Clifford Chance

The "AdWords" referencing service

Readers may very well find themselves Googling a certain brand of product or service and obtaining, in the search results, not only the information sought, but also advertisements containing links to competitors' websites.

This is because when a user performs a search on Google, the internet search engine displays (i) the sites which appear to best correspond to the search (i.e. the "natural" results) and also (ii) advertising links to the websites of economic operators that have paid to reserve certain keywords and have them appear in the search results, in the event of a correspondence between those keywords and the search performed by the user. That advertising link is accompanied by a short commercial message or heading.

Background to the dispute

Ortodoncis, holder of the word mark "Clínicas Ortodoncis" for services in class 44 (dentistry), brought trademark infringement proceedings against dental clinics franchising chain Vitaldent, which had subscribed to Google's "AdWords" referencing service, so that when an internet user typed the terms "Clínicas Ortodoncis" on Google, an advertisement consisting of the heading "Clínicas Ortodoncis" and the link to Vitaldent's website appeared.

The case reached the Spanish Supreme Court, which was asked to decide whether the use of the "Clínicas Ortodoncis" sign by Vitaldent as a keyword in the "AdWords" referencing service constituted trademark infringement.

"AdWords" and trademark infringement

In its Judgment of 20 April 2021, the Supreme Court highlighted that the case fell under the so-called "double identity" situation, in which Vitaldent was using, as a keyword, a sign identical to the "Clínicas Ortodoncis" trademark in relation to goods or services which are identical to those for which the trademark was registered (dentistry services).

Against this background, the Supreme Court found that according to the doctrine of the Court of Justice of the European Union ("CJEU")¹ the proprietor of a trademark is entitled to prevent a competitor from advertising – on the basis of a keyword which is identical to the trademark and which has been selected in an internet referencing service by the competitor without the proprietor’s consent – goods or services identical to those for which that mark is registered, where that use is liable to have an adverse effect on one of the functions of the trademark.

In particular, such use adversely affects the trademark's function of indicating origin where the advertising displayed on the basis of that keyword does not enable reasonably well-informed and observant internet users, or enables them only with difficulty, to ascertain whether the goods or services concerned in the advertisement originate from the trademark proprietor or from an undertaking economically linked to that proprietor or, on the contrary, from a third party.

Applying this CJEU jurisprudence to the matter at hand, and taking a closer look at the specific circumstances of the case, the Supreme Court concluded that Vitaldent had indeed infringed Ortodoncis' trademark, insofar as the sponsored advertisement with the link to Vitaldent's website was accompanied by the heading "Clínicas Ortodoncis". This adversely affected the trademark's function of indicating origin, as the Court found that the advertisement reasonably suggested that Vitaldent was somehow economically linked to Ortodoncis.

The 1% damages rule

Claimant Ortodoncis had chosen to assess the damages on the basis of Article 43.5 of the Spanish Trademark Act, which establishes that the holder of an infringed trademark is entitled to claim as damages, in any event and without the need for any proof, 1% of the turnover recorded by the infringer for the unlawfully marked products or services. Of note, Article 43.5 of the Trademark Act constitutes a distinctive feature of Spanish trademark law, not contained in Directive 2004/48².

Defendant Vitaldent argued that such 1% should only apply to the turnover generated by it through the particular use of Ortodoncis' trademark (i.e. to the services actually rendered to those patients who went to a Vitaldent clinic as a result of the infringing advertisement). However, the Supreme Court clarified that the provision refers to all "unlawfully marked products or services", not only to those that have been ultimately sold or rendered to actual clients who purchased them after considering the infringing advertisement. Therefore, since Vitaldent was offering all of its dentistry services through the website referred to in the advertisement that was found to infringe Ortodoncis' trademark, the Supreme Court awarded damages to the claimant amounting to over half a million euros (1% of Vitaldent's total turnover).

In short, this Judgment constitutes a warning for market players using third-party trademarks as keywords in online advertising systems by reference such as Google's "AdWords".

¹ Judgments of the CJEU of 23 March 2012 (C-236/08 to C-238/08) and 22 September 2012 (C-323/09).

² For more on the interpretation of Article 43.5 of the Spanish Trademark Act, see Sebé, S., The Supreme Court qualifies the 1% rule for the calculation of the compensation for damages in cases of trade mark infringement specifying that it does not apply in any case, Clifford Chance Global IP Newsletter 25th Edition, Issue 03/20, March 2020.