Google Adwords: Paris Appeal Court (1) Contradicts CJEU in a Recent Decision

Cobrason sells top of the range video and audio equipment, inter alia, via its website. Home Cine Solution sells the same goods also via its own website. Cobrason discovered that when it conducted a search against its name on Google, a sponsored link to its competitor, Home Cine Solutions, appeared instead. In an application for judgment in expedited proceedings Cobrason attempted to obtain the suppression of the disputed sponsored link. It subsequently brought legal proceedings on the merits against Home Cine Solutions, Google France and Google Inc. Before the Paris Commercial Court , Google was held liable for unfair competition in respect of its Adwords referencing service. Google was also held liable for misleading advertising in accordance with Article L. 121-1 of the French Consumer Code. This decision was appealed before the Paris Appeal Court.

The Paris Appeal Court ruled on the appeal on 11 May 2011, in a decision which would appear to go against recent rulings of the CJEU.

Indeed, on 23 March 2010 , the CJEU handed down a judgment further to three references for preliminary rulings in relation to Google Adwords’ referencing service. In this judgment, the CJEU held that advertisers using this service could be held liable for trademark infringement if it is established that there is likelihood of confusion on the part of the average internet user on the origin of the trademark holder’s goods and services and those of the advertiser. The CJEU however considered that Google could not be held liable for trademark infringement for its Adwords referencing service as there was no use of the key words provided under this service as a trademark. Furthermore, in view of the CJEU’s judgment, Google, within the scope of its Adwords service, should in principle qualify as a hosting provider as defined in the Electronic Commerce Directive (2000/31/EC), provided that it does not play an active role in giving it knowledge or control over the key words stored under this service. The consequence of the CJEU judgment is that it is now difficult to obtain a judgment holding Google liable.

Although the national courts are required to comply with judgments handed by the CJEU, the Appeal Court would appear not to have applied the findings in the Adwords ruling. This is the first decision in France to have held Google liable since the CJEU’s 23 March 2010 judgment.

In order to uphold the judgment at first instance, the Appeal Court reiterated that the basis for an action in unfair competition is Article 1382 of the Civil Code. In order to establish liability on this basis the claimant must establish a fault. Home Cine Solutions had used the company name Cobrason and the domain name www.cobrason.com as key words. The Appeal Court held that such use gave necessarily rise to a confusion on the part of potential customers between their respective websites. Consequently, the Appeal Court held that Home Cine Solutions was liable for unfair and parasitic competition insofar as it had effectively unfairly poached Cobrason’s customers and piggybacked off the latter’s investments. Furthermore, the Appeal Court also held Google liable on the grounds that it had contributed, by providing technical means, to the confusion generated on the part of the public by presenting the key word Cobrason in the Adwords programme and by displaying the said key word on the search page. The Appeal Court held that Google was in breach of it duty of commercial loyalty and also held that it was liable for misleading advertising.

It is too early to comment on the consequences of this decision and indeed this could be a one-off decision. However, it is clear that the Appeal Court failed to examine whether Google in providing the Adwords service qualified as a hosting provider and whether as such Google could benefit from the restriction of liability of such service providers as set out in the Electronic Commerce Directive (2000/31/EC). We will have to wait and see if the French Supreme Court clarifies the situation, and only if, of course, this decision is appealed.

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