property rights

Galyna MYKHAILIUK, PhD, Associate Professor, International Law Department National University “Kyiv–Mohyla Academy”

Differences in the advertising legislation of Member States «have direct effect on the smooth functioning of the internal market» and can cause negative influences on the free circulation of goods and services, as well as deceive businesses around the EU.1 As mentioned in the Preamble of Directive 2006/114/EC «misleading and unlawful comparative advertising can lead to distortion of competition within the internal market».2 That is why a comparative analysis of keyword advertising liability in different Member States should be conducted, since the extant differences in legislation might be the root of the problem.

The author agrees with Bernarz and Waelde that consumer confusion is «the touchstone of liability»3 and also one of the reasons why the problem in question has arisen. It is essential for trade mark proprietors to protect their trade marks from improper advertisement and the possible confusion of clients.

The aim of the present paper is to trace the phenomenon of the shifting liability of Internet Service Providers (ISPs) and keyword advertisers across the EU and to identify the advantages and disadvantages of this fluctuation for consumers in each country.

The popularity of Google among Internet users led to advertisers desiring to be top ranked on the first page of the search results. While bidding for a keyword, some advertisers tend to replicate a trade mark sign/slogan of a well–known competitor, in order to construct an imaginary connection to the official website, or one closely connected to the famous competitor. The opportunity to land in one of the highest–ranked positions has a significant influence on a company’s profit. This situation led to a number of claims against ISPs.

Judicial practice among EU Member States differs significantly, as regulations controlling internet infringement liabilities are country–specific. Most of the courts considered the use of a sign in the course of trade as the yardstick. On the question of the resulting consumers’ confusion caused by the use of a brand’s symbol, courts’ opinions also vary.

The increase in the number of cases against keyword advertisers and ISPs is caused by the anxiety of trade mark owners to prevent harmful effects on their reputation and profit margin, as a consequence of misleading advertisements and proposed goods of distinctly lower quality.

UK is the country with the least number of cases concerning keyword advertising disputes. The leaders in this area are France and Germany, where the majority of EU decisions on the subject was taken.

The author of the present paper is largely in agreement with Seville that the E–Commerce Directive (ECD) has the strongest impact on ISPs liability.4 In particular Art.12–14 stipulates liability exemptions and Art.15 deals with the monitoring of obligations. In the most recent decisions, the Supreme Courts of Member States adopted the ECJ’s decision in Google France applying the limited liability rules established by the ECD.5 As a consequence, it is likely that ISPs will «enjoy limited liability if their activities are neutral, or passive, in respect of the infringement at stake».6 Following from Seville’s point of view, there is a general argument that ISPs are immune from liability, i.e. they are not liable for the content of the information they transmit, because they act as a «mere conduit».7 Additionally, they cannot be held liable for the storage of information at the request of the advertiser, unless they know about the unlawful character of that information or the advertiser’s activity and do nothing to prevent its dissemination. It is worth underlying that ISPs have «more practical power than right holders to address the infringement of intellectual property rights in material found on sites which they control».8 While conducting their business ISPs have no obligation to monitor the dispatched information or to investigate illegal actions, as their service is of a «mere technical, automatic and passive nature».9 Conversely, they have to inform the authorities about any wrongdoings that they discover, made by the recipients of their service. As a result, by assisting in the creation of the ad copy for keyword advertisers, ISPs have hidden for a safe harbour and have largely escaped liability.

In spite of the content of Art.12–14 ECD, courts can still order ISPs to «terminate or prevent an infringement».10

In brief, as follows from the Google France ruling,11 an ISP, who conserves symbols/phrases of registered brands as keywords and displays them upon request, does not use that symbol/phrase in compliance with Art. 5 (1)(a) TMD (Trade Marks Directive 89/104/EEC).12 It is essential, however, to differentiate between trademarks owners within the keyword advertisement copy.13

As can be seen from the ECJ judgement, the Court preferred to answer only questions put forward by La Cour de Cassation. It is for this reason that no comprehensive solution on keyword advertising legality in the EU has been found. The most important aspect of this judgement was that all three issues were decided in favour of the ISP. Hence, they are held not liable for the use of brands’ signs by third parties. A parallel decision was made in July 2010 regarding the Portakabin v Primakabin case.14

Prior to the aforementioned decisions, the national courts of Member States adopted diverse approaches and rulings on the cases of keywords use by third parties. Nevertheless, at present, national courts still have an opportunity, left open by the ECJ, to reconsider the liability of ISPs.

Under the French judicial practice courts of jurisdiction may not adhere to upper courts’ judgement. As a consequence, under the influence of the ECJ’s decisions, Google decided to change its policy for AdWords.

Under the UK Trade Marks Act 1938 (repealed 31 October 1994) there was a general view that a descriptive use of a trade mark could exist, which would not infringe the trade mark proprietor’s rights.15 Additionally, English courts tend to adhere to the view that using a trade mark sign in keyword advertising does not imply its «use in the course of trade» and, thus, there is no trade mark infringement. In 2008, UK courts were given their first opportunity to adjudicate on a keywords advertising case in Wilson v Yahoo!, where the French approach was imitated.16

Nowadays, there are limited liability rules, or as they are called «safe harbours» regulating an ISP’s liability, which are implemented both in the EU and the US. A lot of grey areas, nevertheless, persist.

As McMahon affirms, a number of cases were referred recently to the ECJ regarding the monitoring responsibilities of ISPs under Art. 267 TFEU.17 In the UK case L’Oreal v eBay, where the Internet auction operator booked the «L’Oreal» keyword and used it on its website for advertisements of third parties, the trade mark proprietor sought to impose an injunction under Art. 11 of Directive 2004/48/EC to protect itself from possible future infringements.18 On 9 December 2010, the Advocate General commented that infringement under Art. 14 of ECD denoted «past or present infringements but not from the future».19

In the legal practice of Germany, keyword advertisers are predominately the defendant. The author of this paper disagree with the point of view put forward by Bednarz and Waelde that even if the ISP was the respondent, there would be no case where they would be found liable.20 These scholars offer several explanations for this. It is commonly believed that the ISP, and the author of the present paper supports this point of view, merely provides a virtual reality, where the keyword advertisers themselves are responsible for the decision to buy and use a certain keyword. It is practically impossible for the ISP to observe and check the origin of every keyword, as millions of advertisers use the system every day. The author, however, can provide examples of several German cases where the court held that the ISP could be held liable as an accomplice to trade mark infringement.21 In fact, in Internet Auction II22 the ISP was held liable for its inactivity after receiving a notice about an infringement.23 Thus, ISPs could be held liable for the non–prevention of overhanging possibility of infringement or its reiteration.

On the contrary, in the Belgian case Lancôme v eBay the court held that the ISP had no responsibility to avert the infringement.24

An additional argument can be found in the existence of Störerhaftung. This refers to the liability which is a corollary of Internet law, when two people are held liable: a «person who commits a trade mark infringement» and a «person who causes a disturbance to the trade mark owner’s rights».25

The point of Shaefer’s article seems to be that the actions of ISPs have practical value when they result in trade mark infringement. To cut a long story short, the ISP can be found liable only in conjunction with the advertiser.26

The assumption being made by Matulionyte is that German liability standards seem to be higher than their French equivalents. The reason for this is a principle of acquiescence, whereby anyone who, consciously or by accident, facilitates an infringement is liable, as they have acquiesced to the act and have defaulted on a monitoring duty. The essence if this monitoring duty is to take «technically and economically possible and reasonable measures» in order to prevent the infringement.27 Hence, there is a link between liability and monitoring duty in the German court practice. Thus, the ECJ in Google France stated that the ISP is not liable and is also immune from secondary liability if their role is passive and if they exercise no control over the keyword advertising.28 After the ISP is notified about a content of infringement though (Art. 14 ECD), it must check this immediately in order to prevent future infringements.

In French legal practice the ISP is the main defendant. Trade mark proprietors have received large sums for compensation from ISPs in all legal disputes that were decided in their favour. A good example is the Google France case, where the ISP was ordered to pay 300.000 Euro29. This discrepancy can be explained by several reasons. First of all, it was Google who created AdWords and received a respectable yearly income of it. Secondly, Google plays an active role in choosing the keywords. In the French Courts of First Instance, in all three cases it was ruled that the ISP was liable for brand infringement under both TMD and CTMR (Community Trade Mark Regulations 2006 No. 1027).30

The French Freedom of Communication Act 2000 in Art. 43–48 states that ISPs are «liable for damages or infringements in respect of contents they host only when they did not diligently impede the access to this content after having been requested to by a judiciary authority».31

What is more, Art. L. 713–3 of the Intellectual Property Code of France stipulates that:

«The following shall be prohibited, unless authorised by the owner, if there is a likelihood of confusion in the mind of the public: (a) The reproduction, use or affixing of a mark or use of a reproduced mark for goods or services that are similar to those designated in the registration; (b) The imitation of a mark and the use of an imitated mark for goods or services that are identical or similar to those designated in the registration».32

In the case of Google France33 the ISP retorted that it was «neither the author nor co–author of the advertisements using the trade marks» i.e. keyword advertisers, as the proprietors of the linked websites, should be liable for the trade mark infringement.34

However, the Court of First Instance did not take into account Google’s arguments and held it liable for trade mark infringement, precisely because the ISP received profit from a trade mark sign, which was used for advertising fake products. Furthermore, while typing the world «imitation» AdWords nominated «imitation Louis Vuitton».35 Finally, the ISP was held liable for allowing the usage of signs of already registered trade marks.

Google has developed a function of keyword suggestions offered to users, which exploits algorithmic formulas. This process has led to situations whereby, while typing keywords corresponding to the names registered as brands, Google Suggest displayed the results together with words such as «rape», «satanic», «prison» and others. The ISP argued that these search results could not be considered slanderous, as they were generated automatically by the service and without any human input. Subsequently, however, the ISP and its executive director were held liable for slanderous «search suggestions» and «defamation against individuals under the French law».36 The decision was appealed on the grounds of the technically neutral character of Google’s services with reference to the Google France judgement.37

Following the work of Lemperiere, the author of this paper concurs that it is hard for legislators to create new regulations that will be kept up–to–date with technological innovations. The cost of some of these innovations overtops the amount of the fine imposed by the court. As a result it is more comfortable for ISPs to allege on the neutral character of service than to divulge the principles upon which its algorithms are based. The tendency to put the onus of evidence on the respondent, however, makes the protection of ISPs more complex.38

It should be kept in mind, however, that the placement of new filtering programs can deprive ISPs of their exemption from liability, as «mere conduits».

Additionally, copyright law in Art.8 (3) of Directive 2001/29/EC specifies that mark rights holders should have the opportunity «to apply for an injunction» against ISPs, if their services are used by third parties to violate intellectual property rights.39

To conclude, both the German and French Supreme Courts, in the number of cases they have tried, have proven reluctant to apply EU safe–harbour provisions, and are keen to find ISPs liable under the most stringent national laws. As a result, the application of safe–harbour provisions differs between Member States: attention no longer focuses on whether these provisions are applicable, but on the ways they can be applicable.40

Not all French decisions are similar, however, as will be explained in the following discussions.

Member States interpret Art.15 of ECD differently: in Germany ISPs have to have regular inspections of the data they provide; in France «the court denied the ISP the benefit of Art. 15» in Belgium the observing functions of ISPs are forbidden.41

The comparative judicial analysis can be presented in Table 1.

In conclusion, it essential to highlight that from the author’s point of view, it is not right for a company to escape liability, offering its services from a particular EU country with favourable legislation, while others have to suffer financially for its misconducts. It may turn out that business structures will move to particular countries under the sole purpose of escaping liability. For the moment, French and Belgian legal practice recognise the use of trade mark signs by a competitor as trade mark infringement, in comparison to the UK and Germany, where no unlawful use is normally considered. The relevant policy should be uniform across the EU, much in the spirit of the original goals behind the Union’s creation.

The disparities between Member States’ law lead to the comfortable positioning of ISPs in particular countries, rather than others, precisely on account of their favourable regulations in regard to keyword advertising. The same situation can be observed in Copyright Law and Google Books Search, as pointed out by Waelde.42

To conclude, it is obvious that the regulation of relationships between keyword advertisers and trade mark owners is essential for the smooth running of the domestic market.