Using competitors' brands as keywords in Google Ads can be very expensive.

The use of competitors' trademarks in Google Ads is a very common practice which, until now, has been tacitly admitted, as there has been no pronouncement on the matter. 

But recently, our Supreme Court has ruled on these practices in a highly innovative judgment

In this case, a well-known brand of dental clinics decided to include as a keyword the trademark of another company that was also active in the same sector

This second society began to observe that, When typing its brand name into Google's search engine, a competitor's ad appeared and it decided to take legal action to protect its brand reputation.

These facts date back to 2012 and, finally, in 2022 we have been able to know the Supreme Court's ruling. 

Even so, both the Commercial Court of first instance and the Provincial Court of Madrid did not hesitate to agree with the affected company, including a compensation of 600,000 euros. 

So what has the Supreme Court said about this? 

In this regard, two key aspects of the Supreme Court's ruling should be highlighted, which are as follows: 

  • Trademark infringement: 

With regard to this type of practice, the Court has chosen to recall how this section of the search engine works. 

Well, Google Ads, when creating an advertising campaign, offers entrepreneurs a number of keywords that are often trademarked.

This being the case, and on the basis of European regulations, Every entrepreneur has the power to prohibit the use of his trademark by competitors, including its use in Internet advertisements. 

Now, specifically in the field of Internet advertising, European case law requires that such use without consent is liable to impair the functions of the trade mark.. In this regard, he mentions three situations: 

  • Impairment of the indication-of-origin function of the markThis situation refers to those uses which prevent the consumer from identifying whether the goods or services originate from the advertisement holder, from a company economically linked to the advertisement holder or from a completely unrelated third party company. 
  • Undermining of the brand's advertising function: A situation that refers to preventing or hindering a brand from advertising on the Internet. 
  • Undermining of the brand's investment functionA situation that refers to preventing or hindering a market from being able to maintain or acquire a reputation that will enable it to gain new consumers or customers.

Well, in this case, our Court considered that both the indication and investment functions were clearly affected, as they were not only taking advantage of another brand's potential reputation and undermining it, but also creating clear confusion among customers, who could not identify whether they were competitors or part of the same group.

Therefore, the conduct consisting of the use of the trademark as a keyword has been considered by our Supreme Court as a full-fledged trademark infringement, both under European regulations and case law and under our Trademark Law.

  • Compensation: 

Finally, another very interesting point is the debate that has arisen regarding the compensation to be paid by the infringing company. 

As has been advanced, 600,000, of which more than 500,000 euros are the sole and exclusive consequence of the trade mark infringement.

But why do you have to pay such a high amount of compensation? 

Well, in these cases, Article 43.5 of the Trademark Act comes into play, which states: "The owner of the trade mark whose infringement has been judicially declared shall, in any event and without the need for any proof, be entitled to receive damages of 1 per cent of the turnover of the infringer in respect of the goods or services unlawfully marked.". 

Therefore, and on the basis of this article, the company concerned could claim that amount without any problem, and that is precisely what it did. 

In the face of this, the infringing company argued that this 1% should only be in respect of the figure obtained through the infringement and not of the infringer's total turnover. 

But the Supreme Court, quickly and briefly, ruled that it should be on the total turnover, since it is a rule that seeks to facilitate the quantification of the compensation.It is impossible and extremely costly to carry out an analysis to determine which businesses were a consequence of the infringement and which were not. 

For this reason, compensation must be quantified on the basis of the total turnover of the infringing company, even if it may be increased if greater damage or loss is proven.

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